IN THE MATTER OF VENDING COMPONENTS, INC. AND BUILDEX, INC.

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NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6646-03T26646-03T2

IN THE MATTER OF VENDING

COMPONENTS, INC. AND BUILDEX,

INC.

_________________________________________________

 

Submitted March 13, 2006 - Decided May 9, 2006

Before Judges Fall, C.S. Fisher and Yannotti.

On appeal from a final agency decision of the New Jersey Department of Environmental Protection, NJ DEP No. E86297.

Marcus, Brody, Ford, Kessler & Sahner, attorneys for appellant Buildex, Inc. (Todd M. Sahner, on the brief).

Zulima V. Farber, Attorney General, attorney for respondent Department of Environmental Protection (Patrick DeAlmeida, Assistant Attorney General, of counsel; Rachel Jeanne Lehr, Deputy Attorney General, on the brief).

PER CURIAM

In this appeal, we consider whether the New Jersey Department of Environmental Protection (DEP) acted arbitrarily in recently rescinding its approval -- granted eighteen years earlier -- of a negative declaration that had been submitted pursuant to the New Jersey Environmental Cleanup Responsibility Act (ECRA), now known as the Industrial Site Recovery Act (ISRA), N.J.S.A. 13:1K-6 to -33, concerning the environmental condition of the property in question, when the DEP refused in 1996 to rescind its approval of the same negative declaration for what might appear to be similar reasons -- a determination that we upheld. See In re Railroad Realty Associates, 313 N.J. Super. 225 (App. Div. 1998). Because the appeal presents an inadequate factual record for our consideration of the legal issues raised, we vacate the final agency decision in question and remand to the DEP with the direction that it transfer the matter to the Office of Administrative Law for a hearing and findings of fact, following which the DEP should again take up the question of whether the extraordinary remedy of rescission is appropriate in this case.

I

This appeal concerns approximately 1.3 acres located at 204 Railroad Avenue in Hackensack (the property). According to the DEP, the property had been utilized many years earlier as a horse stable and an ice manufacturing facility. Sometime in the 1930's, the Tap-Rite Division of Vending Components, Inc. (Vending Components) began manufacturing carbonated beverage dispensing equipment at this site. Id. at 229. In 1985, Vending Components sold the property and substantially all its assets to Buildex, Inc. (Buildex). In connection with that transfer, and as required by ISRA, Vending Components submitted documentation to the DEP, asserting there had been "no known spills or discharges of hazardous substances or wastes" on the property. Ibid.

In our 1998 decision in Railroad Realty, we described the communications and events surrounding the transfer to Buildex in the following way:

In that documentation, Vending Components asserted that, "[b]ased on the background information supplied and a site inspection, we feel that no environmental sampling is necessary." See N.J.A.C. 7:26B-3.2(d) (repealed) (sampling may be avoided if owner or operator provides fully documented justification). Vending Components informed the DEP that a number of industrial solvents and other chemicals had been used on the premises and that some hazardous substances would remain stored at the site after the sale to Buildex. Vending Components also informed the DEP that the site contained an abandoned well and an abandoned underground oil tank, which was full of oil. The tank had been tested in November 1985 and was found to be "tight."

After receipt of this documentation, an inspector from the DEP's Bureau of Industrial Site Evaluation examined the site. The only deficiency he noted was one inch of oily sludge on the floor of the compressor room. After receipt of his report, the DEP approved Vending Components' negative declaration on January 16, 1986. The approval recognized the presence of "limited quantities of hazardous substances" on the site, but found that the materials were "being handled in accordance with appropriate DEP regulations."

[Id. at 230.]

As a result, the transfer to Buildex was consummated. It appears from the record that Buildex then formed an entity known as Taprite Products Corp. (Taprite), which engaged in an operation similar to that of Vending's Tape Rite Division. Id. at 231.

Within the year, Taprite entered into an agreement to sell the property to Railroad Realty Associates (RRA). Taprite employed an environmental consultant and submitted "substantially similar" negative declaration documentation as had been submitted by Vending Components. Ibid. Taprite also asserted that it did not believe any environmental sampling was necessary. An inspector from the DEP's Bureau of Industrial Site Evaluation examined the property in June 1986 and found no deficiencies. Ibid. As a result, Taprite's negative declaration was approved on September 11, 1986 and RRA thereafter assumed ownership of the property. Ibid.

