Empire Lumber Co. v. Thermal-Dynamic Towers, Inc.

• Decision Date: 30 November 1998
• Docket Number: No. 23062,THERMAL-DYNAMIC,23062
• Citation: 132 Idaho 295,971 P.2d 1119
• Parties: EMPIRE LUMBER COMPANY, a Washington corporation, Plaintiff-Respondent, v.TOWERS, INC., d/b/a Thermal-Dynamic Cooling Towers, Defendant-Appellant. Coeur d'Alene, Oct. 1997 Term
• Court: Idaho Supreme Court

Page 1119

971 P.2d 1119

132 Idaho 295

EMPIRE LUMBER COMPANY, a Washington corporation, Plaintiff-Respondent, v. THERMAL-DYNAMIC TOWERS, INC., d/b/a Thermal-Dynamic Cooling Towers, Defendant-Appellant.

No. 23062.

Supreme Court of Idaho,

Coeur d'Alene, Oct. 1997 Term.

Nov. 30, 1998.

Rehearing Denied Feb. 18, 1999.

Moffatt, Thomas, Barrett, Rock & Fields, Chartered, and Lynch & Associates, Boise, for appellant. Robert E. Bakes argued.

Charles A. Brown, Lewiston, for respondent.

SILAK, Justice

This is an appeal from a judgment entered on a jury verdict in favor of the respondent Empire Lumber Company (Empire), lessor, and against the appellant Thermal-Dynamic Towers, Inc. (TDT), lessee, for negligence and breach of a lease of space in a warehouse resulting from a fire which destroyed the warehouse. We affirm.

I. FACTS AND PROCEDURAL BACKGROUND

In 1979, Empire purchased a nine-acre parcel of property in Post Falls, Idaho, upon which three buildings were located. The building which burned was a large warehouse with a concrete floor, cinder block walls, and a wooden truss roof. The building contained approximately 32,000 square feet of open undivided floor space and 4,000 square feet of office space on a mezzanine. The other two buildings on the property were leased to a trucking/leasing company called Requipco. One of those structures contained a diesel engine and pump which allegedly was to supply water for fire suppression purposes for the warehouse and the other building leased to Requipco.

In November 1989, Empire and TDT entered into a five month lease whereby Empire leased to TDT 38% of the warehouse. TDT used the leased space to construct fiberglass components for cooling towers which TDT used in its business of manufacturing cooling equipment. TDT was in the process of constructing a new manufacturing facility a few miles away in Rathdrum, Idaho, and needed the short term lease until the facility was completed and TDT's entire operation could be moved.

The original term of the lease (which was drafted by Empire) ran from November 22, 1989 through April 22, 1990. Paragraph 5 of the lease provided that, "[e]xcept for reasonable wear and tear and damage by fire or unavoidable casualty, Lessee will at all times preserve said premises in as good repair as they now are or may hereafter be put to...." Paragraph 9 of the lease provided that, "Lessee will insure said premises for fire protection of $___ and on this day furnish a binder naming Lessor as insured; and the liability insurance shall show Lessor as The record indicates that the parties, in negotiating the lease, agreed that TDT would not be required to provide fire insurance on the leased building, and that Empire would provide the insurance. The letters "N/A" were typed into the blank space in paragraph 9 of the lease indicating that although normally the lessee was to provide fire insurance in a certain dollar amount, in this case, it was not applicable. In November 1989, Empire purchased fire insurance on the warehouse for a one year period. At the end of the initial term of the lease in April 1990, the parties continued the lease on a month-to-month basis due to TDT's new facility not being completed. Although the parties allegedly never again discussed the issue of insurance, in November 1990, Empire extended the fire insurance through February 1991, and again through April 22, 1991. At the end of April 1991, TDT gave a 30-day written notice to Empire that it would be vacating the building on or before May 31, 1991. Empire's request of its insurer to extend the fire insurance one more month was either denied and/or was cost prohibitive.

additionally insured, and Lessee shall pay all premiums."

On Sunday, May 19, 1991, two juveniles, ages 10 and 11, entered the warehouse through an unlocked door and engaged in a game in which they placed wadded-up newspaper inside a plastic sack, set the paper on fire, and then tossed the sack back and forth. At one point, the bag went over the head of one of the youths, landing on some flammable pallets. A fire started, spread and destroyed the warehouse. The pallets had been stored there by employees of TDT to block an open doorway. The overhead door which would have secured the open doorway had been knocked off its rollers several days earlier by a forklift operated by a TDT employee and had not yet been repaired. Testimony indicated that there was also a hazardous and highly flammable material in the warehouse at the time of the fire called "Philly Clad." Apparently, this "Philly Clad" had been left in the warehouse by TDT in five gallon cans, numbering approximately twenty. One of the cans had been punctured on the day the fire started and the "Philly Clad" spread across the floor. There was also testimony that TDT had left the valve to the overhead sprinkler system in the "off" position.

