Marsh v. New Jersey Dept. of Environmental Protection

• Decision Date: 18 December 1997
• Citation: 152 N.J. 137,703 A.2d 927
• Parties: Marie MARSH, Petitioner-Respondent and Cross-Appellant, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Environmental Claims Administration, Spill Compensation Fund, Respondent-Appellants and Cross-Respondents.
• Court: New Jersey Supreme Court

Page 137

152 N.J. 137

703 A.2d 927

Marie MARSH, Petitioner-Respondent and Cross-Appellant, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION,

Environmental Claims Administration, Spill

Compensation Fund, Respondent-Appellants

and Cross-Respondents.

Supreme Court of New Jersey.

Argued Sept. 8, 1997.

Decided Dec. 18, 1997.

Richard F. Engel, Deputy Attorney General, for respondent-appellant and cross-respondent (Peter Verniero, Attorney General of New Jersey, attorney; Mary C. Jacobson, Assistant Attorney General, of counsel; Mark D. Oshinskie, Deputy Attorney General, on the briefs).

Craig J. Huber, Haddonfield, for petitioner-respondent and cross-appellant (Archer & Greiner, attorneys).

The opinion of the Court was delivered by

O'HERN, J.

This appeal concerns the right of one who has acquired property, without knowledge of the presence on the property of hazardous substances, to seek reimbursement of the costs of remediation under the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.24. The Act created the New Jersey Spill Compensation Fund (Spill Fund or Fund), which provides for qualified claimants reimbursement of the cleanup costs for environmental contamination. We affirm the judgment of the Appellate Division that this claimant is ineligible to recover under the Spill Fund. We do so because the property was discharging pollutants during the period of her ownership. We disapprove, on this record, the invalidation of N.J.A.C. 7:1J-2.7(b)(1), a 1993 regulation that makes ineligible for Spill Fund recovery a property owner who had not exercised, before acquisition of property, due diligence in ascertaining the presence of environmental contamination. We also find no legislative authority for the Appellate Division's recognition of a minimal discharge exception from the provisions of the Spill Act that impose liability on the owner of a property discharging hazardous substances.

I

The parties have stipulated to the pertinent facts. In 1991, Marie Marsh's mother conveyed to her property at 772 Black Horse Pike, Turnersville, Washington Township, New Jersey. From 1930 through 1974, three prior owners of the property, including Marsh's parents, leased the property to operators of gas stations. After receiving title to the property, Marsh attempted to obtain subdivision approval. During that process, Township representatives informed her that there might be underground petroleum storage tanks located on the property and that the tanks would have to be registered and then either removed or properly closed.

Upon receipt of this information, Marsh retained an engineering consultant firm (Krydon) to conduct an examination of the property. Krydon advised her that it believed that there were two underground storage tanks existing on the property. In March 1991, Marsh authorized Krydon to excavate the tanks.

During the course of the excavation, Krydon discovered that the tanks had not been properly sealed or filled with an inert material. In addition, during the excavation, Krydon discovered three other tanks that it had not suspected to be beneath the property. Krydon found that the three additional tanks were perforated and had discharged petroleum products into the soil in the past and that at least one of the tanks was still leaking petroleum. Marsh spent more than $41,000 to have the tanks and contaminated soil removed. The New Jersey Department of Environmental Protection and Energy (DEP) advised her that, in addition, she would have to install monitoring wells and sample ground water, at a cost in excess of $10,000. DEP also told Marsh that if contaminated ground water were found, her costs of cure would greatly exceed $10,000.

Marsh was unaware of the presence of the underground tanks until Krydon informed her of its discovery of the tanks. The property was never used as a gas station during Marsh's ownership. Neither she nor her tenants used the underground tanks.

On April 23, 1992, Marsh filed a claim with the Spill Fund seeking compensation for cleanup costs incurred as a result of the presence of the hazardous substances on her property. The Administrator of the Spill Fund denied Marsh's claim and referred the matter as a contested case for a hearing before an Administrative Law Judge (ALJ). The Fund argued that, pursuant to N.J.S.A. 58:10-23.11g(c)(1) (hereafter referred to as 11g(c)), Marsh was in the disqualified category of a person "in any way responsible for the discharge," either because she owned the property while a discharge of gasoline occurred or because she had not exercised due diligence before acquiring the property.

