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206-36th Street, LLC v. Wick

July 30, 2009

206-36TH STREET, LLC, PLAINTIFF-RESPONDENT,
v.
OTTO WICK, DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-1789-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 18, 2009

Before Judges Stern, Rodríguez and Ashrafi.

Defendant Otto Wick (Seller) appeals from the May 8, 2008 judgment of $79,342.50 in favor of 206-36th Street, LLC (Buyer). We affirm.

It is undisputed that Buyer agreed to purchase real estate, located at 206-208 36th Street in Union City. The property, which was used as an embroidery factory for several years, needed environmental renovations due to lead contamination. Thus, the property is subject to the Industrial Site Recovery Act (ISRA), N.J.S.A. 13:1K-6 to -35, which is implemented by the New Jersey Department of Environmental Protection (NJDEP). The factory building had wooden floors in some areas. In addition, part of the property consisted of open grassy areas.

Buyer purchased the property with the intention of demolishing the existing structure and erecting a multi-unit residential dwelling. Seller agreed to tender a No Further Action (NFA) letter from the NJDEP "on or before closing." An NFA letter is a "written determination by [NJDEP] that, based upon an evaluation of the historical use of the industrial establishment and the property . . . there are no discharged hazardous substances or hazardous wastes present at the site of the industrial establishment . . . ." N.J.S.A. 13:1K-8. The NFA letter also provides that "any discharged hazardous substances or hazardous wastes present at the industrial establishment . . . have been remediated in accordance with applicable remediation regulations." Ibid.

On the day before closing, Seller's attorney sent a letter stating that all environmental work had been completed, although the NFA letter had not been received. The letter referenced a report received from Seller's engineer, H2M Associates, Inc. (H2M). In its "Site Investigation, Remedial Investigation, Remedial Action Report," H2M found that:

[T]he remedial activities conducted onsite have addressed operational environmental impacts on the subject property identified . . . and additional intrusive remedial activities (e.g. soil removal) are not likely to be required by the NJDEP.

Implementation of a deed notice recognizing existing engineering controls (e.g. the building) should be adequate to address the historic fill onsite, contingent upon NJDEP's review and approval of the attached document.

The closing occurred on February 27, 2004. However, the NFA letter was not provided by Seller. According to Paul Hanak, a shareholder of the Buyer corporation, Seller's counsel represented at closing that an NFA letter would be available "in about a week or two." According to Richard Molinari, another shareholder of the Buyer corporation, the NJDEP later imposed a $10,000 fine on the Seller for transferring the property without either an approved remediation action report or an NFA letter. N.J.S.A. 13:1K-13b. After numerous futile attempts were made to get the Seller to pay the fine, Buyer, with approval from the NJDEP, paid the fine in order to move the process forward.

About six weeks after the closing, the NJDEP completed its review of H2M's report. Pei C. Huang, a case manager for NJDEP's Bureau of Risk Management, noted that "[a]n institutional control via a deed restriction along with the identification of the appropriate engineering control for the subject site shall be submitted for NJDEP's review." In response, H2M prepared a document to address additional site investigation activities performed on the property. H2M acknowledged that, "due to the presence of historic fill . . . an application for a deed of environmental restriction on the subject property will be submitted to the NJDEP under separate cover. The [deed restriction] application will include a proposed engineering control consisting of a cap over the subject property." Subsequently, Huang informed the project engineer from H2M that she was satisfied with the results noted in the response letter and that the NFA letter would be issued upon receipt of the deed notice.

More than a year after the closing, Buyer prepared the deed notice, which was forwarded to the NJDEP. In response to the receipt of the draft deed, the NJDEP advised Seller's counsel that Seller had violated ISRA by failing to either obtain an NFA letter prior to closing, receive an NJDEP approved remedial action workplan, or execute a remediation agreement pursuant to N.J.A.C. 7:26B-1.10(c).

Buyer hired PetroScience, Inc. (PetroScience) to develop the remedial action workplan. PetroScience completed the workplan in July 2005. Thus, it was not until sixteen months after the closing that ...


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