Current through Register Vol. 63, No. 3, March 1, 2024
(1) Pre-foreclosure. A person or "holder" who
maintains indicia of ownership primarily to protect a security interest in a
facility, and who does not participate in the management of the facility, is
not an "owner or operator" of such facility under ORS 465.255(1)(a) and (b).
Whether a transaction falls within this exemption will depend on the facts and
on the law otherwise applicable to the transaction:
(a) "Holder" for the purposes of ORS 465.200
et seq. and this rule means a person who maintains indicia of ownership (as
defined below) primarily to protect a security interest (as defined below). A
holder includes the initial holder (such as a loan originator), any subsequent
holder (such as a successor-in-interest or subsequent purchaser of the security
interest on the secondary market), a guarantor of an obligation, a surety, or
any other person who holds ownership indicia primarily to protect a security
interest, or a receiver or other person who acts on behalf or for the benefit
of a holder;
(b) "Indicia of
Ownership" as used in ORS 465.200 et seq. and this rule means evidence of a
security interest, evidence of an interest in a security interest, or evidence
of an interest in real or personal property securing a loan or other
obligation, including any legal or equitable title to real or personal property
acquired incident to foreclosure or its equivalents. Evidence of such interests
include, but are not limited to, mortgages, deeds of trust, liens, judgment
liens, statutory liens, surety bonds and guarantees of obligations, title held
pursuant to a lease financing transaction in which the lessor does not select
initially the leased property (hereinafter "lease financing transaction"),
legal or equitable title obtained pursuant to foreclosure, and their
equivalents. Evidence of such interests also include, but are not limited to,
assignments, pledges, or other rights to or other forms of encumbrance against
property that are held primarily to protect a security interest. A person is
not required to hold title or a security interest in order to maintain indicia
of ownership;
(c) "Primarily to
Protect a Security Interest" as used in ORS 465.200 et seq. and this rule means
that the holder's indicia of ownership are held primarily for the purpose of
securing payment or performance of an obligation. The term "primarily to
protect a security interest" does not include indicia of ownership held
primarily for investment purposes, nor ownership indicia held primarily for
purposes other than as protection for a security interest;
(d) "Security Interest" as used in ORS
465.200 et seq. and this rule means an interest in a facility created or
established for the purpose of securing a loan or other obligation. Security
interests include, but are not limited to, mortgages, deeds of trusts, liens,
judgment liens, statutory liens, and title pursuant to lease financing
transactions. Security interests may also arise from transactions such as sale
and leasebacks, conditional sales, installment sales, trust receipt
transactions, assignments, factoring agreements, accounts receivable financing
arrangements, and consignments, if the transaction creates or establishes an
interest in a facility for the purpose of securing a loan or other
obligation;
(e) "Participating in
the Management of a Facility" as used in ORS 465.200 et seq. and this rule
means that the holder is engaging or has engaged in acts of facility
management, as defined herein:
(A) Actions
that Are Participation in Management. Participation in the management of a
facility means actual participation in the management or operational affairs of
the facility by the holder, and does not include the mere capacity to
influence, or ability to influence, or the unexercised right to control
facility operations. Whether the holder has participated in management
sufficiently to void the exemption is a fact-sensitive inquiry. In all cases,
the determination of whether a holder is participating in management depends on
the holder's actions with respect to the facility rather than the outcomes
associated with such actions. A holder is participating in management, while
the borrower is still in possession of the facility encumbered by the security
interest, only if the holder either:
(i)
Exercises decision-making control over the borrower's environmental compliance,
such that the holder has undertaken responsibility for the borrower's hazardous
substance handling or disposal practices; or
(ii) 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 operational (as opposed to financial or
administrative) decision-making of the enterprise. Operational aspects of the
enterprise include, but are not limited to, functions typically performed by
positions such as that of facility or plant manager, operations manager, chief
operating officer, or chief executive officer. Financial or administrative
aspects include, but are not limited to, functions typically performed by
positions such as that of credit manager, accounts payable/receivable manager,
personnel manager, controller, or chief financial officer.
(B) Actions That are not Participation in
Management:
(i) 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. A prospective holder who
undertakes or requires an environmental inspection of the facility in which
indicia of ownership is to be held, or requires a prospective borrower to clean
up a facility 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 facility's management. Neither the
statute nor this rule requires a holder to conduct or require an inspection to
qualify for the exemption, and the liability of a holder cannot be based on or
affected by the holder not conducting or requiring an inspection.
NOTE:A person who desires to preserve or claim a
defense under ORS 465.255(2)(a) must undertake the appropriate inquiry
described in ORS 465.255(6).
(ii) Policing the Security Interest or Loan.
A holder who engages in policing activities prior to foreclosure or its
equivalents will remain within the exemption provided that the holder does not
by such actions participate in the management of the facility. Such policing
actions include, but are not limited to, requiring the borrower to clean up the
facility 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
facility (including on-site 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);
(iii) Work Out. A holder
who engages in work out activities prior to foreclosure or its equivalent will
remain within the exemption provided that the holder does not by such action
participate in the management of the facility. For purposes of this rule, "work
out" refers to those actions by which a holder, at any time prior to
foreclosure or its equivalents, 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, but are not limited to,
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 relating to
work out activities; and exercising any right or remedy the holder is entitled
to by law or under any warranties, convenants, conditions, representations, or
promises from the borrower;
(iv)
Actions Taken Under ORS 465.255(7)(a). A holder does not participate in the
management of a facility merely by taking a response action in accordance with
ORS 465.255(7)(a).
