Opinion
No. X06-CV-99-0170072-S
May 8, 2003
MEMORANDUM OF DECISION ON CROSS MOTIONS FOR SUMMARY JUDGMENT ON DEFENDANTS' COUNTERCLAIM (##190 and 191)
This litigation concerns the 1996 sale of property located in Milford, Connecticut, which, during the 1980s, had been used by gasoline service stations, used car lots and/or car repair (body shop) garages. The plaintiffs in this action, Edward A. Visconti, Jr., Edward A. Visconti, Jr. d/b/a E. A. Visconti Sons a/k/a Visconti Sons, Surrogate Wheels of Milford, Inc. and Auto Specialists of Milford, LLC, including the purchaser of the property Edward A. Visconti, Jr. (Visconti), are related entities. The defendants include the seller of the property, Pepper Partners Limited Partnership (Pepper Partners), Ernest A. Wiehl, Jr. (Wiehl), Richard V. Wiehl and Consumer Petroleum of Connecticut Incorporated (Consumer Petroleum). The plaintiffs in a twelve-count complaint essentially claim that the property was environmentally contaminated and the defendants are liable to them because of the condition of the property and the circumstances associated with the sale of the property.
The real property in interest is located at 199-211 Naugatuck Avenue, Milford, Connecticut. The property was purchased by Wiehl in 1980. Wiehl leased the property to the defendant Consumer Petroleum, which, in turn, subleased the property to third-party entities that operated gasoline service stations, used car lots and/or car repair garages on the property until 1989. In 1989, Wiehl transferred title of the property to the defendant Pepper Partners. Pepper Partners is a limited partnership. Prior to February of 2000, Wiehl was a general partner with a 99% ownership interest in the partnership, and his wife was a limited partner with a 1% ownership interest.
The defendant Richard Wiehl is the son of Ernest Wiehl. He is neither employed by Pepper Partners, nor does he have any ownership interest in the partnership.
The defendant Consumer Petroleum is a Connecticut Corporation whose primary business is the wholesale delivery of petroleum products to gasoline service stations. Wiehl was president, director and sole shareholder of Consumer Petroleum until December of 1990, at which time his interest in Consumer Petroleum was transferred to Richard Wiehl. The defendants Consumer Petroleum and Richard Wiehl have never had an ownership interest in the subject property. None of the defendants have operated a gasoline service station or a car repair facility on the property at any time. None of the defendants has ever held an ownership interest in the entities that operated a service station or garage on the property. Consumer Petroleum supplied petroleum products to tenants operating service stations and garages on the property.
Visconti has some familiarity with the property, having worked at a service station located there in 1977. He first expressed an interest in purchasing the property in 1989, at which time he filed a request with the Milford Health Department Division of Environmental Health to obtain information regarding environmental problems on the property. In late 1994 or early 1995, Visconti observed a realtor's sign on the property. In early 1995, he visited the property with a realtor (Art Overfield). Knowing that the property had been used as a service station, Visconti inquired about the underground gasoline storage tanks. Overfield responded that the tanks, along with the septic tank and the service station islands, had been removed and backfilled with clean soil. Visconti noticed a visible difference in the soil which had been amended by new fill.
Visconti had a subsequent conversation with Overfield concerning the terms of the sale, with no further discussions about the condition of the property.
Visconti next made an offer for the purchase of the property, which prompted a meeting with Wiehl. In their discussion, the terms of the purchase were agreed upon whereby Visconti would buy the property for $200,000 ($5,000 in cash and $195,000 of purchase money mortgage on the property). Wiehl reiterated Overfield's report that the underground gas storage tanks, septic tanks and service station islands had been removed, along with the contaminated soil, and clean soil had been brought in so as to "satisfy the authorities." These conversations, one with Overfield and the other with Wiehl, were the only conversations that Visconti had with any agent or representative of the seller.
Based on these discussions, Visconti assumed that the soil was contaminated around the tank area (Visconti, May 15, 2001 deposition, p. 96; Second Request to Admit, p. 17.) Visconti acknowledged at his deposition that he was never informed that there was no contamination left on the property. (Visconti, May 15, 2001 deposition, pp. 192-93; Visconti, May 31, 2001 deposition, p. 20.) Visconti indicated that neither Wiehl nor Overfield told him whether or not to have the property tested for environmental problems.
Visconti and Pepper Partners entered into a written sales contract providing that the buyer at his own expense could "make such inspection of the premises (including, without limitation, a phase I environmental site assessment) as buyer deems appropriate."
