On appeal from Superior Court of New Jersey, Law Division, Hudson County
King, Ashbey and Skillman. The opinion of the court was delivered by Skillman, J.A.D.
The issue presented by this appeal is whether a transferee of property conveyed in violation of the Environmental Cleanup Responsibility Act (ECRA), N.J.S.A. 13:1K-6 to 13, may sue the transferor for damages without voiding the conveyance. The trial court held that the transferee's sole remedy under ECRA was to void the conveyance and recover incidental damages. We conclude that the trial court's interpretation of the remedies authorized by ECRA was unduly restrictive and therefore reverse.
On April 28, 1983, the predecessor in title of plaintiff Dixon Venture (Venture) entered into a contract with defendant Joseph Dixon Crucible Company, the predecessor of defendant Dixon Ticonderoga Company (Ticonderoga), to purchase a large industrial complex in Jersey City. The complex had been used for at least 20 years to manufacture pencils, erasers, crayons, lubricants and related products. Prior to the closing, the Legislature enacted ECRA, which became effective on December 31, 1983. See L. 1983, c. 330, § 11. Title to the property was conveyed on February 28, 1984. Neither the contract of sale nor any of the closing documents contain any reference to
ECRA and no cleanup plan under ECRA was submitted prior to closing.*fn1 Venture leased a portion of the property back to Ticonderoga for a two year term. Around September 1985, the parties terminated the lease-back.
In connection with the termination of the lease, Venture sent a letter, dated July 15, 1985, formally requesting that Ticonderoga commence the steps required to comply with ECRA. On October 9, 1985, Venture sent a second letter to Ticonderoga, asserting that Ticonderoga had been obligated to comply with ECRA prior to conveying the property to Venture. The second letter also asserted that Ticonderoga had refused to sign proposed ECRA submissions to the Department of Environmental Protection (DEP) and that Venture would file those submissions on its own.
Subsequently, in order to preserve a commitment for financing to undertake residential development, Venture filed several submissions with the DEP to secure its approval for a proposed cleanup of the site. As a result, Venture agreed to an Administrative Consent Order, which made it responsible for all costs of cleanup, imposed a $6,850 penalty, required a letter of credit in the amount of $500,000 to be posted and authorized Venture to proceed with its residential development.
On May 27, 1986, Venture filed a three count complaint alleging that Ticonderoga failed to comply with the requirement of ECRA when it sold the premises to plaintiff and ceased manufacturing operations, violated the subsequent lease-back agreement and breached its implied obligation of good faith in connection with both the contract of sale and the lease agreement. Defendants answered by denying all allegations of the complaint and raising various affirmative defenses including estoppel.
The trial court heard the matter on cross-motions for summary judgment and issued a letter opinion on February 18, 1988 which held that the sole remedy available to a transferee for a violation of ECRA was to void the conveyance and recover incidental damages. The court further held that Venture was barred on grounds of waiver and estoppel from obtaining any recovery from Ticonderoga, because it had entered into an Administrative Consent Order pursuant to which it agreed to clean up the property instead of seeking to void the conveyance.
Venture then moved to amend its complaint to specifically assert common law contract and tort claims. However, the trial court concluded that Venture's complaint raised only "ECRA claims" and that Venture should not be permitted to amend its complaint more than two years after filing. Consequently, a judgment was entered dismissing the complaint.
Under ECRA, the owner or operator of an industrial establishment who plans to sell or transfer operations must (1) notify DEP within five days of the execution of an agreement of sale; (2) submit, within 60 days prior to transfer of title, a cleanup plan or a negative declaration that there has been no hazardous discharge or that such discharge has been cleaned up; and (3) obtain financial security guaranteeing performance of any required cleanup plan. N.J.S.A. 13:1K-9b. The cleanup plan is ordinarily implemented by the present owner or operator, but a transferee may assume that responsibility. N.J.S.A. 13:1K-9c. In ...