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Environmental Pollution and Property Damage: Overcoming the Permanent Nuisance Three Year Statute of Limitations - Anatomy of a $2,000,000 Property Damage Settlement, Part I


In May, 1994, forty-two families in Sutter Creek, California learned their homes, which had been constructed between 1975 and 1985, were built on land contaminated with mine tailings containing arsenic. In California's Gold Country background levels of arsenic in soil are approximately 22 parts per million [ppm]. But on these properties, arsenic levels were as high as 1320 ppm, well into the toxic range.

California law was squarely against the homeowners. First, California nuisance law precludes claims for permanent pollution which originated more than three years before the filing of a complaint. In this case mine pollution began in the 1890s and continued through 1958. By law the last time to file a claim for permanent nuisance was 1961. Secondly, the ten year statute of limitations for claiming latent construction defects precluded recovery.

A settlement was obtained for these Amador County homeowners because of a little known federal law which allows delayed discovery in cases qualifying under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 USC Section 9601[known as CERCLA or "Superfund"]. CERCLA also suspends the California ten year statute of limitations on construction defects in toxic pollution cases. Although virtually every site of permanent pollution is subject to CERCLA's broad definitions, the federal delayed discovery statute has only been discussed in one 1996 California appellate opinion, which holds that the ten year limit on construction defect claims is pre-empted by federal law.


The Central Eureka Mine opened in 1890. The headframe is less than a quarter mile east of Highway 49, sitting on a hill top, just north of the Westover Amador County Airport. The mine and its mill operated continuously from that time until closed by President Roosevelt in 1942. After WWII, the mine reopened and operated until 1958. Quartz ore was crushed until reduced to a fine sand that could pass through a 1/32nds of an inch screen. It then was treated with cyanide to extract the gold and the waste, known as "slime," was sluiced to a pond, where the water drained into a creek, leaving behind the fine sands in a mine tailings pile located approximately 150 yards east of Highway 49.

By 1958 the mine tailings pile was three stories high and had a top surface area of 11 acres. The Central Eureka Mine was aware of the presence of arsenic in the gold ore processed on the site because of U.S. Mint assay reports, but in the 1960 sale of the tailings pile and the surrounding 19 acres the deed mentioned mine tailings on the property but did not disclose that the tailings contained arsenic. Through a series of corporate mergers, the Central Eureka Mining Corporation became the property of AlliedSignal, Inc., a Fortune 500 business.

By 1970, the 30 acre parcel had been transferred several times and it was approved for housing by the City of Sutter Creek as the Mesa de Oro and Gold Quartz Subdivisions. The County Health Department was aware of the presence of arsenopyrite on the site, which is reported to be "safe" in its natural state. An environmental consultant suggested the crushed arsenopyrite should be tested. Mesa de Oro was developed on top of the mine tailings pile. The Gold Quartz Subdivision lots bordered the tailings pile on the west and south and became the location for large, attractive homes with an average value of $350,000, before the discovery of arsenic.

In April, 1994 Cal-OSHA received a report that a worker at Mesa de Oro had developed rashes and flu symptoms. Arsenic was determined to be the cause. The California Department of Toxic Substances Control of Cal/EPA and US/EPA joined in the investigation. Cal-OSHA ordered a halt to all construction on the site and the county stopped home sales.

In May, 1994, Cal/EPA reported that the waste pile contained high concentrations of arsenic which could be inhaled in dust and dissolved in water. Soil sampling in May, 1994 showed arsenic levels on Mesa de Oro ranging from 115 ppm to 1,320 ppm. Levels in excess of 500 ppm are hazardous waste under California law.

In November, 1994 Cal/EPA and US/EPA released the results of their tests on soil from the Mesa, the slopes and the yards around the tailings pile, which showed concentrations of 90 to 1,142 ppm. Arsenic also was found in homeowners' vacuum cleaner bags. Of 14 tested vacuum bags, eight had arsenic: five had concentrations between 20 and 42 ppm and three had concentrations between 278 and 889 ppm.

Arsenic is commonly found in gold ore and in its natural state is not considered a mining hazard, but once it is pulverized the increased surface area accelerates its interaction with soils, salts and minerals, and renders the arensic salts bioavailable and bioaccessible. California EPA toxicologist Dr. Charles Salocks reported that testing by the State of California, and a contractor hired by AlliedSignal confirmed, that the arsenic in the dirt and sands found on Mesa de Oro were bioavailable and bioaccessible.

