Festival Realty, Inc. v. William Prym, Inc. et al. (2010)

MEMORANDUM OF DECISION ON MOTIONS FOR SUMMARY JUDGMENT

In this case, plaintiff Festival Realty, Inc. (“Festival”), a Connecticut corporation,¹ has sued defendant William Prym, Inc. (“Prym”), a Delaware corporation, to obtain declaratory relief and recover money damages for alleged breach of contract in connection with Prym's alleged failure and refusal to defend and indemnify Festival with respect to claims assertedly made against it by the State of Connecticut Department of Environmental Protection (“DEP”) for alleged violation of the Connecticut Transfer Act, General Statutes § 22a-134a, in connection with separate transfers of two parcels of real property in 2006 and 2007.   Prym's duty to defend and indemnify Festival in connection with those claims allegedly arises under the indemnification clause of the December 14, 1993 Agreement of Sale (“Agreement” or “1993 Agreement”) between them, whereby Prym sold to Festival a larger Property ² in Killingly which included the two transferred parcels.

The larger Property sold by Prym to Festival constituted an “establishment,” within the meaning of Section 22a-134a, because it was real property at which, on or after November 19, 1980, there was generated more than one hundred kilograms of hazardous waste in any one month.   Pursuant to Section 22a-134a, each transfer of title to an “establishment” on which all hazardous waste has not yet been fully remediated requires the preparation, signing and filing with the DEP of a document known as a Form III. In the Form III, a “party associated with the transaction” who is denominated the “certifying party” agrees to “investigate the parcel in accordance with prevailing standards and guidelines and to remediate pollution caused by any release of a hazardous waste or hazardous substance from the establishment in accordance with the remediation standards” established by State regulations.  Id. The Form III must be submitted to the DEP together with a complete environmental condition assessment form for the parcel and the statutory fee of $3,000.

For the purpose of Section 22a-134a, a “party associated with the transfer of an establishment” means:  “(A) the present or past owner or operator of the establishment, (B) the owner of the real property on which the establishment is located, (C) the transferor, transferee, lender, guarantor or indemnitor, (D) the business entity which operates or operated the establishment, or (E) the state.”  General Statutes § 22a-134a(7).   Any such party who agrees to sign the Form III and to perform the investigative and remediative duties therein specified may serve as the certifying party for the transaction.   When, however, there is disagreement among the parties associated with the transaction as to who among them should prepare and sign the Form III as the certifying party, General Statutes § 22a-134a(c) resolves the issue by providing as follows:  “If no other party associated with the transfer of an establishment prepares and signs the proper form as a certifying party, the transferor shall have the obligation for such preparation and signing.”

In light of these statutory provisions, Prym and Festival agreed, in their 1993 Agreement, that Prym would prepare and sign the Form III in connection with the Prym's transfer of the Property to Festival, thereby certifying that it would investigate the Property for the presence of environmental hazards in accordance with prevailing standards and guidelines and that it would remediate any pollution caused by any release of a hazardous waste or hazardous substance from the Property in accordance with applicable State regulations.   Prym further agreed, inter alia, in paragraph 5(e) of the Agreement, that it would

defend all claims and actions against Festival with respect to, and would pay, protect, indemnify and save harmless Festival from all fines, charges, fees, liabilities, losses, damages, costs and expenses asserted, imposed, made, brought, filed or incurred by third parties, by reason of or in any way arising out of or in connection with, ․ (ii) the application, or any claim of application, of any Environmental Law to the Premises or the operation thereof, if caused by conditions existing prior to the Closing;  ․ [or] (iv) any failure by Seller (Prym) or of the Premises to comply with the terms of any order, consent agreement, or action of the Connecticut Department of Environmental Protection or any other federal, state or municipal governmental authority under any Environmental Law, if caused by conditions existing prior to the Closing[.]

Agreement, ¶ 5(c).  The present lawsuit seeks relief under this above-cited provisions of the parties' Agreement.

