INDEPENDENCE HARBOR I CONDOMINIUM ASSOCIATION, INC. v. HARTZ RIVER ROAD LIMITED PARTNERSHIP, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0744-05T50744-05T5

INDEPENDENCE HARBOR I

CONDOMINIUM ASSOCIATION, INC.,

a New Jersey Non-Profit

Corporation,

Plaintiff,

v.

HARTZ RIVER ROAD LIMITED

PARTNERSHIP, 361 RIVER ROAD

CORP., HARTZ MOUNTAIN

INDUSTRIES, INC., KENNETH C.

BONTE, HERBERT L. MANDEL,

NACAMULI ASSOCIATES, L.L.C.,

C&F CONCRETE CONSTRUCTION CO.,

INC., J&J LANDSCAPING, INC.,

J.P. PATTI CO., INC., C&S

FENCE CO., INC., UNIVERSAL

PAVING CO., INC., PARKRITE

STRIPING CO., INC., BASSANI

BROS. EXCAVATING CO., INC.,

HACKENSACK STEEL CORP.,

GRINNEL HAULERS, INC., f/k/a

GRINNELL CONCRETE

PAVINGSTONES, INC., ROMAN

WATERPROOFING & ROOFING, INC.,

R&L CONSTRUCTION MANAGEMENT

CORP., f/k/a MARINE

CONTRACTORS, SPRAY STEEL

FIREPROOFING CORP., INTERSTATE

INDUSTRIAL CORP., BP DECKS AND

FLOORS, INC., FRITZE KEYSPAN,

LLC, (FORMERLY KNOWN AS PHILIP

FRITZE & SONS, INC.), BUILDERS

FIRSTSOURCE NORTHEAST GROUP,

INC. f/k/a BLACKSTONE COMPANY,

INC., PLESCIA ROOFING, INC.,

AMERICAN WEATHER-TIGHT, INC.,

QUALITY DIVERSIFIED SYSTEMS,

INC., COSTA ENTERPRISES, INC.,

MARCH ASSOCIATES, INC.,

ADVANCED WALL SYSTEMS, INC.,

JRH ELECTRICAL MECHANICAL

CONTRACTING, INC., F & G

MECHANICAL CORP., GUARDIAN

FENCE CO., INC., HOWELL STEEL

SERVICE, INC., THE BOROUGH OF

EDGEWATER, UNIVERSAL STEEL

ERECTORS, INC., LORNA CHEN, DON

ESPOSITIO, MARTY GOLD, ART

MICHELS, DIANE LEMBO, MATTHEW

HINZPETER, and DAVID HUGHES,

Defendants,

and

HARTZ RIVER ROAD LIMITED

PARTNERSHIP and HARTZ MOUNTAIN

INDUSTRIES, INC.,

Third-Party Plaintiffs/

Appellants,

v.

J.P. Patti Co., Inc.,

Third-Party Defendant/

Respondent.

_________________________________________________

 

Argued February 15, 2006 - Decided June 27, 2006

Before Judges Skillman, Axelrad and Payne.

On appeal from Superior Court of New

Jersey, Law Division, Bergen County,

BER-L-701-00.

John D. North argued the cause for

appellants (Greenbaum, Rowe, Smith &

Davis LLP, attorneys; Mr. North and

Christine F. Marks on the brief).

James J. Ross argued the cause for

respondent (Carroll, McNulty & Kull,

attorneys; Mr. Ross on the brief).

PER CURIAM

Defendants, third-party plaintiffs Hartz River Road Limited Partnership and Hartz Mountain Industries, Inc. (together, "Hartz"), the developer of the Independence Harbor I condominium complex and its parent company, respectively, appeal from an order entered following trial that denied Hartz contractual indemnification from waterproofing subcontractor J.P. Patti for damages in the amount of $2,750,000 awarded to plaintiff Independence Harbor I Condominium Association as the result of Hartz's breaches of warranties covering the waterproofing system installed on the "podium deck" or surface level of the condominium development, over a parking garage. Patti had installed a waterproofing membrane over major portions of the podium deck as part of the waterproofing system.

On May 15, 1989, a contract in the form of a purchase order was executed between Hartz River Road LP and Patti that provided that Patti was to "[f]urnish all labor, equipment, and materials to complete the waterproofing and deck protection of the podium level deck" of the condominium development, using a Bituthene 3000 membrane covered by one-eighth-inch Bituthene asphaltic protection board. The total cost was $470,520. The purchase order contained an indemnity clause that provided that Patti would indemnify Hartz for "claims, suits, damages, charges, liabilities and losses, including attorney's fees, arising from or out of (a) the work or incident to, or resulting from, any and all operations performed by Subcontractor under or pursuant to any of the provisions of this order."

