Case Title: New Jersey Transit Corporation v. Cat in the Hat, LLC

Citation: 

Docket Number: a-42-02

State: new-jersey

Court: New Jersey Supreme Court

Date: 2003-07-10T00:00:00Z

Document:
The issue on appeal is whether a trial court may enter an order in an eminent-domain proceeding that preserves a governmental condemnor s ability to bring a separate cost-recovery action against a condemnee for cleanup of contamination and, if so, whether that order also may bar the condemnee from later raising the preclusionary defenses of res judicata, collateral estoppel, and the entire controversy doctrine. Goldman and Cat in the Hat properties In April 2000, New Jersey Transit Corporation (NJT) began condemnation actions against Goldman, Popkin, Caputi, Hegedus, and Carom Partnership (Goldman) trading as Best Spot Parking and Cat in the Hat, LLC (Cat in the Hat), trading as Penn Central Parking (collectively condemnees). The subject properties, separately owned, are adjacent commercial parking lots near the Trenton Train Station. NJT sought to acquire the sites as part of its construction of a new light rail transit system between Trenton and Camden. The plans call for NJT to construct a station stop terminus, which will stretch across the two subject properties, any remainder to be put to other uses. At the time of NJT s condemnation actions, both properties operated as commercial automobile parking lots covered by impervious asphalt caps (parking lot surface). Prior to instituting its condemnation actions, NJT retained an environmental testing firm to conduct a Phase I assessment of the subject properties. The assessment included an investigation of the history, prior uses, and other available information on the site, an examination of relevant environmental records, and limited site inspection. After the site investigation, a Property Acquisition Cost Estimating (PAECE) report was prepared. Each condemnee received the a report that calculated the estimated cost to remediate the property, to develop it to its highest and best use, and to comply with New Jersey Department of Environmental Protection (NJDEP) requirements. In January and March 2000, NJT informed the condemnees that the PAECE report detected soil contamination on the properties. However, NJT indicated that because of the low concentration of contaminants found, NJDEP would most likely not require further investigation and cleanup or remediation in accordance with NJDEP guidelines. NJT informed the condemnees that NJDEP would likely require placement of a Declaration of Environmental Restriction, commonly known as a Deed Notice, to provide notice to any subsequent owners about the contamination on the properties. NJT s environmental consultant indicated that the easiest and least expensive method to remediate the site was to maintain the parking lot surface to avoid human exposure to any contaminants. NJT estimated the cost of remediation for each property at $25,000, including transactional costs. NJT filed verified complaints and declarations of taking to acquire the subject properties by eminent domain. Each complaint sought a final judgment with an environmental reservation clause pursuant to which NJT, as a governmental entity condemnor, reserved its right to recover any present or future cleanup costs. NJT s proposed orders for judgment also included language providing that the NJT could raise hazardous waste claims without being barred by the principles of res judicata, collateral estoppel, and/or the entire controversy doctrine. In April 2000, the trial court ordered the condemnees to show cause why judgment should not be entered declaring that NJT had properly exercised its powers of eminent domain and appointing three disinterested commissioners to value the property. NJT s orders sought judgment declaring that the reservation of rights made in Paragraphs 7 and 8 of the complaint as to environmental contamination issues existing as of or prior to the date NJT took title and possession, were preserved in accordance with the proposed order for judgment. NJT deposited $500,000 in court for the Goldman property and $985,000 for the Cat in the Hat property, representing the fair market value as if the properties had been remediated. The condemnees filed answers and objected to the reservation of rights language, requesting that NJT bring all claims in one action. The condemnees also contended that NJT did not conduct proper bona fide negotiations because of its defective environmental reservations and illegal environmental claims. The condemnees later moved to withdraw the monies deposited in court. NJT sought to withhold $25,000 from each condemnation award to cover estimated remediation costs. The trial court ruled that NJT s environmental reservation provision was valid, but modified the proposed language. The court found that the language in the reservation of rights clause that forever barred the condemnees from asserting the defenses of res judicata, collateral estoppel, and/or the entire controversy doctrine goes too far. The court modified the language, withdrawing the automatic preclusion of these defenses, noting that it will be up to the trial court to determine if those doctrines can or cannot be invoked in relation to after-discovery of environmental contamination. The court entered an order permitting the condemnees to withdraw the amount of just compensation determined by the