Ever since the Closing, which took place on January 27, 1994, Prym has engaged in environmental clean-up of the Property in a manner coordinated by the United States Environmental Protection Agency (“EPA”) and the DEP. Its cleanup efforts, which continue to this day, were still in progress when, in 2006 and 2007, Festival sold portions of the Property, each of which still contained unremediated environmental hazards that had been present on the Property since the time of Closing, to different purchasers.   Thus, on April 26, 2006, Festival sold the parcel located at 411 Hartford Pike to Keith Pasey of Pasey Development, LLC in Dayville, Connecticut.   Title to that parcel passed from Festival to Mr. Pasey on the date of the sale.   Thereafter, on June 6, 2007, Festival sold the parcel located at 400 Hartford Pike to Anthony Simpson of SIMFAB Real Estate Holdings, LLC in Pomfret Center, Connecticut.   Title to that parcel likewise passed from Festival to Mr. Simpson on the date of the sale.

Festival never submitted a Form III to the DEP in connection with its transfer of 411 Hartford Pike to Mr. Pasay, nor did it ever submit an environmental conditions assessment form with respect to that parcel or pay the $3,000 statutory fee in connection therewith.   On August 7, 2007, by contrast, it filed a Form III and paid the $3,000 statutory fee with respect to its transfer of the parcel located at 400 Hartford Pike to Mr. Simpson, although it did not sign the new Form III, and thus failed therein to certify that it would investigate the parcel for environmental hazards and remediate all releases of pollution from the Premises as required by law.   In acting as aforesaid, Festival claims to have believed that Prym was responsible for preparing, signing and filing new Form IIIs with respect to the transfers of the two parcels and for paying all associated statutory fees and costs for the preparation of an environmental conditions assessment form in connection therewith.   This belief was assertedly grounded upon Festival's knowledge that it had made no changes to either parcels since the date of their purchase from Prym, and thus that all claims potentially arising from the presence of environmental hazards on the parcels and/or the release of pollution therefrom were covered both by Prym's original Form III and by the indemnification clause of the parties' 1993 Agreement.   Prym refused to prepare and sign new Form IIIs in connection with Festival's transfers of the two parcels to Messrs Pasay and Simpson despite Festival's demand that it do so, and refused demands by Festival that it pay or reimburse Festival for all fees or costs it had incurred or would incur in connection with such filings.

On or about March 4, 2008, Festival received a letter from the DEP stating that it had failed to file a new Form III, to pay the $3,000 statutory fee, and to submit an complete environmental condition assessment form with the DEP for the April 26, 2006 transfer of the parcel located at 411 Hartford Pike to Mr. Pasay.   To “correct the[se] violations,” the letter instructed Festival to submit the required forms and make the required payment to the Remediation Division of the DEP within thirty days.   In that same letter, the DEP also informed Festival that it had failed to file a complete, fully executed Form III and an environmental condition assessment form for the transfer of the parcel located at 400 Hartford Pike in Killingly.   To “correct the[se] violations,” the letter instructed Festival to submit the required forms to the Remediation Division of the DEP within thirty days.   Neither of these notices of violation was sent or directed to Prym

Following receipt of the above-described notices of violation from the DEP, Festival sent a letter to Prym requesting that a corporate representative from Prym prepare and sign new Form IIIs with respect to the two transferred parcels, reimburse Festival for the $3,000 statutory fee it had already paid to the DEP when filing the incomplete Form III with respect to the property located at 400 Hartford Pike, and pay both the $3,000 statutory fee with respect to the property located at 411 Hartford Pike and all costs incurred to hire a licensed environmental professional to prepare an environmental condition assessment form for the two transferred parcels.   Prym responded to Festival's demands in a letter from its counsel, wherein it refused to sign new Form IIIs in connection with the transfers of the two parcels and refused to make or reimburse Festival for any of the fees or costs, specified in its demand letter.   As for the signing of new Form IIIs for the two parcels, in particular, Prym's counsel informed Festival that it had no obligation to sign such new Forms because it had already signed a Form III with respect to the two parcels when it sold them to Festival in January 1994.

