Participation in management (lender liability)

The term "participating in the management of an underground storage tank or underground storage tank system" means that, subsequent to December 6, 1995, the holder was engaging in decisionmaking control of, or activities related to, operation of the underground storage tank or underground storage tank system, as defined herein. 1. Actions that are participation in management. a. Participation in the management of an underground storage tank or underground storage tank system means, for purposes of sections 33.1-24-08-115 through 33.1-24-08-130, actual participation by the holder in the management or control of decisionmaking related to the operation of an underground storage tank or underground storage tank system. Participation in management does not include the mere capacity or ability to influence or the unexercised right to control underground storage tank or underground storage tank system operations. A holder is participating in the management of the underground storage tank or underground storage tank system only if the holder either: (1) Exercises decisionmaking control over the operational (as opposed to financial or administrative) aspects of the underground storage tank or underground storage tank system, such that the holder has undertaken responsibility for all or substantially all of the management of the underground storage tank or underground storage tank system; or (2) Exercises control at a level comparable to that of a manager of the borrower's enterprise, such that the holder has assumed or manifested responsibility for the overall management of the enterprise encompassing the day-to-day decisionmaking of the enterprise with respect to all, or substantially all, of the operational (as opposed to financial or administrative) aspects of the enterprise. b. Operational aspects of the enterprise relate to the use, storage, filling, or dispensing of petroleum contained in an underground storage tank or underground storage tank system, and include functions such as that of a facility or plant manager, operations manager, chief operating officer, or chief executive officer. Financial or administrative aspects include functions such as that of a credit manager, personnel manager, controller, chief financial officer, or similar functions. Operational aspects of the enterprise do not include the financial or administrative aspects of the enterprise, or actions associated with environmental compliance, or actions undertaken voluntarily to protect the environment in accordance with applicable requirements in chapter 33.1-24-08. 2. Actions that are not participation in management preforeclosure. a. Actions at the inception of the loan or other transaction. No act or omission prior to the time that indicia of ownership are held primarily to protect a security interest constitutes evidence of participation in management within the meaning of sections 33.1-24-08-115 through 33.1-24-08-130. A prospective holder who undertakes or requires an environmental investigation (which could include one or more of the following: a site assessment, inspection, or audit) of the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located (in which indicia of ownership are to be held), or requires a prospective borrower to clean up contamination from the underground storage tank or underground storage tank system or to comply or come into compliance (whether prior or subsequent to the time that indicia of ownership are held primarily to protect a security interest) with any applicable law or regulation, is not by such action considered to be participating in the management of the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located. b. Loan policing and work out. Actions that are consistent with holding ownership indicia primarily to protect a security interest do not constitute participation in management for purposes of sections 33.1-24-08-115 through 33.1-24-08-130. The authority for the holder to take such actions may, but need not, be contained in contractual or other documents specifying requirements for financial, environmental, and other warranties, covenants, conditions, representations, or promises from the borrower. Loan policing and work out activities cover and include all such activities up to foreclosure, exclusive of any activities that constitute participation in management. (1) Policing the security interest or loan. (a) A holder who engages in policing activities prior to foreclosure will remain within the exemption provided that the holder does not together with other actions participate in the management of the underground storage tank or underground storage tank system as provided in subsection 1. Such policing actions include requiring the borrower to clean up contamination from the underground storage tank or underground storage tank system during the term of the security interest; requiring the borrower to comply or come into compliance with applicable federal, state, and local environmental and other laws, rules, and regulations during the term of the security interest; securing or exercising authority to monitor or inspect the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located (including onsite inspections) in which indicia of ownership are maintained, or the borrower's business or financial condition during the term of the security interest; or taking other actions to adequately police the loan or security interest (such as requiring a borrower to comply with any warranties, covenants, conditions, representations, or promises from the borrower). (b) Policing activities also include undertaking by the holder of underground storage tank environmental compliance actions and voluntary environmental actions taken in compliance with chapter 33.1-24-08, provided that the holder does not otherwise participate in the management or daily operation of the underground storage tank or underground storage tank system as provided in subsection 1 of section 33.1-24-08-120 and section 33.1-24-08-130. Such allowable actions include release detection and release reporting, release response and corrective action, temporary or permanent closure of an underground storage tank or underground storage tank system, underground storage tank upgrading or replacement, and maintenance of corrosion protection. A holder who undertakes these actions must do so in compliance with the applicable requirements in chapter 33.1-24-08. A holder may directly oversee these environmental compliance actions and voluntary environmental actions, and directly hire contractors to perform the work, and is not by such action considered to be participating in the