Grippo v. Schrenell and Co.

• Decision Date: 29 February 1988
• Parties: Thomas GRIPPO, Plaintiff, v. SCHRENELL AND CO., Defendant-Appellant, and Brown & Matthews, Inc., Defendant-Respondent, and John Doe and Timeplex, Inc., Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 154

223 N.J.Super. 154

538 A.2d 404

Thomas GRIPPO, Plaintiff, v. SCHRENELL AND CO., Defendant-Appellant, and Brown & Matthews, Inc., Defendant-Respondent,

and

John Doe and Timeplex, Inc., Defendants.

Superior Court of New Jersey,

Appellate Division.

Argued Feb. 8, 1988.

Decided Feb. 29, 1988.

Mark A. Clemente, Bloomfield, for defendant-appellant.

Joseph DeDonato, Livingston, for defendant-respondent Brown & Matthews, Inc. (Morgan, Melhuish, Monaghan, Arvidson, Abrutyn & Lisowski, attorneys, Joseph DeDonato, of counsel and on the letter brief).

Before Judges J.H. COLEMAN, O'BRIEN and STERN.

The opinion of the court was delivered by

COLEMAN, J.H., P.J.A.D.

This appeal raises the question of whether the 1983 amendment to N.J.S.A. 2A:40A-1, which removed the prohibition of all indemnification agreements in construction contracts, should be given prospective or retroactive application. The judge below applied the amendment retroactively. We now affirm.

Brown & Matthews, Inc. (Brown & Matthews) was the general contractor of a building under construction in Woodcliff Lakes which was owned by Timeplex, Inc. Brown & Matthews hired Schrenell and Co. (Schrenell) to install the plumbing at the construction site. As part of the contract between Brown & Matthews and Schrenell, which was dated January 14, 1982, Schrenell was required to pay for and maintain insurance that would fully protect Brown & Matthews, Timeplex, Inc. and Schrenell "from any other claims for damages which may arise from operations under this contract, whether such operations be by itself or by any subcontractor, or anyone directly or indirectly employed by either of them." The contract between Brown & Matthews and Schrenell also contained an indemnity clause which forms the basis for the present litigation. The indemnity clause stated:

The Subcontractor hereby agrees to save and indemnify and keep harmless Brown & Matthews and the Owner against all liability, claims and judgements [sic ] or demands for damages arising from accidents to persons or property occasioned by the Subcontractor, its agents or employees, and against all claims or demands for damages arising from accidents to the Subcontractor, its agents or employees whether occasioned by said Subcontractor or its employees or by Brown & Matthews or by Owner or its employees or any other person or persons and the Subcontractor will defend any and all suits that may be brought against the Owner or Brown & Matthews on account of any such accident and will make good to and reimburse, Brown & Matthews and Owner for any expenditure that Owner or Brown & Matthews may make by reason of such accidents.

On May 27, 1982 plaintiff Thomas Grippo was employed as an electrician at the construction site. He worked for Allan Electric, the electrical contractor on the construction project. While walking backward pulling wire off a spool, plaintiff stepped into an eight inch by fifteen inch hole in a finished cement floor. Grippo instituted the present suit in December 1982 against Schrenell, Brown & Matthews, Timeplex, Inc. and others not involved in this appeal. In January 1985 Brown & Matthews filed a motion to compel Schrenell to (1) assume the defense for Brown & Matthews, (2) indemnify Brown & Matthews from any and all liability, and (3) reimburse Brown & Matthews for previously expended attorneys fees and litigation expenses. On the return day of the motion, Schrenell argued that the indemnification agreement was unenforceable because it contravened N.J.S.A. 2A:40A-1 which prohibited indemnification clauses in construction contracts at the time the agreement was made in this case on January 14, 1982.

Judge Meehan decided the motion on February 1, 1985. He ruled that N.J.S.A. 2A:40A-1 had been amended by L. 1983, c. 107 § 1, effective March 14, 1983, and by virtue of that amendment the indemnification clause was valid. He gave retroactive application to the amendment. The judge declined to grant any part of the Brown & Matthews motion because discovery had not been completed and factual questions existed regarding who created the hole. An order dated March 5, 1985 embracing this ruling was filed.