A 1997 study by Drs. Golub and Keen of the UC Davis Department of Internal Medicine and Nutrition also concluded that arsenic from Mesa de Oro soil is bioavailable. Fortunately testing of human hair and urine in late 1994, well after the community had been alerted to the arsenic hazard and had taken steps to limit their exposures, did not reveal any significant deposits of arsenic. According to the Agency for Toxic Substances and Disease Registry, arsenic clears through human urine and blood in 48 hours. Although the toxicity of arsenic is well known, it is a carcinogen only in humans, but not in animals. Accordingly there are no animal carcinogenicity studies. The latency period for skin cancer in humans is estimated to be three to four decades according to one Asian study of arsenic in well water.

It is common for pollution sites to languish on the U.S. EPA's National Priority List for years before action is taken. Fortunately these subdivisions were declared an Emergency Response Site. Remediation work began in 1995 and was completed in 1996. It included removing contaminated dirt and replacing with clean fill, as well as grading, capping, and replanting the mine tailings pile, and installing drainage and water diversion channels.

Utilizing original sales reports, appraisals both before and after the 1994 disclosure of arsenic, data on the county-wide appreciation of homes reported by the Amador County Development Corporation and comparable sales in the City of Sutter Creek, and after an individual inspection of each property, a market study and appraisal by an MAI certified appraiser showed that homeowners had suffered an estimated diminution in value of approximately 25%. Total diminution in value was approximately $2,000,000.


California's nuisance laws were written in the 19th century and are on the common law which implicitly assumes that a nuisance can be objectively perceived. Conceptually, California's application of nuisance law was designed to exclude damage caused by invisible, underground toxic pollution that is concealed from sight or smell.

California Civil Code Section 3479 states that "anything which is injurious to health, including, but not limited to, the illegal sale of controlled substances, or is indecent or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property, or unlawfully obstruct the free passage or use, in the customary manner, or any navigable lake, or river, bay, stream, canal, or basin, or any public park, square, street, or highway, is a nuisance." The definition clearly covers underground toxic chemicals.

The chief evil of California nuisance law is the distinction between a "permanent" and an "abatable" or "continuing" nuisance. A permanent nuisance is one that cannot be "abated" by removal or termination of conduct. Because a permanent nuisance continues indefinitely it causes permanent injury. By comparison a continuing nuisance is a use which is repeated and can be discontinued or abated at any time.

The distinction between a "permanent" and a "continuing" nuisance is important under California law for two reasons.

First, Mangini v. Aerojet-General Corp. (1991) 230 Cal. App. 3d 1125, 281 Cal. Rptr. 827 held that "where a private citizen sues for damage from a permanent nuisance, the statute of limitations begins to run upon creation of the nuisance." Id. at 1143 and 838. This has long been the law in California. "Where a nuisance is of such character that it will presumably continue indefinitely it is considered permanent and the limitations period runs from the time the nuisance is created." Phillips v. City of Pasadena (1945) 27 Cal. 2d 104, 107. In Mangini underground TCE intentionally dumped by Aerojet, lessees of the property, had heavily polluted the lessor's land for years and no action was taken until well after the three year statute had run against the land. Accordingly the owners were left with only the right to pursue a "continuing" nuisance case.

Secondly, it is only under a permanent nuisance claim that an injured party can collect diminution in value that has been suffered. Diminution damages are not available in a case of continuing nuisance, which also has a three year statute of limitations, but one which does not run with the land. It is a "rolling" three year statute which allows an aggrieved landowner to claim limited damages for the loss of use and enjoyment during the three years preceding the filing of the action.

A continuing nuisance by definition is "abatable" and therefore once the nuisance is corrected there is no claim for diminution in value. So while there is a remedy, it is often meaningless because the polluter will defend by proving a permanent nuisance in order to obtain the absolute defense of the statute of limitations. The California Supreme Court's 1996 decision in Mangini concluded that the 1991 Mangini decision created a meaningless right. The Manginis were precluded from collecting for lost value and they eventually lost a multi-million dollar verdict because they could not disprove that the pollution caused by the lessee had caused the permanent destruction of their land; therefore it was not a "continuing" or "abatable" nuisance and the judgment awarding lost value was reversed. Aerojet escaped liability for the damage it created because it had caused permanent damage and because the statute of limitations for bringing suit ran with the land. As a result Mangini's lost, even though Aerojet dumped tons of a known carcinogen into the Sacramento water table.

Santa Fe Partnership v. ARCO Products Co. (1996) 46 Cal .App. 4th 967, illustrates California's policy not to hold liable polluters who cause permanent damage to the environment. In 1988 Santa Fe learned its property was polluted and suit was filed 1992. The plaintiffs argued that diminution in value damages should be allowed in all cases for contamination by toxics or hazardous materials and that it is "cumbersome, inefficient and contrary to the goal of efficient legal remedies to bring numerous and successive suits [for continuing nuisance] during the period the land remains contaminated despite remediation efforts." Santa Fe Partnership v. ARCO Products, supra, at 983. Because the plaintiffs did not contend the nuisance was permanent, the court held that diminution in value damages were not available in an action for an abatable or continuing nuisance. Accordingly, the Court said these "circumstances combined to prevent appellants from receiving the damages they seek despite the possibility appellants' land may continue to suffer from stigma due to its history of contamination." Santa Fe Partnership v. ARCO Products, supra, at 984.

