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Martorana v. Township of Voorhees

A-5955-97T2 (N.J. Super. App. Div. 1999) (Unpublished)

CONTRACTS; EXTENSIONS—Where performance of a contract for services continues without objection after the expiration of the term of the written contract, there is a presumption that the same contract terms, including those for indemnification, apply.

A municipality installed a new sanitary sewer pipe in the vicinity of a one-family house. Also, near the house, the sanitary sewer pipe merged with a storm sewer pipe. In the summer of 1991 and, in 1994, 1995 and twice in 1996, surface water invaded the house during a heavy rainstorm inundating and damaging it and its contents. The homeowner alleged that the flooding had been caused by the faulty design and construction of the intersection between the storm sewer and the sanitary sewer. Consequently, it sued the municipality and the municipal engineer. A written retainer agreement between the engineer and the municipality required the engineer to hold the municipality harmless against claims resulting from the engineer’s acts, whether negligent or not. At trial, a jury found that the homeowner’s damage was caused by the faulty design of the sanitary sewers. It found that the engineer was liable for its negligence and the municipality was liable for trespass, nuisance, and inverse condemnation. This left, as unresolved, the municipality’s claim for indemnification from the engineer. The lower court denied the municipality’s motion for summary judgment and held for the engineer on the ground that the engineer had agreed to indemnify the municipality only against liability resulting from the engineer’s own negligence and that the municipality had been held liable on the separate grounds of trespass, nuisance, and inverse condemnation. The written agreement containing the indemnification language was signed for calender year 1984. In subsequent years, the engineer continued as the municipal engineer by virtue of the municipality adopting annual resolutions authorizing the execution of an employment agreement with the engineer. The engineer never signed any subsequent agreement, but also never asserted any objection to the agreement until after the lawsuit was commenced. The engineer continued to function as municipal engineer on the same basis as previously. The Court felt that the terms of the 1984 retainer agreement were in effect in 1985 when the engineer designed and approved construction of the faulty sewer intersection, even though the agreement was never signed. Where, as in this case, performance of a contract for services continues without objection after the expiration of the term of a written agreement, there is a presumption that the same contract terms continue to apply. As to the merits of the indemnification claim, the Court held that it was an inescapable implication of the jury’s finding that the engineer’s negligence resulted in the malfunction of the sewer intersection and that such negligence was the proximate cause of the municipality’s having maintained a nuisance and having become a trespasser and an involuntary condemner. The only factual basis for the municipality’s professed liability to the homeowner was the engineer’s faulty design or negligent supervision of the construction of the intersection between the sewer lines. Consequently, the Court ruled that the engineer was obligated to indemnify the municipality according to the terms of the agreement.


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