25548.1
. As used in this chapter, the following terms have the
following meaning:
(a) "Actual benefit" means the amount, if any, realized by the
lender upon the disposition of property acquired through foreclosure
or its equivalent as a direct result of a removal or remedial action
undertaken by another person, not to exceed the amount, if any, by
which the disposition proceeds exceed the sum of the balance of all
of the following:
(1) The loan or obligation or the amount of the lien, evidenced by
the loan or obligation outstanding at foreclosure or its equivalent.
(2) The costs, including attorneys' fees, incurred by the lender
in connection with the foreclosure or its equivalent, subsequent
ownership, any removal or remedial action, and disposition of the
property.
(b) "Borrower, debtor or obligor" means a person who is obligated
to a lender under a loan or obligation, whether or not the lender
maintains a security interest in that person's property.
(c) "Damages" includes compensatory damages, exemplary damages,
punitive damages, and costs of every kind and nature, including, but
not limited to, costs of a removal or remedial action.
(d) "Fiduciary" means a person who is acting in any of the
following capacities:
(1) As trustee for a trust described in paragraph (1) or (2) of
subdivision (a) of Section 82 of the Probate Code.
(2) As a fiduciary in any arrangement described in paragraphs (1)
to (3), inclusive, or paragraphs (5) to (14), inclusive, of
subdivision (b) of Section 82 of the Probate Code.
(3) A trustee appointed in proceedings under any state or federal
bankruptcy law.
(4) An assignee or a trustee acting under an assignment made for
the benefit of creditors.
(5) A court-appointed receiver.
(e) "Finance lease" means a transaction with respect to which both
of the following apply:
(1) The lessor does not select or manufacture the goods or does
not supply the goods, except in the case of a re-lease, whether it is
created by a new transaction or substitution of the lessee.
(2) The lessor acquires the goods or right to possession and use
of the goods in connection with the lease or a prior lease
transaction.
(f) "Foreclosure or its equivalent" means the acquisition of
property by a lender through any of the following:
(1) Judicial or nonjudicial foreclosure of the lender's security
interest in the property or acceptance of a deed or other conveyance
in satisfaction thereto.
(2) Acceptance of a deed in lieu or other conveyance in
satisfaction of a loan or obligation previously contracted.
(3) Termination of a finance lease by consent or default.
(4) Any other formal or informal manner, whether pursuant to law
or under warranties, covenants, conditions, representations or
promises from the borrower, by which the lender acquires, for
subsequent disposition, actual possession of the property subject to
a security interest.
(g) "Hazardous material" has the same meaning as defined in
subdivision (d) of Section 25260.
(h) (1) "Indicia of ownership" 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, but not limited to, any legal or equitable
title to real or personal property acquired incident to foreclosure
or its equivalent.
(2) "Evidence of an interest" includes, but is not limited to, all
of the following:
(A) Mortgages.
(B) Deeds of trust.
(C) Liens.
(D) Surety bonds and guarantees of obligations.
(E) Title held pursuant to a finance lease in which the lessor
does not select initially the leased property.
(F) Legal or equitable title obtained pursuant to foreclosure or
its equivalent.
(G) Assignments, pledges, or other rights to, or other forms of,
encumbrance against property that are held primarily to protect a
security interest.
(3) A person is not required to hold title or a security interest
to maintain indicia of ownership.
(i) "Lender" means a person to the extent of the capacity in which
that person maintains indicia of ownership primarily to protect a
security interest or makes, acquires, renews, modifies, or holds a
loan or obligation from a borrower. "Lender" includes either of the
following persons:
(1) Any person who acts as, or on behalf of, a lender in
connection with any aspect of the solicitation, negotiation,
consummation, disbursement, administration, servicing, collection,
enforcement, or foreclosure or its equivalent of a loan or obligation
or security interest in property such as a surety, escrow, or title
company.
(2) Any person who makes, secures, acquires, or holds a loan or
obligation or security interest by assignment, sale, pledge,
subrogation, succession, or operation of law, or becomes the receiver
for the holder of a loan or obligation or security interest.
(j) "Loan or obligation" means a loan, revolving or nonrevolving
line of credit, finance lease, sale-leaseback that provides for a
purchase option in favor of the lessee, installment sale contract,
sale on account, or other credit sale, letter of credit, forbearance
or guaranty, collateral pledge, or other suretyship obligation, and
any extension, renewal, or modification thereof. A loan or obligation
may or may not involve a security interest in property.
(k) (1) Except as provided in paragraphs (3) and (4), "participate
(or participation) in the management of the property" means actual
participation in the management or operational affairs of the
property by the lender while the borrower, under the loan or
obligation, is in possession of the property, and the lender
exercises decisionmaking control over the environmental compliance by
the borrower, so that the lender assumes responsibility for the
hazardous material handling or disposal practices of the borrower, or
exercises control at a level comparable to that of a manager of the
enterprise of the borrower, so that the lender assumes or manifests
responsibility for the overall management of the enterprise
encompassing the day-to-day decisionmaking of the enterprise with
respect to either of the following:
(A) Environmental compliance.
(B) All, or substantially all, of the operational, as opposed to
financial or administrative, aspects of the enterprise other than
environmental compliance.
(2) For purposes of paragraph (1), the following terms have the
following meaning:
(A) "Operational aspects of the enterprise" includes, but is not
limited to, functions such as that of facility or plant manager,
operations manager, chief operating officer, or chief executive
officer.
(B) "Financial or administrative aspects" includes, but is not
limited to, functions such as that of a credit manager, accounts
payable/receivable manager, personnel manager, controller, or chief
financial officer.
