On appeal from Superior Court of New Jersey, Law Division, Bergen County.
Coleman, J.h., Arnold M. Stein and Conley. The opinion of the court was delivered by Coleman, J.h., P.J.A.D.
[259 NJSuper Page 586] This appeal raises two important issues: (1) whether the sellers of industrial realty encumbered by the Environmental Cleanup Responsibility Act, N.J.S.A. 13:1K-6 to 13, (ECRA), may unilaterally rescind a contract of sale when the owner's cleanup obligation has been capped at less than 9% of the selling price, and (2) whether the signing of a contract of sale is a "sale or transfer" which triggers ECRA cleanup responsibilities. The trial Judge held that the seller could not rescind and that the buyers were entitled to specific performance of the contract of sale. We agree and affirm.
The essential facts are not in dispute. Plaintiff partnership and the individual partners agreed to sell industrial realty located at 5 Fir Court, Oakland, New Jersey, to defendants for $1,200,000. The property consists of approximately one acre with a two story office building used for offices and light manufacturing. The contract of sale as amended was executed after the effective date of ECRA. While the contract acknowledges the applicability of ECRA, it does not specifically enumerate or define the sellers' ECRA responsibilities. The contract, however, does provide, among other things, that:
4. In the event the title is not passed from seller to buyer in accordance with Contract dated April 12, 1985, due to any fault of the seller, including failure to obtain ECRA approval, buyer will be entitled to the return of all deposit monies used in accordance with the preceding paragraphs.
The New Jersey Department of Environmental Protection and Energy (DEPE) informed plaintiffs on August 30, 1985, that because of the activities of two tenants in the premises, the sale of the property was "subject to the provisions of ECRA." That prompted plaintiffs to retain the services of B & P Environmental Resources, Inc. (B & P) to prepare a Sampling Plan and a Cleanup Plan. On approximately March 1, 1987, B & P advised plaintiffs that the cleanup costs were estimated to be between $50,000 and $70,000. Plaintiffs fired B & P near the end of March 1987.
Plaintiffs then retained Langan Engineering. Joseph Torlucci, a geologist and project manager assigned to plaintiffs' case, projected in January or February 1988 that soil remediation would range in costs from a low of less than $100,000 to a high of $300,000. On at least two occasions before March 1988, the DEPE and Torlucci recommended that plaintiffs execute an Administrative Consent Order (ACO) to permit the title closing to occur. As an incentive, in January 1988 defendants offered to post a performance bond, not exceeding $100,000, if plaintiffs would enter into an ACO with DEPE and close title. Plaintiffs refused to execute an ACO.
On March 14, 1988, plaintiffs' attorney attempted to rescind the contract unilaterally in a letter addressed to defendants. The letter stated:
Unfortunately, despite the best efforts of my clients, they have been unable to satisfy the requirements of the Environmental Clean Up and Responsibility Act of the State of New Jersey, and, as a result, have been unable to transfer the property in accord with the terms of the contract.
At the present time they are uncertain as to when or if ever they will be able to satisfy the statutory requirements. For the foregoing reasons and in accord with the terms of the above referenced contract, I hereby declare this contract void. Pursuant to Paragraph 4, I have enclosed herewith a check in the amount of $30,577.79, representing a refund of your deposit monies as per Paragraph 4 of the second addendum to the contract.
When defendants rejected plaintiffs attempt to cancel the contract, plaintiffs instituted the present litigation on March 25, 1988 in the Chancery Division, General Equity, seeking rescission of the contract of sale. Defendants filed a counterclaim seeking the following relief:
A. Requiring that [plaintiffs] specifically perform the provisions of their Contract with the Defendants and obtain E.C.R.A. approval of the New Jersey Department of Environmental Protection for the transfer of title;
B. Requiring that they specifically perform their Contracts with the Defendants and convey the premises to the Defendants when ...