We described the events surrounding RRA's ownership and actions regarding the property in Railroad Realty:

RRA altered the property, and in 1989, took in three industrial tenants; two of which utilized solvents containing tri-chloroethane in their operations.

When it undertook to sell the property in February 1990, RRA found that it had an ECRA problem. The abandoned oil tank failed a precision test, and after its removal, hazardous contaminants including trichloro-ethane were found in the soil around the excavation site. On April 9, 1990, RRA submitted an application to the DEP for an administrative consent order pursuant to N.J.A.C. 7:26C-7.1 to -7.6, which permits an industrial establishment to be sold before ISRA remediation requirements are satisfied, if the seller makes adequate financial assurance that the clean-up will eventually be carried out.

The parties entered into an administrative consent order on May 9, 1990, which required RRA to obtain and post financial assurance in the amount of $250,000. On May 15, 1990, [First Indemnity of America Insurance Company (First Indemnity)] executed and issued to the DEP a performance bond in that amount, assuring RRA's performance under the administrative consent order. RRA then completed the sale of the property [to 656 Ninth Avenue Associates].

[Id. at 230.]

RRA declared bankruptcy in March 1992 without having met ISRA's clean-up requirements. Ibid. In December 1993, the DEP declared that RRA was in default and, as a result, directed First Indemnity to perform in accordance with its surety bond. Id. at 230-31.

First Indemnity applied to the DEP for a rescission of the negative declaration approvals previously granted to Vending Components and Taprite. The DEP denied that application on September 25, 1996, determining that First Indemnity had failed to submit sufficient information to justify rescission. Ibid. An application for reconsideration was denied on December 10, 1996. Ibid. First Indemnity filed an appeal from the DEP's final decision, arguing that

the DEP's decision to approve the negative declarations without first undertaking groundwater and soil sampling was contrary to the DEP's own regulations, and that the DEP's refusal to rescind the negative declarations was arbitrary, capricious and unreasonable, and not supported by substantial, credible evidence in the record. In substance, [First Indemnity] contends that the DEP should either order Vending Components or Taprite to remediate the contamination at the property or act to remediate the site on its own.

[Id. at 231.]

In response, the DEP argued that it was under no obligation to rescind its prior approvals and that such a request represented "extraordinary relief, which may be granted only in the rarest of circumstances." Ibid.

We agreed with the DEP's position as to the extraordinary nature of the relief sought by First Indemnity in Railroad Realty. We concluded that the circumstances significantly differed from those cases in which we upheld the DEP's rescission of negative declaration approvals, see Cadgene, supra, 286 N.J. Super. 270; Chemos Corp. v. State of N.J., Dep't of Environ. Protect., 237 N.J. Super. 359 (App. Div. 1989), because in those cases the rescission resulted from "defects in the approval process," Railroad Realty, 313 N.J. Super. at 233, explaining:

In Chemos, the approval was given notwithstanding an inspector's report which affirmatively stated that sampling should be undertaken first. The DEP characterized that action as a ministerial error, since normal procedure would have been to follow the recommendations in the inspector's report. The error was corrected through rescission. In Cadgene, the seller made affirmative misrepresentations in its certifications to the DEP, which led the DEP to approve the negative declaration under false pretenses. Again, the situation was corrected through rescission. Here, however, there is nothing in the record to indicate that either Vending Components or Taprite affirmatively misrepresented the environmental condition of the property or that there was a ministerial mistake on the part of the DEP. The inspections carried out prior to each approval found either a minor deficiency or none at all.

[313 N.J. Super. at 233 (emphasis added; citations omitted).]

As a result, we determined there was no evidence at that time to suggest the approval of Vending Component's and Taprite's negative declarations was fraudulently obtained or to suggest that the DEP had made a ministerial mistake. And, in deferring to its expertise, we concluded that the DEP did not act arbitrarily or capriciously in refusing to rescind the approval of a negative declaration when imposing environmental remediation upon a successor to the prior owners. Id. at 234-35.