commissioners, but required each to maintain on deposit in court $25,000 in estimated remediation/transactional costs. Eisen Sandra Eisen was the owner of property in Hudson County acquired by eminent domain by the New Jersey Department of Transportation (NJDOT). The reservation of rights issue raised by NJT in Goldman and Cat in the Hat also was raised in Eisen. However, the trial court permitted in the condemnation judgment a reservation of rights provision identical to the provision in NJT s proposed orders, including the preclusion of res judicata, collateral estoppel and the entire controversy doctrine. All condemnees appealed and in July 2002, the Appellate Division affirmed in Eisen and reversed in Goldman and Cat in the Hat. According to the Appellate Division, the condemnees position regarding the preclusionary defenses threatens the immunity conferred by the Legislature on acquiring public entities and runs counter to the legislative intent to impose strict liability under the Spill Act on those who are responsible for environmental contamination. The Supreme Court granted certification. HELD: The reservation of rights clause and the preclusion of the defenses of res judicata, collateral estoppel, and entire controversy are proper concomitants of the valuation methodology adopted today in Housing Authority of the City of New Brunswick v. Suydam Investors, LLC. 1. Under the valuation methodology approved today in Housing Authority, the condemnor appraises the property as if remediated, deposits that amount into a trust-escrow account in court, and reserves the right to bring a separate action to recover remediation costs. That valuation scheme addresses the condemnees concerns over double liability. The purpose of the reservation of rights clause is to avoid a future entire-controversy claim by notifying the trial court that the condemnation suit does not adjudicate the contamination claim, which is reserved for determination in a separate cost-recovery action. Thus, the preclusion of the entire controversy defense follows from the existence of the reservation or rights provision. (Pp. 17-19) 2. Where the property is valued in condemnation as if remediated and the State specifically reserves the right to recover cleanup costs in a separate action, collateral estoppel and res judicata are, by their very nature, inapplicable because the condemnation action did not adjudicate the contamination. Due to the nature of eminent domain, a complete initial environmental investigation prior to condemnation is not possible or practical. Moreover, the Eminent Domain Act does not require the condemnor to conduct an environmental assessment of the property. All that the Act requires is that the condemnor conveys what is known. (Pp. 19-21) 3. The condemnees claim that they should be able to argue the reasonableness of the government s initial investigation contravenes the statutory scheme underlying the Spill Act. The Legislature has provided that a governmental condemnor generally is immune from liability for contamination and that the party responsible remains liable even after transfer of the property. Any reasonableness argument would chip away at the government s immunity and shield the condemnees from liability in contravention of the statutory scheme. (Pp. 21-22) Judgment of the Appellate Division is AFFIRMED. CHIEF JUSTICE PORITZ and JUSTICES COLEMAN, VERNIERO, LaVECCHIA, and ZAZZALI join in JUSTICE LONG s opinion. JUSTICE ALBIN did not participate. SUPREME COURT OF NEW JERSEY A- 42 September Term 2002 Plaintiff-Respondent, v. CAT IN THE HAT, LLC, Defendant-Appellant, and THE STATE OF NEW JERSEY, and the CITY OF TRENTON, Defendants. NEW JERSEY TRANSIT CORPORATION, a body corporate and politic, Plaintiff-Respondent, v. THE GOLDMAN, POPKIN, CAPUTI, HEGEDUS and CAROM PARTNERSHIP, a New Jersey General Partnership, T/A Best-Spot Parking, GOLDMANN, POPKIN, CAPUTI, HEGEDUS and CAROM, a New Jersey General Partnership, T/A Best-Spot Parking, GOLDMANN, POPKIN, HEGEDUS and CAROM, a New Jersey General Partnership, T/A Best-Spot Parking, Best Spot Parking Lot, a New Jersey Partnership, T/A Best Spot Parking Lot, Ruth Carom, a/k/a Ruth H. Carom, Partner, Barbara Caputi, Partner, Beatrice Goldman, a/k/a Beatrice Goldmann, Partner, Carmela Hegedus, a/k/a Carmella Hegedus, Partner, and Ruth Popkin, a/k/a Ruth C. Popkin, Partner, Defendants-Appellants, and CITY OF TRENTON, Defendant. STATE OF NEW JERSEY, by the COMMISSIONER OF TRANSPORTATION, Plaintiff-Respondent, v. SANDRA E. EISEN, Defendant-Appellant, and ADAMS PERFECT FUNERAL HOME, INC., a Corporation of New Jersey, and CITY OF JERSEY CITY, in the County of Hudson, a Municipal Corporation of New Jersey, Defendant. Argued April 29, 2003 Decided July 10, 2003 On certification to the Superior Court, Appellate Division, whose opinion is reported at 353 N.J. Super. 