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G & S Investors Frelinghuysen Avenue Inc. v. Aristocrat Leather Products Inc.

Decided: May 20, 1992.

G & S INVESTORS FRELINGHUYSEN AVENUE, INC., A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT,
v.
ARISTOCRAT LEATHER PRODUCTS, INC., EVANS RULE COMPANY, INC. F/K/A EVANS-ARISTOCRAT INDUSTRIES, INC., MEM COMPANY, INC., PAUL GAST, SAIBER, SCHLESINGER, SATZ & GOLDSTEIN, A PARTNERSHIP ORGANIZED FOR THE PRACTICE OF LAW, AND LEGGETT & PLATT, INC., DEFENDANTS, AND SAIBER, SCHLESINGER, SATZ & GOLDSTEIN, A PARTNERSHIP ORGANIZED FOR THE PRACTICE OF LAW, THIRD-PARTY PLAINTIFF, V. MCCARTER & ENGLISH, THIRD-PARTY DEFENDANT, AND ARISTOCRAT LEATHER PRODUCTS, INC. AND MEM COMPANY, INC., THIRD-PARTY PLAINTIFFS, V. MASCO CORPORATION AND MARKAY PRODUCTS COMPANY, INC., THIRD-PARTY DEFENDANTS



On appeal from Superior Court, Law Division, Essex County.

Antell, Baime and Thomas. The opinion of the court was delivered by Antell, P.J.A.D.

Antell

ANTELL, P.J.A.D.

On December 27, 1985, plaintiff purchased an industrial building located on Frelinghuysen Avenue in Newark from defendant Evans-Aristocrat Industries, Inc., now known as Evans Rule Company, Inc., for $1,125,000. On November 12, 1985, defendant requested from the New Jersey Department of Environmental Protection and Energy ("DEPE"), then known as the Department of Environmental Protection, a "letter of non-applicability," declaring that the transaction would not be subject to the New Jersey Environmental Cleanup Responsibility Act ("ECRA"), N.J.S.A. 13:1K-6 et seq. Although not formally provided for by regulation, such letters were issued by DEPE in accordance with "general policies and procedures" under the authority of N.J.S.A. 13:1K-10. See, In re Adoption of N.J.A.C. 7:26B, 250 N.J. Super. 189, 203-204, 593 A.2d 1193 (App.Div.1991), affirmed in part, rev'd in part, 128 N.J. 442, 608 A.2d 288 (1992).

As part of its application, defendant submitted an affidavit prepared by its plant manager, defendant Paul Gast, to the effect that no chemical or hazardous substances had been used in the defendant's operations. Paragraph 10 thereof specifically recites that "the operations of Aristocrat do not involve and, to my knowledge, have not involved the generation, manufacture, refining, transportation, treatment, handling or disposal of hazardous substances on-site, above or below ground." Notably absent from that statement was any reference to the "storage" of hazardous substances.

On December 3, 1985, DEPE issued the letter of non-applicability, stating that the sale of the property was not subject to the provisions of ECRA. The letter, however, expressed DEPE's understanding that defendant had not been engaged in

operations which involve the "generation, manufacture, refining, transportation, treatment, storage, handling or disposal of hazardous waste or substances." (emphasis added). After receipt of DEPE's letter, the closing took place and closing documents revealed the presence of an underground fuel storage tank on the premises. The fuel stored in the tank was used to heat the building.

In 1988 plaintiff entered into negotiations looking toward a possible sale of the property to Citibag, Inc., and applied for a letter of non-applicability from DEPE on July 5, 1988. In its letter to DEPE, plaintiff noted that the property had two underground fuel tanks, one which served the premises and another which served a contiguous property not owned by plaintiff. Based on this information, DEPE replied under date of August 5, 1988, that plaintiff's sale of the property to Citibag would be subject to the provisions of ECRA. DEPE further indicated that the previous transfer in December 1985 from defendant to plaintiff was also subject to ECRA, and the letter of non-applicability pertaining to that transaction was accordingly rescinded.

On May 25, 1990, plaintiff filed an amended complaint seeking, among other things, indemnification for cleanup costs that plaintiff anticipated it would have to bear under ECRA. The basis of the complaint lies in defendant's having obtained a letter of non-applicability in 1985 by failing to reveal the underground fuel tanks which, according to DEPE, subjected the sale to the requirements of ECRA.

ECRA obliges an owner or operator of an "industrial establishment," as defined in N.J.S.A. 13:1K-8f, that closes or transfers its facility to submit a cleanup plan and provide financial assurance for the cleanup of any hazardous materials discharged at the property before it closes or transfers ownership. N.J.S.A. 13:1K-9. ECRA's applicability to a transaction is determined by a three-part test:

1. Whether the facility is planning to close operations, or to transfer its operations or the real property where ...


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