II

There is little in the record to indicate what has occurred with this property between our decision in Railroad Realty, and the DEP's January 16, 2003 statement. In arguing against rescission in Railroad Realty, the DEP argued there was no evidence of a material misrepresentation or a ministerial mistake when it approved Vending Component's and Taprite's negative declarations. In contrast, in its January 16, 2003 statement, the DEP declared that Vending Components, Buildex and Taprite "did not accurately depict all areas of concern, the full type, nature, extent and magnitude of contamination" on the property. The DEP apparently based its more recent conclusion on a report provided by First Indemnity, which, with the submission of that report and its underlying investigation, expended the full amount of its surety bond. Based upon what that report apparently disclosed, the DEP advised Buildex on January 16, 2003 of the following:

In 1990 Corporate Woodworking, Inc., Rototech Corporation, and JMJ Screen Printing Co., subsequent operators on the same property, triggered ECRA due [to] the sale of [the] property from [RRA] to 656 Ninth Avenue Associations. In March of 1990 as part of the investigation and the removal of a #2 fuel oil tank at the Corporate Woodworking, Inc. leasehold; elevated levels of chlorinated volatile organic compounds (CVOC) were detected in soil and groundwater. The CVOCs were determined to be unrelated to the #2 fuel oil tank. Subsequent investigations of the CVOC contamination by soil gas survey sampling, soil sampling and groundwater sampling indicate contamination exists on the property. High levels of CVOCs exist at the Railroad Embankment Area (Area C), Former Degreasing Area (Area D), Drain Pad Area (Area F) and a Former Plating Building (Area E) used by Vending Components, Inc.

The DEP also asserted in its January 16, 2003 letter that sampling of these areas was not conducted when Vending Components, Buildex and Taprite owned the property, and, also, that those entities did not disclose to the DEP the existence of the Former Plating Building, which was discovered during First Indemnity's investigation by way of a 1950 map and aerial photographs. The DEP asserted that this building

appears to have been demolished in 1973 to construct a building addition to an existing building. Historical records indicate that Vending Components, Inc. used large quantities of chlorinated solvents contained in degreasers on this property. A 1981 Selected Substance Report document[ed] approximately 18,000 pounds of Trichloro-ethane (TCA) was disposed of annually. A 1985 Hazardous Waste Manifest by Vending Components shows 4,622 pounds of TCA and 3,423 pounds of plating bath waste were manifested.

Some additional detail was provided in a DEP letter to Buildex dated July 13, 2004.

In light of this information, the DEP indicated that it would rescind its 1986 approval of the negative declarations of Vending Components and Taprite. The DEP, however, held that determination in abeyance and entered into discussions with Buildex's representatives. On July 13, 2004, the DEP rendered its final decision to rescind the negative declarations issued to Vending Components and Taprite.

III

Buildex appealed, raising the following arguments for our consideration:

I. THE DEP'S DECISION TO RESCIND THE NEGATIVE DECLARATION SHOULD BE REVERSED BY THIS COURT BECAUSE NO SUFFICIENT BASIS IN FACT OR LAW EXISTS TO WARRANT A RESCISSION.

A. THE DEP'S APPROVAL OF THE NEGATIVE DECLARATION IS NOT A MINISTERIAL MISTAKE.

B. TAP-RITE DID NOT [MISREPRESENT] THE CONDITION OF THE SITE TO OBTAIN THE DEP'S APPROVAL OF THE NEGATIVE DECLARATION.

II. THE DEP SHOULD BE JUDICIALLY ESTOPPED FROM RESCINDING THE NEGATIVE DECLARATION BECAUSE IT SUCCESSFULLY ARGUED PREVIOUSLY THAT RESCISSION IN THESE CIRCUMSTANCES IS INAPPROPRIATE AS A MATTER OF LAW.

III. THE DEP SHOULD BE PRECLUDED FROM RESCINDING THE NEGATIVE DECLARATION BECAUSE IT HAS ACTED WITHOUT REASONABLE DILIGENCE AND THE PARTIES HAVE DETRIMENTALLY RELIED FOR EIGHTEEN YEARS ON THE NEGATIVE DECLARATION.

IV. THE DEP'S DECISION TO RESCIND THE NEGATIVE DECLARATION SHOULD BE REVERSED BECAUSE IT IS PLAINLY UNREASONABLE AND IN CONTRAVENTION OF PUBLIC POLICY.

As a general matter, these issues present a conflict between a former property owner's expectation of repose upon receiving approval of its negative declaration, on the one hand, and the public interest in obtaining remediation of contaminated property that is embodied in various pieces of legislation, including ISRA.

