| DiBuono v Abbey, LLC |
| 2012 NY Slip Op 03801 [95 AD3d 1062] |
| May 15, 2012 |
| Appellate Division, Second Department |
| James DiBuono et al., Plaintiffs, v Abbey, LLC,Respondent, et al., Defendants. L.M.C. Partners, LLC, Defendant/Third-Party Plaintiff; PalisadesResources, Inc., Third-Party Defendant-Appellant. (And a Second Third-PartyAction.) |
—[*1] Robert P. Harmon, Larchmont, N.Y., for respondent.
In an action to recover damages for injury to property, the third-party defendant appeals froman order of the Supreme Court, Westchester County (Lefkowitz, J.), dated December 10, 2010,which granted those branches of the motion of the defendant Abbey, LLC, which were forsummary judgment on that defendant's cross claims against it to recover damages for breach ofcontract for failure to procure insurance, for a judgment declaring that it is obligated to defendand indemnify the defendant Abbey, LLC, in the main action pursuant to a lease dated January20, 1999, and for a judgment declaring, in effect, that it is obligated to indemnify Abbey, LLC, inthe main action pursuant to a lease dated February 15, 2005.
Ordered that the order is modified, on the law, (1) by deleting the provision thereof grantingthat branch of the motion of the defendant Abbey, LLC, which was for summary judgment on somuch of its third cross claim as sought a judgment declaring that the third-party defendant isobligated to defend and indemnify it in the main action pursuant to a lease dated January 20,1999, for damages allegedly arising from discharges of petroleum or other contaminantsoccurring before or after the period during which that lease was in effect, and substitutingtherefor a provision denying that branch of the motion, (2) by deleting the provision thereofgranting that branch of the motion of the defendant Abbey, LLC, which was for summaryjudgment on its sixth cross claim for a judgment declaring, in effect, that the third-partydefendant is obligated to indemnify it in the main action pursuant to a lease dated February 15,2005, and substituting therefor a provision denying that branch of the motion, (3) by adding aprovision thereto searching the record and awarding summary judgment to the third-partydefendant declaring that it is not obligated to defend and indemnify the defendant Abbey, LLC,in the main action for damages allegedly arising from discharges of petroleum or othercontaminants occurring before or after the period during which the lease dated January 20, 1999,was in effect, and (4) by adding a provision thereto searching the record and awarding summaryjudgment to the third-party defendant declaring that it is not obligated to indemnify the defendantAbbey, LLC, in the main action pursuant to the lease [*2]datedFebruary 15, 2005; as so modified, the order is affirmed, without costs or disbursements, and thematter is remitted to the Supreme Court, Westchester County, for the entry of a judgment, interalia, declaring that the third-party defendant is not obligated to defend and indemnify thedefendant Abbey, LLC, in the main action pursuant to the lease dated January 20, 1999, fordamages allegedly arising from discharges of petroleum or other contaminants occurring beforeor after the period during which that lease was in effect and declaring that the third-partydefendant is not obligated to indemnify the defendant Abbey, LLC, in the main action pursuant tothe lease dated February 15, 2005.
The plaintiffs commenced this action to recover damages for injuries to their real property,alleging that on or before July 25, 2005, their property was contaminated by the leaking ofpetroleum from gasoline storage tanks located at three nearby service stations. The defendantAbbey, LLC (hereinafter Abbey), allegedly purchased one of the service stations from thedefendant/third-party plaintiff, L.M.C. Partners, LLC (hereinafter LMC), on January 13, 2004,subject to the obligations and liabilities of a lease dated January 20, 1999 (hereinafter Lease 1),between LMC and the third-party defendant, Palisades Resources, Inc. (hereinafter Palisades).Thereafter, on February 15, 2005, Abbey and Palisades allegedly agreed to a second andsuperseding lease (hereinafter Lease 2), which was effective from February 1, 2005, onwards.Abbey asserted cross claims against Palisades, inter alia, to recover damages for breach of Lease1 and Lease 2 based on Palisade's failure to procure an insurance policy naming Abbey as aninsured party (second and fifth cross claims), for a judgment declaring that Palisades is obligatedto defend and indemnify it in the main action pursuant to Lease 1 (third cross claim), and for ajudgment declaring, in effect, that Palisades is obligated to indemnify it in the main actionpursuant to Lease 2 (sixth cross claim).
