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Russell-Stanley Corp. v. Plant Industries Inc.

Decided: May 3, 1991.

RUSSELL-STANLEY CORP., A CORPORATION OF THE STATE OF NEW JERSEY, AND RUSSELL-STANLEY WEST, INC., A CALIFORNIA CORPORATION, PLAINTIFFS,
v.
PLANT INDUSTRIES, INC., A DELAWARE CORPORATION, ET AL., DEFENDANTS, V. CAMDEN PROPERTIES, INC., ET AL., PLAINTIFFS-INTERVENORS, V. PLANT INDUSTRIES, INC., ET AL., DEFENDANTS/THIRD PARTY PLAINTIFFS, V. RCA CORPORATION, ET AL., THIRD PARTY DEFENDANTS



Bachman, P.J. Ch.

Bachman

The matter presently before the court came by way of a motion for summary judgement by intervenor, Camden Properties, Inc. ("CPI"), to dismiss cross-claims made by plaintiffs, Russell-Stanley Corp. and Russell-Stanley West, Inc. (two related corporate entities, collectively known as "Russell-Stanley"). These cross-claims, which were recently asserted in plaintiffs' fifth amended complaint, are the following commonlaw causes of action:

(1) strict liability -- second count of the fifth amended complaint;

(2) failure to warn -- third count of the fifth amended complaint;

(3) negligence -- fourth count of the fifth amended complaint;

(4) misrepresentation -- fifth count of the fifth amended complaint; and

(5) unjust enrichment -- sixth count of the fifth amended complaint.

Russell-Stanley, in turn, has made a cross-motion for summary judgement against intervenor CPI to impose liability for the costs incurred by Russell-Stanley in effecting a clean-up program based upon the theories that:

(A) a landlord is strictly liable for costs incurred when a government ordered clean-up occurs of a site contaminated by a tenant;

(B) CPI, as a matter of New Jersey law, is strictly liable as an owner of property at the time when its tenant discharged hazardous substances onto the site; and

(C) an unjust enrichment would occur if the court were to rule otherwise since CPI, as the owner of the polluted site, would then be the ultimate beneficiary of the government ordered clean-up.

This action, like many stemming from the Environmental Cleanup Responsibility Act ("ECRA"), N.J.S.A. 13:1K-6 et seq., and the Environmental Rights Act ("ERA"), N.J.S.A. 2A:35A-1 et seq., arises from a complicated set of facts. On December 14, 1970, the RCA Corporation*fn1 transferred a commercial site

located at River Road and State Street in Camden, New Jersey to CPI, the present owner. On February 15, 1974, CPI leased the site to Advanced Chemical Technology ("ACT"), a subsidiary of Plant Industries, Inc. ("Plant"). Until the January 12, 1984 asset sale of its business to Russell-Stanley, ACT operated a plastic container and drum manufacturing facility at this site. During the course of these operations, based upon the current evidence of contamination on the site, it is alleged that ACT polluted the parcel through the release of lubricants and coolants from the machines it engaged in its manufacturing processes.

When Russell-Stanley acquired ACT's business through the 1984 asset purchase, the parties also entered into an "Assignment and Assumption of Lease" agreement. Under this agreement, Russell-Stanley assumed all of ACT's obligations under the lease with CPI. CPI consented to the assignment of the lease under the proviso that Plant remain secondarily liable in the event that Russell-Stanley should fail to perform any of its obligations under the lease. Also at this time, ACT and Russell-Stanley entered into an "Environmental Clean-up Responsibility Act Escrow" agreement, whereby ACT agreed to comply with any liabilities imposed upon the business transfer by ECRA. Under this agreement, ACT and Russell-Stanley deposited $50,000 into an escrow account for the purpose of funding any required cleanup. In addition, with the escrow agreement, ACT acknowledged its responsibility to comply with the provisions of ECRA.

Russell-Stanley's purchase of ACT's plastic container and drum business caused the provisions of ECRA, N.J.S.A. Sec. 13:1K-6 et seq., to be invoked. As such, ACT informed the New Jersey Department of Environmental Protection ("NJDEP") of the transaction and the appropriate activities

were begun to ensure that the property was free from contamination pursuant to the statute. As a result of the inspection process that ensued, NJDEP determined that a level of contamination existed beyond that anticipated by any of the parties. Additionally, by NJDEP order, Russell-Stanley was held responsible for the cleanup. Russell-Stanley currently estimates that the clean up will cost $461,622.

