Kessler v. Tarrats

• Decision Date: 01 June 1984
• Citation: 476 A.2d 326,194 N.J.Super. 136
• Parties: Sheldon KESSLER, Plaintiff-Appellant, v. Daniel TARRATS; Barone Barrel & Drum Co., a proprietorship; Barone Hazardous Waste Management Corp., a N.J. Corp.; Carshel Realty Company, a partnership; Foam Craft Corp., a N.J. Corp.; Irwin, Post & Rosen, P.A.; Employers Insurance of Wassau, Defendants, and City of Paterson, a municipal corporation of the State of New Jersey; State of New Jersey, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 136

194 N.J.Super. 136

476 A.2d 326

Sheldon KESSLER, Plaintiff-Appellant, v. Daniel TARRATS; Barone Barrel & Drum Co., a proprietorship Barone Hazardous Waste Management Corp., a N.J. Corp. Carshel Realty Company, a partnership; Foam Craft Corp., a N.J. Corp.; Irwin, Post & Rosen, P.A.; Employers Insurance of Wassau, Defendants and City of Paterson, a municipal corporation of the State of New Jersey; State of New Jersey, Defendants-Respondents.

Superior Court of New Jersey Appellate Division.

Submitted April 30, 1984.

Decided June 1, 1984.

Grabow, Verp & Leddy, Paterson, for plaintiff-appellant (Richard J. Savino, Paterson, on the brief).

Ralph L. DeLuccia, Jr., Corp. Counsel, Paterson, for defendant-respondent, City of Paterson (Julie M. Romaniw, Asst. Corp. Counsel, North Bergen, on the letter brief).

Irwin I. Kimmelman, Atty. Gen. of New Jersey, for defendant-respondent, State of N.J. (Deborah T. Poritz, Deputy Atty. Gen., of counsel; Howard B. Epstein, Deputy Atty. Gen., on the brief).

No other briefs were filed.

Before Judges BISCHOFF, PETRELLA and BRODY.

The opinion of the court was delivered by

PETRELLA, J.A.D.

The trial court held that the Spill Act gave the State of New Jersey a paramount lien over the City of Paterson's preexisting tax lien and the interests of the assignee of a mortgage in Kessler v. Tarrats, 191 N.J.Super. 273, 466 A.2d 581 (Ch.Div.1983). Paterson and the holder of the mortgage appeal. We affirm.

On December 21, 1976 Carshel Realty, a partnership owned by Sheldon Kessler and his wife, bought the premises at 190--16th Avenue, Paterson, New Jersey from 190--16th Avenue Corporation (hereinafter 190 Corp.) and executed a note and a mortgage to 190 Corp. ¹ On February 22, 1977 Carshel conveyed the premises to Foam Craft which assumed the mortgage owed to 190 Corp.

On November 9, 1979 Employers Insurance of Wassau obtained a judgment against Foam Craft, and obtained a lien on the subject property. On December 1, 1979 Foam Craft conveyed the premises (subject to the 1976 mortgage to 190 Corp.) to Daniel Tarrats who operated Barone Barrel and Drum Company on the premises. Contemporaneously, Tarrats executed a $27,000 mortgage to Foam Craft. On June 17, 1980 Tarrats executed a $7,000 mortgage to Irving Savings and Loan, which mortgage has apparently been satisfied.

On January 23, 1980 the Spill Fund lien provision was signed into law. Under N.J.S.A. 58:10-23.11f(f) the State was given a priority lien in all cases where the administrator of the Spill Fund is required to clean up a site pursuant to this act.

On October 31, 1980 the Paterson Tax Collector sold the tax certificate and recorded the City's lien for the unpaid taxes of $2,874.86 which accrued in 1979. On December 31, 1981 Tarrats gave a mortgage for $25,000 to Irwin, Post & Rosen, P.A., a law firm which represented Tarrats, and which did not participate in this appeal or the underlying action.

In October 1981 the State of New Jersey and the City of Paterson learned that the premises were being used for the illegal storage of toxic chemicals. The State of New Jersey Department of Environmental Protection (DEP) negotiated with Tarrats regarding cleaning up the toxic chemicals. On October 26, 1981 Tarrats entered into a consent order with the DEP in which he undertook to clean up the property. Upon Tarrats' default under the consent order, the DEP obtained an order on January 5, 1982 which permitted it to clean up the site. The DEP expended $274,581.43 in performing that task. The City of Paterson also expended a considerable, but unstated amount, in providing municipal employees to assist in the clean-up, most notably Paterson police officers and firemen.

On April 13, 1982, 190 Corp. assigned the note and mortgage to Sheldon Kessler, a partner in Carshel Realty which originally had given the 1976 mortgage. At the time Tarrats held fee title to the premises. On May 7, 1982 the State filed a certification of expenditures with the court representing the cost of the clean-up. On May 25, 1982 Kessler filed a complaint to foreclose on the property. On July 27, 1982 the State filed its lien pursuant to the Spill Act.