management of the underground storage tank or underground storage tank system. (2) Loan work out. A holder who engages in work out activities prior to foreclosure will remain within the exemption provided that the holder does not together with other actions participate in the management of the underground storage tank or underground storage tank system as provided in subsection 1. For purposes of this rule, "work out" refers to those actions by which a holder, at any time prior to foreclosure, seeks to prevent, cure, or mitigate a default by the borrower or obligor; or to preserve, or prevent the diminution of, the value of the security. Work out activities include restructuring or renegotiating the terms of the security interest; requiring payment of additional rent or interest; exercising forbearance; requiring or exercising rights pursuant to an assignment of accounts or other amounts owing to an obligor; requiring or exercising rights pursuant to an escrow agreement pertaining to amounts owing to an obligor; providing specific or general financial or other advice, suggestions, counseling, or guidance; and exercising any right or remedy the holder is entitled to by law or under any warranties, covenants, conditions, representations, or promises from the borrower. 3. Foreclosure on an underground storage tank or underground storage tank system or facility or property on which an underground storage tank or underground storage tank system is located, and participation in management activities postforeclosure. a. Foreclosure. (1) Indicia of ownership that are held primarily to protect a security interest include legal or equitable title or deed to real or personal property acquired through or incident to foreclosure. For purposes of sections 33.1-24-08-115 through 33.1-24-08-130, the term "foreclosure" means that legal, marketable, or equitable title or deed has been issued, approved, and recorded, and that the holder has obtained access to the underground storage tank, or underground storage tank system, underground storage tank facility, and property on which the underground storage tank or underground storage tank system is located, provided that the holder acted diligently to acquire marketable title or deed and to gain access to the underground storage tank, underground storage tank system, underground storage tank facility, and property on which the underground storage tank or underground storage tank system is located. The indicia of ownership held after foreclosure continue to be maintained primarily as protection for a security interest provided that the holder undertakes to sell, release an underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, held pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), or otherwise divest itself of the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, in a reasonably expeditious manner, using whatever commercially reasonable means are relevant or appropriate with respect to the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, taking all facts and circumstances into consideration, and provided that the holder does not participate in management as defined in subsection 1 prior to or after foreclosure. (2) For purposes of establishing that a holder is seeking to sell, release pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), or divest in a reasonably expeditious manner an underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, the holder may use whatever commercially reasonable means as are relevant or appropriate with respect to the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, or may employ the means specified in subdivision b of subsection 3. A holder that outbids, rejects, or fails to act upon a written bona fide, firm offer of fair consideration for the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, as provided in subdivision b of subsection 3, is not considered to hold indicia of ownership primarily to protect a security interest. b. Holding foreclosed property for disposition and liquidation. A holder, who does not participate in management prior to or after foreclosure, may sell, release, pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), an underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, liquidate, wind up operations, and take measures, prior to sale or other disposition, to preserve, protect, or prepare the secured underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located. A holder may also arrange for an existing or new operator to continue or initiate operation of the underground storage tank or underground storage tank system. The holder may conduct these activities without voiding the security interest exemption, subject to the requirements of sections 33.1-24-08-115 through 33.1-24-08-130. (1) A holder establishes that the ownership indicia maintained after foreclosure continue to be held primarily to protect a security interest by, within twelve months following foreclosure, listing the underground storage tank or underground storage tank system or the facility or property on which the underground storage tank or underground storage tank system is located, with a broker, dealer, or agent who deals with the type of property in question, or by advertising the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, as being for sale or disposition on at least a monthly basis in either a real estate publication or a traded or other publication suitable for the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, or a newspaper of general circulation (defined as one with a circulation more than ten thousand, or one suitable under any applicable federal, state, or local rules of court for publication required by court order or rules of civil procedure) covering the location of the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located. For purposes of this provision, the twelve-month period begins to run from December 6, 1995, or from the date that the marketable title or deed has been issued, approved and recorded, and the holder has obtained access to the underground storage tank or underground storage tank system, underground storage tank facility and property on which the underground storage tank or underground storage tank system is located, whichever is later, provided that the holder acted diligently to acquire marketable title or deed and to obtain access to the underground storage tank or underground storage tank system, underground storage tank facility and property on which the underground storage tank or underground storage tank system is located. If the holder fails to act diligently to acquire marketable title or deed or to gain access to the underground storage