Abbey moved, inter alia, for summary judgment on those cross claims. The Supreme Courtgranted those branches of Abbey's motion, determining that Palisades breached its obligations toprocure insurance coverage in Abbey's favor under Leases 1 and 2, that Palisades breached itsobligations under Lease 1 to defend and indemnify Abbey in the main action, and that Palisadesbreached its obligation under Lease 2 to indemnify Abbey in the main action. Palisades appeals,and we modify.
Contrary to Palisades's contention, the indemnification provisions in Leases 1 and 2 were notrendered unenforceable by General Obligations Law § 5-321, which provides that anagreement which purports to exempt a lessor from its own negligence is void and unenforceable."[W]here, as here, the liability is to a third party, General Obligations Law § 5-321 doesnot preclude enforcement of an indemnification provision in a commercial lease negotiated atarm's length between two sophisticated parties when coupled with an insurance procurementrequirement" (DiBuono v Abbey,LLC, 83 AD3d 650, 653 [2011] [internal quotation marks omitted]; see Great N. Ins. Co. v Interior Constr.Corp., 7 NY3d 412, 418-419 [2006]; Hogeland v Sibley, Lindsay & Curr Co.,42 NY2d 153 [1977]; Castano v Zee-JayRealty Co., 55 AD3d 770 [2008]). Here, Abbey established, prima facie, that thepurpose of the indemnification clauses in Leases 1 and 2 was not to exempt the lessor fromliability to the victim, but rather to allocate the risk of liability to third parties between the lessorand the lessee (see Castano v Zee-Jay Realty Co., 55 AD3d at 772).
In opposition to Abbey's prima facie showing that Lease 1 was enforceable as betweenPalisades and itself, Palisades failed to raise a triable issue of fact as to whether LMC initiallyprocured the agreement through fraudulent inducement by concealing and misrepresenting thesubsurface conditions of the demised premises. While a general merger clause is ineffective toexclude parol evidence of fraud, a specific disclaimer will defeat any allegation that the contractwas executed in reliance upon contrary oral representations (see Danann Realty Corp. vHarris, 5 NY2d 317, 320-321 [1959]; McGowan v Winant Place Assoc., 270 AD2d466 [2000]; Busch v Mastropierro, 258 AD2d 492, 493 [1999]). Here, Lease 1 containedprovisions stating that Palisades had examined, and was fully familiar with, the physicalcondition of the demised premises, including the subsurface conditions, and that norepresentations or warranties, whether expressed or implied, had been made regarding thecondition of the demised premises. These provisions were sufficiently specific to bar Palisades'sclaim that LMC fraudulently induced it into entering the contract by concealing or orallymisrepresenting the subsurface conditions at the demised premises (see Kasten v Golden,50 AD3d [*3]1098, 1098-1099 [2008]; Fabozzi v Coppa, 5 AD3d 722,723-724 [2004]; Bedowitz v Farrell Dev. Co., 289 AD2d 432, 433 [2001]; Platzmanv Morris, 283 AD2d 561, 562-563 [2001]; Busch v Mastropierro, 258 AD2d at 493;Masters v Visual Bldg. Inspections, 227 AD2d 597, 597-598 [1996]). Moreover, Lease 1contained several provisions indicating that LMC would perform certain remedial work at thedemised premises. Thus, the facts which were allegedly misrepresented with respect to thesubsurface conditions were "not matters peculiarly within [LMC's] knowledge, and [Palisades]ha[d] the means available to [it] of knowing, by the exercise of ordinary intelligence, the truth orthe real quality of the subject of the representation" (Danann Realty Corp. v Harris, 5NY2d at 322 [internal quotation marks omitted]). Accordingly, Palisades "will not be heard tocomplain that [it] was induced to enter into the transaction by misrepresentations" regarding thesubsurface conditions at the demised premises (id. [internal quotation marks omitted]).
Therefore, insofar as Palisades contends that it raised a triable issue of fact as to whetherLease 1 was procured by fraudulent inducement, thereby precluding summary judgment in favorof Abbey on its cross claims to recover damages for breach of contract for failure to procureinsurance and for a judgment declaring that Palisades is obligated to defend and indemnify it inthe main action under Lease 1, its argument is without merit.