Against this background, Festival claims initially that it is entitled, under the indemnification clause of its Agreement with Prym, to the issuance of a declaratory judgment that “Prym must sign the Form III as the ‘responsible party,’ and pay the $3,000 statutory fees and $5,000-$7,000 fee for the preparation environmental condition assessment form, regarding the properties located at 400 and 411 Hartford Pike.” Secondly, Festival claims that Prym is liable to it for breach of contract for failing to sign Form IIIs in connection with the transfers of the two parcels, for failing to pay the $3,000 statutory fee in connection with the transfer of 411 Hartford Pike, for failing to reimburse it for the $3,000 statutory fee it had paid to the DEP in connection with the transfer of 400 Hartford Pike, and for failing to pay for the completion of an environmental condition assessment form for the two parcels.   As damages for the alleged breach, Festival seeks all fees for which it claims that Prym is legally responsible under their Agreement, plus all attorneys fees expended by it to recover these fees.

The case is now before the Court on the parties' cross motions for summary judgment.   Both parties contend, in their supporting memoranda, that they are entitled to summary judgment because the operative facts are undisputed and their right to prevail on the merits Festival's breach-of-contract claims can appropriately be determined as a matter of law based upon the unambiguous language of the parties' 1993 Agreement.

I

SUMMARY JUDGMENT

“Summary judgment is a method of resolving litigation when 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 ․ The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried.”  (Citations omitted.)  Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).  “However, since litigants ordinarily have a constitutional right to have issues of fact decided by a jury ․ the moving party for summary judgment is held to a strict standard ․ of demonstrating his entitlement to summary judgment.”  (Citation omitted;  internal quotation marks omitted.)   Kakadelis v. DeFabritis, 191 Conn. 276, 282, 464 A.2d 57 (1983).

“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.”  (Internal quotation marks omitted.)  Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007).

“In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact ․ The courts hold the movant to a strict standard.   To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ․ As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent.”  (Internal quotation marks omitted.)  Zielinski v. Kotsoris, 279 Conn. 312, 318, 901 A.2d 1207 (2006).

“A motion for summary judgment shall be supported by such documents as may be appropriate, including but not limited to affidavits, certified transcripts of testimony under oath, disclosures, written admissions and the like.   The motion shall be placed on the short calendar to be held not less than fifteen days following the filing of the motion and the supporting materials, unless the judicial authority otherwise directs.   Any adverse party may, within ten days of the filing of the motion with the court, file a request for extension of time to respond to the motion.   The clerk shall grant such request and cause the motion to appear on the short calendar not less than thirty days from the filing of the request.   Any adverse party shall at least five days before the date the motion is to be considered on the short calendar file opposing affidavits and other available documentary evidence.   Affidavits, and other documentary proof not already a part of the file, shall be filed and served as are pleadings.”  Practice Book § 17-45.

II

THE PARTIES' ARGUMENTS

In support of its Motion for Summary Judgment, Festival argues that it is entitled to have Prym prepare and sign new Form IIIs in connection with its 2006 and 2007 transfers of the two parcels to Mr. Pasay and Mr. Simpson, respectively, and to have Prym pay or reimburse it for all fees, costs and expenses associated with such filings because its own obligation to make those filings and to pay such fees, costs and expenses arose in such a manner as to require Prym to defend and indemnify it with respect to them under the indemnification clause of the parties' 1993 Agreement.   On this score, Festival relies, in particular, upon paragraph 5(e) of the 1993 Agreement, wherein Prym agreed, inter alia, to “defend all actions or claims against [Festival] ․ and pay, protect, indemnify and save [it] harmless from and against, any and all fines, charges, fees, liabilities, losses, damages, costs, expenses (including reasonable attorneys fees and reasonable expenses) ․ assessed, imposed, made, brought[ or] filed by third parties ․ by reason of or in any way arising out of or in connection with:  ․ (ii) the application, or any claim of application of any Environmental Law to the Premises or the operation thereof, if caused by conditions existing prior to the Closing;  ․ [or] (iv) any failure by Seller (Prym) or of the Premises to comply with the terms of any order, consent agreement, or action of the Connecticut Department of Environmental Protection or any other federal, state or municipal governmental authority under any Environmental Law, if caused by conditions existing prior to the Closing[.].” ] (Emphasis added.)