(3) Notwithstanding paragraph (1), "participation in the
management of the property" does not include an act or omission by a
prospective lender prior to making, acquiring, or holding a loan or
obligation. "Participation in the management of the property" also
does not include the actions taken by a prospective lender who
undertakes or requires an environmental inspection of property prior
to making, acquiring, or holding a loan or obligation. A lender or
prospective lender does not "participate in the management of the
property" if the lender or prospective lender requires the borrower
to clean up the property or requires the borrower to comply or come
into compliance with any applicable law or regulation. This chapter
does not require a lender to conduct or require an inspection prior
to foreclosure or its equivalent to qualify for the exemption
provided by this chapter, and the liability of a lender shall not be
based on or affected by whether the lender conducts or requires an
inspection prior to foreclosure or its equivalent.
(4) Loan policing and work out activities, as specified in
paragraphs (5) and (6), that are consistent with holding ownership
indicia primarily to protect a security interest and consistent with
a loan or obligation made, acquired, or held primarily for purposes
other than investment purposes, do not constitute participation in
the management of the property. The authority for the lender to take
those actions may, but are not required to, 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 include all activities up to foreclosure or its
equivalent.
(5) A lender who engages in loan policing activities prior to
foreclosure or its equivalent is exempt from liability pursuant to
this chapter if the lender does not, by those actions, participate in
the management of the property. Those actions include, but are not
limited to, all of the following:
(A) Requiring the borrower to conduct a removal or remedial action
during the term of the security interest or loan or obligation.
(B) Requiring the borrower to comply or come into compliance with
applicable federal, state, and local environmental and other laws
during the term of the security interest or loan or obligation.
(C) Securing or exercising authority to monitor or inspect the
property, including onsite inspections, or the business or financial
condition of the borrower during the term of the security interest or
loan or obligation.
(D) Taking other actions to adequately police the loan,
obligation, or security interest, such as requiring the borrower to
comply with any warranties, covenants, conditions, representations,
or promises in connection with the security interest or loan or
obligation.
(6) (A) A lender who engages in work out activities prior to
foreclosure or its equivalents is exempt from liability pursuant to
this chapter if the lender does not, by those actions, participate in
the management of the property.
(B) "Work out" means those actions by which a lender, at any time
prior to foreclosure or its equivalent, seeks to prevent, cure, or
mitigate a default by the borrower, or to preserve or prevent the
diminution of the value of the property, security interest, or loan
or obligation.
(C) Work out activities include, but are not limited to, all of
the following:
(i) Restructuring or renegotiating the terms of the loan,
obligation, or security interest.
(ii) Requiring payment of additional rent or interest.
(iii) Exercising rights pursuant to an assignment of accounts or
other amounts owing to a lender.
(iv) Requiring or exercising rights pursuant to an escrow
agreement pertaining to amounts owing to a lender.
(v) Exercising forbearance.
(vi) Providing specific or general financial or other advice,
suggestions, counseling, or guidance.
(vii) Exercising any right or remedy the lender is entitled to by
law or under any warranties, covenants, conditions, representations,
or promises from the borrower.
(7) A lender does not participate in the management of the
property by taking any response action under Section 107(d)(1) of the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (42 U.S.C. Sec. 9607(d)(1)). However, the lender may be
liable for damages, as defined by this chapter, that occur as a
result of the gross negligence or willful misconduct of the lender in
his or her performance of a response action under Section 107 (d)(1)
of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Sec. 9607(d)(1)).
(l) "Person" means any entity, including, but not limited to, an
individual, estate, trust, firm, business trust, joint stock company,
corporation, partnership, joint venture, limited liability company,
association, or government. "Person" includes, but is not limited to,
any city, county, district, the state, or the federal government, or
any department, subdivision, or agency thereof.
(m) (1) "Primarily to protect a security interest" means that the
indicia of ownership of a lender are held primarily for the purpose
of securing payment or performance of an obligation.
(2) "Primarily to protect a security interest" does not include
indicia of ownership held primarily for investment purposes or
indicia of ownership held primarily for purposes other than as
protection for a security interest. A lender may have other,
secondary reasons for maintaining indicia of ownership, but the
primary reason that any indicia of ownership are held shall be as
protection for a security interest.
(n) "Property" means any real or personal property where hazardous
materials are or were generated, handled, managed, deposited,
stored, disposed of, placed, released, or otherwise have come to be
located. In the context of a loan or obligation, "property" includes
any real or personal property in which the obligor has or had an
ownership, leasehold, or possessory interest, whether or not it was
the subject of a security interest for the loan or obligation.
(o) "Release" has the same meaning as defined in Section 25320.
(p) "Remedial action" has the same meaning as defined in
subdivision (g) of Section 25260.
(q) "Removal" means the cleanup or removal of released hazardous
materials from the environment or the taking of other actions that
may be necessary to prevent, minimize, or mitigate damages that may
otherwise result from a release or threatened release, as further
defined in Section 101(23) of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Sec. 9601
(23)).
(r) "Security interest" means an interest in a property created or
established for the purpose of securing a loan or obligation.
Security interests include, but are not limited to, mortgages, deeds
of trust, liens, and title pursuant to a finance lease. Security
interests may also arise from transactions such as sale and
leasebacks, conditional sales, installment sales, trust receipt
transactions, certain assignments, factoring agreements, and accounts
receivable financing arrangements and consignments if the
transaction creates or establishes an interest in a property for the
purpose of securing a loan or other obligation.