Opinion
NOT TO BE PUBLISHED
Super. Ct. No. 165285.
RAYE, Acting P. J.
Defendants Bob and Cheryl Davis (Davis) operated a gas station on their property, which became contaminated with the banned additive MTBE. Plaintiff TBS Petroleum, LLC (TBS) purchased the property from Davis after the discovery of the contamination. When both were named as jointly responsible parties liable for the cost of cleaning up the contamination, TBS sued Davis for indemnity for the cleanup costs.
Davis demurred, arguing the claims were barred due to TBS’s prior knowledge and the language of the sales contract. The trial court sustained the demurrer with leave to amend. After TBS declined to amend, the court entered a judgment of dismissal. TBS appeals, contending that the “as is” clause of the sales contract does not bar its claims for contractual and equitable indemnity. We disagree and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
From 1989 through April 20, 2005, Davis owned and operated a gas station on his property. In 1997 two underground gasoline storage tanks were removed, leaving a third which stored diesel fuel. Soil samples taken from the property revealed the presence of methyl tertiary butyl ether (MTBE).
In December 1997 the Shasta County Department of Resource Management (County) informed Davis no further action was required in connection with the removal of the underground storage tanks. The letter from the County noted nothing precluded the County or any other agency from taking enforcement actions, or exempted the property owner from responsibilities under state law or county ordinances, if existing, additional, or previously unidentified contaminants posed a threat to public health or water quality. In 2002 the California Air Resources Board outlawed the formulation of gasoline with MTBE for use in California.
On December 20, 2004, TBS purchased the property from Davis. Escrow on the property closed on April 20, 2005. Two years later, groundwater samples from the property were tested and MTBE was detected. The California Regional Water Quality Control Board ordered a preliminary site assessment work plan for the property.
In January 2009 TBS filed suit against Davis, seeking damages and declaratory relief for breach of contract, private nuisance, trespass, breach of implied covenant of good faith and fair dealing, and contribution. Davis demurred to the complaint, asserting the “as is” and “risk of loss” clauses in the purchase contract precluded TBS’s causes of action.
The trial court sustained Davis’s demurrer with leave to amend. The court, citing Shapiro v. Hu (1986) 188 Cal.App.3d 324 (Shapiro), noted the use of the phrase “as is” means a sale of the property in its “present or existing condition.” The use of the phrase relieves a seller of real property from liability for defects in the condition of the property. The only exception to this rule is when a seller, through fraud or misrepresentation, intentionally conceals material defects not otherwise visible to the buyer.
The court observed: “‘Appellants have cited no cases, nor have we found any, in which a person selling real property “as is” was liable for defects in the quality or condition of the real property, where the property was not new construction, and the sale was made in good faith and without some form of fraudulent misrepresentation or concealment.’ [Shapiro, supra, 188 Cal.App.3d] at [pp.] 333-334.” The court rejected TBS’s contention that since there were no allegations of misrepresentation or nondisclosure, the “as is” clause was inapplicable.
The court also rejected TBS’s argument that the purchase contract’s indemnity clause permitted its action against Davis. The court concluded: “Accepting plaintiff’s interpretation of the contract, which would allow plaintiff to assert claims against defendants to reimburse plaintiff for expenses associated with correcting conditions that existed on the property at the time of the sale, would eviscerate the ‘as is’ clause. Based on the allegations of the complaint, the contamination existed at the time the property was sold. There are no allegations in the complaint that the plaintiffs were not aware of the contamination or that defendants failed to disclose or misrepresented any facts regarding the existence of contamination on the property. The ‘as is’ clause functions to transfer certain liabilities to the new owner. The claims raised in the present complaint are precisely the type of liabilities that were sold along with the property. A finding that the ‘as is’ clause does not apply would render such clauses meaningless.”
Accordingly, the court sustained the demurrer with leave to amend “[t]o the extent that plaintiff can possibly plead facts demonstrating lack of knowledge on the part of plaintiff or fraud, misrepresentation or failure to disclose on the part of defendants with respect to the condition of the property.” TBS declined to amend its complaint. The trial court entered a judgment of dismissal with prejudice. TBS filed a timely notice of appeal.
DISCUSSION
I
In determining whether TBS properly stated a claim for relief, we treat the demurrer as admitting all material facts properly pled, but not contentions, deductions, or conclusions of fact or law. We also consider matters that may be judicially noticed. In addition, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
II
The parties’ contentions revolve around two provisions of the purchase contract between TBS and Davis: the “as is” clause and the indemnity clause.
The “as is” clause states: “‘As Is’ Sale: [¶] Buyer and Sellers agree that: [¶] (a) Except as specified in this Agreement or as specified in writing and delivered to Buyer by Sellers, neither Sellers nor any other representative of Sellers has made any representations or warranties regarding the Property, including, without limitation, any representations or warranties concerning the Property’s physical condition, access, zoning laws, environmental matters, utilities, or any other matter affecting the Property or the use of the Property; and [¶] (b) Except for the representations and warranties in this Agreement or otherwise delivered to Buyer by Seller in writing, Purchaser has not relied and will not rely on any implied warranties, guaranties, statements, representations, or information about the Property, whether made by Sellers or any other individual representing or purporting to represent Seller. [¶] (c) If Buyer purchases the Property, Buyer purchases the Property ‘As Is’, and Buyer is relying and will rely solely on Buyer’s inspection of the Property and Buyer’s experts’ inspection of the Property.”