According to Festival, its obligation to file new Form IIIs with respect to the transfers of the two parcels, and to pay all associated statutory fees and expenses for the preparation of an environmental condition assessment form for the two parcels, arises from the March 4, 2008 letter from the DEP in 2008, wherein the DEP informed it that it must prepare, sign and submit such forms and pay such fees and expenses in order not to be found in a violation of Section 22a-134a.   The letter, it argues, constituted a notice of violation, and thus a “claim” within the meaning of the Agreement, for it constituted an attempt to assert a right or to enforce a duty through legal action.   The defendant, it notes, has conceded, through the deposition testimony of its CEO, Mr. Johan Starrenburg, that the DEP's letter was indeed a “claim” within the meaning of the Agreement.   That claim, it further argues, was made by a “third party” to the Agreement, for the DEP, unlike Festival and Prym, was not a party to the Agreement.

Festival further argues that the DEP's claim against it constituted a “claim of application of any Environmental Law to the Premises,” because General Statutes § 22a-134a is an “Environmental Law” within the meaning of paragraph 5(a) of the Agreement.   On this score, Festival notes that Prym's CEO, Mr. Starrenburg, has also admitted in his deposition that Section 22a-134a is an “Environmental Law,” within the meaning of the Agreement.

Festival concludes that the DEP's claim of application to the Premises of Section 22a-134a is covered by the indemnification clause of the 1993 Agreement because the claim in question “is caused by conditions existing prior to the Closing.”   In this regard, it notes that a transferor's statutory obligation to prepare and sign a Form III upon the transfer of real property constituting an establishment is based upon the presence of pollution on the parcel that has not yet been remediated.   Hence, it argues that since all unremediated pollution on the parcels here at issue at the time of their respective transfers to third parties has been on those parcels since before the Closing on its original purchase of the Property from Prym-a fact supported by substantial, uncontested evidence that Festival has done nothing on or to the Property since the Closing that could have added new pollution to it ³ -the DEP's claim against Festival is necessarily based upon conditions existing on the parcels prior to the Closing.

Defendant Prym does not deny that it has a continuing obligation to Festival, pursuant to the parties' 1993 Agreement and the original Form III it prepared, signed and filed in connection therewith, to investigate and remediate pollution upon the two parcels, to the extent that such pollution was present on the Property when it was first sold to Festival.   Even so, it denies that it has any obligation either to file a new Form III or to pay any costs and fees incurred in connection with any later transfer by Festival of all or part of the Property to a third party.   In this regard, it claims initially that the controlling statute, Section 22a-134a, plainly imposes all form-filing and payment obligations in connection with the transfer of real property constituting an establishment on the transferor-in this case, Festival-and that nothing in the indemnification clause or any other provision of the parties' 1993 Agreement shifted any of those obligations to it.   Indeed, it argues that other provisions in the Agreement expressly limit its form-filing and payment obligations under Section 22a-134a to the time of the original Closing under the 1993 Agreement.   Prym argues, on this basis, that it has no obligation at all to defend or indemnify Festival with respect to Festival's own violations of Section 22a-134a because such statutory violations do not constitute failures by Prym or by the Premises to comply with any Environmental Law.

Prym insists, moreover, that the Agreement expressly limits Festival's right to be defended or indemnified by it under the Agreement to claims and actions brought against Festival by third parties, thereby excluding from the scope of the Agreement any first-party claims brought by Festival itself against Prym. Here, it argues, the only claim allegedly brought against Festival is a notice of violation by the DEP based upon Festival's alleged failure to obey Section 22a-134a, not any failure by Prym or by the Premises to comply with that or any other law.   Hence, then, it argues that the instant claim is nothing more than a self-inflicted wound-a first-party claim by Festival based upon its own violation of law, which does not trigger the indemnification clause of the Agreement.