tank or underground storage tank system, the twelve-month period begins to run from December 6, 1995, or from the date on which the holder first acquires either title to or possession of the secured underground storage tank or underground storage tank system, or facility or property on which the underground storage tank or underground storage tank system is located, whichever is later. (2) A holder that outbids, rejects, or fails to act upon an offer of fair consideration for the underground storage tank or underground storage tank system or the facility or property on which the underground storage tank or underground storage tank system is located, establishes by such outbidding, rejection, or failure to act, that the ownership indicia in the secured underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located are not held primarily to protect the security interest, unless the holder is required, in order to avoid liability under federal or state law, to make a higher bid, to obtain a higher offer, or to seek or obtain an offer in a different manner. (a) Fair consideration, in the case of a holder maintaining indicia of ownership primarily to protect a senior security interest in the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, is the value of the security interest as defined in this section. The value of the security interest includes all debt and costs incurred by the security interest holder, and is calculated as an amount equal to or in excess of the sum of the outstanding principal (or comparable amount in the case of a lease that constitutes a security interest) owed to the holder immediately preceding the acquisition of full title (or possession in the case of a lease financing transaction) pursuant to foreclosure, plus any unpaid interest, rent, or penalties (whether arising before or after foreclosure). The value of the security interest also includes all reasonable and necessary costs, fees, or other charges incurred by the holder incident to work out, foreclosure, retention, preserving, protecting, and preparing, prior to sale, the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, release, pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), of an underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, or other disposition. The value of the security interest also includes environmental investigation costs (which could include one or more of the following: a site assessment, inspection, or audit of the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located), and corrective action costs incurred under sections 33.1-24-08-41 through 33.1-24-08-57, or any other costs incurred as a result of reasonable efforts to comply with any other applicable federal, state, or local law or regulation; less any amounts received by the holder in connection with any partial disposition of the property and any amounts paid by the borrower (if not already applied to the borrower's obligations) subsequent to the acquisition of full title (or possession in the case of a lease financing transaction) pursuant to foreclosure. In the case of a holder maintaining indicia of ownership primarily to protect a junior security interest, fair consideration is the value of all outstanding higher priority security interests plus the value of the security interest held by the junior holder, each calculated as set forth in this subparagraph. (b) Outbids, rejects, or fails to act upon an offer of fair consideration means that the holder outbids, rejects, or fails to act upon within ninety days of receipt, a written, bona fide, firm offer of fair consideration for the underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located received at any time after six months following foreclosure, as defined in subsection 3. A "written, bona fide, firm offer" means a legally enforceable, commercially reasonable, cash offer solely for the foreclosed underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located, including all material terms of the transaction, from a ready, willing, and able purchaser who demonstrates to the holder's satisfaction the ability to perform. For purposes of this provision, the six-month period begins to run from December 6, 1995, or from the date that marketable title or deed has been issued, approved and recorded to the holder, and the holder has obtained access to the underground storage tank or underground storage tank system, underground storage tank facility and property on which the underground storage tank or underground storage tank system is located, whichever is later, provided that the holder was acting diligently to acquire marketable title or deed or to gain access to the underground storage tank or underground storage tank system, underground storage tank facility and property on which the underground storage tank or underground storage tank system is located. If the holder fails to act diligently to acquire marketable title or deed or to gain access to the underground storage tank or underground storage tank system, the six-month period begins to run from December 6, 1995, or from the date on which the holder first acquires either title to or possession of the secured underground storage tank or underground storage tank system, or facility or property on which the underground storage tank or underground storage tank system is located, whichever is later. c. Actions that are not participation in management postforeclosure. A holder is not considered to be participating in the management of an underground storage tank or underground storage tank system or facility or property on which the underground storage tank or underground storage tank system is located when undertaking actions under chapter 33.1-24-08, provided that the holder does not otherwise participate in the management or daily operation of the underground storage tank or underground storage tank system as provided in subsection 1 of section 33.1-24-08-120 and section 33.1-24-08-130. Such allowable actions include release detection and release reporting, release response and corrective action, temporary or permanent closure of the underground storage tank or underground storage tank system, underground storage tank upgrading or replacement, and maintenance of corrosion protection. A holder who undertakes these actions must do so in compliance with the applicable requirements in chapter 33.1-24-08. A holder may directly oversee these environmental compliance actions and voluntary environmental actions, and directly hire contractors to perform the work, and is not by such action considered to be participating in the management of the underground storage tank or underground storage tank system.