In August 1985 Brown & Matthews renewed its motion seeking the same relief previously sought in the February 1, 1985 motion. By this time, discovery had been conducted. Brown & Matthews argued that no new facts had come to light concerning who dug the hole and since Schrenell had not established that someone else was responsible, Schrenell had to defend and indemnify Brown & Matthews. This motion was argued before Judge Van Tassel on September 13, 1985. Judge Van Tassel ruled that Schrenell had to defend and indemnify because plaintiff alleged that Schrenell created the hole. By order dated October 15, 1985 Judge Van Tassel required Schrenell to (1) assume the defense on behalf of Brown & Matthews and Timeplex, Inc., (2) indemnify those defendants for any liability that might arise, and (3) reimburse those defendants for attorney fees and litigation expenses already incurred. We denied leave to appeal from the October 15, 1985 order.

Grippo settled the underlying action for $12,000. By release dated February 18, 1986, Grippo gave up all of his claims against Schrenell, Brown & Matthews and Timeplex, Inc. On February 28, 1986 Brown & Matthews sought to enforce the order of October 15, 1985. It alleged that it had incurred $11,032.01 in fees and expenses and that Schrenell had paid all but $2,144. The supporting papers set forth a detailed list of expenses and fees. The motion was unopposed. By order dated April 28, 1986 Judge Boggia awarded Brown & Matthews $11,032 pursuant to the order of October 15, 1985 with an appropriate credit for payments made.

On November 22, 1986 Brown & Matthews moved to enforce litigants' rights. Its attorney alleged that Schrenell had paid the settlement to plaintiff but had not fully reimbursed Brown & Matthews for attorneys' fees and litigation expenses. By order dated December 19, 1986 Judge Boggia again awarded Brown & Matthews $11,032 with appropriate credits and dismissed all other claims of all other parties with prejudice.

Schrenell has appealed from the orders of March 5, 1985, October 15, 1985 and December 19, 1986. Schrenell later filed an amended notice of appeal which modified the caption in the original notice of appeal. We now affirm in part and reverse in part.

First we address Schrenell's contention that the 1983 amendment to N.J.S.A. 2A:40A-1 should not have been applied retroactively. Schrenell argues that the judge had no reason to deviate from the general rule that statutes should be given prospective effect only. It points out that the Legislature never expressly stated that the amendment should be given retroactive application.

Brown & Matthews responds by arguing that the amendment was intended to clarify the original statute and was therefore a curative measure which should be applied retroactively. According to Brown & Matthews, the legislative history makes clear that the original statute was intended to void only those clauses purporting to indemnify the indemnitee from the consequences of the indemnitee's sole negligence. It relies on Miller v. Hall Bldg. Corp., 210 N.J.Super. 248, 509 A.2d 316 (Law Div.1985), where the amendment was applied retroactively.

As originally enacted, effective December 3, 1981, N.J.S.A. 2A:40A-1 stated:

A covenant, promise, agreement or understanding in, or in connection with or collateral to a contract, agreement or purchase order, relative to the construction, alteration, repair, maintenance, servicing, or security of a building, structure, highway, railroad, appurtenance and appliance, including moving, demolition, excavating, grading, clearing, site preparation or development of real property connected therewith, purporting to indemnify or hold harmless the promisee against liability for damages arising out of bodily injury to persons or damage to property is against public policy and is void and unenforceable; provided that this section shall not affect the validity of any insurance contract, workmen's compensation or agreement issued by an authorized insurer. [L.1981, c. 317, § 1]

Following the 1983 amendment, N.J.S.A. 2A:40A-1 now reads:

A covenant, promise, agreement or understanding in, or in connection with or collateral to a contract, agreement or purchase order, relative to the construction, alteration, repair, maintenance, servicing, or security of a building, structure, highway, railroad, appurtenance and appliance, including moving, demolition, excavating, grading, clearing, site preparation or development of real property connected therewith, purporting to indemnify or hold harmless the promisee against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the promisee, his agents, or employees, is against public policy and is void and unenforceable; provided that this section shall not affect the validity of any insurance contract, workmen's compensation or agreement issued by an authorized insurer. [1983 Amendment indicated by underlining].

This statute, as originally introduced by Assemblyman Bornheimer on March 13, 1980 as Assembly Bill No. 1349, invalidated only those indemnity clauses which required indemnity for the sole negligence of the indemnitee. The sponsor's statement noted that it was increasingly common for indemnity clauses to be printed on forms, the effect of which was to shift liability in a casual manner. The sponsor thought this trend "particularly dangerous" because such agreements frequently shifted unintended liability against those who might be unable to obtain insurance. Accordingly, the purpose of the bill was to "make void and unenforceable" those indemnity agreements "where liability is shifted for the sole negligence of the promisee."

As noted, N.J.S.A. 2A:40A-1 as...