For the following reasons, the Court agrees with Prym that it has no statutory duty or contractual obligation under the 1993 Agreement either to prepare and sign new Form IIIs or to make or indemnify Festival for any payments it may have made or be required to make in connection with Festival's post-Agreement transfers of the two parcels to third parties, and thus that Prym is entitled to judgment on the plaintiff's claims against it as a matter of law.

III

ANALYSIS

As a threshold matter, the Court agrees with Prym that under General Statutes § 22a-134a(d), the party ultimately responsible for preparing and signing a Form III with respect to the transfer of an “establishment” is its transferor.   Thus, although the statute expressly authorizes other “parties associated with the transaction” to serve as the “certifying party” with respect to such a transfer if they are willing to prepare and sign a Form III with respect thereto and to perform all investigative and remediative work agreed to therein, it names the transferor of the establishment as the party who must prepare and sign the Form III if no other party associated with the transaction agrees to do so.

Whether or not another party associated with a transaction for the transfer of an establishment to a third party has assumed what would otherwise be the transferor's statutory obligation to prepare and sign a Form III with respect to the transfer necessarily depends upon the terms of any relevant contract between them.   Here, Festival claims that Prym assumed such statutory obligations with respect to any future transfer of all or part of the Property to a third party, if and to the extent that the original pollution on the parcel was not fully remediated by the time of such transfer, by agreeing, in the 1993 Agreement, both to prepare and sign the Form III with respect to its original sale of the Property to Festival and to defend and indemnify Festival with respect to any claimed violations of Environmental Law by Prym or the Premises.   For the following reasons, the Court disagrees.

First, Prym's agreement to sign, prepare and submit the Form III in connection with its original sale of the Property to Festival did not contemplate the filing of new or additional Form IIIs, at any time or for any reason.   Instead, the Agreement was fully satisfied by Prym's timely submission of the original Form III, because the 1993 Agreement set a time line for its submission and Prym complied with that time line.   The Agreement mentioned nothing at all about future transfers of the Property by Festival to others, and thus failed entirely to address what might happen if the Property were still being remediated at the time of any such future transfer.   In short, there is nothing in the 1993 Agreement that even touches upon the issue of future transfers of the Property by Festival to others, much less that commits Prym to the filing of a new Form IIIs with respect to any such future transfer.

It is true, of course, that by preparing and signing the Form III with respect to its transfer of the Property to Festival, Prym committed itself to investigating and remediating all environmental hazards existing on the Property at the time of the Closing.   Therefore, since there was no sunset provision in the Form III stating when its commitment to investigate and remediate such pre-Closing pollution on the Property would end, its obligation to investigate and remediate pollution the Property would last for as long as it took to get the job done.   Nothing in this commitment to engage in investigative and remediative work with respect to pre-Closing pollution on the Property, however, included any promise by Prym that it would file a new Form III, and thereby renew its commitment to clean up such pre-Closing pollution on the Property, if ever and whenever the Property was transferred to a third party.   The Court must reject Festival's suggestion that the original Form III itself required Prym to file the new Form IIIs upon the future transfer of any as-yet-unremediated portion of the Property.

Turning to the indemnification clause of the 1993 Agreement, the question presented on these Motions is whether that clause requires Prym to file new Form IIIs and pay all fees and costs associated with such filings in connection with Festival's subsequent transfers of portions of the Property, or parts thereof, to third parties.   This depends, in the first instance, upon whether the DEP's March 4, 2008 letter to Festival constitutes a claim of application of Environmental Law to the Premises, within the meaning of the parties' 1993 Agreement, and if so, whether that claim of application of Environmental Law to the Premises is based upon conditions existing on the Premises at the time of Closing.   Unless both conditions are satisfied, the indemnification clause of the 1993 Agreement cannot apply to the DEP's claims against Festival, and thus Festival is not entitled to be defended on or indemnified with respect to that claim.