The indemnity clause states: “Additional Terms/Indemnity Agreements: [¶] (a) Sellers’ Indemnity Agreement: Except as otherwise expressly provided in this Contract or any attachment to this Contract, Sellers shall indemnify and hold Buyer and the property of Buyer, including said assets, free and harmless from and tender a defense against any and all claims, liability, loss, damage, or expense resulting from Seller’s ownership of said assets or Sellers’ operation of said assets prior to close of escrow, including any claim, liability, loss, or damage arising by reason of the injury to or death of any person or persons, or the damage of any property, caused by Sellers’ use of said assets, the condition of said assets when owned by Sellers, or the sale or manufacture by Sellers of any product or products. Sellers shall also indemnify Buyer against any and all claims, demands, losses and liabilities, including interest, penalties, and reasonable attorney’s fees that Buyer shall incur by reason of any other claims of third parties for periods prior to close of escrow.”
III
On appeal, TBS argues the “as is” clause operates only to bar breach of warranty claims by a buyer arising from allegations that the property is other than represented. According to TBS, since its claims are not based on a breach of warranty, the “as is” clause does not apply and the indemnity clause provides relief. We decline to read the “as is” clause so narrowly.
The purchase contract between the parties states: “If Buyer purchases the Property, Buyer purchases the Property ‘As Is’, and Buyer is relying and will rely solely on Buyer’s inspection of the Property and Buyer’s experts’ inspection of the Property.” The indemnity clause of the purchase contract begins, “Except as otherwise expressly provided in this Contract... Sellers shall indemnify....”
Any sale of real property “as is” is a sale of the property in its present or existing condition. Use of the phrase relieves the seller of real property from liability for defects in that condition. In contrast to the sale of personal property, the sale of real property has long been that of caveat emptor, wherein the buyer assumes the risk on quality or condition of the property, absent express warranty, fraud, or misrepresentation. (Shapiro, supra, 188 Cal.App.3d at pp. 332-333.)
The purchase contract in the present case contained an explicit “as is” clause and an indemnity clause requiring indemnification except as otherwise provided in the contract. TBS’s complaint does not state that it was not aware of the MTBE contamination prior to the close of escrow or that the property had previously been found to contain contaminants. Nor does the complaint allege any fraud or misrepresentation on the part of Davis in regard to the contamination. Accordingly, the trial court was correct in sustaining Davis’s demurrer with leave to amend to state it had no knowledge of the contamination or to allege fraud or misrepresentation on the part of Davis.
TBS argues the “as is” clause does not apply to “unmentioned environmental liabilities.” In support, TBS relies on Wiegmann & Rose Intern. Corp. v. NL Industries (N.D.Cal. 1990) 735 F.Supp. 957. In Wiegmann, the seller argued the “as is” clause barred indemnity claims under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.; CERCLA) brought by Department of Health Services. The seller contended the clause released it from liability for all defects, including liability under CERCLA. The court found the “as is” clause was “standard, boiler-plate language routinely included in every contract.... It is not even clear from the record that the ‘as is’ clause was a negotiated term of the land sale contract.” (Wiegmann, at p. 961.) The court concluded the clause could not have been intended to release the seller from statutory causes of action arising out of its contamination of the property. (Ibid.)
Here, however, TBS’s complaint does not state a cause of action for contribution under CERCLA or allege TBS incurred any costs for remediation under CERCLA. TBS provides no authority that the “as is” clause found in its purchase contract does not apply to its causes of action for breach of contract, private nuisance, trespass, breach of implied covenant of good faith and fair dealing, contribution, and declaratory relief.
We agree with the trial court that TBS’s reliance on Umbra U.S.A., Inc. v. Niagara Frontier Transp. Auth. (N.Y.App.Div. 1999) 693 N.Y.S.2d 371 is unavailing because it is based on a New York statute and conflicts with California law.
TBS also asserts that its knowledge of the contamination is “in the absence of an express assumption of liability, irrelevant to the determination of indemnity for pollution occurring during the Seller’s ownership of the property. The Seller is held strictly liable for the act of polluting the property; the Buyer’s knowledge of the pollution at the time of sale does not relieve the Seller of that liability. In fact, the Buyer is also strictly liable for the cost of remediating the contamination based purely on the ownership of the property, even if the Buyer/Owner did not pollute and had no prior knowledge of the pollution.” Strikingly, TBS provides no authority for these assertions, but simply states them as fact. To entertain this interpretation of the contract would be to eviscerate the “as is” clause.
DISPOSITION
The judgment is affirmed. Defendants shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)
We concur: ROBIE, J., BUTZ, J.