Although at the conclusion of trial the jury had found that Patti had breached no warranties and committed no negligence in connection with its installation of the podium waterproofing membrane, whereas Hartz had breached express and implied warranties and committed acts of negligence in connection with the podium waterproofing system, Hartz claimed before the trial judge that the indemnification provision of its contract with Patti required that Patti indemnify Hartz for the damages that the jury had assessed against it. Hartz argued that the damages that the jury had found as the result of Hartz's breach of warranties arose from its "sellers" warranties relating to the podium waterproofing membrane installed by Patti, and in the absence of a specific finding of negligence by Hartz in connection with the membrane, indemnification by Patti was required. We granted Hartz's motion for leave to appeal from the judge's ruling against Hartz, and we now affirm.

We have not been provided with the full record of the underlying six-month trial of this matter. However, we understand the facts to be as follows. In 1988, Hartz commenced the construction of 514 dwelling units, contained in fourteen residential buildings, that were constructed on the original foundation of a Ford Motor Company manufacturing plant located in Edgewater, New Jersey. Substantial defects were found to exist in the construction of the units, leading to protracted litigation and significant liability on the part of Hartz and others. This dispute concerns but a part of the overall liability assessed against Hartz.

Twelve of the buildings in the development were built on the second or "podium" level of the Ford plant. A parking garage occupied the first level. Because landscaping was to occur and both roads and buildings were to be built above the parking area, it was necessary to protect that area from water penetration with a "podium waterproofing system," of which a waterproofing membrane was one component, along with the mechanical assemblies installed over expansion joints. In addition to the elements installed as part of the waterproofing system, that system was considered throughout trial to consist as well of the expansion joints themselves, "construction joints," and what was referred to as "expansion joints, i.e., building expansion joints and ramp expansion joints." Patti contracted only to install the podium waterproofing membrane.

Responsibility for the design of the podium waterproofing system, including the various expansion and construction joints, lay with architect Herbert L. Mandel and a structural engineering firm, Nacamuli Associates. The construction of the waterproofing system was actively supervised by Hartz, which exercised control over it throughout the course of the various stages of construction, including approving plans and specifications for the placement and treatment of expansion joints, sequencing installation of components of the system by the subcontractors, specifying the type of mechanical assembly to be placed over expansion joints, directing the placement of such assemblies, maintaining the integrity of the system once installed, and eventually providing repairs that were stated in the record to have made matters worse.

As we have stated, the jury found no breach of warranty or negligence in the installation of the membrane component of the podium waterproofing system by Patti. However, there is evidence in the record from which the jury could have concluded (and apparently did conclude) that damages occurred to the membrane as the result of construction activities in connection with the waterproofing system that Hartz directed to occur after the membrane had been installed. Particular damage occurred in the area between expansion joints one and three, which comprised approximately fifty percent of the membrane. Significant amounts of evidence at trial centered around the placement, installation and treatment of those expansion joints and their contribution to the failure of the waterproofing system.

The jury interrogatories in this case appear to make a crucial distinction between the installation of the podium waterproofing membrane by Patti, the installation of the mechanical assemblies over expansion joints by another subcontractor, Roman Caulking and Waterproofing Company, and the specification, supervision, sequencing of installation, and maintenance of the podium waterproofing system as a whole by Hartz. After analyzing evidence with respect to defects in the "podium waterproofing system," the jury found that Hartz had breached implied warranties of good workmanship and habitability, express warranties that the system was fit for its intended use and was free from substantial defects due to faulty materials or workmanship, and that Hartz was negligent in the "specification, installation and supervision or maintenance

. . . of the podium waterproofing system including the membrane, expansion joints and construction joints." The jury found in connection with "the installation of the waterproofing membrane materials" that Patti had not breached any implied warranties, and that it was not negligent "with regard to the installation of the waterproofing membrane." A similar verdict was entered with respect to the installation of the mechanical assemblies over expansion joints by Roman Caulking.

The jury's verdict sheet can be reasonably construed as reflecting the jury's conclusion that damage to the waterproofing membrane did not require its replacement, but only its repair. In that connection, the jury assessed damages for breach of warranty against Hartz, as we have previously stated, of $2,750,000 "with regard to the waterproofing membrane materials and flashing at buildings, drains and other penetrations." No damages for breach of warranty or negligence were assessed against Patti or against two other entities that appear to have been involved in installation of portions of the membrane. Similarly, no damages were assessed against Roman Caulking.

