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Citizens for Equity v. New Jersey Department of Environmental Protection

decided.: June 20, 1990.

CITIZENS FOR EQUITY, ET AL., APPELLANTS,
v.
NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, RESPONDENT. IN THE MATTER OF THE ADOPTION OF N.J.A.C. 7:11 (SANITARY LANDFILL FACILITY CONTINGENCY FUND REGULATIONS). WALTER CORSON AND CATHERINE CORSON, HIS WIFE, ET AL., PLAINTIFFS-APPELLANTS, AND CITIZENS FOR EQUITY, ET AL., PLAINTIFFS/INTERVENORS/APPELLANTS, V. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, DEFENDANT-RESPONDENT.



Gaulkin, Scalera, D'annunzio

Per Curiam

[252 NJSuper Page 65] Effective July 18, 1988, the Department of Environmental Protection (DEP) revised its regulations (N.J.A.C. 7:11-1.1 et seq.) adopted pursuant to the Sanitary Landfill Facility Closure and Contingency Fund Act (Act) (N.J.S.A. 13:1E-100 et seq.). Appellants in these consolidated appeals challenge the revised regulations and urge that the prior regulations should be

applicable in any event to claims filed before amendment of the regulations.

I.

The Act, adopted in 1981, is designed to insure "the proper closure of sanitary landfills" and "to provide a mechanism for the prompt and adequate compensation" for "damage resulting from improper operation or closure." N.J.S.A. 13:1E-101. To that end, the Act imposes a tax upon the owner or operator of any sanitary landfill. N.J.S.A. 13:1E-104. The revenues collected are maintained "as a nonlapsing, revolvoing fund" in DEP, denominated the Sanitary Landfill Facility Contingency Fund (Fund). N.J.S.A. 13:1E-105. The Fund is "strictly liable for all direct and indirect damages, no matter by whom sustained, proximately resulting from the operations or closure of any sanitary landfill." N.J.S.A. 13:1E-106a.

DEP initially promulgated regulations in 1983. 15 N.J.R. 1213(a), December 5, 1983. Those regulations provided that "[a]ny person who claims to have incurred any direct or indirect damages as a proximate result of the operations or closure of a sanitary landfill is eligible to file a claim." N.J.A.C. 7:1I-1.6(a) (repealed). "Damages" was defined as including, but not limited to, "the diminution in fair market value of any real or personal property." N.J.A.C. 7:1I-1.4 (repealed). However, DEP would "consider only those damages for which the claimant can produce substantial evidence." N.J.A.C. 7:1I-1.7(a) (repealed).

In 1986, DEP began a review of the claims processing system. According to a certification filed by David C. Mack, Acting Administrator of DEP's environmental claims administration, which has responsibility for the processing of claims filed against the Fund, that review disclosed "disturbing trends which challenged the basic framework of then-current processing policy" which "needed to be addressed before they got out of hand":

Essentially, the trend we saw developing was that by not requiring property sales for property diminution damage claims, claims were being filed in a pattern unrelated to the landfill. Once a claim was satisfied without requiring the property to be sold, that settlement seemed to promote the perception of similar damages to surrounding properties. This was best evidenced by the receipt of claims from properties over two miles from GEMS Landfill. Therefore, we concluded that the Fund by its own actions was, in effect, creating the very condition which the law was enacted to remedy.

The regulations were accordingly revised in 1988, according to Mack, "to insure the continued availability of monies for people who could satisfy the requirements for compensation." The revised regulations define "damages" to include "the diminution in fair market value of any real property." N.J.A.C. 7:1I-1.5. The Fund, however, will pay "only those claims for damages for which the claimant can produce substantial evidence pursuant to N.J.A.C. 7:1I-3." N.J.A.C. 7:1I-1.7(a). N.J.A.C. 7:1I-3.3 establishes the "[c]riteria for claims based on real property value diminution damage." That regulation is the focus of these litigations:

(a) Claims for real property value diminution as a result of the operation or closure of a sanitary landfill are compensable upon sale of the property. The claimed property must be located within one-half mile of the landfill area except:

1. Claims for property value diminution which were filed prior to March 7, 1988 are not subject to the one-half mile limitation, or to the criteria at (d) below if the damaged property was sold prior to July 18, 1988, but shall meet all other criteria of this section. Damaged property shall be considered sold prior to July 18, 1988 if a binding agreement of sale was entered into prior to this date.

2. Claims for property diminution which include physical intrusion are not subject to the one-half mile limitation but shall meet all other criteria of this section.