Visconti reviewed the contract with an attorney. Visconti did not complete the due diligence provision of the contract or undertake any investigation of the property prior to the sale. The sales contract provided that the buyer, Visconti, had inspected the property and was fully satisfied with its physical condition; that neither the seller nor any representative of the seller had made any representation, promise or warranty of any kind relating to the condition of the property; and that the buyer was accepting the property in substantially its present condition. The sales contract also expresses that Visconti was advised that the property "may fall within the definition of an `establishment' "; that Pepper Partners had "made no representations of any kind . . . concerning the environmental condition of the property"; and that Pepper Partners would have no obligation to provide or execute a statutorily required environmental certificate form. According to the contract, Visconti would provide and execute the requisite forms, pay all the fees associated with the environmental filings, assume responsibility for environmental testing and any necessary clean-up of the property, and indemnify Pepper Partners for any loss arising out of environmental conditions on the property.
The court, in a May 14, 2002 memorandum of decision, granted the defendants' motion for summary judgment as to all counts of the plaintiffs' complaint.
In their revised answer, special defenses and counterclaim dated August 23, 2001, Pepper Partners asserted a counterclaim against Visconti that is premised upon his agreement to indemnify Pepper Partners against, to hold Pepper Partners harmless from, and to reimburse Pepper Partners for any liabilities, including legal fees, incurred as a result of environmental contamination occurring on the property. In a pleading dated December 6, 2002, Visconti asserted special defenses to the counterclaim, claiming that the indemnification agreement was not enforceable due to unconscionability, no mutual assent, mutual mistake, public policy, exclusion and set-off, and unclean hands.
Both parties have filed motions with supporting documents and briefs seeking summary judgment as to the counterclaim.
The indemnification agreements that Pepper Partners seeks to enforce are contained in paragraph 10(b) (iii) of the sales contract and paragraph 15(e) of the mortgage. Paragraph 10(b) of the sales contract provides: "[a]t closing, Buyer shall agree to indemnify and hold the seller harmless from any and all loss, cost, damage, liability, etc. to which Seller may be subjected or which Seller may pay in consequence of (i) any circumstances or conditions arising out of the environmental condition of the Premises; (ii) the violation of any laws by Buyer or occurring on the Premises; (iii) any personal injury (including wrongful death) or damage to property directly or indirectly caused by an occurrence described in (i) or (ii) above."
Paragraph 15(e) of the mortgage provides: "[t]he Mortgagor [Visconti] agrees to indemnify the Mortgagee against, to hold Mortgagee harmless from, and to reimburse Mortgagee for any losses, claims, demands, damages, fines, penalties, liabilities (joint or several), costs and expenses (including, without limitation, fees and expenses of legal counsel for Mortgagee, consultant fees and expenses of investigation and laboratory costs) to which Mortgagee may be subjected, or which Mortgagee may pay, incur, or sustain, in consequence of (a) any presence, discharge, spillage, emanation, uncontrolled loss, seepage or filtration of any Hazardous Substance upon the Property, (b) the violation of any Environmental Law by Mortgagor or occurring upon the Property, or (c) any personal injury (including wrongful death) or damage to Property (whether real or personal) caused, directly or indirectly, by an occurrence described in (a) or (b) above. The provisions of this paragraph shall survive the repayment of the Loan and foreclosure or release of any mortgages or security interests securing the Loan.
The court in the related case of Pepper Partners Limited Partnership v. Visconti et al., X06-CV-00-0170070S, entered summary judgment for Pepper Partners in their foreclosure action on the purchase money mortgage executed by Visconti. A judgment of strict foreclosure was entered on April 21, 2003.
Visconti is seeking summary judgment on the counterclaim on the basis that it is legally sufficient because the indemnity clauses contained in the mortgage and sales contract do not cover claims asserted against the real estate transaction; but instead address claims arising from damages associated with tortious contamination and clean-up. Visconti also argues that the indemnity provisions are void as against public policy.
Visconti's attempt to characterize this action as one limited to the real estate transaction is unavailing. The court in its memorandum of decision granting the defendants' motion for summary judgment on the complaint found that "the essence of all of the plaintiffs' claims is that the defendants had knowledge of environmental problems on the property and did not properly inform the buyer concerning such hazards." (Memorandum of Decision, May 14, 2002, p. 10.)
The twelve counts of the complaint included fraud (count 1); fraudulent non-disclosure (count 2); fraudulent prevention of inquiry (count 3); civil conspiracy (count 4); breach of the covenant of good faith and fair dealing (count 5); breach of contract (count 6); negligent misrepresentation (count 7); negligence (count 8); negligence per se pursuant to General Statutes § 22a-427 (count 9); liability under General Statutes § 22a-452 for reimbursement (count 10); liability under General Statutes § 22a-16 (count 11); and a claim for violation of the Connecticut Unfair Trade Practices Act (CUTPA) (count 12).
