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State Of New Jersey Department Of Environmental Protection v. Caldeira

March 16, 2001

STATE OF NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
JOSEPH J. CALDEIRA, SR., INDIVIDUALLY, AND AS PRIOR OWNER, OPERATOR, MANAGER, DIRECTOR, OFFICER AND/OR SHAREHOLDER OF FORCEES, INC., CALDEIRA BROTHERS, INC., AND SOUTHERN OCEAN LANDFILL, INC., DEFENDANT-RESPONDENT/ CROSS-APPELLANT, AND JOSEPH J. CALDEIRA, JR., INDIVIDUALLY, AND AS OWNER, OPERATOR, MANAGER, DIRECTOR, OFFICER AND/OR SHAREHOLDER OF FORCEES, INC. AND CALDEIRA BROTHERS, INC., CALDEIRA BROTHERS, INC., U.S.A. WASTE RECYCLING OF NEW JERSEY, INC., A CORPORATION OF THE STATE OF NEW JERSEY AND CORPORATE SUCCESSOR TO CALDEIRA BROTHERS, INC., DEFENDANTS-RESPONDENTS, AND SOUTHERN OCEAN LANDFILL, INC., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Ocean County, L-1329-99.

Before Judges Keefe, Eichen and Steinberg.

The opinion of the court was delivered by: Eichen, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 18, 2000

On April 23, 1999, the New Jersey Department of Environmental Protection (DEP) filed a complaint against the owners and operators of various solid waste public utility companies, the companies, and their related entities, under the Uniform Fraudulent Transfer Act, N.J.S.A. 25:2-20 to -34 (the Fraudulent Transfer Act or Act). Named as defendants are Joseph J. Caldeira, Jr. (Caldeira, Jr.), individually and as prior owner, operator, manager, director, officer and/or shareholder of Forcees, Inc. and Caldeira Brothers, Inc., Caldeira Brothers, Inc. (Caldeira Brothers), Joseph J. Caldeira, Sr. (Caldeira, Sr.), individually and as prior owner, operator, manager, director, officer and/or shareholder of Forcees, Inc., Caldeira Brothers and Southern Ocean Landfill, Inc., Southern Ocean Landfill, Inc. (SOLF),*fn1 and U.S.A. Waste Recycling of New Jersey, Inc. (U.S.A. Waste).

The complaint seeks to set aside, as fraudulent, certain transfers and to use the transferred assets, and any proceeds thereof, to fund the closure of a landfill operated by SOLF located in Ocean County. The transferred assets are Caldeira, Sr.'s stock in Caldeira Brothers and Forcees, Inc. and a $600,000 debt owed to SOLF by Caldeira Brothers for tipping fees. Count one of the complaint alleges that Caldeira, Sr. made the transfers to Caldeira, Jr. with the intent to defraud the DEP, pursuant to N.J.S.A. 25:2-25a (actual fraud). Count two alleges that Caldeira, Sr. made the transfers "without receiving a reasonably equivalent value in exchange," pursuant to N.J.S.A. 25:2-25b (constructive fraud). The complaint contains no allegations against U.S.A. Waste.

The appeal requires us to determine which limitation period applies to the filing of the DEP's complaint brought under N.J.S.A. 25:2-25: the four-year/one-year time limitations in N.J.S.A. 25:2- 31, or the ten-year limitations period in N.J.S.A. 2A:14-1.2, the general statute of limitations for bringing actions against the State or its political subdivisions. If the ten-year period applies, the DEP's action is not time-barred. If the four-year limitations period of N.J.S.A. 25:2-31 applies, then the action is time-barred, unless the DEP filed its complaint within four years after the date the challenged assets were transferred or one year from the date the transfers could reasonably have been discovered by the DEP.

The appeal arises from the grant of a motion to dismiss the complaint by defendants under R. 4:6-2(e). The judge treated the motion as one for summary judgment without objection by the parties. The following undisputed facts are derived from the documents submitted by the parties.