(b) All claims filed subsequent to the effective date of this chapter for which the property has been sold prior to receipt of an appraisal of the subject property value from the Department are barred from compensation.

(c) The Department shall notify each claimant who filed a claim before March 7, 1988 of the requirements of this chapter. Such claimants shall then have 60 days from receipt of such notice to inform the Department by certified mail return receipt requested, of their intent to pursue their claim for property value diminution pursuant to this chapter, immediately, request that the claim be suspended for a period of up to two years, or to withdraw that claim for those damages. If a claimant requests suspension of their claim, the claimant may at any time during the period of suspension, request reactivation of the claim. At the end of the two year suspension period, the claim will be automatically

reactivated, unless the claimant has previously withdrawn the claim. Priority status of reactivated claims will be established based on the date of receipt of the reactivation request.

(d) The Department will provide a claimant with the Department's appraisal of the value of the subject property absent any landfill effects. Claimant shall, within 90 days of receipt of such appraisal, offer the property for sale with a multiple listing service at no less than the Department's appraisal value for at least 60 days and attempt to sell in good faith. The claimant shall submit to the Department a copy of the brokerage agreement. Failure to list the property for sale within 90 days of receipt of the appraisal will result in denial of the claim. If no offers are received from responsible buyers for that price, the claimant may reduce the price by 2.5 percent per month. Any variation from the above formula allowing for a larger or smaller percent reduction or an accelerated or decelerated time frame for reductions shall be approved in advance by the Department.

(e) Within 60 days after the settlement date for the property or the effective date of this rule, whichever occurs last, the claimant shall submit to the Department, as evidence of the sale and that the sale was a good faith sale, the following:

1. All written offers for the property;

2. The contract of sale for the property;

3. The settlement sheet(s), including the one required by the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C.A. 2601 et seq.;

4. The deed;

5. An affidavit by the claimant stating the total sales price of the property, that no other money or other compensation has been received from any person for the property and that the documents submitted pursuant to (e)1 through 4 above are true copies of the original documents used in the sale transaction; and

6. An affidavit from the claimant's realtor providing the following information:

i. How long the property was up for sale;

ii. What the initial listing price was;

iii. A list of any changes in the listing price;

iv. A record of all inquiries, showings or open houses held for the purpose of selling the claimant's property. This record shall include the names and addresses of all persons who inquired about, were shown or attended open houses held for the purpose of selling the property and will include a detailed description of the specific statements of these persons concerning the property;

(1) Claimants who filed claims prior to March 7, 1988 and sold property prior to July 18, 1988 will not be required to submit the names and addresses of the persons who inquired about, were shown or attended open houses held for the purposes of sale of the property; and

v. The number of offers received, the amount of each offer and date received.

(f) Claimants who satisfy the criteria (a) through (d) above and have been unable to sell the property after one year of continuous good faith attempts to sell, measured from the date of listing, shall be eligible to recover damages calculated in accordance with N.J.A.C. 7:11-4.2(b). If the property is sold within two years of settlement, claimant shall satisfy all requirements of (e) above, and any paid settlement shall be subject to adjustment pursuant to N.J.A.C. 7:11-4.2(b).

If a property is sold, DEP will pay damages "in an amount equal to [DEP's] appraisal of the property value absent the landfill minus the actual selling price. N.J.A.C. 7:1I-4.2(a). If the claimant makes a good faith attempt but cannot sell within one year, DEP will "appraise the value of the property absent the landfill and survey sales based claims settlements in the area to determine the average percentage diminution for the area" and "shall pay, as damages, the dollar value arrived at by multiplying the appraised value of the property absent the landfill by the average diminution percentage determined for the area." N.J.A.C. 7:1I-4.2(b). Any damage award shall also be reduced "by the amount of any prior compensation for the claimed damages received by the claimant from any insurance program, from any court awards, or from any other State or Federal program." N.J.A.C. 7:1I-1.7(b).

Shortly after the revised regulations were proposed (20 N.J.R. 443, March 7, 1988), plaintiffs Walter and Catherine Corson and twelve other individuals, all of whom owned homes near the GEMS Landfill, commenced a prerogative writs action in the Law Division against the DEP, alleging that they had filed claims against the Fund and that DEP had failed to process them "within a reasonable time" as then required by N.J.A.C. 7:1I-2.3(b) (repealed). Those plaintiffs sought judgment compelling DEP to begin processing their claims under the regulations in effect at the time they were filed. Citizens for Equity (Citizens) describing itself as a ...


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