(2) Post-foreclosure. A person who holds
indicia of ownership after foreclosure or its equivalents primarily to protect
a security interest is not an "owner or operator" of such facility under ORS
465.255(1)(a) and (b) provided that the holder undertakes to sell, re-lease
property 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 property in a reasonably expeditious manner, using whatever
commercially reasonable means are relevant or appropriate with respect to the
facility, taking all facts and circumstances into consideration, and provided
that the holder did not participate in management prior to foreclosure or its
equivalents:
(a) "Foreclosure or its
equivalents" as used in this rule include, but are not limited to, purchase at
foreclosure sale; acquisition or assignment of title in lieu of foreclosure;
termination of a lease financing transaction or other repossession; acquisition
of a right to title or possession; an agreement in satisfaction of the
obligation; or any other formal or informal manner (whether pursuant to law or
under warranties, covenants, conditions, representations, or promises from the
borrower) by which the holder acquires title to or possession of the secured
property. Indicia of ownership that are held primarily to protect a security
interest include legal or equitable title acquired through or incident to
foreclosure or its equivalents;
(b)
A holder who did not participate in management prior to foreclosure or its
equivalents, may sell, release property held pursuant to a lease financing
transaction (whether by a new lease financing transaction or substitution of
the lessee), liquidate, maintain business activities, wind up operations,
undertake any response action in accordance with ORS 465.255(7)(a), and take
measures to preserve, protect, or prepare the secured asset prior to sale or
other disposition without voiding the exemption, provided that the holder
undertakes to sell, re-lease property held pursuant to a lease financing
transaction (whether by a new lease financing transaction or substitution of
the lessee), or otherwise divest the facility in a reasonably expeditious
manner. To show that the holder has acted in a "reasonably expeditious manner,"
the holder may:
(A) Use whatever commercially
reasonable means to sell, re-lease, or divest as are relevant or appropriate
with respect to the facility; or
(B) Establish that the ownership indicia
maintained following foreclosure or its equivalents continue to be held
primarily to protect a security interest if, within 12 months following
foreclosure, the holder lists the facility with a broker, dealer, or agent who
deals with the type of property in question, or advertises the facility as
being for sale or disposition on at least a monthly basis in either a real
estate publication or a trade or other publication suitable for the facility in
question, or a newspaper of general circulation (defined as one with a
circulation over 10,000, 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 area whether the property is located. For
purposes of this provision, the 12-month period begins to run from the time
that the holder acquires marketable title, provided that the holder, after the
expiration of any redemption or other waiting period provided by law, acts
diligently to acquire marketable title. If the holder fails to act diligently
to acquire marketable title, the 12-month period begins to run on the date of
the foreclosure or its equivalents.
(c) A holder that outbids, rejects, or fails
to act upon an offer of fair consideration for the facility establishes that
the ownership indicia in the secured property 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 facility, is the value of the security interest calculated as
follows:
(i) 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 property
subject to a lease financing transaction) pursuant to foreclosure or its
equivalents; plus
(ii) Any unpaid
interest, rent, or penalties (whether arising before or after foreclosure or
its equivalents); plus
(iii) All
reasonable and necessary costs, fees, or other charges incurred by the holder
incident to work out, foreclosure or its equivalents, retention, maintaining
the business activities of the enterprise, preserving, protecting and preparing
the facility prior to sale, re-lease of property held pursuant to a lease
financing transaction (whether by a new lease financing transaction or
substitution of the lessee), or other disposition; plus
(iv) Remedial action costs incurred under ORS
465.255(7)(a); less
(v) Any amounts
received by the holder in connection with any partial disposition of the
property, gross revenues received as a result of maintaining the business
activities of the enterprise, and any amounts paid by the borrower subsequent
to the acquisition of full title (or possession in the case of property subject
to a lease financing transaction) pursuant to foreclosure or its equivalents.
(B) 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 above;
(C) "Outbids, rejects, or fails to act upon
an offer" of fair consideration means that the holder outbids, rejects, or
fails to act upon within 90 days of receipt of a written, bona fide, firm offer
of fair consideration for the property received at any time after six months
following foreclosure and its equivalents. A "written, bona fide, firm offer"
means a legally enforceable, commercially reasonable, cash offer solely for the
foreclosed facility, including all material terms of the transaction, from a
ready, willing, and able purchaser who demonstrates the ability to perform. For
purposes of this provision, the six-month period begins to run from the time
that the holder acquires marketable title, provided that the holder, after the
expiration of any redemption or other waiting period provided by law, acts
diligently to acquire marketable title. If the holder fails to act diligently
to acquire marketable title, the six-month period begins to run on the date of
foreclosure or its equivalents.
(3) Holder's Basis of Liability Independent
of Status as Owner or Operator:
(a)
Notwithstanding this rule, a holder may incur liability in connection with its
activities under the independent bases of liability set forth in ORS
465.255(1)(d) to (7);
(b) A holder
who obtains actual knowledge of a release at a facility acquired by the holder
through foreclosure or its equivalent and then subsequently transfers ownership
or operation of the facility to another person without disclosing such
knowledge shall not be entitled to the security interest exemption and shall be
considered an "owner or operator" under ORS 465.255(1)(c);
(c) This rule applies only to liability under
ORS 465.200 et seq. and does not apply to any right that the state or any
person may have under federal statute, common law, or state statute other than
ORS 465.200 et seq., to recover remedial action costs or to seek any other
relief related to a release.
Stat. Auth.: ORS 465.400, ORS 465.435 & ORS
465.440
Stats. Implemented: ORS 465.200 - ORS 465.455, ORS 465.900,
ORS 466.706 - ORS 466.835 & ORS
466.895