Capsco Products, Inc. v. Savageau, 920206

CourtUnited States State Supreme Court of North Dakota
Writing for the CourtVANDE WALLE; ERICKSTAD
Citation493 N.W.2d 650
PartiesCAPSCO PRODUCTS, INC., d/b/a Bis-Man Sea Ray Boats, Plaintiff and Appellant, v. Robert SAVAGEAU; Bianco Realty, Inc., Defendants and Appellees, Caroline F. Shinnick and Larry Shinnick, individually, and Caroline F. Shinnick as Trustee, Defendants. Civ.
Docket NumberNo. 920206,920206
Decision Date14 December 1992

Steven A. Storslee of Fleck, Mather & Strutz, Bismarck, for plaintiff and appellant.

John M. Olson of Wheeler Wolf Law Firm, Bismarck, for defendants and appellees.


Capsco Products, Inc., leased a building in which to store its business inventory. Capsco's inventory was damaged by a break in the building's sprinkler system, and Capsco filed suit against a group of defendants including the broker and realty company, as well as the owner. Capsco appealed from a district court judgment which granted the defendants' summary judgment motion. We reverse and remand.

Caroline F. Shinnick and Larry Shinnick, individually, and Caroline F. Shinnick as Trustee [Shinnick] owned a building located at 1200 Industrial Drive in Bismarck. In the fall of 1988, Shinnick retained Bianco Realty and Robert Savageau, a broker with Bianco Realty, to list and sell the building. Savageau acted as the agent of Shinnick for the purpose of selling, and perhaps leasing the property. Although Savageau's goal was to sell the property, he, at various times, procured lessees for the building. He did this without compensation from Shinnick.

In October 1988, Hank Albers contacted Savageau and inquired as to the availability of a large facility to store some business and personal inventory. Savageau thought that the Shinnick property would suit Albers's needs, and contacted Shinnick for permission to lease the property. Shinnick consented, and Savageau acted as a messenger between Albers and Shinnick as they negotiated the lease. Albers and Shinnick entered into a lease, and Albers wrote lease checks out to Shinnick, but gave them to Savageau for Savageau to transmit to Shinnick.

In early 1989, representatives of the water, gas, and electric utility companies contacted Savageau, as the property's listing agent, about the nonpayment of the utility bills. Savageau informed them that Shinnick was responsible for paying the utility bills, but for one reason or another, Shinnick chose not to pay.

On January 18, 1989, Leo Rohrich, an employee of the Bismarck Water Department, requested Savageau to allow him entry onto the property to disconnect the water supply because of Shinnick's nonpayment. The building had two water mains--one for general use, and another to service the fire sprinkler system. Rohrich only disconnected the general use water main. In his affidavit, Rohrich claimed that he informed Savageau of the two different water mains, and that Savageau instructed him to leave the fire main on. Rohrich claimed that he told Savageau that the water main would freeze if the heat was not left on in the wintertime and Savageau assured Rohrich that the heat would be left on. In his deposition, however, Savageau claimed that he had no idea that the building was serviced by two water mains, that he did not instruct Rohrich to leave the fire main on, and that there were no discussions about heat being left on in the wintertime.

Sometime after January 18, but before March 1989, the electricity was turned off or failed, and the water in the fire sprinkler system froze. The reasons for the lack of electrical power are varied. Savageau claimed there was a temporary outage due to a short in the wiring; Capsco, though not a tenant at the time, claimed that the electricity had been entirely disconnected; and George Georgeson, an employee of Nova Fire Protection, the company that repaired the sprinkler system, claimed that the power to the system's compressor had been manually turned off. Regardless, the freezing did extensive damage and the sprinkler system had to be replaced. We are not told if Albers suffered any damages as a result of this accident.

Sometime after March 1989, the gas heat was turned off in the building. By the summer of 1989, Albers was no longer leasing the building.

In the fall of 1989, Bob Heringer, owner of a boat dealership, contacted Savageau to inquire if the building Albers had been using (the Shinnick property) was available for lease. Savageau indicated that they were working on a potential sale, but the building might possibly be available on a month-to-month basis. Savageau claimed he received permission from Shinnick to lease the property to Heringer and collected a lease check made out to Shinnick.

