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ALLSTATE LIFE INSURANCE COMPANY v. BFA LIMITED PARTNERSHIP ET AL. (SC 18017)
Rogers, C. J., and Norcott, Katz, Vertefeuille and Schaller, Js. Argued January 14--officially released June 10, 2008

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

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

Opinion

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 entitled ``Environmental Indemnity agreement 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-inlieu 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

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