Opinion ID: 1989717
Heading Depth: 1
Heading Rank: 2

Heading: Goldman and Cat in the Hat

Text: In April 2000, plaintiff New Jersey Transit Corporation (NJT) began condemnation actions against defendant Goldman, Popkin, Caputi, Hegedus and Carom Partnership (Goldman), t/a Best Spot Parking and defendant Cat in the Hat, LLC (Cat in the Hat), T/A Penn Central Parking (collectively condemnees). The subject properties, separately owned, are adjacent commercial parking lots near the Trenton Train Station. The Goldman properties consist of approximately 8,800 square feet, and the Cat in the Hat properties consist of approximately 16,000 square feet. NJT sought to acquire the sites in connection with the construction of its Southern New Jersey Light Rail Transit System between Trenton and Camden. The construction plans for the subject properties call for NJT to construct a station stop terminus, which includes construction platforms, covering canopy, associated lighting, automated ticket vending and various artistic treatments. The structure will stretch across the two properties and the remainder of both properties will be available for other uses, including parking. At the time of NJT's condemnation actions, both properties operated as commercial automobile parking lots covered by impervious asphalt caps. Prior to the institution of its condemnation proceedings, NJT retained an environmental testing firm to conduct what is known as a Phase I assessment of the subject properties. The Phase I assessment included an investigation of the history, prior uses and other available information on the site, an examination of relevant environmental records, and a limited site inspection. N.J.A.C. 7:26E-3.1; Robert I. McMurray, Treatment of Environmental Contamination in Eminent Domain Cases, C975 ALI-ABA 237 (1995). According to Nicholas Marton, Manager of Environmental Compliance for NJT's Office of New Rail Construction, the history of the subject sites, including prior hotel usage and demolition and current parking lot usage, triggered the need for an actual site investigation. The purpose of a site investigation is to determine if any contaminants are present at the site, or, have emanated or are emanating from the site above any of the applicable unrestricted use remediation standards or if no further remediation is required. N.J.A.C. 7:26E-3.3. Soil and groundwater testing were conducted prior to condemnation negotiations to identify potential environmental contamination. After the site investigation, a Property Acquisition Environmental Cost Estimating (PAECE) report was prepared. Each condemnee received a report that calculated the estimated cost that the property owner likely would incur 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 of 2000, NJT informed the condemnees that the PAECE report detected soil contamination on the properties but NJT indicated that [b]ecause the samplings showed contaminant concentrations below Non-Residential NJDEP Soil Cleanup Criteria, NJDEP would most likely not require further investigation and cleanup or remediation in accordance with NJDEP guidelines and regulations. Instead of soil remediation, NJT stated that NJDEP likely would require placement of a Declaration of Environmental Restriction, commonly known as a Deed Notice, to provide notice to any subsequent owners of the contamination on the property. Moreover, NJT's environmental consultant indicated that the easiest and least expensive method to remediate the site would be to maintain the impervious asphalt cap, i.e., the parking lot surface, to preclude human exposure to any contaminants. NJT estimated the cost of remediation for each property at $25,000, which included NJT's cost of investigating, testing and delineation ($20,000) and the cost of preparing and filing a deed notice ($5,000). According to NJT, those costs represented the minimum cost that any owner would incur to remediate the property in compliance with state environmental standards. The actual testing and delineation costs were $23,000, plus $5,000 for the deed notice for the Goldman properties and $27,000, plus $5,000 for the deed notice for the Cat in the Hat properties. 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 costs of remediation, sanitary landfill closure, and/or removal of solid waste. The reservation clause provided in relevant part: 7. Plaintiff hereby reserves any and all rights it had or may have to recover in this action, in any subsequent or pending action or by any administrative means, all costs of remediation and/or cleanup of contamination and/or removal of solid waste and/or sanitary landfill closure that have been incurred or may be incurred in the future by reason of conditions which were in existence as of or prior to the date of vesting of title and possession pursuant to N.J.S.A. 20:3-19. Plaintiff further reserves the right to seek, at its sole discretion, any and all available legal, administrative and equitable remedies to compel defendants to remediate and/or cleanup the property in accordance with applicable state and federal statutory and regulatory provisions or to remove solid waste or carry out closure of a sanitary landfill if located on the subject property. Pursuant to N.J.S.A. 58:10-23.11g(d)(4), plaintiff is not liable for the cleanup and removal costs of any discharge which occurred or began prior to the New Jersey Transit Corporation's ownership. 8. Plaintiff has caused the subject property to be inspected for the existence of contamination and/or solid waste and has found contamination and/or solid waste which requires further investigation and cleanup or remediation in accordance with New Jersey Department of Environmental Protection guidelines and regulations. Since the New Jersey Department of Environmental Protection would likely permit the property owners to address the (soil) contamination on the parcel through the placement of a Deed Notice on the parcel, plaintiff has determined to seek recovery of the costs associated with execution and establishment of a Deed Notice on the parcel. It is estimated that the anticipated costs will be approximately $25,000.00. Notification to the owners regarding the contamination and anticipated remediation is set forth in Exhibit C attached hereto. However, the property will be appraised taking into consideration the market effect of a Deed Notice on the property. 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 [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.