364 (2002). Edward D. McKirdy argued the cause for appellants (McKirdy and Riskin, attorneys; Mr. McKirdy and L. Jeffrey Lewis, on the briefs). Maureen Hinchliffe Bonney, Deputy Attorney General, argued the cause for respondent (Peter C. Harvey, Acting Attorney General of New Jersey, attorney; Patrick DeAlmeida, Deputy Attorney General, of counsel). The opinion of the Court was delivered by LONG, J. In these consolidated condemnation cases, we are called on to determine whether a trial court may enter an order in an eminent domain proceeding that preserves a governmental condemnor s ability to bring a separate cost-recovery action against a condemnee for cleanup of contamination and if so, whether that order also may bar the condemnee from later raising the preclusionary defenses of res judicata, collateral estoppel and the entire controversy doctrine. In light of our decision today in Housing Auth. of City of New Brunswick v. Suydam Invs., __ N.J. __ (2003), holding that contamination should not be considered as a valuation issue in a condemnation case, but should be reserved for a separate cost-recovery action, it follows that the reservation of rights clause is legitimate and that res judicata, collateral estoppel and entire controversy defenses are unavailable in the later cost-recovery action. A. Goldman and Cat in the Hat Notwithstanding the results of the State s inspection and the State s determination to limit its cost-recovery to the costs associated with the Deed Notice, plaintiff does not accept liability for any pre-existing contamination or solid waste, whether known now or subsequently discovered, on the subject property . . . . Furthermore, plaintiff has valued the property as if it has been remediated . . . . Plaintiff further reserves its right to amend, at its discretion, the amount of the estimated cleanup or remediation costs, as well as the scope and breadth of the cleanup or remediation, if additional information becomes available. Further, NJT s proposed orders for judgment and appointment of commissioners included the following language: 5. In accordance with the reservations made by plaintiff in paragraphs 7 and 8 of the Verified Complaint relating to issues of contamination, hazardous material or solid waste existing as of or prior to the date of vesting of title and possession pursuant to N.J.S.A. 20:3-19, plaintiff may raise any such claims, or any other claims relating thereto, without being barred by the principles of res judicata, collateral estoppel and/or the Entire Controversy Doctrine. The Court reserves as to the merits of such claims. Defendants shall also retain the right to assert any and all defenses, when and if such claims are raised, except for the defenses of res judicata, collateral estoppel and/or the Entire Controversy Doctrine premised upon this condemnation proceeding. In April 2000, the trial court ordered the condemnees to show cause why judgment should not be entered declaring that NJT properly exercised its powers of eminent domain and appointing three disinterested commissioners to fix the value of the property. Additionally, the orders to show cause sought judgment declaring that the reservations made in paragraphs 7 and 8 of the complaint as to the issues regarding contamination, hazardous material or solid waste, existing as of our prior to the date of vesting of title and possession pursuant to N.J.S.A. 20:3-19, were preserved in accord with the proposed form of order for judgment and appointing commissioners. NJT deposited $500,000 in court for the Goldman properties and $985,000 for the Cat in the Hat properties, which represented the fair market value thereof as if the property had been remediated See footnote 1. The condemnees filed answers and objected to reservation of rights language in NJT s proposed order for final judgment. The condemnees requested that NJT bring all claims, including those relating to valuation of the subject property, in one action. They also contended that NJT did not conduct proper bona fide negotiations because of its defective environmental reservations and illegal environmental claims. Subsequently, the condemnees filed motions to withdraw the monies deposited by NJT. NJT responded with a request to withhold $25,000 from each condemnation award to cover the estimated transactional costs. The trial court ruled that NJT s environmental reservation provision was valid, but modified the proposed language. The court noted that NJT, in essence, by including the standard environmental reservation, is seeking indemnification from the defendants, in light of the Spill Act provisions, which exempt a state governmental entity that acquires ownership of property through eminent domain, from liability for the costs of cleanup and removal of any discharge which occurred or began prior to that ownership. The court went on: The court understands and appreciates NJT s concern to preserve its rights in the future. In fact, NJT s effort to include language to protect future claims represents a prudent and reasonable decision. However, the standard environmental reservation that the defendants are forever barred from the defenses of res judicata, collateral estoppel or the entire controversy doctrine goes too far. That is a determination if it is ever made at all which will have to be made by some other court at some other time based upon the facts as they may appear at that time based upon a record not on the record that now exits. . . . . The effect of the modified environmental reservation will not be to automatically preclude NJT from filing suit against the property owner, in the event that contamination is discovered at a latter date. Nor will it have the effect of always and routinely permitting the condemnor to bring suit without any regard whatsoever for the doctrines of finality of judgment, res judicata or the entire controversy doctrine. It will permit the court, in those cases of after-discovered contamination, to weigh, based