Buildex contends that the long passage of time since Taprite's negative declaration was approved in 1986, together with the DEP's rejection of First Indemnity's attempt to have that negative declaration rescinded, a decision we affirmed in Railroad Realty in 1998, have created circumstances that should preclude the DEP's revisiting of its prior determinations at this late date absent proof of a ministerial mistake or misrepresentation. See Railroad Realty, supra, 313 N.J. Super. at 233. The DEP argues that any such interest in repose must give way to the legislative intent that responsibility for remediation be strictly imposed upon a property owner and that its determination to rescind an approval previously given should not be disturbed by this court unless the decision is arbitrary or capricious.

These contentions raise interesting questions not previously resolved by our courts. Unfortunately, we are in no position to resolve these arguments because of the rather bald record presented. The matter cannot turn simply on the broad-based liability imposed by ISRA on property owners and ISRA's purpose of preventing private businesses from imposing upon the public the expense of cleaning up abandoned industrial sites contaminated with hazardous substances, and the granting of approval of a negative declaration cannot be as meaningless as the DEP's arguments would suggest. Here, as the record that preceded our ruling in Railroad Realty demonstrates, the DEP has had numerous opportunities and a considerable period of time to rescind its approval of Taprite's negative declaration. Until recently, it not only failed to take such action but, in fact, vigorously -- and successfully -- resisted First Indemnity's claim that its prior approval be rescinded. Moreover, there have been activities on the property since the approval of Taprite's negative declaration that may have created contamination not present when Buildex was the property's owner. While it is true that a successor may be obligated to remediate contamination created by a predecessor, there is nothing in ISRA to suggest that a predecessor owner may be obligated to remediate contamination caused by a successor.

In consideration of the passage of a significant amount of time that has elapsed since granting approval in 1986, and of the DEP's determination not to rescind in 1996, a decision successfully defended on appeal in 1998, we conclude that a greater record of all relevant circumstances should be considered by the DEP before again considering whether to take the extraordinary step of rescinding its 1986 approval of Taprite's negative declaration.

The matter should be transferred to the Office of Administrative Law for the conducting of a plenary hearing into these questions. This examination should include, but not necessarily be limited to, the reasons why the DEP approved the negative declaration in 1986, which should at least include the information then known, the accuracy of the content of the negative declaration, and the difficulty in ascertaining other information, including the information upon which the asserted right to rescind is now based. This hearing should also ascertain the uses to which the property has been put since Buildex's transfer of the property and the likelihood that these subsequent uses brought about the contamination referred to by the DEP in deciding to rescind its earlier approval of the negative declaration. We also direct that the hearing regarding the circumstances surrounding the DEP's decision to rescind its approval should also encompass those circumstances upon which Buildex bases the estoppel arguments presented in its Points II and III. In short, we impose no limitation on the scope of the plenary hearing, but require only that it be broad enough to envelope all those circumstances urged by the parties to be relevant to their contentions in this appeal or as may be deemed relevant upon further examination of those issues. In short, our mandate should be broadly interpreted in the spirit in which it has been imposed. See, e.g., Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 621 (App. Div.), certif. denied, 183 N.J. 591 (2005); Bubis v. Kassin, 353 N.J. Super. 415, 427-28 (App. Div. 2002).

For these reasons, we reverse the final agency decision in question and remand for further proceedings, including the transfer of the matter to the OAL for a plenary hearing in conformity with this opinion. We do not retain jurisdiction.

 

ISRA requires owners of industrial sites to develop a cleanup plan for property contaminated by hazardous waste as a precondition to the sale or transfer of a business, or to "certify in a 'negative declaration' that remediation is unnecessary." In re Cadgene Family Partnership, 286 N.J. Super. 270, 273 (App. Div. 1995), certif. denied, 143 N.J. 330 (1996). A negative declaration is defined by ISRA as "[a] written declaration, submitted by the owner or operator of an industrial establishment . . . to the department, certifying that there has been no discharge of hazardous substances or hazardous wastes on that site, or that any such discharge on the site or discharge that has migrated or is migrating from the site has been remediated in accordance with procedures approved by the department." N.J.S.A. 13:1K-8. The DEP is required to approve or reject the application within 45 days of its submission. N.J.S.A. 13:1K-9.

Two weeks later, the DEP commenced an action in the Law Division against Buildex, alleging that Buildex is responsible for the remediation of the property pursuant to ISRA and the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.24.

(continued)

(continued)

15

A-6646-03T2

May 9, 2006

 


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