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In re St. Lawrence Corp.

Citation: 30 ELR 20612
No. No. 98-50249 SAS, 248 B.R. 734/(D.N.J., 05/23/2000)

The court holds that a bankruptcy court correctly allowed a Chapter 7 trustee to abandon real property of the bankruptcy estate over a state environmental agency's objection. The agency argued that although a trustee may abandon property of an estate that is burdensome or of inconsequential value and benefit, the trustee must first comply with the New Jersey Industrial Site Recovery Act (ISRA) in light of the U.S. Supreme Court's holding in Midlantic National Bank v. New Jersey Department of Environmental Protection, 474 U.S. 494, 16 ELR 20278 (1986), in which the Court held that a trustee may not abandon property in contravention of state law or regulation that is reasonably designed to protect the public health or safety from identified hazards.

The court first holds that the bankruptcy court correctly determined that the state agency had the burden of proving facts necessary to show that the Midlantic exception to the trustee's abandonment power applied. The agency has the affirmative with respect to the first three elements set forth in Midlantic because it would be unsuccessful if no evidence on the issue were submitted. Only if the agency met its burden on the first three elements would the burden of proof be placed on the trustee to prove that compliance with the statute or regulation would be so onerous as to interfere with the bankruptcy proceeding, the fourth Midlantic element. In addition, one who relies on an exception to a general rule or statute has the burden of providing that the case falls within the exception unless the nonexistence of the exception is made a condition of the application of the rule. Here, the nonexistence of the Midlantic exception is not a precondition to application of the trustee's abandonment powers.

The court next holds that the bankruptcy court correctly determined that the state agency failed to set forth facts necessary to support its objection to the trustee's abandonment of the property. The agency failed to prove that an identified hazard exists on the property that poses a risk of imminent and identifiable harm to the public health and safety, which is the first element to the Midlantic exception. The only evidence offered as to the existence of a hazard on the property was hearsay, whereas the admissible evidence offered below demonstrated that the property does not constitute a hazard that poses a risk to public health and safety. Moreover, the agency failed to allege which of the ISRA's provisions are reasonably calculated to protect the public health and safety from imminent and identifiable harm caused by identified hazards.

Thus, assuming that the Act was violated (the second Midlantic element), the agency failed to prove the third element to the Midlantic exception.

The full text of this opinion is available from ELR (11 pp., ELR Order No. L-228).

Counsel for Appellant
Rachel J. Lehr
Attorney General's Office
R.J.H. Justice Complex
25 Market St., CN-080, Trenton NJ 08625
(609) 292-4925

Counsel for Appellees
Sam D. Fera Jr.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione
One Riverfront Plaza, Newark NJ 07102
(973) 596-4500