Environmental Contamination? Hidden Dangers Beneath The Ground

Property ownership can involve serious and unforeseen risks. Such is the case with environmental contamination from underground storage tanks and conflicts among co-owners. A recent Washington Court of Appeals case, Johnston v. Peach, illustrates these perils vividly. In this decision, co-owners of a commercial building in Bellingham faced costly soil pollution from leaking oil tanks left by previous owners. The leaking tanks lead to a decade-long cleanup, and a bitter disputes over expenses and profits. This post explores the dangers of underground storage tanks, including their potential for environmental harm and financial burdens, as well as the risks of co-ownership disputes that can arise when partners fail to share responsibilities fairly. By examining this case, landowners can better understand how such issues escalate into legal battles.

Underground storage tanks pose significant potential threats. In Johnston, former owners installed the tanks for a garbage-hauling business. The tanks leaked oil into the soil over the course of many years. This contaminated the property and triggered mandatory remediation under Washington's Model Toxics Control Act. The cleanup process began in 2013 and lasted until 2023. It involved excavation, environmental assessments, and oversight by the Department of Ecology, costing over $318,000. Such leaks not only devalue properties—reducing the site's worth by hundreds of thousands of dollars in its contaminated state—but also create health risks from polluted groundwater and soil, potential fines from regulators, and liability for harm to neighboring lands. Johnston highlights how hidden tanks can turn a valuable asset into a long-term liability, emphasizing the need for thorough inspections before purchase.

Co-ownership of real property adds another layer of complexity, as disputes can erupt when partners' contributions become uneven. Here, the Johnstons and Peaches owned through an LLC, with each owning an equal interest. Initially, the LLC members shared cleanup costs from personal funds, but when the Peaches stopped contributing, the Johnstons were left to cover the remaining expenses alone. This led to a lawsuit seeking reimbursement, a forced sale of the property, and claims of unjust enrichment, where the Johnstons argued they deserved the full increase in property value—about $650,000 after remediation—and a $270,000 settlement from prior owners. The court pierced the LLC's veil, ordering shared proceeds after reimbursing the Johnstons' extra costs, but rejected full unjust enrichment, noting the initial joint efforts. This outcome shows how co-ownership agreements, even in dissolved entities, can fuel conflicts over management duties, asset distribution, and fair compensation.

The interplay between contamination and co-ownership disputes in Johnston v. Peach reveals how one issue can amplify the other. The remediation not only drained the owners' finances but also strained relationships, as the LLC's informal operations—lacking sufficient contracts—complicated accountability. The appellate court affirmed that, while one party bore the later burdens, equity required proportional sharing of benefits. The case underscores the importance of clear agreements to prevent such rifts. Landowners must recognize that environmental problems like tank leaks can ignite legal fights among partners, potentially leading to court-ordered sales and limited recoveries.

In summary, Johnston v. Peach demonstrates the dangers of underground storage tanks, from environmental contamination to hefty cleanup costs, and the potential for co-ownership disputes to turn partnerships sour. These risks can devastate finances and relationships if the parties fail to address the issues up front. Landowners should consult their lawyers promptly about possible soil contamination, and they should pursue professionally-drafted agreements with their partners to avoid co-ownership pitfalls.

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