March 25, 2009
CATHERINE DORSEY, PLAINTIFF,
COBBLESTONE VILLAGE EQUITIES, LLC, SCHULTZ MANAGEMENT CORP., AND BAYVILLE PHARMACY, DEFENDANTS-RESPONDENTS, AND J.T. SPRINKLERS T/A SUN LANDSCAPE CONTRACTORS, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-2613-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 25, 2009
Before Judges Parrillo and Messano.
Defendant J.T. Sprinklers t/a Sun Landscape Contractors (Sun Landscape) appeals from the order of the Law Division granting summary judgment in favor of defendants Cobblestone Village Equities, LLC, and Schultz Management Group (collectively, Cobblestone) on their cross-claim for indemnity. We affirm.
The facts are straightforward. On February 5, 2004, plaintiff Catherine Dorsey slipped and fell on ice in the parking lot of Cobblestone Village, a strip mall in Ocean Township, in front of a Bayville Pharmacy store. Cobblestone Village is owned by Cobblestone Village Equities, LLC and managed by Schultz Management Corporation. Three months prior to plaintiff's fall, Schultz hired an independent contractor, Sun Landscape, to remove ice and snow on the Cobblestone Village property. The parties entered into a service contract from November 15, 2003 to April 30, 2004, which obligated Sun Landscape, among other things, to perform the following duties:
Whenever any snow or freezing weather occurs, contractor will remove snow and/or apply sand, calcium chloride, or a combination thereof, to clear the surface parking lots and walkways to eliminate hazardous slipping conditions and make them safe and passable for cars and pedestrians when and where required. In no event will Contractor allow accumulation of snow to exceed a depth of two (2) inches. [emphasis in original.]
The contract included an indemnity clause providing that Sun Landscape would indemnify Cobblestone from and against any loss, cost, damage, or expense, by reason of any liability for damage because of bodily injuries . . . sustained by any person . . . arising out of, or on account of, or in consequence of the performance of this Contract, whether or not such injuries or persons . . . are due to . . . any negligence of [Cobblestone] . . ., excepting from the foregoing the sole and complete negligence of [Cobblestone].*fn1
Despite the ice that accumulated on the pavement of the Cobblestone Village parking lot on February 5, 2004, which Sun Landscape did not dispute, Sun Landscape admitted not having performed removal services on that day. Prior to plaintiff's fall, Sun Landscape last performed removal services on the property on January 28, 2004.
On July 27, 2005, plaintiff sued Cobblestone, Sun Landscape and Bayville, for negligence. Cobblestone asserted cross-claims for contribution and indemnification against Sun Landscape and Bayville.*fn2
Plaintiff's case went to trial from July 24 to July 27, 2007, at the end of which the jury returned a verdict finding plaintiff 23% at fault, Cobblestone 65% at fault, and Sun Landscape 12% at fault. Post-trial, the judge granted summary judgment in favor of Cobblestone on their cross-claim for indemnity against Sun Landscape.
On appeal of the summary judgment order, Sun Landscape frames the following issues for our review:
I. THE CONTRACTUAL INDEMNIFICATION CLAUSE IS NOT TRIGGERED IN THIS CASE AND SUN LANDSCAPE CAN NOT BE REQUIRED TO INDEMNIFY SCHULTZ MANAGEMENT.
II. THE MODIFICATION OF THE CONTRACT MAKES THE INDEMNIFICATION CLAUSE UNENFORCEABLE IN THE PRESENT CIRCUMSTANCES.
III. THE CLAIM FOR INDEMNIFICATION IS BARRED BY EQUITABLE PRINCIPLES.
As an initial matter, indemnification clauses in commercial contracts are valid and enforceable in New Jersey, Berry v. V. Ponte & Sons, 166 N.J. Super. 513, 517 (App. Div.), certif. denied, 81 N.J. 271 (1979), and there are no public policy concerns prohibiting "an indemnitor [from] undertaking to indemnify the indemnitee in respect of the indemnitee's own negligence" as long as the indemnitee is not solely at fault. Leitao v. Damon G. Douglas Co., 301 N.J. Super. 187, 192 (App. Div.), certif. denied, 151 N.J. 466 (1997). Allocating liability between parties is part of the bargaining process, and is thus not "antithetical to the [public] policy of compelling tortfeasors to bear responsibility for conduct heedless of the risks to others," id. at 193, except for losses incurred as a result of intentional torts, Ambassador Ins. Co. v. Montes, 76 N.J. 477, 483 (1978).
The Supreme Court has established general principles for interpreting indemnification clauses:
Indemnity contracts are interpreted in accordance with the rules governing the construction of contracts generally. When the meaning of the clause is ambiguous, however, the clause should be strictly construed against the indemnitee. Thus, a contract will not be construed to indemnify the indemnitee against losses resulting from its own negligence unless such an intention is expressed in unequivocal terms.