From 1965 until 1989, Caldeira, Sr. owned and operated Caldeira Brothers, a solid waste collection public utility company which was then subject to the control of the Board of Public Utilities (BPU). Caldeira, Sr. also owned SOLF and was the director and/or officer of that company. SOLF owned and operated a sanitary landfill in Ocean County. In addition, Caldeira, Sr. owned 100% of the shares in Forcees, Inc. (Forcees), an equipment leasing company. Forcees was the exclusive provider of the equipment used by Caldeira Brothers in its hauling operations.*fn2

In 1988, the landfill operated by SOLF had reached its permitted capacity and ceased accepting sanitary waste. Sometime thereafter, SOLF presented a closure plan to the DEP pursuant to the Landfill Facility Closure and Contingency Fund Act (the Closure Act), N.J.S.A. 13:1E-100 to -116.*fn3 The Closure Act imposes liability on "owners and operators" of sanitary landfills for costs related to the operation and closure of such facilities. There are two primary types of landfill escrow accounts required to be maintained by a landfill owner: a closure/post-closure account established under the Closure Act (DEP closure account), and an environmental improvement escrow account (BPU closure account), established by the former BPU in its rate-making capacity pursuant to N.J.S.A. 48:2-21. The cost of funding the closure and post- closure care of SOLF's landfill was projected in SOLF's closure plan to be $23 million.

In 1989, Caldeira, Sr. transferred 99% of his stock in Caldeira Brothers to his son, Caldeira, Jr. "[i]n consideration of the valuable services provided to [Caldeira Brothers] by [Caldeira, Jr.]." On December 22, 1989, the BPU issued an order approving the transfer. At the same time, Caldeira, Sr. transferred all of his stock in Forcees to Caldeira, Jr. allegedly without any consideration being paid by Caldeira, Jr. In 1991, Caldeira, Sr., on behalf of SOLF, and Caldeira. Jr., on behalf of Caldeira Brothers, entered into an agreement in which SOLF agreed to forgive a $600,000 indebtedness owed to it by Caldeira Brothers for tipping fees. In the same year, and, effective August 19, 1991, pursuant to Reorganization Plan No. 002- 1991, N.J.S.A. 13:1D-1, the responsibilities for solid waste economic regulation, including responsibility for the oversight and administration of the escrow funds in the closure accounts for all landfills, were transferred from the BPU to the DEP. On April 27, 1992, Caldeira, Sr. submitted a sworn "Personal History Disclosure Statement" to the DEP, Division of Solid Waste Management (the Division), A-901 unit, the Division's licensing section. The statement reveals that Caldeira, Sr. was no longer the owner of Caldeira Brothers.

Other documents in the possession of the DEP reflect that on March 19, 1993, Caldeira, Jr. transferred his shares of stock in Forcees to Envirofil, Inc. in consideration of $822,000. A few months later, on August 5, 1993, he transferred the assets of Caldeira Brothers to Mid-Jersey Disposal Company, Inc. for $600,000. On February 28, 1994, Envirofil, Inc. acquired the stock of Mid-Jersey Disposal Company, Inc. Defendant U.S.A. Waste acquired the stock in Envirofil, Inc. on May 27, 1994.

On November 24, 1997, the DEP commenced an enforcement proceeding against SOLF and Caldeira, Sr., individually, and as owner and operator of SOLF. The same judge as was the motion judge in this fraudulent transfer action presided over the enforcement proceeding (the closure action). The DEP's complaint in the closure action alleged that the spillage of leachate from the landfill was imminent, that the defendants improperly operated the landfill and failed to implement a closure and post-closure care plan for the landfill in violation of the Closure Act.

