Allstate Life Ins. v. Bfa L.P., No. 18017.

948 A.2d 318

287 Conn. 307

ALLSTATE LIFE INSURANCE COMPANY v. BFA LIMITED PARTNERSHIP et al.

No. 18017.

Supreme Court of Connecticut.

Argued January 14, 2008.

Decided June 10, 2008.

Daniel J. Klau, with whom was Joseph J. Chambers, Hartford, for the appellant (plaintiff).

Richard P. Weinstein, with whom was Nathan A. Schatz, for the appellees (defendants).

ROGERS, C.J., and NORCOTT, KATZ, VERTEFEUILLE and SCHALLER, Js.

ROGERS, C.J.

In this appeal, we are asked to review the trial court's interpretation of an environmental indemnity agreement (indemnity agreement) and a subsequent reaffirmation of the indemnity agreement executed by a lender and borrower as security for a loan and later loan modification. The trial court determined that the reaffirmation of the indemnity agreement did not incorporate the indemnity agreement's durational provisions, but instead supplanted them so that foreclosure of the mortgaged parcel of commercial property used as security for both loans extinguished the borrowers' obligation to pay remediation costs and attorney's fees incurred by the lender due to the environmental contamination of that property. The plaintiff, Allstate Life Insurance Company, the lender, appeals from the trial court's granting of summary judgment in favor of the defendants,¹ the borrowers. On appeal, the plaintiff argues that the defendants' indemnification obligation was not extinguished by foreclosure because the reaffirmation of the indemnity agreement was a ratification of the indemnity agreement that incorporated its durational terms. We agree and reverse the judgment of the trial court.²

The record reveals the following undisputed facts and procedural history. In January, 1991, the plaintiff loaned the defendants $8.2 million and the defendants executed a promissory note secured by a mortgage deed on a parcel of commercial property in Bristol (property). As a loan condition, the plaintiff also required the defendants to execute an indemnity agreement entitled "Environmental Indemnity Agreement" "in order to induce [the plaintiff] to accept the Property as security for the Loan and to enter into the Loan and to disburse the proceeds of the Loan...." Under the indemnity agreement, the defendants were required "to unconditionally indemnify, defend, and hold [the plaintiff] harmless against any loss, liability, damage, expense or claim arising under any Hazardous Material Law ... [or] ... resulting from the presence of Hazardous Material on the Property...." Paragraph four of the indemnity agreement provided that the defendants' indemnification obligation would continue indefinitely "unless (a) in the case of payment of the Note, [the defendants deliver] to [the plaintiff], after payment of the principal, interest and all other amounts due under the Note, an environmental report in form and substance acceptable to [the plaintiff] from an environmental consultant acceptable to [the plaintiff] showing no violation of Hazardous Material Laws or the presence of any Hazardous Materials on the Property or (b) in the case of a foreclosure or deed-in-lieu of foreclosure, no notice of any violation of the Hazardous Material Laws or the presence of any Hazardous Materials on the Property has been received by the [defendants] from [the plaintiff] within five years after such foreclosure or transfer. ..."

In 1998, the plaintiff agreed to advance up to $2 million in additional funds to the defendants and to extend the maturity date of the loan. "As a condition precedent to entering into the [loan] restructuring," the plaintiff required the defendants to execute the reaffirmation of the indemnity agreement on April 22, 1998. The reaffirmation of the indemnity agreement provided, inter alia, that "in order to induce [the plaintiff] to enter into the Second Modification Agreement, and in consideration therefor ... [the defendants] ... hereby ratify and confirm the provisions, representations, warranties, covenants, obligations and conditions of the Original Environmental Indemnity [Agreement], which shall remain in full force and effect until the full and indefeasible payment of the Notes."

The defendants subsequently defaulted by failing to make payments on the loan, and the plaintiff commenced a foreclosure action on the property. The parties entered into a stipulated judgment of strict foreclosure, and the plaintiff obtained title to the property on January 3, 2002. The plaintiff did not move for a deficiency judgment.

When the plaintiff sold the property on or about May 9, 2003, it was required to comply with the Connecticut Transfer Act, General Statutes § 22a-134 et seq., by performing an environmental site assessment and undertaking remediation of contamination on the property. The site assessment revealed the presence of hazardous materials on the property that required remediation and monitoring, and the plaintiff consequently has incurred in excess of $100,000 in ongoing costs and fees. The defendants refused to indemnify the plaintiff, and the plaintiff brought this action against the defendants to recover its costs and fees, claiming that the defendants had breached both the indemnity agreement and the reaffirmation of the indemnity agreement. The defendants moved for summary judgment and argued that the agreements were no longer in force after the foreclosure of the mortgage on the property. The trial court, Hon. M. Richard Rittenband, judge trial referee, rendered summary judgment in favor of the defendants and held that the reaffirmation of the indemnity agreement's durational language "take[s] precedence" over the indemnity agreement's durational provisions in paragraph four. Specifically, the trial court found that, under the reaffirmation of the indemnity agreement, the defendants' indemnity obligation had terminated upon "the full and indefeasible payment of the Notes" when the plaintiff's mortgage on the property was foreclosed. Moreover, the trial court held that, by failing to seek a deficiency judgment, the plaintiff had accepted that the debt was paid in full.³ The trial court also held, in the alternative, that "[a]ssuming arguendo that the [termination] language in [the reaffirmation of the indemnity agreement] does not prevail," the language of the indemnity agreement dealing with duration, waivers, and recourse was in conflict with the durational language in the reaffirmation of the indemnity agreement and that the resulting ambiguity should be resolved against the plaintiff as the drafter of the agreements.⁴ This appeal followed.⁵

We begin with well established principles that govern our review of this appeal. "Practice Book § 17-49 provides that 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 that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law.... The test is whether the party moving for summary judgment would be entitled to a directed verdict on the same facts.... Our review of the trial court's decision to grant the [defendants'] motion for summary judgment is plenary." (Internal quotation marks omitted.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007).

The standard for our review of the trial court's interpretation of the agreements is also well established. "A contract must be construed to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction.... [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and ... the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract.... Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms. A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity...." (Internal quotation marks omitted.) Alstom Power, Inc. v. Balcke-Durr, Inc., 269 Conn. 599, 610-11, 849 A.2d 804 (2004). Thus, "[w]hen a party asserts a claim that challenges the trial court's construction of a contract, we must first ascertain whether the relevant language in the agreement is ambiguous." (Internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 13, 938 A.2d 576 (2008). That determination is a question of law that we decide de novo. See State v. Rivers, 283 Conn. 713, 725, 931 A.2d 185 (2007).

"A contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself.... Accordingly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms"; (internal quotation marks omitted) Ramirez v. Health Net of the Northeast, Inc., supra, 285 Conn. at 13, 938 A.2d 576; and "[w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) Connecticut Light &amp Power Co. v. Lighthouse Landings, Inc., 279 Conn. 90, 109, 900 A.2d 1242 (2006). "Furthermore, a presumption that the language used is definitive arises when, as in the present case, the contract at issue is between sophisticated parties and is commercial in nature." United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 670, 791 A.2d 546 (2002).

In the present...