Plant and ACT refused to take any of the steps necessary to clean up the site pursuant to NJDEP's ECRA order. In fact, in the summer 1987, Plant and ACT filed for protection under federal bankruptcy laws. Also, in April 1986, Russell-Stanley had $700,000 in proceeds owed to ACT on two promissory notes from the asset sale escrowed for the purpose of funding the cleanup. The financing of this cleanup became even further complicated by the fact that ACT had assigned the proceeds of these promissory notes to Commercial Credit Corporation, which ultimately assigned the proceeds to Marine Midland Business Loans, Inc. ("Marine Midland"). In October 1986, Marine Midland began its own collateral lawsuit against Russell-Stanley in federal court regarding these funds. Russell-Stanley and Marine Midland settled this separate litigation in December 1987, with Russell-Stanley agreeing to remit $582,425.66 to Marine Midland. The remaining $166,154.11 in escrow funds were then used to fund the testing and clean-up of the site.

In the course of this six-year litigation, as more facts were learned from discovery and from site testing, the pleadings in this matter have been repeatedly amended. Of significance with regard to the matter currently before the court is a motion heard by the court on February 16, 1990, which resulted in an order dated March 5, 1990. In that motion, CPI moved, by way of summary judgement, to have claims asserted by Russell-Stanley dismissed. Russell-Stanley was asserting claims against CPI based upon the theory that private rights of action existed under ECRA and ERA. Specifically, Russell-Stanley was seeking injunctive relief, under ERA, to compel CPI to

cleanup the site, pursuant to ECRA. In dismissing Russell-Stanley's claim based on this private right of action theory, the court ruled that, pursuant to the Appellate Division's opinion in Superior Air Prod. v. NL Industries, 216 N.J. Super. 46, 522 A.2d 1025 (App.Div.1986), no statutory private right of action existed under the facts of this case since the provisions of ECRA had been properly triggered by and imposed upon Russell-Stanley. Therefore, as the DEP had acted, all that was left was for Russell-Stanley to cleanup the property and then pursue contribution in the form of monetary damages from the other parties that might have contaminated the site. As a result of this ruling, Russell-Stanley was given leave to amend its pleadings to add the common-law causes of action, which are now the subject matter of these proceedings.

It is CPI's argument that it should be granted summary judgement dismissing these newly amended common-law cross claims on the grounds that there is no legal or factual basis for them as was required in the court's March 5, 1990 order. In addition, CPI argues that Russell-Stanley, by virtue of its status as ACT's successor, is liable for any contamination caused by ACT on the property and, therefore, cannot pursue a cause of action against CPI for damages resulting from the ACT's conduct. Finally, CPI has also asserted the argument that it cannot be held liable, under principles of landlord-tenant contract law, for any possible claim Russell-Stanley might make for unjust enrichment.

Russell-Stanley, with its cross-motion for summary judgement, opposes the dismissal of the common-law causes of action from its fifth amended complaint by asserting that, as landlord, CPI is responsible for the cleanup costs of all contamination on its property not caused by Russell-Stanley based upon the common-law theories of strict liability and landlord-tenant law. In addition, Russell-Stanley asserts that CPI should be found liable based upon notions of unjust enrichment.

What the court finds to be of great significance, at least with regard to its consideration of these cross-motions for summary judgement, is one of the exhibits submitted by Russell-Stanley in support of its motion. The exhibit in question was a portion of the transcript from an April 1989 deposition of an employee of CPI who functioned in the capacity of a property or site manager for the Russell-Stanley Camden plant. This individual stated that he or some other employee would inspect the site, usually on a weekly basis for CPI. This individual testified that this practice had been going on since at least 1971. The purpose of these inspections was to be sure of the maintenance of certain items -- such as the roof, sprinkler systems and other building components -- and to make sure that the tenants (ACT or Russell-Stanley) were keeping up with their obligations with regard to the lease. Obviously, statements such as these cause substantive questions to be raised regarding CPI's role in the administration and management of the subject site. For example, questions exist as to the exact nature of CPI's role as a landlord; were they actively or passively involved in the management of the property? Also, under the lease, did they still maintain exclusive rights as to the administration of the land, or were they precluded from any involvement by virtue of their agreement?*fn2

Ultimately, as suggested by this court with both the hearing of oral argument on the February 16, 1990 motion (in which the Russell-Stanley's ERA and ECRA claims were dismissed), and the January 25, 1991 hearing of oral argument on this particular matter, the court would be called upon to construe the Supreme Court of New Jersey's opinion in State, Dept. of Environ. Protect. v. Ventron Corp., 94 N.J. 473, 468 A.2d 150 (1983) to determine whether a subsequent tenant can bring a

common law cause of action for contribution against a landlord who owned a site when it was polluted by a previous tenant. The court finds the question of whether a subsequent tenant can hold a landlord liable for the cleanup of a site contaminated by a former tenant to be one of first impression. Therefore, before dealing with the particulars of each common-law claim brought against CPI by Russell-Stanley, the court must first determine the merits of such common-law causes of action against a landlord.

