James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.

• Decision Date: 16 May 2019
• Docket Number: No. 20180317,20180317
• Citation: 927 N.W.2d 452
• Parties: JAMES VAULT & PRECAST CO., Donna Bline, Melvin Zent, Thomas Kuntz, Dave Olheiser and Jerry Kram, Plaintiffs v. B&B HOT OIL SERVICE, INC., Steve Forster, Daniel Krebs, and Debra D. Krebs, Defendants Steve Forster, Daniel Krebs, and Debra D. Krebs, Crossclaim Plaintiffs and Appellants v. B&B Hot Oil Service, Inc., Crossclaim Defendant and Appellee and JB’s Welding and St. Paul Surplus Lines Insurance Company, Crossclaim Defendants B&B Hot Oil Service, Inc., Counter-Crossclaim Plaintiff and Appellee v. Steve Forster, Daniel Krebs and Debra D. Krebs, Counter-Crossclaim Defendants and Appellants Steve Forster, Daniel Krebs, and Debra D. Krebs, Plaintiffs v. St. Paul Surplus Lines Insurance Company, Defendant St. Paul Surplus Lines Insurance Company, Third-Party Plaintiff v. Acuity, a Mutual Insurance Company, Third-Party Defendant
• Court: North Dakota Supreme Court

927 N.W.2d 452

JAMES VAULT & PRECAST CO., Donna Bline, Melvin Zent, Thomas Kuntz, Dave Olheiser and Jerry Kram, Plaintiffs

v.B&B HOT OIL SERVICE, INC., Steve Forster, Daniel Krebs, and Debra D. Krebs, Defendants

Steve Forster, Daniel Krebs, and Debra D. Krebs, Crossclaim Plaintiffs and Appellants

v.B&B Hot Oil Service, Inc., Crossclaim Defendant and AppelleeandJB’s Welding and St. Paul Surplus Lines Insurance Company, Crossclaim Defendants

B&B Hot Oil Service, Inc., Counter-Crossclaim Plaintiff and Appellee

v.Steve Forster, Daniel Krebs and Debra D. Krebs, Counter-Crossclaim Defendants and Appellants

Steve Forster, Daniel Krebs, and Debra D. Krebs, Plaintiffs

v.St. Paul Surplus Lines Insurance Company, Defendant

St. Paul Surplus Lines Insurance Company, Third-Party Plaintiff

v.Acuity, a Mutual Insurance Company, Third-Party Defendant

No. 20180317

Supreme Court of North Dakota.

Filed May 16, 2019

Randall J. Bakke (argued) and Shawn A. Grinolds (on brief), Bismarck, ND, for defendants, crossclaim plaintiffs and appellants, counter-crossclaim defendants and appellants, plaintiffs, and third-party defendants Steve Forster, Daniel Krebs, Debra Krebs, and Acuity, a Mutual Insurance Company.

Nicholas C. Grant (argued), Randall N. Sickler (on brief), and Allison R. Mann (on brief), Dickinson, ND, for defendant, crossclaim defendant and appellee, counter-crossclaim plaintiff and appellee B&B Hot Oil Service Inc.

Zachary E. Pelham (appeared), Bismarck, ND, for defendant, crossclaim defendant and appellee, counter-crossclaim plaintiff and appellee B&B Hot Oil Service, Inc.

McEvers, Justice.

[¶1] Steve Forster, Daniel Krebs, and Debra Krebs (collectively "Forster/Krebs") appeal from a summary judgment dismissing their claims against B&B Hot Oil Service, Inc. We conclude the district court correctly construed the language in the parties’ lease agreement, as a whole, to operate as a waiver of claims against each other for damages to the leased building and the contents therein. We further conclude the provision in the parties’ lease waiving any claims against the other for any loss or damage to the leased premises or property therein is unenforceable to the extent it exempts B&B Hot Oil from responsibility for a willful or negligent violation of law. We affirm in part, reverse in part, and remand for further proceedings.

I

[¶2] In October 2009, Daniel Krebs, as owner, executed a written agreement with B&B Hot Oil to lease the west half of a building in Dickinson owned by Forster and Daniel Krebs as joint tenants. B&B Hot Oil used the west half of the building to store two hot oil trucks—a 2005 truck designed and manufactured by Energy Fabrication and a 2009 "knockoff" truck built by B&B Hot Oil with help from JB’s Welding through "reverse engineering" of the truck manufactured by Energy Fabrication. Each hot oil truck contained propane used in B&B Hot Oil’s business. An explosion and fire in the building in January 2010, destroyed the building and its contents and extensively damaged surrounding property. An investigation revealed the explosion was caused by a propane leak from the "knockoff" truck, which, unlike the truck manufactured by Energy Fabrication, did not have an electronic failsafe control valve to shut off the flow of propane if the manual control valve failed to close. See Messer v. B&B Hot Oil Serv., Inc. , 2015 ND 202, ¶¶ 1-4, 868 N.W.2d 373 (outlining general underlying factual background and reversing summary judgment dismissal of adjoining building owners’ strict products liability and negligence claims against JB’s Welding for property damage).