The DEP filed a certification in the closure action prepared by Joseph Lomerson, the supervisor of the "Escrow/Administration unit in the Bureau of Solid Waste Regulation, Division of Solid and Hazardous Waste, Department of Environmental Protection." Mr. Lomerson certified, among other things, that the BPU closure account was depleted, and that the DEP closure account, which contained only $1.69 million, could not be used until there were sufficient funds in the account to properly close and maintain the landfill. Mr. Lomerson further certified that the cost and caring for the landfill was estimated to be approximately $14 million.

Thereafter, on December 8, 1997 and January 6, 1998, the parties entered into consent enforcement orders which required Caldeira, Sr. and SOLF to control and transport the leachate generated at the landfill that was threatening to spill over into the surrounding environment.*fn4 On April 30, 1998, during discovery in the closure action, the DEP's attorney claims, the DEP discovered, for the first time, that Caldeira, Sr. had previously transferred his interest in both Caldeira Brothers and Forcees and that SOLF forgave Caldeira Brothers for $600,000 in tipping fees.

Approximately one year later, on April 23, 1999, the DEP commenced this fraudulent transfer action in the Law Division. As previously noted, in count one of its complaint, the DEP alleges that Caldeira, Sr. transferred his shares of Caldeira Brothers stock and Forcees stock to Caldeira, Jr., and that he forgave the Caldeira Brothers' $600,000 debt to SOLF, with the intent to hinder, delay or defraud the DEP by divesting himself of the assets needed to satisfy his obligations under the Closure Act, contrary to N.J.S.A. 25:2-25a. In count two of the complaint, the DEP alleges that the transfers were made by Caldeira, Sr. without receiving "reasonably equivalent value" for the property transferred, contrary to N.J.S.A. 25:2-25b. The complaint seeks avoidance of the transfers, an accounting, and delivery of all proceeds of the transfers and transactions to the DEP to be held in escrow for the closure of the landfill, as well as an injunction against further encumbering of the assets.

The complaint also names U.S.A. Waste as a subsequent transferee, seeking to compel an accounting by that defendant "for any and all property received" and "for all proceeds arising from [the] transactions" described in the complaint. The complaint also seeks to escrow the proceeds in a DEP account. The complaint does not allege any culpable action by U.S.A. Waste.*fn5

Before filing answers to the complaint, defendants Caldeira, Sr., Caldeira, Jr., Caldeira Brothers, and U.S.A. Waste moved in the Law Division for an order pursuant to R. 4:6-2(e) dismissing the DEP's complaint on the ground that the action was barred by the four-year statute of limitations set forth in N.J.S.A. 25:2-31. In addition, U.S.A. Waste sought a dismissal of the complaint on the ground that the complaint failed to state a claim against it upon which relief could be granted. As previously noted, the record reflects that the parties did not contest the previously recited "facts" and essentially acquiesced in the judge's treating the R. 4:6-2(e) motion as though it were a summary judgment motion.

On October 22, 1999, the motion judge dismissed the complaint as time-barred under N.J.S.A. 25:2-31 against U.S.A. Waste and Caldeira, Jr. with respect to the transfer of ownership in Caldeira Brothers and the $600,000 debt forgiveness, but denied Caldeira, Jr.'s motion to dismiss as it related to the transfer of the Forcees stock.*fn6 The judge also ruled that the complaint failed to set forth with specificity any cause of action against U.S.A. Waste and dismissed the complaint against U.S.A. Waste on that basis as well. The judge, however, concluded the complaint was not time- barred against Caldeira, Sr., determining that the ten-year statute of limitations in N.J.S.A. 2A:14-1.2 rather than the four-year limitations provision in the Fraudulent Transfer Act applied to that defendant. We granted the DEP's motion for leave to appeal and Caldeira, Sr. filed a cross-appeal. On appeal, the DEP makes the following arguments:

POINT I

IT WAS ERROR FOR THE LOWER COURT TO DISMISS THE DEPARTMENT'S COMPLAINT AS AGAINST U.S.A. WASTE AS THE COMPLAINT MORE THAN SUFFICIENTLY STATES A ...


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