The following findings were made previously in this court's May 2002 memorandum of decision: General Statutes § 22a-134 addresses the transfer of hazardous waste establishments. An establishment would include, pursuant to § 22a-134 (3) E, property whereupon a vehicle body repair shop or vehicle painting shop was located on or after May 1, 1967. The property conveyed had been the site of a vehicle body repair shop and vehicle painting shop during the 1980s. When property has such a history, General Statutes § 22a-134a mandates that an environmental condition assessment form (ECAF) and a property transfer program form III (Form III) must be completed as part of the sale. The ECAF provides that the certifying party must provide information known to him regarding the environmental condition of the property being transferred. The Form III provides that the certifying party agrees to take responsibility for pollution of environmental property found on the property being transferred. Pursuant to the sales contract, it was Visconti who assumed the obligation to complete and sign the environmental forms, pay the required filing fees, and assume the responsibilities for the environmental condition of the property.
Prior to the closing, Pepper Partners' attorney indicated to Visconti's attorney that the transfer act provisions would have to be complied with unless Visconti could prove to Pepper Partners that the property was not a General Statute § 22a-134 "establishment." Pepper Partners' attorney suggested to Visconti's attorney that Visconti might wish to undertake an environmental study before closing. Pepper Partners indicated that Visconti would have to file the Form III with the Department of Environmental Protection (DEP), pay the filing fees in excess of $2,000, and file the ECAF. Visconti was advised through counsel that Pepper Partners would release Visconti from his obligation under the sales contract, but would not sell without the transfer act filings or the filing fees certified and paid by Visconti. Pepper Partners also indicated that it would extend the time to close to allow a reasonable time for Visconti to conduct any pre-closing investigation of the property. Visconti declined to perform such a site investigation, and agreed to assume responsibility for the transfer act filings and payment of the filing fees.
Pepper Partners' attorneys provided to Visconti's attorney the ECAF and Form III with certain information, including reference to the fact that a prior tenant operated an autobody repair shop on the property. Pepper Partners' attorney understood that Visconti's attorney would review the information with his client and change the form to reflect what Visconti knew about the environmental condition and history of the property. Visconti and his attorney made no changes in the ECAF or Form III, executed by Visconti. The closing occurred on February 9, 1996. Visconti has not paid the note and mortgage since April of 1996.
The indemnity provision of the sales contract obligates Visconti to indemnify Pepper Partners and hold it harmless from "all loss, costs, damages, liability, etc . . ." which Pepper Partners may be subjected to or may pay in consequence of "circumstances or conditions arising out of the environmental condition of the premises." Similarly, the indemnification provision of the mortgage provides for the indemnification for any losses and consequence of any hazardous substance on the property. There is no question that the Visconti lawsuit against Pepper Partners arose out of the environmental condition and/or hazardous substances on the property. Visconti's motion for summary judgment on the legal insufficiency argument is denied.
With respect to the public policy argument, Visconti characterizes the indemnification provision as an exculpatory contract, relying on Griffin v. Nationwide Moving Storage Co., Inc., 187 Conn. 405, 446 A.2d 799 (1982), and its citation to Section 195 of the Restatement (Second) of Contracts, comment b. "[E]xculpatory contracts receive careful judicial scrutiny . . . unless the contract clearly, unequivocally, specifically, and unmistakably express[es] the parties' intention to exculpate the [defendant] from liability resulting from its own negligence, the [contract] is insufficient for that purpose . . . An obligation to indemnify a party against its own negligence will not be given effect in the absence of language which itself compels such a result." (Citations omitted; internal quotation marks omitted.) Malin v. Whitewater Mountain Resorts, Superior Court, judicial district of New Haven, Docket No. 432774 (March 16, 2001, Blue, J.) ( 29 Conn.L.Rptr. 374).
The language in this case with respect to indemnification quite clearly evidences the intent of the parties with respect to the scope of indemnification. Connecticut courts will enforce indemnification agreements when the contract fairly includes the promise to indemnify even the negligent indemnitee. Burkle v. Car Truck Leasing Co., 1 Conn. App. 54, 57, 467 A.2d 1255 (1983).
Visconti fails to point out how public policy is offended by parties to a commercial transaction assigning responsibilities mandated by the environmental laws, when the state is free to pursue either party regardless of their contractual agreements. See General Statutes § 22a-432; Cadlerock Properties Joint Venture, L.P. v. Commissioner of Environmental Protection, 253 Conn. 661, 757 A.2d 1 (2000).
Pursuant to Practice Book § 17-49, "summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Pelletier v. Sordoni Skonska Construction Co., 262 Conn. 372 (2003); Amoco Oil Co. v. Liberty Auto Electric Co., 262 Conn. 142, 147-48 (2002). The indemnification provisions are clear enough and broad enough to cover the defendants' damages incurred in defending this litigation. The indemnification provisions in this commercial contract are not violative of public policy. The plaintiff Visconti's motion for summary judgment on the counterclaim is denied.