[¶3] Several plaintiffs sued Forster/Krebs and B&B Hot Oil in this action for $378,502 in property damage caused by the explosion and fire. In October 2010, Forster/Krebs answered and crossclaimed against B&B Hot Oil for property damage relating to the destruction of the building and its contents. Forster/Krebs specifically alleged B&B Hot Oil breached paragraph 9 of the lease agreement requiring B&B Hot Oil to obtain a general public liability insurance policy naming Daniel Krebs and Steve Forster as an additional insured and requiring B&B Hot Oil to indemnify and save harmless Forster/Krebs from any and all liabilities arising from injury to persons or property. Forster/Krebs also alleged claims against B&B Hot Oil for negligence, res ipsa loquitur, and strict products liability, and asserted B&B Hot Oil improperly stored trucks containing propane in the building in violation of applicable code requirements and manufacturer’s instructions. In November 2013, the district court granted Forster/Krebs’ motion to amend their pleading to add JB’s Welding as an additional crossclaim defendant for claims alleging negligence and strict products liability.

[¶4] In December 2013, the district court granted B&B Hot Oil’s motion for summary judgment and dismissed Forster/Krebs’ claims against B&B Hot Oil. The court decided that Forster was a party to the lease and that Forster/Krebs waived their claims for damages to their property under waiver language in paragraph 10 of the lease. The court explained that although Forster did not sign the written lease, both Forster and Krebs were parties to the lease and bound by the waiver language because their pleading admitted that they leased space in the building to B&B Hot Oil and that they were entitled to protection as owners under the lease. The court decided Forster/Krebs’ claims against B&B Hot Oil for their property damage were waived as a matter of law under the unambiguous language in paragraphs 9 and 10 of the lease. The court explained the language in paragraph 9 was a standard indemnity and hold harmless clause that was limited to B&B Hot Oil’s contractual responsibility to provide Forster/Krebs with indemnity protection against liabilities to third parties and not to protect Forster/Krebs for their property losses. The court said that B&B Hot Oil satisfied its contractual obligation under paragraph 9 by securing third-party liability coverage that designated Forster and Krebs as named insureds and that B&B Hot Oil’s insurer indemnified Forster/Krebs for claims by third parties. The court also determined that under paragraph 10, Forster/Krebs waived any claims they had against B&B Hot Oil for any loss to their property, including their building and its contents. The court described the allegations in Forster/Krebs’ breach of contract claim:

The Court further concludes that Forster/Krebs’ claims against B&B, as set forth in their Answer, Jury Demand and Crossclaim dated October 28, 2010, did not include breach of contract claims based upon paragraphs 7 (Repairs) and 12 (Environmental Compliance) of the lease and claims upon B&B’s "dishonest acts." Forster/Krebs have not moved to amend their crossclaim against B&B so as to assert new claims or bases for claims. B&B clearly has not agreed that claims not included in Forster/Krebs’ existing Crossclaim against B&B can be litigated by consent. Therefore, the Court reviews the pending motions on the basis of the existing pleadings.

However, for reasons set forth herein below, even if the Court were to conclude that Forster/Krebs’ pleadings did include breach of contract claims based upon paragraphs 7 (Repairs) and 12 (Environmental Compliance) of the lease and claims upon B&B’s "dishonest acts", such would not alter the Court’s conclusion or decision on the pending motions for summary judgment.

[¶5] In May 2014, the district court denied Forster/Krebs’ motions to reconsider under N.D.R.Civ.P. 59(j) and to amend their crossclaim against B&B Hot Oil to specifically include claims for breach of contract based upon paragraphs 7 and 12 of the lease and claims for "dishonest acts." The court explained the proposed amendments would be futile because the court had already concluded they would not survive summary judgment.

[¶6] In July 2014, the district court decided Forster/Krebs’ crossclaim against B&B Hot Oil did not include claims for concerted action and a joint venture with JB’s Welding and denied another motion by Forster/Krebs to amend their crossclaim against B&B Hot Oil to include a claim for concerted action and a joint venture with JB’s Welding. The court recognized it had not yet ruled on Forster/Krebs’ remaining claims against JB’s Welding and granted Forster/Krebs’ motion to amend their pleading against JB’s Welding to include claims for concerted action and a joint venture with B&B Hot Oil.

[¶7] In September 2014, the district court granted summary judgment dismissing claims by Forster/Krebs’ insurer, Acuity, for subrogation against B&B Hot Oil. The court explained a subrogation claim flows directly from an underlying claim against a tortfeasor and Forster/Krebs’ waiver of claims against B&B Hot Oil under paragraph 10 of the lease operated as a waiver of Acuity’s subrogation claim against B&B Hot Oil. The court also explained that Acuity’s policy with Forster/Krebs included language allowing Forster/Krebs to waive the right to subrogation from B&B Hot Oil.

[¶8] The district court thereafter granted summary judgment dismissing Forster/Krebs’ action against JB’s Welding, but the parties agreed to reinstate Forster/Krebs’ negligence and strict products liability claims against JB’s Welding after this Court’s decision reversing the summary judgment dismissal of other adjoining building owners’ strict products liability and negligence claims against JB’s Welding. See Messer , 2015 ND 202, ¶ 1, 868 N.W.2d 373. Forster/Krebs and JB’s Welding thereafter stipulated to voluntarily dismiss Forster/Krebs’ remaining claims against JB’s Welding without prejudice, and Forster/Krebs appealed from a February 2017 judgment disposing of all the claims in this action.

[¶9] We dismissed Forster/Krebs’ appeal, concluding the February 2017 judgment was not final for purposes of our appellate jurisdiction. James Vault & Precast Co. v. B&B Hot Oil Serv., Inc. , 2018 ND 63, ¶ 17, 908 N.W.2d 108. We explained we ha...