Marsh contended that at the time of her acquisition there was no responsibility on the part of a person taking title to property to conduct an inquiry into the presence of hazardous substances and that such a requirement had only recently been inserted into the Spill Act by Section 44 of the Industrial Site Recovery Act (ISRA), L. 1993, c. 139, amending section 11g of the Spill Act. This 1993 provision imposed specific responsibility to investigate for hazardous substances on a person who plans to acquire property as a condition of being absolved from responsibility under the Spill Act. ¹ Marsh argued that there was no law creating such a duty prior to the effective date of this amendment, when Marsh received her property, and that the Legislature had specifically provided (in the last paragraph of N.J.S.A. 58:10-23.11g(d)(2)) that there should be no retroactive application of ISRA. She also argued that a similar due diligence requirement set forth in N.J.A.C. 7:1J-2.7(b)(1) went into effect after the disapproval of her claim and could not be given retroactive effect.

Administrative Law Judge Tylutki denied Marsh's Spill Fund claim. She held that, as an owner of the premises, Marsh was responsible for that portion of the discharge that took place during the time she held title to the property. The ALJ read the case law to provide a narrow defense to Spill Act liability for innocent landowners, but she concluded that the innocent landowner defense was unavailable to Marsh. According to the ALJ, even though Marsh may not have known about the underground tanks on the site, by accepting the property with knowledge that her parents had leased it for use as a gasoline service station, Marsh assumed the risk that the property had been contaminated. The ALJ therefore concluded that Marsh would be strictly liable for the discharge that took place while she owned the property. Apparently operating under the belief that Marsh could collect from the Spill Fund the cost of cleaning whatever portion of the pollution existed before she took title, the ALJ noted the absence of proof that any discharge had taken place before Marsh owned the lot. Because N.J.A.C. 7:1J-2.3 places the burden on the claimant to prove satisfaction of all requirements for Spill Fund recovery, the ALJ denied Marsh's claim in total.

On appeal, the Appellate Division affirmed the denial of the claim but disagreed with the reasoning of the ALJ. Relying on our decision in Department of Environmental Protection v. Ventron Corp., 94 N.J. 473, 468 A.2d 150 (1983), it concluded that the fact that "de minimis " quantities of hazardous substances continued to make their way off polluted property during a period of ownership did not make an owner of property "responsible for a hazardous substance" within the meaning of 11g(c). In addition, it concluded that the DEP could not rely on the requirement of due diligence created by the 1993 amendment to N.J.S.A. 58:10-23.11g because the amendment applied only to those transfers made on or after its effective date. (The amendment took effect on September 14, 1993. Marsh received the property in February 1991.) The panel further concluded that N.J.A.C. 7:1J-2.7(b)(1), which required a transferee to make a diligent inquiry before obtaining title in order to be eligible to recover from the Fund, was not authorized by law until ISRA later amended N.J.S.A. 58:10-23.11g.

However, the Appellate Division found that Marsh's mother was clearly a party "responsible for a hazardous substance" within the meaning of 11g(c) because she should have known of the existence of the leaking tanks on her property long before she gave the land to her daughter and she failed to stop the leaks or remove the contamination. The panel would not interpret the Spill Act to permit a property owner who has profited by contamination or permitted the contamination of property to obtain public financing for the cleanup of pollution by the expedient of making a gift of the property to a family member. Consequently, it held that a donee's right to recover reimbursement from the Spill Fund is no greater than the entitlement of a donor. The court declined to decide whether the donee of a property might be liable for cleanup costs in an amount greater than the value of the property.

We granted Marsh's petition for certification and DEP's cross-petition concerning the validity of its regulation and the exception from responsibility for de minimis discharges. 147 N.J. 576, 688 A.2d 1052 (1997).

II

In order to put the issues in perspective, it is necessary to review again the history of the Spill Act. See Buonviaggio v. Hillsborough Township Comm., 122 N.J. 5, 7-10, 583 A.2d 739 (1991).

New Jersey's Spill Act was a pioneering effort by government to provide monies for a swift and sure response to environmental contamination. Since the enactment of New Jersey's Spill Act, many states and the federal government have followed suit. E.g., N.Y. Navigation Law §§ 171-97 (McKinney 1989 & Supp.1996); Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42 U.S.C.A. §§ 9601-9675 (West 1997).

The Spill Act was adopted in 1976 to deal with potential contamination from off-shore oil spills and to stem the "threat to the economy and environment of this State"...