The defendant Pepper Partners also is seeking summary judgment as to liability on its counterclaims on the indemnification provisions. In response, Visconti has asserted special defenses. The first special defense to the counterclaim is that the sale contract and mortgage are procedurally unconscionable. "As a general matter, we know of no case . . . in which a party may invoke unconscionability without a showing of some kind of relevant misconduct by the party seeking enforcement of a contract . . . Many of the unconscionability cases arise in the context of some kind of misleading conduct that comes close to being fraudulent. Under the law of procedural unconscionability, such contracts may be voidable by an innocent party who has been misled about the advisability of entering into such a contract." Shoreline Communications, Inc. v. Norwich Taxi, LLC, 70 Conn. App. 60, 70-71, 797 A.2d 1165 (2002) citing 1 Restatement (Second) of Contracts § 153. In this case, the court has previously concluded that there is no fraud or other wrongdoing or misrepresentation by Pepper Partners in the transaction. The plaintiff Visconti, who was represented by counsel, was afforded after his execution of the contract the option to terminate the agreement without penalty if he did not wish to assume the environmental responsibilities and transfer act obligations.
Visconti argues that he is functionally illiterate and had no prior experience in purchasing commercial property. Our Supreme Court has held in Smith v. Mitsubishi Motors Credit of America, Inc., 247 Conn. 342, 721 A.2d 1187 (1998), "[w]e have never held that principles of unconscionability supersede, in toto, the duty of the contracting party to read the terms of an agreement or else be deemed to have notice of the terms." Id., 251-52. Visconti had the benefit of legal counsel and the specific opportunity to void the contract if he thought the assumption of the environmental responsibility was beyond him. The allegations of his attorney's alleged malpractice does not appear to be the basis for relieving a contracting party of its contractual obligations. Unconscionability is a matter of law to be decided by the court based on all the facts and circumstances of the case. Iamartino v. Avallone, 2 Conn. App. 119, 125, 477 A.2d 124 (1984). The court finds as a matter of law there was no unconscionability in the contract or mortgage.
The defendants' second special defense is an assertion that there was no mutual consent to the indemnification provision because he didn't understand the meaning of the contractual terms. Shoreline Communications, Inc. v. Norwich Taxi, supra, 70 Conn. App. 60, would appear to be controlling on this issue. In Shoreline Communications, an assignee of the licensing of a radar communications tower claimed there was no mutual consent because it did not know, prior to entering into the agreement that its equipment was not compatible with the plaintiff's tower. Our Appellate Court confirmed the trial court's holding that the defendant's unilateral mistake did not provide it with a defense to enforcement of the parties' contract. Unilateral mistake will relieve a party of its obligations only if the mistaken party does not bear the risk of the mistake. Id., 65-66. In this case, Visconti specifically bore the risk of the mistake, as he was invited to perform environmental assessments and any and all inspections of the property he desired. He also specifically assumed the risk of environmental problems. In Shoreline Communications, supra, the court held at 70 Conn. App. 68 that a party cannot avoid its contractual obligations when it could have taken steps to check out the accuracy of its expectations.
Mutual mistake is asserted as the third special defense. Mutual mistake is usually associated with efforts to reform a contract when, through mistake common to both parties, the written instrument fails to express the real agreement or transaction. Harlach v. Metropolitan Property Liability Insurance Co., 221 Conn. 185, 190, 602 A.2d 1007 (1992). The standard of proof in a mutual mistake claim is clear, substantial and convincing evidence. Lopinto v. Haines, 185 Conn. 527, 534-35, 441 A.2d 151 (1981). The court has already determined that there is no evidence of any intent to transfer clean property to Visconti. He believed it was contaminated, the sellers invited him to do a thorough inspection, and they insisted on his assumption of the risk of environmental contamination.
The fourth special defense is that the indemnification provisions were void as against public policy. This defense has previously been discussed in considering Visconti's claim for summary judgment on the indemnification provision. In essence, the indemnification provisions are sufficiently clear to impose a risk of environmental contamination on Visconti and to require his indemnification of Pepper Partners.
The fifth special defense appears to assert set-off and limitations on recovery. There is no question that Pepper Partners is seeking to enforce the express terms of its mortgage and sales contract. There is no evidence of a set-off or failure to comply with the condition precedent to recovery under the sale contract or mortgage indemnification provision.
The sixth special defense is "unclean hands." This is a restatement of the fraud and non-disclosure claims that the court previously decided in the summary judgment on Visconti's complaint.
CONCLUSION
Judgment enters for Pepper Partners (#191) and against Visconti (#190) as to liability on the counterclaim for indemnification.
Robert F. McWeeny, J.