In seeking to prove the absence of any active negligence in connection with the podium waterproofing membrane and thus a legal basis for indemnification for damages assessed for breach of warranty, Hartz has seized upon two aspects of the jury interrogatories that relate to negligence. First, Hartz claims that the interrogatory resulting in a finding of negligence on its part was compound in nature, since it referred to negligence "with regard to the specification, installation and supervision or maintenance . . . of the podium waterproofing system including the membrane, expansion joints and construction joints." It then argues that it could not have been found negligent in connection with just the podium waterproofing membrane, because in answer to a subsequent question specifically concerning the membrane, the jury assessed no damages.

We do not read the interrogatories as Hartz does, and instead find them to provide further evidence in a negligence context that the jury did not find any fault in connection with the work that Patti was contracted to do or damage arising out of that work. Instead, we find the interrogatories to have once more reflected the theories of liability asserted in the case, asking first whether there was negligence on Hartz's part as the result of its extensive involvement with all phases of the specification, construction, maintenance and repair of the podium waterproofing system, and then asking whether there was negligence on the part of the architect and structural engineering firm in connection with the work of each on the construction and expansion joints, and whether the negligence of each of the three parties was a proximate cause of damages. The jury found all three to have committed acts of negligence that were causally related to plaintiff's damages. These interrogatories were followed by a series of interrogatories addressing whether there had been negligence in the installation of components of the system, including the waterproofing membrane installed by Patti, to which the jury uniformly answered "no."

The interrogatories relating to a finding of negligence were followed by questions relating to damages and their apportionment among the parties. The interrogatory to the jury with respect to damages for negligence in connection with the membrane, when read in conjunction with the following question concerning damages for negligence in connection with the mechanical assemblies over expansion joints, can reasonably be construed to refer to negligence in the "installation" of the membrane component, not its treatment following installation. The jury interrogatory regarding the mechanical assemblies makes specific reference to "installation." The prior interrogatory regarding the podium waterproofing membrane does not contain the "installation" language. However, the inclusion of that concept is consistent with the distinction between liability for installation of a component and liability for the specification, installation, supervision and maintenance of the podium waterproofing system that appears throughout the jury verdict form. Viewed in that light, what the jury concluded was that there was nothing wrong with the podium membrane as it was installed. The damages sustained were the result of forces acting upon the membrane such as the expansion joints, not the membrane itself. This construction of the jury's intent is consistent with its award of no damages arising from negligence in the "installation" of the mechanical assemblies over the expansion joints, and its award of substantial damages arising from negligence associated with the construction and expansion joints, apportioned between Hartz, Mandel and Nacamuli.

The agreement between Hartz and Patti required indemnification to Hartz only if its damages arose "from or out of" the work that Patti contracted to perform or were "incident to, or resulting from" operations performed by Patti. We agree with the trial court that Hartz has failed to sustain its burden of demonstrating an entitlement to indemnification pursuant to this language, since the jury's verdict can only be reasonably interpreted as exonerating Patti from liability for the installation of the podium waterproofing membrane and imposing liability upon Hartz for the repair of that membrane as the result of damages to it sustained thereafter, primarily as the result of the manner in which the construction and expansion joints were designed, placed, and maintained.

Indemnity clauses are to be interpreted in accordance with the rules governing contracts in general; any ambiguity must be construed strictly against the indemnitee. Mantilla v. NC Mall Assocs., 167 N.J. 262, 269 (2001). When contract construction principles are applied to the indemnification provision at issue here, it is evident that indemnification is not warranted, because the terms of the agreement between Hartz and Patti did not provide for indemnity in the circumstances presented. Indemnification was required only when the damage arose out of Patti's work or was incident to or resulted from Patti's operations. The damage in this case did not arise from either circumstance, but rather from conduct occurring after the membrane had been installed over which Hartz had direct supervision and control. As a consequence, even if the indemnity clause were read broadly, in a manner contrary to existing precedent, indemnity would be barred as the result of the jury's finding that active negligence on Hartz's part led to the failure of the podium waterproofing system, including its waterproofing membrane. The contract at issue did not specifically require Patti to indemnify Hartz for Hartz's own negligence, and in the absence of such an explicit requirement, the contract can not be enforced in this context. Ibid.; see also Azurak v. Corporate Prop. Investors, 175 N.J. 110, 112 (2003). Moreover, enforcement of such an agreement in a construction contract purporting to provide indemnification to Hartz as the result of its "sole negligence" is statutorily barred pursuant to N.J.S.A. 2A:40A-1 as contrary to public policy.

The order of the trial court is therefore affirmed.

 

The interrogatory states:

You must determine the amount of damages, if any, sustained by the plaintiff with regard to the installation of the mechanical assemblies over the expansion joints. Set forth the amount of money that would reasonably and fairly compensate plaintiff for any losses or damages relating to the mechanical assemblies over expansion joints.

(continued)

(continued)

13

A-0744-05T5

June 27, 2006