upon the facts of each case, whether those doctrines should be invoked or whether the circumstances relating to the after-discovery of the particular environmental contamination in that case render those doctrines inapplicable. The modified language protects the interest of NJT while at the same time vesting the decision regarding res judicata, equitable estoppel and the entire controversy doctrine with the judge presiding over the subsequent proceeding. The modification in no way impairs the ability of NJT, or any other governmental entity, from initiating and recovering in a cost-recovery suit the costs related to remediation and clean-up. Accordingly, the court inserted the following modified language in the orders for final judgment and appointment of commissioners: The court notes the reservation of rights claimed by plaintiff in paragraphs 7 and 8 to the complaint relating to contamination, hazardous materials or solid waste existing as of the filing of the complaint. The court has made no rulings regarding the merits or efficacy of those reservations, however. The court also notes the defendants allegations and defenses asserted in the answer against plaintiff in regard to said reservations. The court has made no ruling regarding the merits of those allegations and defenses. In August 2000, the court entered an order that permitted the condemnees to withdraw the amount of just compensation determined by the appointed commissioners, but required each to maintain on deposit in court the $25,000 in estimated transactional costs pending further order of the court. I m not convinced that sound policy under both the Condemnation Act, and the Spill Act would require the placing of that burden on the State. As a consequence, I m satisfied that it is appropriate for the condemning authority to include these reservations of rights in all cases as a prophylactic matter. All condemnees appealed See footnote 2 and in July 2002, the Appellate Division affirmed in Eisen and reversed in Goldman and Cat in the Hat. New Jersey Transit Corp. v. Cat in the Hat, 353 N.J. Super. 364, 378 (2002). In so doing, Judge Cuff, writing for the panel stated: As our review of the Spill Act demonstrates, the Legislature has not only imposed liability for cleanup and removal costs on property owners who have discharged hazardous substances which have contaminated soil or water but also strictly limited the defenses which a property owner may assert in defense of a claim for cleanup and removal costs. N.J.S.A. 58:10-23.11g-d(1)(4). Furthermore, just compensation for property acquired by a public entity is determined by reference to the highest and best use of the property. The State s practice of appraising the property as if any contamination has been remediated is consistent with this rule. Nevertheless, defendants argue that they should be able to raise the preclusionary defenses of res judicata, collateral estoppel, and the entire controversy doctrine. They contend that their inability to raise these defenses leaves them exposed to claims for an indeterminate period into the future, that NJT and NJDOT have had ample opportunity to investigate the site, and by implication that they may have to pay twice for the existence of contaminants on this site. The latter concern, however, is predicated on the assumption that the existence of contamination is reflected in the just compensation paid to the property owner. Interestingly, no court in this State has ruled that the existence of contamination or hazardous substances on the site is a relevant factor for consideration by a jury in setting just compensation. The State also asserts that its valuation of the property assumes the property has been remediated. It will, however, withhold the estimated cost of removal and cleanup from the property owner. Defendants position threatens not only the immunity conferred by the Legislature on acquiring public entities but also runs counter to the legislative intent to impose strict liability on those who are responsible for soil and water contamination. In the end, defendants arguments are no more than a thinly veiled attempt to enhance their position over other owners of contaminated property solely due to the fact that their property was taken by a public entity for a public purpose. In effect, they seek to have the final condemnation judgment act as a bar to an after-discovered contamination claim. We discern no intent by the Legislature to immunize a property owner from the costs of cleanup and removal of hazardous substances on their property solely due to the fact that a public entity has acquired their property for a public purpose. In fact, such a result flies in the face of a statutory scheme which imposes liability on a public entity for cleanup and removal costs only to situations in which the public entity is responsible for the contamination. [Id. at 376-78 (footnote omitted).] All condemnees petitioned for certification. We granted the petitions, 175 N.J. 80 (2002), and now affirm. NO. A-42 SEPTEMBER TERM 2002 ON CERTIFICATION TO Appellate Division, Superior Court NEW JERSEY TRANSIT CORPORATION, a body corporate and politic, Plaintiff-Respondent, v. CAT IN THE HAT, LLC, Defendant-Appellant, and THE STATE OF NEW JERSEY, and the CITY OF TRENTON, Defendants. DECIDED July 10, 2003 Chief Justice Poritz PRESIDING OPINION BY Justice Long CONCURRING OPINION BY DISSENTING OPINION BY