Before more fully addressing these issues, the court must stress the fact that the matter before it is that of cross-motions for summary judgement. This situation is in marked contrast to that which was before the Supreme Court of New Jersey in Ventron. Specifically, Ventron was a case which had been initially ruled upon after 55 days of trial. Thus, the Supreme Court had before it a factual record that was fully developed. In contrast, this court in now called upon to rule regarding pretrial cross-motions for summary judgement. Obviously, although extensive discovery has occurred, this court does not have the advantage of a complete and fully developed record. In addition, it should be noted that, as this is a ruling on cross-motions for summary judgement, the standard of judgement is that of whether a genuine issue of material fact exists and, if not, then whether the movant is entitled to judgement as a matter of law. R. 4:46-2 and Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 74, 110 A.2d 24 (1954).

I.

In Ventron, a case dealing with the mercury pollution of a 40-acre tract surrounding Berry's Creek, which flows into the Hackensack River, the Supreme Court of New Jersey held that corporations involved in the pollution of a particular site were liable under various common-law principles. Various chemical corporations owned this site throughout the years, and contributed to the mercury pollution with their manufacturing activities. Significantly, the Berry's Creek site was owned by Velsicol

Chemical Corporation ("Velsicol"), a company which owned the site during most of the 1960's, and Ventron Corporation ("Ventron"), which owned the site from 1968 to about 1974.*fn3 In 1972, Ventron had a study conducted of the site and, in terms that were most clear and specific, knew of the mercury pollution. Also during this early 1970's time period, the mercury pollution had come to the attention of the United States Environmental Protection Agency ("EPA"). In 1974, Robert and Rita Wolf, real estate developers, purchased the site from Ventron. The Wolf's knew that mercury manufacturing had been conducted on the site. They did not, however, know that the site was contaminated, or they at least were not informed by Ventron of the results of its 1972 private study. Id. 94 N.J. at 483-485, 468 A.2d 150. NJDEP brought its action in 1976, naming Velsicol, Ventron, Wood Ridge*fn4 and the Wolfs.

In its decision in Ventron, the Supreme Court specifically noted that in Berg v. Reaction Motors Div., Thiokol Chem. Corp., 37 N.J. 396, 181 A.2d 487 (1962),*fn5 it had "adopted the proposition that 'an ultrahazardous activity which introduces an unusual danger into the community . . . should pay its own way in the event it actually causes damage to others.'" Id. 94 N.J.

at 487, 468 A.2d 150. In imposing liability in Berg, the court embraced the tests of the Restatement, Torts, §§ 519-520 (1938). As pointed out in Ventron, the "ultrahazardous" standard of Berg has since been replaced by the "abnormally dangerous" activities test of Restatement, Torts 2d, § 520, comments (d) and (e) (1977). In effect, this "abnormally dangerous" activities test is that of Rylands v. Fletcher, L.R. 1 Ex. 265 (1866), aff'd, L.R. 3 H.L. 330 (1868). Justice Pollock, in the Court's opinion in Ventron, then went on to state that the time had come:

to recognize expressly that the law of liability ha[d] evolved so that a landowner is strictly liable to others for harm caused by toxic wastes stored on his property and flow onto the property of others. Therefore, we overrule Marshall v. Wellwood and adopt the principle of liability originally declared in Rylands v. Fletcher. The net result is that those who use, or permit others to use, land for the conduct of abnormally dangerous activities are strictly liable for resultant damages. [94 N.J. at 488, 468 A.2d 150]*fn6

A further reading of Justice Pollock's opinion in Ventron suggests that, although the holding is clearly predicated upon Rylands v. Fletcher -- the case which is generally accepted as having been the one which promulgated the notion of strict liability -- it also clearly provides for common-law causes of action against landowners that pollute a given site. 94 N.J. at 488-491, 468 A.2d 150. Specifically, Justice Pollock discussed how the English common-law doctrines of nuisance and negligence gave ...


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