To begin with, the Court agrees with Prym that, even if the DEP's notification letter of March 4, 2008 constitutes a “claim” against Festival under Section 22a-134a and Section 22a-134a constitutes an “Environmental Law” within the meaning of that Agreement, that claim is not covered by the indemnification clause of the Agreement because it does not allege that “the Premises” are in violation of that Environmental Law. Instead, as Prym correctly argues, the violation therein specified is not that of the Premises, but of Festival itself, for having failed thus far to sign and file completed Form IIIs with respect to its transfers of the two parcels and having failed as well to pay all fees and costs associated with such transfers.   Subsection (ii) of the indemnification clause, to reiterate, provides, in relevant part, that Prym must “defend all actions or claims against [Festival] ․ and pay, protect, indemnify and save [it] harmless from and against, any and all fines, charges, fees, liabilities, losses, damages, costs, expenses (including reasonable attorneys fees and reasonable expenses) ․ assessed, imposed, made, brought [ or] filed by third parties ․ by reason of or in any way arising out of or in connection with:  ․ (ii) the application, or any claim of application of any Environmental Law to the Premises or the operation thereof, if caused by conditions existing prior to the Closing[.]  (Emphasis added.)   Because the violation of statute here alleged is that of Festival rather than that of the Premises, Festival is not entitled to be defended or indemnified by Prym in connection therewith.

Festival fares no better under subsection (iv) of the indemnification clause, which, to reiterate, provides that Prym shall:  “defend all actions or claims against [Festival] ․ and pay, protect, indemnify and save [it] harmless from and against, any and all fines, charges, fees, liabilities, losses, damages, costs, expenses (including reasonable attorneys fees and reasonable expenses) ․ assessed, imposed, made. brought[ or] filed by third parties ․ by reason of or in any way arising out of or in connection with:  ․ (iv) any failure by Seller (Prym) or of the Premises to comply with the terms of any order, consent agreement, or action of the Connecticut Department of Environmental Protection or any other federal, state or municipal governmental authority under any Environmental Law, if caused by conditions existing prior to the Closing [.].”] (Emphasis added.)   There, as under subsection (ii) of the indemnification clause, Prym's duty to defend and indemnify Festival extends only to claims in any way arising from or in connection with “any failure by Prym or the Premises” to comply with the terms of any order or action of the DEP, if caused by conditions existing prior to the Closing.   Thus the indemnification obligation created by this subsection does not apply to claims by the DEP against Festival arising from Festival's own violation of an Environmental Law, such as the alleged failures here at issue to file Form IIIs in connection with its transfers of the two parcels to third parties and its failure to pay all associated fees and costs in connection therewith.   For the foregoing reasons, the Court finds that Festival has no right under the indemnification clause of the 1993 Agreement to require Prym to defend or indemnify it with respect to its alleged violations of Section 22a-134a in connection with its 2006 and 2007 transfers of the subject parcels to third parties.

Accordingly, Festival's Motion for Summary Judgment must be DENIED and Prym's Cross Motion for Summary Judgment must be GRANTED.

IT IS SO ORDERED this 5th day of August 2010.

Michael R. Sheldon, J.

FOOTNOTES

FN1. Festival has dissolved..  FN1. Festival has dissolved.

FN2. Terms which are specially defined in and for the purpose of the parties' 1993 Agreement are capitalized in this Memorandum of Decision as well..  FN2. Terms which are specially defined in and for the purpose of the parties' 1993 Agreement are capitalized in this Memorandum of Decision as well.

FN3. This evidence is summarized in the affidavit of Festival's owner, Mr. Kenneth R. Loiselle, which was submitted in support of the plaintiff's Motion..  FN3. This evidence is summarized in the affidavit of Festival's owner, Mr. Kenneth R. Loiselle, which was submitted in support of the plaintiff's Motion.

Sheldon, Michael R., J.