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White Oak Funding, Inc. v. Scarborough

A-2940-01T2 (N.J. Super. App. Div. 2003) (Unpublished)

ENVIRONMENTAL LIABILITY; SPILL ACT—The 1993 amendments to the New Jersey Spill Act apply to persons who owned property on the day of its passage, not to persons who disposed of property before its passage.

A property was owned and operated as a fuel oil distribution business. It had an above-ground oil tank that was subsequently removed. Then, a photocopy business owned the land for three years, eventually selling it to a florist shop. The florist shop defaulted on its mortgage and the defaulted mortgage was purchased by an investor. After the investor purchased the property at a sheriff’s sale, it learned that the property was contaminated. When the New Jersey Department of Environmental Protection learned about the contamination, it ordered the original fuel distribution business to clean up the property, but that owner had filed for bankruptcy. The investor then sued the photocopy business, but lost. In an earlier proceeding, the Court concluded that “passive migration of contamination does not constitute a ‘discharge’ for the purposes of the Spill Act, ..., and that [the photocopy business], who had purchased the property prior to the enactment of the Spill Act could not be considered to be ‘in any way responsible’ for the contamination.” A week after that original opinion was issued, the Spill Act was amended “to create an innocent purchaser defense for parties who purchased property prior to [the date] when the Spill Act became effective.” The investor then contended that because the photocopy business had been aware of the fuel oil business on the site “and conducted no environmental inspection before purchasing the property, [the photocopy business] could not qualify for the innocent purchaser defense.” The New Jersey Supreme Court denied certification and the investor filed a motion for reconsideration of the decision that the photocopy business had no liability to the investor. The lower court felt that the amendment to the Spill Act should not be given retroactive effect, and in this case, the Appellate Division agreed. The Court looked at the language of the statute, which begins “A person, including an owner or operator of a major facility, who owns real property acquired prior to September 14, 1993… .” According to the Court, “[t]he Legislature spoke in the present tense, that is, those owning such property at the time the amendment was passed. It made no provision for a party who owns such property prior to September 14, 1993 and transferred ownership between September 14, 1993 and the passage of the amendment. Surely, if the Legislature had intended its amending language to have such a sweeping effect, it would have given clearer indication.” Further, the Court found that the statute was to be applied prospectively and that there were no exceptional circumstances for overturning the original judgment that found the photocopy business to have no liability under those circumstances.


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