After Sheldon Kessler filed his foreclosure complaint, the City of Paterson filed an answer and cross-claim asserting its statutory lien for unpaid taxes, and the State of New Jersey filed an answer, cross-claim and counterclaim to enforce the lien of the administrator of the New Jersey Spill Compensation Fund, entered pursuant to N.J.S.A. 58:10-23.11f(f). The administrator filed a motion for summary judgment, seeking an adjudication that its lien was paramount to all others.

The trial judge held that the Spill Fund created a paramount lien in the State which took priority over Paterson's lien and the lien of the mortgage now held by Kessler under the assignment.

The issues on this appeal relate primarily to the priority of the liens. Kessler also argues that his rights relate back in time to when 190 Corp. took the mortgage because he has since assumed 190 Corp.'s rights and obligations. Moreover, Kessler argues that the Spill Act is an unconstitutional impairment of contract and constitutes a taking of his property without just compensation. The DEP responds that Kessler's rights arose after the enactment of the priority lien law and that the Spill Act is a valid exercise of the police power. The City of Paterson argues that its lien arose before the enactment of the Spill Act lien provision, and because its lien was perfected first, it therefore has priority.

The Spill Act was enacted in 1976. The lien provision at issue herein, N.J.S.A. 58:10-23.11f(f), was enacted in L.1979, c. 346, and became effective on January 23, 1980. The lien provision provides:

Any expenditures made by the administrator pursuant to this act shall constitute a first priority claim and lien paramount to all other claims and liens upon the revenues and all real and personal property of the discharger, whether or not the discharger is insolvent. (Emphasis added.)

Since the trial court's decision in this case, the New Jersey Supreme Court has held that the Spill Act has retroactive application. In State, Dept. of Environ. Protect. v. Ventron Corp., 94 N.J. 473, 498, 468 A.2d 150 (1983), the court held that the Legislature intended the Spill Act to have retroactive application, and thus held defendants strictly liable for their violations even though the acts constituting the violations took place prior to the enactment of the Spill Act. Id. at 486-487, 468 A.2d 150. The specific holding in Ventron did not address all aspects of the Spill Act, but we find the analysis used in finding the strict liability provision retroactive to be equally applicable to the lien provision. In Ventron, Justice Pollack wrote:

When considering whether a statute should be applied prospectively or retroactively, our quest is to ascertain the intention of the Legislature. In the absence of an express declaration to the contrary, that search may lead to the conclusion that a statute should be given only prospective effect. Rothman v. Rothman, 65 N.J. 219, 224 (1974). Conversely, when the Legislature has clearly indicated that a statute should be given retroactive effect, the courts will give it that effect unless it will violate the constitution or result in a manifest injustice. Baldwin v. Newark, 38 N.J.L. 158, 159 (Sup.Ct.1895); see Gibbons v. Gibbons, 86 N.J. 515, 522-23 (1981); Howard Savings Inst. v. Kielb, 38 N.J. 186, 193 (1962). As noted, the Legislature has expressly declared that the Spill Act should be given retroactive effect.

Retroactivity need not render a statute unconstitutional, Rothman v. Rothman, 65 N.J. at 225 , and the Spill Act, not being a criminal provision, is not invalid as an ex post facto law. Furthermore, the due process clause generally does not prohibit retroactive civil legislation unless the consequences are particularly harsh and oppressive. United States Trust Co. v. New Jersey, 431 U.S. 1, 19 n. 13, 97 S.Ct. 1505, 1516 n. 13, 52 L.Ed.2d 92, 106 n. 13 (1977). In the exercise of the police power, a state may enact a statute to promote public health, safety or the general welfare. Rothman v. Rothman, 65 N.J. at 225 . Although retroactive application of a statute may impair private property rights, when protection of the public interest so clearly predominates over that impairment, the statute is valid. Id. In this case, we find that the public interest outweighs any impairment of private property rights. [Id. at 498-499, 468 A.2d 150].

Our holding that the Spill Act lien provision is retroactive necessarily rejects the City of Paterson's claim that its lien is paramount. Under N.J.S.A. 54:5-9, the municipality generally has a priority lien over all prior and any subsequent State encumbrances. Irvington v. Ollemar, 128 N.J.Eq. 402, 409, 16 A.2d 563 (Ch. 1940). However, that priority is limited by the lien authorized by the subsequent enactment of the Spill Act.

Although the Spill Act lien is paramount to the priority lien of the City, it is nonetheless clear that a municipality has no claim under the Constitution against the State. Trenton v. New Jersey, 262 U.S. 182, 187, 43 S.Ct. 534, 536, 67 L.Ed. 937, 941 (1922). The municipality has no rights against the State based on impairment of its statutory lien. As was stated in Trenton, supra:

In New Jersey it has been held that, within the limits prescribed by the state Constitution, the legislature may delegate to municipalities such portion of political power as they may deem expedient, withholding other powers, and may withdraw any part of that which has been delegated. Van Cleve v. Passaic Valley Sewerage Comrs, 71 N.J.L. 183, 198, 58 [A.] 571.

In the absence of state constitutional provisions safeguarding it to them, municipalities have no inherent right of self-government which is beyond the legislative control of the state. A municipality...