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Algonquin Gas Transmission Company v. Petracca

A-0132-03T5 (N.J. Super. App. Div. 2006) (Unpublished)

AGREEMENTS; INDEMNIFICATION—Agreements to indemnify are interpreted according to the rules of contract interpretation and when the parties fail to be specific in the text of their agreement, a court will look to see if it can discern the parties’ intention at the time the provision was drafted.

In 1969 and 1972, a landowner purchased two adjoining parcels of land (lots 3 and 4) and thereafter merged the separate lots into one lot. The landowner granted a pipeline easement running over both former lots 3 and 4 to a gas company. Placing fill was prohibited within the easement. The Department of Transportation (DOT) awarded a resurfacing contract to a paving company. The resurfacing contract involved grinding two inches from the top of the road and replacing it with new asphalt. The paving company and the landowner entered into an agreement whereby the paving company would park its equipment on the landowner’s property and, in return, the paving company would supply the landowner with the ground-up asphalt. The paving company dumped the asphalt fill on the landowner’s property, including over the pipeline easement. The gas company complained and demanded removal of the asphalt fill. The DOT advised the paving company that the landowner’s property was an illegal dumpsite. It directed the paving company to stop dumping the asphalt fill on the landowner’s property. The next day, to induce the paving company to continue to provide asphalt fill, the landowner and the paving company executed an indemnification agreement drafted by the landowner. In the indemnification agreement, the landowner agreed to hold the paving company harmless for “... any problems arising from the receiving of [the asphalt fill].” Thus, the paving company continued to deliver the asphalt fill to the landowner’s property. Six weeks later, the DOT notified the paving company that it had engaged in “illegal dumping of millings” and directed the paving company to resolve the dispute. The landowner refused to allow the paving company to remove the asphalt fill.

The gas company sued the landowner and the paving company based on the adverse impact of the fill on its pipeline easement. The paving company cross-sued the landowner for indemnification. The Chancery Division permanently enjoined the paving company and the landowner from interfering with the gas company’s easement. Thereafter, the paving company and the gas company reached a settlement, and the landowner and the gas company signed a consent order quieting title to that portion of the easement running through what was previously lot 4. The consent order further stated, in relevant part, that the easement was valid and enforceable.

The matter was transferred to the Law Division for a trial on the paving company’s indemnification claim against the landowner. The paving company demanded indemnification from the landowner for the costs incurred in reaching its settlement with the gas company. The jury found the landowner had breached the indemnification agreement and awarded damages to the paving company. The landowner appealed, claiming: the consent order was signed under duress; the jury’s verdict was against the weight of the evidence; that he should not have been required to indemnify the paving company for its settlement or attorney’s fees; and that the lower court erroneously denied his motion to compel discovery from the paving company and erroneously denied his request for an adjournment due to his poor health.

The landowner disputed the validity of the easement as to former lot 3. However, the Appellate Division found that the gas company’s complaint and the consent order referred only to the former lot 4. The Court further found that at no time did the landowner dispute the validity of the easement over former lot 4. Further, it found that the landowner never sought to vacate the consent judgment in the lower court. Based on these findings, the Court ruled it had no basis for vacating the consent order.

Citing Court Rules, it held that the issue of whether a jury verdict was against the weight of the evidence is not cognizable on appeal unless a motion for a new trial is made on those same grounds in the lower court. Finding the landowner failed to make a motion in the lower court for a new trial based on the claim that the jury verdict was against the weight of the evidence, the Court refused to consider this argument. In further support of its ruling, it held that the rules related to a motion for a new trial based on claims the jury verdict was against the weight of credible evidence had to be strictly enforced.

As to the indemnification agreement, the Court held that indemnity provisions are to be interpreted according to the rules of general contract interpretation. Thus the task is to determine the parties’ intent upon executing the agreement. The absence of language in the indemnification agreement addressing indemnification for the indemnitee’s negligence precluded recovery for its portion of the defense costs. The Appellate Division found the present indemnification agreement lacked any terms addressing the paving company’s negligence. Further, the record did not provide any indication that the landowner requested a jury charge on comparative negligence as to the impact of the asphalt fill delivered prior to the execution of the indemnification agreement. Reading the indemnification agreement, the Court found that the landowner intended to indemnify the paving company for all actions related to the asphalt fill. The agreement did not limit the indemnity to only what happened after the indemnification agreement was signed.

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