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In the Matter of Vending Components, Inc.

A-6646-03T2 (N.J. Super. App. Div. 2006) (Unpublished)

ISRA; NEGATIVE DECLARATIONS — The New Jersey Department of Environmental Protection has the right to rescind its approval of negative declarations, even after the passage of eighteen years, but appropriate grounds to do so exist only when there was originally an affirmative misrepresentation as to the environmental condition of the property or when it can be shown that the Department made a ministerial mistake.

By 1986, an industrial parcel of land had been sold twice in the prior 18 years. Before completion of either sale, and in compliance with the Environmental Cleanup Responsibility Act [now known as the Industrial Site Recovery Act (ISRA)], each then-owner filed a negative declaration with the New Jersey Department of Environmental Protection (DEP) claiming that there were no known spills or discharges of hazardous substances. In both instances, after making inspections, the DEP approved the negative declarations. When the third purchaser tried to sell the property, it’s soil testing revealed the presence of hazardous contaminants. A consent order was entered allowing the third purchaser to sell the property prior to completion of remediation if it obtained a performance bond from an insurance company guaranteeing that it would complete the cleanup. After the sale was completed, the third purchaser declared bankruptcy. The DEP then directed the third purchaser’s insurance company to complete the cleanup. The insurance company applied to the DEP to rescind its earlier approvals of the negative declarations made by the property’s two immediately previous owners. The DEP denied the application because approval of a negative declaration only may be rescinded if: (i) the seller of the property affirmatively misrepresented the environmental condition of the property; or (ii) the DEP made a ministerial mistake. There was no evidence to suggest that the DEP acted arbitrarily or capriciously in refusing to rescind its approvals. Another Appellate Division panel affirmed the approvals of the negative declarations. Subsequently, in response to an investigation by the third owner’s insurance company, the DEP reversed course and rescinded the two earlier approvals of the negative declarations, finding that the two prior land owners had not accurately represented the environmental condition of the property at the time of their respective sales.

In their appeal, the previous landowners argued: (1) the DEP’s approvals of the negative declarations were neither ministerial mistakes nor predicated on misrepresentations; (2) because the DEP in an earlier case before the Appellate Division argued against recision of its approvals, it was now judicially estopped from rescinding its approvals; (3) the DEP should be precluded from rescinding its approvals because it acted without reasonable diligence and the prior land owners, for 18 years, had relied on the approvals; and (4) the recision of the approvals was plainly unreasonable as against public policy. The DEP argued that the legislative intent in holding a previous land owner responsible for remediation should be strictly imposed; and its decision to rescind its earlier approvals could only be disturbed if it was arbitrary, capricious or unreasonable. Considering that 18 years had passed since the approvals, and that the DEP previously fought to sustain its approvals, and in light of the limited factual record, the matter was remanded by the Appellate Division to the Office of Administrative Law (OAL) for a plenary hearing to resolve all of the factual issues, including determining: (a) why the DEP initially approved the negative declarations; (b) the accuracy of the information in the negative declarations; (c) the difficulty in ascertaining additional information; (d) the uses of the property in the intervening years; (e) the likelihood that the third purchaser or its tenants contaminated the soil.

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