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New Jersey Schools Development v. Joseph Marcantuone and Robert Gieson

October 29, 2012


On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-877-08.

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



Argued December 7, 2011

Before Judges Fuentes, Harris, and Koblitz.

The opinion of the court was delivered by FUENTES, P.J.A.D.

In 2005, the City of East Orange (the City) acquired by condemnation real property owned by defendants Joseph Marcantuone and Robert Gieson. Plaintiff New Jersey Schools Development Authority provided the funding for this acquisition. The court entered final judgment in the condemnation action in 2007, awarding defendants $629,407 as just compensation. From this sum, the court set aside $182,035.20, representing the estimated cost of environmental cleanup of the land. The court ordered that these funds be held in trust by the Clerk of the Superior Court until the final cost of remediation was ascertained and a determination on liability established.

In 2008, plaintiff filed suit in the Law Division against defendants to recover approximately $212,000 spent to remediate the site. Relying on our decision in White Oak Funding, Inc. v. Winning, 341 N.J. Super. 294 (App. Div.), certif. denied, 170 N.J. 209 (2001), the trial court granted defendants' motion for summary judgment and dismissed plaintiff's complaint. The trial court held that defendants were not liable because they purchased the property before September 14, 1993,*fn1 and were not "in any way responsible" for the contamination under N.J.S.A. 58:10-23.11g(c)(1) of the New Jersey Spill Compensation and Control Act (the Spill Act), N.J.S.A. 58:10-23.11 to -23.24.

On appeal, plaintiff argues that the trial court erred by failing to recognize that our decision in White Oak was in part implicitly superseded by the 2001 amendments to the Spill Act*fn2

creating the "innocent purchaser" defense codified at N.J.S.A. 58:10-23.11g(d)(5). According to plaintiff, the only way an owner who purchased contaminated land before September 14, 1993, can avoid liability under the Spill Act is to establish, by a preponderance of the evidence, the four elements of the "innocent purchaser" defense.

We agree with plaintiff's position and reverse. Although it may seem counterintuitive to infer liability from legislation establishing an affirmative defense, logic dictates that that is the case. The "innocent purchaser" defense in N.J.S.A. 58:10-23.11g(d)(5), applicable to those who acquired contaminated land before September 14, 1993, read in pari materia with N.J.S.A. 58:10-23.11g(d)(2), which provides a similar defense to those who acquired contaminated land after September 14, 1993, reveals the Legislature's acknowledgment of the underlying liability these affirmative defenses were intended to counteract.

We thus reverse the trial court's decision dismissing plaintiff's complaint and remand the matter for the purpose of permitting defendant to develop and present evidence addressing the elements of the "innocent purchaser" defense established under N.J.S.A. 58:10-23.11g(d)(5). Because we reverse the trial court's grant of summary judgment on these grounds, we do not address plaintiff's argument based on the doctrine of unjust enrichment.


In June 1985, defendants purchased property located at 25-33 North Arlington Avenue in East Orange (the property). At the time of purchase, the property was partly occupied and leased to Carriage Trade Cleaners, a dry cleaning establishment. A number of dry cleaners have continuously operated on this site since 1930.*fn3

Defendants owned and operated a grocery store on another section of the property. They have never personally owned or operated a dry cleaning establishment on the property.

In June 2003, Empire Environmental (Empire) conducted an environmental investigation of the property known as a Phase I Environmental Assessment. This consisted of "an on-site investigation, review of related current and historical environmental records and an examination of adjacent and surrounding properties." This investigation "discovered a number of areas of environmental concern [and] one possible incident of environmental non-compliance but no history of environmental non-compliance with regulatory agencies." The report also noted that "there appears to be an abandoned, unregistered, underground storage tank in the rear parking lot of the site . . . [with] some indication of the use and storage of hazardous materials in consumer and industrial quantities."

Empire recommended that action be taken to determine the age, condition, and contents of the tank and, "if necessary," that the tank be properly removed and abandoned "in accordance with state and local regulations." There was "no evidence of improper disposal of hazardous materials on site," and "no signs of the occurrence of negative environmental impact to the site from the surrounding area."

Empire found that the dry cleaners on site used "industrial quantities of solvents and cleaners," but noted that "[t]he unit in the dry cleaners is a closed system designed to contain all of the cleaning fluids with no emissions to air or liquid discharges." The report concluded that, "[b]ased on [Empire's] field observations, interviews and reviews of available data, the subject site does not appear to be negatively impacted due to past uses or current practices and operations." Although the property did not need "major environmental corrective action," Empire recommended that a limited investigation be conducted.


On November 4, 2005, the City filed a condemnation action against defendants seeking to acquire the property for the purpose of constructing the "East Orange School District Abbott School Demonstration Project Pre-K-12 School for the Performing Arts." The City offered defendants $365,000 in compensation, minus an estimated cleanup and remediation cost of $17,489. On December 15, 2005, the City filed a declaration of taking and deposited the estimated compensation amount with the court pursuant to N.J.S.A. 20:3-18.*fn4

In 2004, prior to this condemnation action, the New Jersey School Construction Corporation retained PMK Group, Inc. (PMK), to conduct an environmental site investigation of the property. Although a complete copy of the preliminary assessment and site investigation report (PA/SIR) from this investigation is not included as part of the appellate record, according to a summary of the report provided by defendants' expert, "[b]ased on [PMK's] findings, no investigation with respect to the (former) dry cleaning operations . . . was originally recommended or proposed by PMK." Plaintiff does not dispute this contention.

On plaintiff's behest, PMK prepared a Property Acquisition Environmental Cost Estimate Report (PAECER) in April 2005, in which it noted that "[PCE] [wa]s used for dry cleaning operations on the property"; it nevertheless concluded that "[n]o further investigation of interior storage areas, or the area ...

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