The end result is that when applying traditional nuisance rules to invisible, underground pollution from solvents, or, in the Sutter Creek case invisible arsenic pollution, the playing field is tilted in favor of the polluter, and in cases of permanent damage to the environment. California law rewards the polluters by freeing them of liability and qualifies for Charles Dickens' memorable words from Oliver Twist: "If the law supposes that . . .the law is a ass, a idiot."


Fortunately CERCLA mandates that the statute of limitations on a state law claim for damage caused by hazardous substances does not begin to run until the plaintiff discovers, or should have discovered, the injury and its cause. CERCLA "provides a mechanism for cleaning up hazardous-waste sites and imposes the cost of the cleanup on those responsible for the contamination." Pennsylvania v. Union Gas Co., 49 U.S. 1, Section (1989). It also pre-empts and controls the commencement of the statute of limitations under 42 USC Section 9658 which provides: "In the case of any action brought under State law for personal injury, or property damages, which are caused or contributed to by exposure to any hazardous substance, or pollutant or contaminant, released into the environment from a facility, if the applicable limitations period for such action (as specified in the State statute of limitations or under common law) provides a commencement date which is earlier than the federally required commencement date, such period shall commence at the federally required commencement date in lieu of the date specified in such State statute." 42 USC Section 9658 (a)(1).

In Sutter Creek, arsenic in mine tailings was released into the environment from the mill and the tailings pond, both of which are "facilities" under CERCLA. A facility is defined as either (1) "any building, structure, installation, equipment, pipe or pipeline (including any pipe into a sewer or publicly owned treatment works), well, pit, pond, lagoon, impoundment, ditch, landfill, storage container, motor vehicle, rolling stock or aircraft" or (2) "any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise came to be located." 42 USC Section 9601(9). Clearly the broad definition of facility and storage place encompassed the tailings pile created by the Central Eureka Mine.

Although CERCLA does not alter the length of a state statute of limitations, it does require that the state limitations period begins to run no later than the date on which the plaintiff discovers, or should have discovered, the injury and its cause. Bolin v. Cessna Aircraft Co., 759 F. Supp. at page 704, fn. 12. Under 42 USC Section 9658 the California three year statute begins to run on the "federally required commencement date" which is defined as: "The date the plaintiff knew (or reasonably should have known) that the personal injury or property damages referred to in subsection (a)(1) of this section were caused or contributed to by the hazardous substance or pollutant or contaminant concerned." 42 USC Section 9658 (b)(4)(A).

But for the application of the federally mandated discovery rule, the three year statute of limitations for the permanent nuisance created by AlliedSignal's predecessor would have run as early as 1897 (three years after the opening of the mine in 1894) or as late as 1961 (three years after the mine's 1958 closing). If that were the law, AlliedSignal would have been free from liability and the Sutter Creek claims would have been outlawed.

That has been the result in several significant nuisance cases where the federal statute was not cited to preclude the application of the statute of limitations defense. See Mangini v. Aerojet-General (1996) 12 Cal. 4th 1087, 51 Cal. Rptr. 272 and Beck Development v. Southern Pacific Transportation Co. (1996) 44 Cal. App. 4th 1160, 52 Cal. Rptr. 518; in both cases the statute of limitations defense was good and there was no mention of the saving effect of 42 USC Section 9658. Only one California opinion discusses 42 USC Section 9658.

In Angeles Chemical Company, Inc. v. Spencer & Jones (1996) 44 Cal. App. 4th 112, 51 Cal. Rptr. 2d 594, the question before the court was whether Code of Civil Procedure Section 337.15 precluded an action for damages to real property caused by a latent defect in construction could be brought more than ten years after the substantial completion of construction. The building in ACC was completed in January, 1982. The plaintiff filed in March, 1993. Defendants alleged the complaint was outlawed under C.C.P. Section 337.15. The court held the complaint was timely because CERCLA "creates a federally mandated discovery rule for the accrual of state law claims involving releases of hazardous substances that cause or contribute to personal injury or property damage." See also Bolin v. Cessna Aircraft Company, supra; Soo Line R. Co. v. B.J. Carney and Co. (D. Minn. 1992) 797 F. Supp. 1472, 1487.

"Practically speaking CERCLA essentially preempts state statute of limitations if those state law claims are based upon exposure to hazardous substances released into the environment and the applicable limitations provides for an earlier commencement date than federal law." Tower Asphalt v. Determan Welding (Minn. Ct. App. 1995) 530 N.W. 2d 872, 875. Angeles Chemical Company v. Spencer and Jones, supra, 44 Cal. App. 4th 112, 123; 51 Cal. Rptr. 594, 599.


