DAVANNE REALTY COMPANY VS. THE DIAL CORPORATIONÂ (L-3517-14, PASSAIC COUNTY AND STATEWIDE)
A-5144-14T2
| N.J. Super. Ct. App. Div. | Jun 23, 2017Background
- Davanne Realty (landlord) leased property to The Dial Corporation (tenant) under a 1958 triple-net lease requiring the tenant to bear costs, comply with laws (present and future), maintain insurance, and indemnify the landlord.
- Lease paragraph 13 indemnified the landlord for "claims, suits, actions, damages and/or causes of action arising ... in, or about, the demised premises" and for costs of defense.
- Years later, NJDEP litigation alleged hazardous discharges from the leased site migrated into the Passaic River/Newark Bay; Davanne and Dial were named as third-party defendants under the Spill Act and settled, each paying $195,000.
- Davanne paid its share, then sued Dial for contractual indemnification and statutory contribution/recovery; Dial moved to dismiss under R.4:6-2(e).
- The Law Division dismissed with prejudice, reasoning the indemnity language was limited to damage "in or about the property" (not the remote river area) and did not contemplate environmental claims.
- On appeal, the Appellate Division reversed, holding the lease read as a whole manifested intent to hold the landlord harmless for liabilities arising from tenant operations, including liabilities under later-enacted environmental law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Davanne stated a claim for contractual indemnification under the lease | Lease language shows intent to "relieve [Davanne] of any and all liability caused by [Dial]'s acts," including defense/indemnity for liabilities arising from tenant operations | Indemnity clause is limited to harms "in or about the demised premises" and thus does not cover remote contamination (Passaic River) or environmental claims | Reversed: complaint sufficiently pleads contractual indemnity — lease, read as whole, covers liabilities from tenant operations including those under later environmental law |
| Whether dismissal under R.4:6-2(e) was proper given the pleadings and lease language | Complaint facially suggests a cause of action; discovery may develop proof | The alleged geographic scope defeats a plausible indemnity claim, so dismissal was proper | Reversed: motion judge erred by reading lease too narrowly; pleadings survive Rule 4:6-2(e) review |
| Whether future laws (like Spill Act) can be covered by a 1958 indemnity provision | Parties intended tenant liability to include compliance with present or future laws; indemnity & covenant to comply support coverage | The parties did not contemplate modern environmental statutes when drafting the lease | Held for Davanne: lease expressly covers compliance with present or future laws and liabilities arising therefrom |
| Whether "in or about the demised premises" imposes a distance limitation on indemnity | Phrase should not be read to limit landlord's recovery from tenant-caused migration of contamination | Phrase is unambiguous and limits indemnity to harms on the premises or immediately adjacent areas | Court: phrase does not impose a geographic limitation when lease read as whole; dismissal premature |
Key Cases Cited
- Donato v. Moldow, 374 N.J. Super. 475 (App. Div. 2005) (standard for reviewing R.4:6-2(e) motion)
- Printing Mart–Morristown v. Sharp Elecs. Corp., 116 N.J. 739 (1989) (complaint survival standard on motion to dismiss)
- Jacobs v. Great Pac. Century Corp., 104 N.J. 580 (1986) (contract interpretation focuses on parties' intent and the instrument as a whole)
- VRG Corp. v. GKN Realty Corp., 135 N.J. 539 (1994) (courts consider particular provision, overall terms, circumstances, and parties' conduct to ascertain intent)
- Hardy ex rel. Dowdell v. Abdul–Matin, 198 N.J. 95 (2009) (contracts must be read fairly and in common-sense manner; avoid isolated parsing)