Kiddie Kollege ruling could have broad impact

A New Jersey Superior Court judge's decision last week to void the deed to a contaminated day-care building, freeing the owner from cleanup costs, has sparked a wide range of reactions and debate about its implications.

The decision infuriated parents who sued the building owner after their children breathed poisoned air in the now-shuttered Kiddie Kollege. But it was applauded by some lawyers because it took up the cause for investors who buy contaminated industrial sites without fair warning of the pollution.

In the nine-page opinion, Judge James E. Rafferty said a Franklin Township real estate broker who acquired a bankrupt thermometer factory and then rented it to the day care was not properly informed of the contamination.

Jim Sullivan III, under the auspices of family companies Navillus Group and Jim Sullivan Inc., had bought tax liens and later foreclosed on the property, saying he did not know it harbored mercury vapors.

Mercury can cause neurological and other ailments, and the parents want Sullivan to pay for medical testing. Nearly 100 children were exposed to the vapors, and tests showed some had high levels of mercury in their bodies.

The judge said the township tax collector should have given Sullivan written notice of the contamination before selling the tax liens.

The ruling could have "impact far beyond this case," said Keith A. Bonchi, general counsel for the state Tax Collectors and Treasurers Association.

"You want to encourage people to come to tax sales and buy liens and pay the taxes," Bonchi said. "People who invest in municipal liens help with unpaid taxes and bring millions and tens of millions a year into the municipal treasuries."

Bonchi said the polluter was the one who should pay for the cleanup, not an unsuspecting investor. "The tax sales are not supposed to be a trap," he said.

The state Department of Environmental Protection wanted Sullivan to pay an estimated $1 million for demolition and cleanup, saying he had bought the building for only about $36,000 in a foreclosure and was legally liable for the property. The DEP also argued that it was up to the buyer to research the history of a property before buying it.

The judge disagreed and reverted the title back to the polluter, Accutherm Inc. and owner Philip Giuliano, who had abandoned the property in the mid-1990s and moved to Virginia.

Bonchi said he believed the decision might be appealed and could eventually set precedent in the state. "It's a ripe question for the state Supreme Court," he said.

He plans to distribute the opinion to his association and possibly the state League of Municipalities for review.

Richard M. Hluchan, who represented Sullivan, said the ruling would also "put tax collectors on notice." He suspects that many tax collectors may not be providing written warnings now, leaving the door open to problems like Kiddie Kollege.

Before the tax sale, the township had published a notice in a local newspaper stating that some of the properties could be contaminated industrial sites. The judge said that was not enough.

Hluchan said Sullivan had read a confusing federal environmental report that mentioned the pollution but that concluded the one-story structure was not a "threat to human health or environment." Sullivan said he had misinterpreted the report and thought the building could be reopened.

Jim Maley, who represented the township, said he was still reviewing the opinion, but he questioned whether tax collectors would have knowledge of all the contaminated industrial sites in a township to be able to issue warnings.

"Towns don't have that kind of information," he said. "It puts an onus on them to give that information to people at a tax sale." The DEP lists roughly 20,000 contaminated sites in New Jersey.

When houses are sold by real estate agents, Maley said, they simply attach "a form and tell people to go look for information" on whether the home might sit on contaminated property. Maley said the agents were not obliged to issue express warnings.

Adam D. Greenberg, a lawyer who specializes in tax and mortgage foreclosures, had similar concerns about the ruling.

"What do tax collectors know about environmental law?" Greenberg asked. "I'd be concerned about the burden it's putting on municipalities."

But Greenberg said the judge did "what he feels is a fair result for someone who became a victim of their own investment." It is important to protect investors who buy tax liens, Greenberg said, because "that's how we get streets cleaned and police cars bought when taxes aren't paid."