Palisades further contends that its obligations under Lease 1 to defend, indemnify, andprocure insurance coverage were dependent upon the successful completion of certain remedialwork by the lessor. This contention, however, is contradicted by the provision in that agreementwhich states that "[t]he obligations and liabilities of Lessee hereunder in no way shall bereleased, discharged or otherwise affected . . . by reason of . . . anyfailure on the part of Lessor to comply with or perform any of the terms hereof."
However, the Supreme Court erred in granting that branch of Abbey's motion which was forsummary judgment on so much of its third cross claim as sought a judgment declaring thatPalisades was obligated to defend and indemnify it in the main action pursuant to Lease 1 fordamages allegedly arising from discharges of petroleum or other contaminants occurring beforeor after the period during which that lease was in effect. The complaint in the main action allegedthat the plaintiffs sustained damages as a result of petroleum discharges from the demisedpremises occurring not only during the effective dates of Lease 1, but also before and after thatperiod. Thus, Abbey was not entitled to indemnification from Palisades pursuant to Lease 1 fordamages to the plaintiffs' land which arose from discharges of petroleum or other contaminantsoccurring before or after the period during which that lease was in effect as between Abbey andPalisades (see DiBuono v Abbey, LLC, 83 AD3d at 653).
Additionally, since Palisades is not an insurer, its duty to defend "is no broader than its dutyto indemnify" under Lease 1 (Bellefleurv Newark Beth Israel Med. Ctr., 66 AD3d 807, 809 [2009]; see George v Marshalls of MA, Inc., 61AD3d 925, 931 [2009]; Bryde vCVS Pharmacy, 61 AD3d 907, 908-909 [2009]; Cannavale v County ofWestchester, 158 AD2d 645 [1990]). Thus, since Abbey is not entitled to indemnification fordamages allegedly arising from discharges of petroleum or other contaminants occurring beforeor after the period during which Lease 1 was in effect, it is also not entitled to a defense for thosealleged damages (see DiBuono v Abbey, LLC, 83 AD3d at 653).
The Supreme Court also erred in granting that branch of Abbey's motion which was forsummary judgment on its sixth cross claim for a judgment declaring, in effect, that Palisades wasobligated to indemnify it in the main action pursuant to the indemnification provision in Lease 2."The right to contractual indemnification depends upon the specific language of the contract"(George v Marshalls of MA, Inc., 61 AD3d at 930; see Bellefleur v Newark BethIsrael Med. Ctr., 66 AD3d at 809; Canela v TLH 140 Perry St., LLC, 47 AD3d 743, 744 [2008])."The promise to indemnify should not be found unless it can be clearly implied from thelanguage and purpose of the entire agreement and the surrounding circumstances" (George vMarshalls of MA, Inc., 61 AD3d at 930; see Bellefleur v Newark Beth Israel Med.Ctr., 66 AD3d at 809). In Lease 2, Palisades agreed to indemnify Abbey for damages orinjuries "occurring on the demised premises or any part thereof." Since the damages alleged inthe main action occurred on the plaintiffs' land, and not on the demised premises under Lease 2or any part thereof, the indemnification provision in Lease 2 does not [*4]obligate Palisades to indemnify Abbey in the main action.
Accordingly, upon searching the record, we conclude that Palisades is entitled to summaryjudgment declaring that it is not obligated to defend and indemnify Abbey in the main actionpursuant to Lease 1 for damages allegedly arising from discharges of petroleum or othercontaminants occurring before or after the period during which that lease was in effect, anddeclaring that it is not obligated to indemnify Abbey in the main action pursuant to Lease 2.
Since Abbey, in part, sought declaratory relief, we remit the matter to the Supreme Court,Westchester County, for the entry of a judgment, inter alia, declaring that Palisades is notobligated to defend and indemnify Abbey in the main action pursuant to Lease 1 for damagesallegedly arising from discharge of petroleum or other contaminants occurring before or after theperiod during which that lease was in effect, and declaring that Palisades is not obligated toindemnify Abby in the main action pursuant to Lease 2 (see Lanza v Wagner, 11 NY2d317 [1962], appeal dismissed 371 US 74 [1962], cert denied 371 US 901 [1962]).Mastro, A.P.J., Hall, Lott and Sgroi, JJ., concur.