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Lawrence J. Dalton and Christine M. Dalton v. Shanna Lynn Corporation

April 19, 2012

LAWRENCE J. DALTON AND CHRISTINE M. DALTON,
PLAINTIFFS-APPELLANTS,
v.
SHANNA LYNN CORPORATION, LYNSEY, INC., LOUIS W. GARMAN, SR.,
THE ESTATE OF THERESA MADERICH, JOSEPH MADERICH, AGNES MADERICH,
VIRGIL ANN MADERICH, AND HENRY MADERICH, DEFENDANTS-RESPONDENTS.
LAWRENCE J. DALTON AND CHRISTINE M. DALTON,
PLAINTIFFS-APPELLANTS,
v.
SHANNA LYNN CORPORATION, LOUIS W. GARMAN, SR.,
THERESA MADERICH, JOSEPH MADERICH, AGNES MADERICH, VIRGIL ANN MADERICH,
HENRY MADERICH, AND LERCO FUEL OIL COMPANY, DEFENDANTS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket Nos. L-516-10 and L-1046-99.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: September 21, 2011

Before Judges Cuff, Waugh, and St. John.

Plaintiffs Lawrence J. Dalton and Christine M. Dalton filed a complaint against defendants Shanna Lynn Corporation and its individual shareholders Louis W. Garman, Sr., Theresa Maderich, Joseph Maderich, Agnes Maderich, Virgil Ann Maderich and Henry Maderich (the Shanna Lynn defendants), and defendant Lerco Fuel Oil Company alleging violations of the Environmental Rights Act (ERA), N.J.S.A. 2A:35A-1 to -14, and the Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11 to -23.24, in connection with the failure of an underground fuel oil storage tank on the property acquired by them in 1988 from the Shanna Lynn defendants. Plaintiffs also sought damages from defendants for negligence, breach of contract, breach of the duty of good faith and fair dealing, consumer fraud, fraud, and equitable fraud. They appeal an order granting partial summary judgment in favor of defendants that dismissed their ERA and Spill Act claims, as well as the order dismissing their equitable fraud claim pursuant to Rule 4:37-2b. We affirm in part, reverse in part and remand for further proceedings.

In August 1988, plaintiffs purchased the Rainbow Inn from the Shanna Lynn defendants. Immediately following the closing, the Shanna Lynn defendants received notice from Lerco that the underground oil tank had failed. Defendants did not inform plaintiffs. It was not until 1997, after a fire destroyed the Rainbow Inn and plaintiffs commenced rebuilding the inn, that an excavator informed plaintiff Lawrence Dalton that he had discovered black sludge in the ground that smelled like oil.

On January 4, 1999, plaintiffs issued a Notice of Suit to be commenced under the Spill Act and the ERA. Plaintiffs served the notice on defendants, the Attorney General of the State of New Jersey, and the Commissioner of Environmental Protection. Plaintiffs filed their complaint on June 8, 1999. In response to cross-motions for summary judgment in December 2002, a judge dismissed all plaintiffs' claims against Lerco, dismissed claims under the ERA, the Solid Waste Act, the Clean Water Act, the Spill Act, and the Consumer Fraud Act (Counts I-V), and a negligence claim (Count VIII) against Shanna Lynn Corporation.

Thereafter, the remaining breach of contract and fraud claims against the Shanna Lynn defendants were tried in March 2006. Following the conclusion of plaintiffs' case, the trial judge dismissed all but the equitable fraud claim due to the absence of any proof of damages. The judge sought further briefs on the remedies for equitable fraud, the remaining cause of action. He also dismissed the jury due to the equitable nature of the remaining claim. After a protracted period without a decision, plaintiffs filed a second complaint in 2010 seeking the same remedies for the 1988 oil spill.

Plaintiffs appeal from two orders. The first order, dated July 22, 2010, granted summary judgment in favor of defendants and dismissed the 2010 complaint. The second order, dated November 15, 2010, dismissed the equitable fraud claim due to lack of an appropriate remedy to address the wrong done to plaintiffs by the Shanna Lynn defendants and entered final judgment in their favor. We consolidated these appeals by order dated February 8, 2011.

On appeal, plaintiffs argue that the motion judge erred in 2002 when he dismissed their environmental claims. Plaintiffs also argue that the trial judge should have permitted them to serve a supplemental expert report in support of a claim that the contamination diminished the value of their property, and that the trial judge erred when he dismissed the equitable fraud claim. Finally, plaintiffs contend that their claims in the 2010 complaint were not barred by the disposition of their 1999 complaint, and that defendants have repeatedly certified to facts that are untrue and undermine the decisions rendered throughout this protracted litigation.

Plaintiffs started to address the problem presented by the 1988 tank failure in 1999 following reconstruction of the building and resumption of business. Following service of the Notice of Suit and filing of the complaint, plaintiffs hired Marks Environmental, Inc. to perform a site investigation. Its November 2000 report concluded that the abandoned fuel oil tank was the source of the black sludge uncovered during excavation for the new building and recommended two actions: first, a full site characterization study; and second, any required remediation. The study would determine the vertical and lateral extent of soil contamination and the existence of any groundwater contamination. Plaintiffs never conducted a full site characterization study.

I Initially, we address plaintiffs' appeal from the July 22, 2010 order dismissing their 2010 complaint. The 2010 complaint was a duplicate of the 1999 complaint, except for claims against Lynsey, Inc., a corporation funded in part by defendants from proceeds from the 1988 sale of the Rainbow Inn, and claims for concealment of property defects and nuisance.

The motion judge held that defendant Lynsey was not a successor to defendant Shanna Lynn and had no liability for its acts or omissions. He also held that all claims in the 2010 complaint were barred by res judicata and the entire controversy doctrine.

The doctrine of res judicata contemplates that when a controversy between parties is once fairly litigated and determined it is no longer open to relitigation. Where the second action is no more than a repetition of the first, the first lawsuit stands as a barrier to the second. The rule precludes parties from relitigating substantially the same cause of action. [Culver v. Ins. Co. of N. Am., 115 N.J. 451, 460 (1989) (citations and internal quotation marks omitted).]

To benefit from this doctrine, the party asserting it must demonstrate:

(1) the judgment in the prior action must be valid, final, and on the merits; (2) the parties in the later action must be identical to or in privity with those in the prior action; and (3) the claim in the later action must grow out of the same transaction or occurrence as the claim in the earlier one. [Watkins v. Resorts Int'l Hotel & Casino, Inc., 124 N.J. 398, 412 (1991).]

The entire controversy doctrine "'embodies the principle that the adjudication of a legal controversy should occur in one litigation in only one court; accordingly, all parties involved in a litigation should at the very least present in that proceeding all of their claims and defenses that are related to the underlying controversy.'" Highland Lakes Country Club & Cmty. Ass'n v. Nicastro, 201 N.J. 123, 125 (2009) (quoting Cogdell v. Hosp. Ctr. at Orange, 116 N.J. 7, 15 (1989)).

Plaintiffs argue the claims they asserted in the second action are not barred by res judicata or the entire controversy doctrine because they are entirely new claims. They contend the claims asserted arose "after the plaintiffs had reported the spill to DEP, after Shanna Lynn had refused to investigate or clean up the oil spill and after being advised by its experts that the open case may give rise to additional damage claims . . . ." However, nothing has changed since plaintiffs filed their complaint in 1999, except for a motion granting partial summary judgment in favor of defendants and a trial at which all but the equitable fraud claim were dismissed. Moreover, ...


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