In May 1993, Empire filed suit against TDT alleging breach of express and implied contract, breach of the Uniform Fire Code, and attractive nuisance. A claim for negligence was added a year later. TDT thereafter moved for summary judgment as to all claims based upon paragraph 5 of the lease. The district court denied the motion except as to the attractive nuisance claim. The court ruled that TDT could not rely on the contract exclusion for "damage by fire" if it was negligent. After a two and a half week trial, a jury returned a verdict in favor of Empire in the amount of $550,593.70, finding both breach of contract and negligence on the part of TDT. TDT's post-trial motions were denied. The district court entered a final amended judgment for Empire in the amount of $550,593.70, together with attorney fees on the contract claim in the amount of $114,416.00, and $9,460.95 in costs, for a total judgment of $674,470.65. TDT appeals from the denial of its motion for summary judgment, from the denial of its post-trial motions for JNOV, new trial and remittitur, and from the judgment and amended judgment entered by the district court.

II. ISSUES ON APPEAL

A. Whether the district court erred in ruling that paragraph 5 of the lease did not relieve TDT of liability for fires caused by its negligent actions.

B. Whether the district court erred in refusing to place the juveniles' and Requipco's names on the special verdict form and in refusing to instruct the jury on superseding cause.

C. Whether the district court erred in refusing to instruct the jury on the defenses of waiver and estoppel.

D. Whether the district court erred in redacting paragraph 9 of the lease, and in giving Jury Instruction Nos. 12 and 13.

E. Whether the district court abused its discretion in restricting the use of Clarence Kast's testimony and in admitting the opinion evidence of Wayne Syth and David Klaue.

F. Whether the district court erred in awarding costs and attorney fees to Empire.

Empire raises the following additional issue on appeal:

G. Whether Empire is entitled to attorney fees on appeal pursuant to paragraph 20 of the lease, I.A.R. 41, I.C. § 12-120(3) and I.C. § 12-121.

III. ANALYSIS

A. The District Court Correctly Ruled That Paragraph 5 Of The Lease Did Not Relieve TDT Of Liability For Fires Caused By Its Negligent Actions.

TDT claims that paragraph 5 of its lease with Empire relieves TDT from all liability for damage caused by fire. The pertinent portion of paragraph 5 provided: "[E]xcept for reasonable wear and tear and damage by fire or unavoidable casualty, Lessee will at all times preserve said premises in as good repair as they now are or may hereafter be put to...." Whether such an exculpatory clause relieves a tenant of liability for a fire which is the result of its own negligence is an issue of first impression in Idaho. We hold that this particular exculpatory clause regarding who bears the risk of loss for fire does not excuse TDT from liability if its negligent actions caused the fire.

This Court has held that parties to a contract, such as a lease, may agree to limit liability for negligence or contractually waive rights and remedies, subject to certain exceptions not applicable in the present case. Lee v. Sun Valley Co., 107 Idaho 976, 978, 695 P.2d 361, 363 (1984); Anderson & Nafziger v. G.T. Newcomb, Inc., 100 Idaho 175, 178, 595 P.2d 709, 712 (1979). However, this Court has also noted that courts look with disfavor on such attempts to limit liability and will strictly construe these provisions against the party relying on them. Anderson, 100 Idaho at 178, 595 P.2d at 712. Contract clauses purporting to exclude liability for negligence must speak clearly and directly to the particular conduct of the defendant which caused the harm at issue. Id.

In Sears, Roebuck and Co. v. Poling, 248 Iowa 582, 81 N.W.2d 462 (1957), the Iowa Supreme Court held that a clause similar to the one in the present case did not clearly express the parties' intention to relieve the tenant from liability for fire caused by its own negligence. The exculpatory clause provided: "Tenant agrees that ... upon the termination of this lease the demised premises will be in substantially as good condition as received, loss by fire, tornado, earthquake or any unavoidable casualty and ordinary wear and tear excepted." Id. at 464. The Iowa Supreme Court, in strictly construing the exculpatory clause against Sears, held that the lease did not clearly express the intention of the parties to relieve Sears from liability for fire caused by its own negligence. The court noted that if the parties truly intended to relieve the lessee from such a liability, they would have included more apt language to express that intent. Id. at 466.

In Winkler v. Appalachian Amusement Co., 238 N.C. 589, 79 S.E.2d 185 (1953), owner Winkler sued the lessee Appalachian for damages as a result of the lessee's negligence in the operation of a popcorn machine which caught fire and caused extensive damage. The lessee argued that the following language in the lease...