On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. ATL-L-2384-00.
The opinion of the court was delivered by: Gilroy, J.S.C. (temporarily assigned).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued on February 6, 2006
Before Judges Lintner, Parrillo and Gilroy.
This is a condemnation action. Plaintiff, Casino Reinvestment Development Authority (CRDA), appeals from the order of the Law Division entered on February 22, 2005, denying its motion to vacate an order of August 27, 2004, granting defendant, City of Atlantic City's (City), motion to withdraw funds previously deposited into court by CRDA on filing of a declaration of taking during the pendency of the condemnation proceeding. The issue presented is whether in the case of environmentally contaminated property, a municipal tax lien attaches to funds held in court for the purpose of paying remediation costs of the condemnor. Because we conclude that remediation costs are a transactional part of the calculation of the value of the property, and that creditors' interests transfer from the res to the surplus on deposit after recoupment of remediation costs by the condemnor, we reverse and remand.
We briefly state the procedural history and uncontested facts. CRDA, a financing and investment agency established pursuant to N.J.S.A. 5:12-153 to -183, is authorized to exercise the right of eminent domain within the City. N.J.S.A. 5:12-161p. On July 14, 2000, CRDA filed a verified complaint seeking to acquire a fee interest in property located at 615 North Carolina Avenue, Atlantic City (the "Property"), as part of the North Carolina Avenue Widening Project. Count Two of the complaint sought a declaration that "defendants, James H. Teller, Sr., and Mary E. Teller [owners of the Property] are legally responsible to CRDA for all reasonable and necessary costs that may arise from or relate to remediation of any discharge of a hazardous substance existing on the Property as of the date of the filing of this Complaint." The complaint stated that the Property was appraised at $55,200, as if "unaffected by adverse environmental conditions," and the "estimated cost of cleaning the adverse environmental conditions is approximately $130,000 to $200,000."
On September 15, 2000, Judge Winkelstein entered an "order for payment into court, for the vesting of title, and for possession." The order provided:
The [$55,200] being deposited with the Clerk of the Superior Court represents the fair market value of the [P]roperty as if unaffected by contamination as estimated by CRDA. The estimated cost of cleaning the contamination on the [P]roperty is $130,000.00 to $200,000.00. The estimated fair market value of the [P]roperty is therefore $1.00.
The order further provided that "[t]he full amount deposited by CRDA shall remain on deposit until a final resolution of Count Two of the Verified Complaint." On October 10, 2000, CRDA filed a Declaration of Taking, and on October 12, 2000, it deposited $55,200 into court. On March 1, 2001, a Report of Commissioners was filed, determining that the fair market value of the Property was $55,200. No appeal was taken from the Report of Commissioners.
On August 2, 2004, the City filed a motion to withdraw $39,098.75 from the funds in court contending that "as of October 5, 2000, the date of taking, there was due to . . . the City . . . the sum of $39,098.75 for unpaid liens and interest on [the Property]." CRDA was not noticed on the motion. Because the motion was unopposed, on August 27, 2004, a second Law Division judge entered an order granting the City's motion, leaving a balance on deposit of $16,101.25. Having completed the environmental cleanup with remediation costs totaling $257,834.56, CRDA filed a motion to withdraw the original deposit of $55,200, together with interest accrued thereon, on October 27, 2004. Learning of the City's withdrawal, CRDA filed a motion to vacate the order of August 27, 2004, authorizing the City's withdrawal of funds, and to compel redeposit of the funds into court. Both of the motions were carried to February 18, 2005. After oral argument, the motion judge, concluding that "municipal tax liens take priority over the CRDA's cleanup costs of the contaminated property," denied the motion to vacate the order of August 27, 2004, and to compel the City to redeposit funds into court, and directed that CRDA "shall be permitted to withdraw the balance of the funds remaining in the Trust Fund." A confirmatory order was entered on February 22, 2005.
On appeal, CRDA argues that the motion judge erred "addressing this matter as an issue of lien priority on the funds in court . . . because, in the special case of contaminated property, the funds in court are not money to which the condemnee is necessarily entitled." CRDA contends that when the "condemning authority deposits the full 'as if remediated' value of the property into court . . . no one expects that the condemnee will receive the entire amount . . . [because] under this approach[,] a 'portion of the award sufficient to cover cleanup costs is escrowed or held in trust until the exact amount of cleanup costs are determined." (quoting Housing Auth. of City of New Brunswick v. Suydam Investors, LLC, 177 N.J. 2, 25 (2003) (Suydam). The City counters that it has a first priority tax lien on the Property (and therefore on the monies on deposit) which is superior to CRDA's claim to cleanup costs.
CRDA's motion to vacate, which sought entry of an order compelling redeposit of funds and granting the previously filed motion to withdraw, requested reconsideration of the matter on its merits. Accordingly, the motion is "characterizable as a motion to alter or amend" the prior order under Rule 4:49-2. Pressler, Current N.J. Court Rules, comment on R. 4:49-2 (2006). Reconsideration under Rule 4:49-2 is a matter within the sound discretion of the court and is to be exercised "for good cause shown and in the service of the ultimate goal of substantial justice." Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 264 (App. Div. 1987), certif. denied, 110 N.J. 196 (1988). This court may only disturb the decision below if it finds error which is "clearly capable of producing an unjust result." R. 2:10-2. However, the trial court's interpretation of the law is afforded no special deference, and this court's review of the legal issues is de novo. Manalapan Realty, L.P. v. Tp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
The City argues that the issue is one of priority between two lien claimants and that it has the right to first satisfaction of its tax lien. We disagree. A municipal tax lien has "first lien" priority status over all other liens against property, except subsequent municipal liens. N.J.S.A. 54:5-9; In re Pryor, 366 N.J. Super. 545, 553 (App. Div.), certif. denied, 181 N.J. 545 (2004); Byram Holding Co. v. Bogren, 2 N.J. Super. 331 (Ch. Div. 1949). The significance of this "super priority" is underpinned by the fact that "[l]ocal property taxes are the primary source of revenue for [municipalities] . . . [and] [e]ach parcel of land in the [municipality] must bear its fair share of the tax burden." Renaissance Plaza Assocs. v. City of Atlantic City, 18 N.J. Tax 342, 352 (1998). Generally, in a condemnation proceeding, a lien for unpaid taxes due as of the date of the deposit of funds with the court attaches to the condemnation award as an interest in the ...