In Angeles Chemical, the court recognized that, except for a toxic release case under the federal statute of limitations, the ten year period for claiming latent construction defects, under Code of Civil Procedure Section 337.15, established an absolute time limit based on the date when the construction is substantially completed, regardless of when the plaintiff discovered the injury or its cause, much the same as AlliedSignal argued in the Sutter Creek case. Accordingly, under federal law the date on which the plaintiff discovered injury had no impact at all in the commencement of the 10-year bar and the court held the claims beginning prior to the ten year period were valid. The end result is that in all cases alleging a latent defect in property, in the absence of CERCLA, "Section 337.15 effectively trumps any benefits conferred by the discovery rule." Angeles Chemical Company Inc. v. Spencer & Jones, supra, 112, 125. The Court refused to allow Section 337.15 to cut off these claims, because of federal pre-emption and because CERCLA is a remedial statute which must be broadly construed to avoid frustrating congressional intent. United States v. Carolina Transformer Co. (4th Cir. 1992) 978 F. 2d 832, 838; Dedham Water Co. v. Cumberland Farms Dairy, Inc. (1st Cir. 1986) 805 F. 2d 1074, 1081.

Together, Section 337, Section 338 and Section 337.15 created a two-step process for determining the timeliness of a claim. Only the second step, which involves Section 337.15 is inconsistent with the discovery rule. "Consequently, we conclude that Section 309 of CERCLA is properly served by basing the statute of limitations analysis on the first step alone, i.e., whether the claims are timely under Section 337 and Section 338. CERCLA preempts the second step in the process thereby eliminating the 10-year bar of Section 337.15 in this category of cases . . . it does not matter here that ACC failed to satisfied the 10-year limitations period of 337.15. It is sufficient that ACC brought its claims for breach of contract and negligence within four years [Section 337] and three years [Section 338], respectively, of discovering the cause of the property damage. Accordingly, the trial court properly found that ACC's claims were timely filed." Angeles Chemical Company, Inc. v. Spencer & Jones, supra, at 125-26, 127.


Because of CERCLA pre-emption the Sutter Creek plaintiffs' causes of action for permanent nuisance accrued in May, 1994 when they first learned their home sites were contaminated with arsenic. An action for permanent nuisance was filed in April, 1995, well within the three year statute of limitations. Because of the federal statute, plaintiffs could claim as damage diminution in property value against both the original polluter and a developer because the ten year limitation on claims for latent defects did not apply under Angles Chemical Company. This paved the way for AlliedSignal to pay two-thirds of the lost property value, with the developer paying the remaining third. Absent federal law, these plaintiffs would have been left with no remedy.

It is time to change California's nuisance laws, which insulate polluters from liability by denying the application of "delayed discovery," long recognized in personal injury cases. California holds that the three year statute of limitations of C.C.P.Section 338 for a permanent nuisance "runs with the land" and requires that an action for permanent nuisance must be brought within three years after the nuisance begins, even though underground pollution is silent, invisible and often not discovered for years or decades. The application of this rule is irrational and severely impacts owners of properties suffering from concealed damage because only under a permanent nuisance can an owner collect for diminution in value.

Only a handful of California Courts of Appeal have been critical of California's enforcement of nuisance and pollution laws that developed in the 1800s. Capogeannis v. Superior Court (Spence) (1993)12 Cal. App. 4th 684, 15 Cal. Rptr. 2d 796; Newhall Land and Farming Company v. Superior Court (1993) 19 Cal. App. 4th 334, 23 Cal. Rptr. 377.

The California Supreme Court had the opportunity to correct decades of judge made pro-polluter law in 1996 in Mangini v. Aerojet-General (1996) 12 Cal. 4th 1087, 51 Cal. Rptr. 272 and not only declined to do so, but endorsed California's pro-polluter laws by releasing a multi-million dollar corporation that intentionally dumped tons of waste rocket fuel and trichloroethylene [TCE] on 2,400 acres in Sacramento County that continues to pollute the aquifer of Sacramento County with a known carcinogen.

There are several Legislative remedies that should be adopted.

In order to protect properties that do not qualify under CERCLA, Section 338 should be amended to provide that the three year statute of limitations for a permanent nuisance action begins to run from the date the plaintiff discovers, or should have reasonably have discovered, the nuisance.

The ten year limitation for actions for damage caused by latent defects should not apply in cases where the latent defect passed onto a good faith buyer involves permanent environmental damage. It is simply a matter of placing the responsibility on those who have profited by foisting their clean-up costs onto innocent parties.

Lastly, in case of continuing nuisance, where many years are necessary to clean-up pollution, diminution in value should be recognized as an element of damages.

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