[Ramos v. Browning Ferris Indus. of S.
Jersey, Inc., 103 N.J. 177, 191 (1986) (internal citations omitted).]
Here, the contract for indemnity clearly and unequivocally provides that Sun Landscape agreed to indemnify Cobblestone for any liability for injury resulting from Cobblestone's negligence, excepting, in accordance with New Jersey law, losses resulting from Cobblestone's sole negligence. Liability, of course, was conditioned on the injury "arising out of, or on account of, or in consequence of the performance of the contract."
Against this backdrop, Sun Landscape challenges the trial court's interpretation of the term "arising out of," arguing that it had no obligation to provide services under the contract on the day of plaintiff's fall because (1) Cobblestone was found 65% liable, and (2) the contract was orally modified to provide that Sun Landscape had no duty to perform services unless notified of a problem or unless snow accumulated greater than two inches. Alternatively, Sun Landscape argues that equitable principles estopp Cobblestone from enforcing the contract.
Viewing the evidence in the light most favorable to Sun Landscape, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995), we disagree and affirm.
The words "arising out of" are afforded "their common and ordinary meaning as referring to a claim 'growing out of' or having its 'origin in' the subject matter of the [contractor's] work duties." Leitao, supra, 301 N.J. Super. at 193. In this regard, we have applied the "substantial nexus" test in determining the causal links between an act and its consequences when ascertaining the scope of an indemnification clause. Mantilla v. NC Mall Assocs., 167 N.J. 262, 274 (2001).
Sun Landscape argues for a narrower interpretation of "arising out of," claiming that the real inquiry is not whether plaintiff's injury broadly relates to the subject matter of the contract, but whether Sun Landscape was actually on the premises performing work at the time of plaintiff's fall. While in Leitao we found the substantial nexus test met because "Leitao was in the process of performing the very work S & J had agreed to complete," Leitao, supra, 301 N.J. Super. at 194, the substantial nexus test is not so limited. In Franklin Mut. Ins. Co. v. Security Indem. Ins. Co., 275 N.J. Super. 335, 341 (App. Div.), certif. denied, 139 N.J. 185 (1994), we stated that the substantial nexus test is met where the cause of the injury was contemplated by the parties to be "a natural and reasonable incident or consequence" of performing the contract and "thus, a risk against which they may reasonably expect those insured under the policy would be protected."
By implication, because the jury assessed 12% liability against Sun Landscape, plaintiff's injuries resulted in part from Sun Landscape failing to perform snow and ice removal services as required by the contract. Slipping and falling on ice is a natural consequence of that failure. What is more, both the plain language of the indemnity clause and the insurance clause obligating Sun Landscape to name Cobblestone as an additional insured under its policy clearly evince that the agreement intended Cobblestone to be protected against Sun Landscape's failure to perform. Therefore, applying the substantial nexus test as described in Franklin, we naturally conclude that plaintiff's injuries "arose out of" Sun Landscape's performance of the contract. For that reason, Cobblestone was entitled to judgment as a matter of law.
Sun Landscape further argues that the contract was orally modified. While parties may by mutual assent modify an existing contract if based on additional consideration, County of Morris v. Fauver, 153 N.J. 80, 99-100 (1998), nothing in the record suggests that Cobblestone, either expressly or impliedly, agreed to any modifications or provided additional consideration. Without evidence of mutual assent, unilateral statements or actions made after an agreement has been reached will not serve to modify the original terms of a contract. Id. at 100.
Finally, Sun Landscape asserts that equitable principles should estopp Cobblestone from enforcing the contract because Cobblestone "never sought to enforce that portion of the contract that allegedly required Sun Landscape to constantly monitor the property for ice during 'freezing weather.'" This argument equally fails for insufficient proof. Without providing any evidence that Cobblestone induced good faith reliance, Sun Landscape cannot justify applying equitable estoppel. See id. at 104.
Nor can it justify applying waiver. While "the intention to waive need not be stated expressly but may be spelled out from a state of facts exhibiting full knowledge of circumstances producing a right and continuing indifference to the exercise of that right," Scibek v. Longette, 339 N.J. Super. 72, 83 (App. Div. 2001) (quoting Merchants Indem. Corp. v. Eggleston, 68 N.J. Super. 235, 254 (App. Div. 1961), aff'd, 37 N.J. 114 (1962)), the record admits of no evidence establishing "continuing indifference." Neither Cobblestone's alleged failure to enforce the contract nor Cobblestone's alleged phone calls asking for ice removal, without any evidence of regularity or prevailing weather conditions, suggests having waived the terms of the contract. Enforcing the contract is thus not inequitable.