Approximately one month later, Capsco purchased Heringer's business and sought to continue leasing the Shinnick property. Savageau met with Stan Puklich, the president of Capsco, and Darrel Vollmers, the controller and corporate treasurer for Stan Puklich Chevrolet, Inc. At this meeting, the three discussed the building, and Savageau informed them that all the utilities--gas, electricity, and water--were turned off. Although Savageau "did not know" if he had authority to bind Shinnick to a lease with Capsco, Savageau claimed an oral lease was entered into between Capsco and Shinnick. Capsco claimed they merely "assumed" the Heringer lease. However, in his Answer to Plaintiff's Interrogatories, Shinnick denied knowledge of any sort of lease.

On November 18, 1989, approximately two weeks after Capsco "assumed" the lease but before they mailed a lease payment, the water in the fire sprinkler system again froze and the pipes ruptured. The explanations for the rupture are varied, but whether it occurred due to the lack of electricity or the lack of gas, thousands of gallons of water filled the building, doing extensive damage to Capsco's property stored therein.

On October 18, 1990, Capsco served a summons and complaint against Savageau, Bianco Realty, the Shinnicks individually, and Caroline F. Shinnick as trustee, for damages done to their property. The complaint alleged causes of action based upon negligence, breach of contract, and breach of warranty of habitability.

On March 26, 1992, the trial court granted Savageau's and Bianco Realty's motion for summary judgment and dismissed Capsco's claim against them based on breach of contract and breach of warranty of habitability. The court granted the motion as to the contractual claims because it concluded that Savageau and Bianco Realty were not party to the contract. The trial court also concluded that habitability is not a viable claim in connection with a commercial lease.

On July 12, 1992, the trial court granted Savageau's and Bianco Realty's motion for summary judgment and dismissed Capsco's claim against them based on negligence. The trial court made two express assumptions in this motion: (1) "Savageau and his principal, Bianco Realty, could be considered as managing agents for the Shinnicks," and (2) "Savageau knew or had reason to know that it was possible that the use that plaintiff intended to make of the premises being leased (cold storage for personal property) might not be compatible with the sprinkling system when there was no heat in the building during very cold periods." Relying on Bellemare v. Gateway Builders, Inc., 420 N.W.2d 733 (N.D.1988), the court held that a landlord owes no duty to a tenant to warn the tenant of conditions which could foreseeably cause damage to the tenant's property while stored pursuant to a business lease. In other words, there was no duty to warn Capsco of the possible hazards as the property leased was in a commercial setting. The trial court extended the summary judgment to Shinnick as well, dismissing all claims against them, individually and as trustee.

Capsco presents two issues for our consideration: (1) whether the trial court erred in ruling there was no question of fact with regard to a contract between Capsco and either or both Savageau, Bianco Realty, and the Shinnicks, individually and as trustee, and (2) whether the trial court erred in ruling that in a commercial lease, neither the landlord not the landlord's managing agent has a duty to disclose a hidden or latent defect on the rented premises which poses a foreseeable risk of injury or damage to the tenant's property.

The Parties' Relationship

In his memorandum opinion and order, the trial judge wrote, "[i]n that connection, I am assuming for purposes of the motion that the evidence could be construed as establishing that Savageau and his principal, Bianco Realty, could be considered as managing agents for the Shinnicks." We do not believe that "managing agent" is a term of art, and interpret that term as indicating that Savageau was the agent of Shinnick for selling, leasing, and managing the property, i.e., to make sure that the utilities were on or off, etc. We agree with this determination.

The liability of the parties stemming from this relationship was not addressed by the trial court. In a deposition, Vollmers was asked about a supposed principal's role in the lease transaction:

"Q. Were you informed that Mr. Savageau was simply the listing agent for the sale of the building?

"A. No.

. . . . .

"Q. Did you know that he owned the building or that somebody else owned it?

"A. I didn't know."

Capsco is deemed to have knowledge of an agency relationship between Savageau and a principal by virtue of Savageau's position in a real estate brokerage office. Ripani v. Liberty Loan Corp. of Carmichael, 95 Cal.App.3d 603, 157 Cal.Rptr. 272 (1979). However, if Capsco did not know Shinnick's identity, Shinnick may be a partially disclosed principal. A partially disclosed principal is generally defined and understood as one whose identity is wholly unknown to the third person at the time of the contracting. An undisclosed principal is one whose interest and position with reference to the agent, as well as his identity, was wholly unknown to the third person at the time of the contracting. 3 C.J.S. Age...

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