The decades-long battle over a buried oil tank

The 1988 sale of the Rainbow Inn appeared to many a clean break.

Theresa Maderich, a self-made businesswoman, was selling the Clayton liquor store and bar to pursue a new opportunity. Larry Dalton, a bartender from a well-known political family, eager to have his own business, saw potential in the former 19th-century hotel.

Neither party anticipated a transaction that would be mired in controversy 27 years later. Neither suspected the trouble that an underground oil tank would present.

A resulting legal saga over contamination would outlive the key player and leave an estate tied up and an attorney fighting to get paid. A court ruling last week seemed to offer a resolution, but the case may not be over.

"We never had any inkling it could turn into anything like this," said Maderich's daughter, Virgil, 56, of Moorestown.

On the day of closing, Aug. 29, 1988, Theresa Maderich visited the bar she ran for more than a decade at Delsea Drive and Academy Street to bid goodbye.

Left for Maderich was an invoice for oil delivery to an underground tank, which had been filled weeks earlier, but was to be "topped off" for closing. The ticket was perplexing: The 550-gallon tank had again been almost entirely filled.

Theresa Maderich, whose thick accent reflected her native Brooklyn, would later say a watchman at the bar, which also served as a boardinghouse, said he saw someone siphoning oil - a prospect that was never seriously probed.

After consulting the oil company, Maderich followed a recommendation to decommission the tank and install two new ones in the basement. She and her partner, Louis Garman, who helped run the store, paid for the tanks and never relayed the possibility of a leak. Dalton never asked what prompted the new system.

Dalton, 68, of Washington Township, said he had been "totally overwhelmed with taking over the business."

The old tank, emptied of its remaining fuel, was abandoned in the ground.

Under Dalton, the Rainbow Inn remained a local watering hole, where residents could get a brew and bite.

Then, in January 1995, an electrical fire tore through the building.

Lost was much of the structure, which had previously operated as the Clayton Hotel and under other names; it was believed to have been built in the 1850s-60s.

Reconstruction was underway in 1997 when an excavator unearthed suspicious sludge. "It clicked," Dalton said. "They should have known . . . that they had a problem."

He concedes that he was reluctant to initiate a full-scale study and risk being held responsible for remediation. He feared dirty land would derail his plan to retire at 60 and sell the property. Restless to regain a cash flow, he continued the restoration.

In 1999, Dalton sued the Maderich family, Garman, and the oil firm, alleging environmental wrongdoings and fraud.

The case was initially delayed when three Gloucester County Superior Court judges cited conflicts related to the Dalton family and couldn't hear the case, said Dalton's attorney, Louis Giansante. Among Dalton's family members who have held public office is his brother, Sean, currently Gloucester County's prosecutor.

Judge David W. Morgan eventually took the case.

By 2006, all claims had been dismissed - except for an equitable-fraud claim against the former owners.

Four years went by without a ruling. The Maderich family believed the legal fight was over. Theresa Maderich died at 81, in 2009, thinking the case had gone away.

The next year, Dalton filed a new complaint - "to get the court's attention," Giansante said - and Morgan finally ruled on the surviving claim. He dismissed it because he could not find an acceptable remedy. Undoing the sale was not realistic.

Dalton appealed, and, in 2012, an appellate court sent the case back to Morgan to fully consider the equitable-fraud claim.

Morgan, saying the former owners had a duty to disclose the information they came across post-closing, validated the equitable-fraud claim. He instructed them to finance most of a site investigation and any remediation; Dalton was to pay 35 percent. A conclusion would allow Dalton to finally sell his property, he said.

Virgil Maderich said her mother would not have intentionally wronged someone and genuinely didn't think she had left behind a spill. "It wasn't like she snuck away in the dark of the night," Maderich said, noting that her mother opened a liquor store in Burlington County.

The study would end the drama, she said, and the family had no issue contributing to a cleanup: "I always felt strongly that, if there was anything there, it was insignificant.

"And I was right."

More than two decades after the sale, experts finally inspected the grounds of the Rainbow Inn and, in 2014, determined that the contamination levels did not warrant environmental remediation.

"Very ironic," said Maderich's attorney, Betsy G. Ramos.

Giansante said that the equitable-fraud finding was a victory in requiring the investigation, but that the oil had broken down over time, benefiting the "concealers."

So Dalton again appealed, seeking attorney fees and profits that the previous owners experienced by not addressing the issue in 1988. Giansante, who has worked the case on a contingency basis, has estimated that fees, with court-permitted enhancements, could surpass $500,000.

To Maderich, the continued fight signaled that the case had been expected to yield "a big sum of money." She said that if an attorney is unrelenting, the courts allowed tort cases to "bankrupt people."

Giansante said the contingency agreement was first made by the firm he was with when the case was referred to him. "Nobody that owns a small business or a home can afford these cases," he said, and this case had a "smoking gun."

Nine months after arguments, the appellate court last week affirmed Morgan's decision. It ruled against the awards.

On Friday, Giansante said he would petition the state Supreme Court to take the case, although he acknowledged that the highest court has declined to hear many cases.

"This is unbelievable," Maderich said, wishing an end to a "16-year horror."

Albert Telsey, an environmental-law attorney not involved with the case, said the length of time seemed "just too long for this size case." The case showed "a pox on both houses," he said.

Maderich said that mistakes were made on both sides, but that her family simply wanted to move on.

The case has cost the family about $150,000, she said, and the estates of her mother and Garman - together valued at about $1.5 million - have been held in a "constructive trust" for work at the site since 2013. Ramos is now asking a court to lift the trust.

"It was my mother's business, but we all worked it with the understanding that it would be ours," Maderich said. "This was our way to retirement."

The family's subsequent store was recently sold. So too was the Rainbow Inn.