Employers Liability Assur. Corp. v. Greenville Business Men's Ass'n

• Decision Date: 22 November 1966
• Citation: 224 A.2d 620,423 Pa. 288
• Parties: EMPLOYERS LIABILITY ASSURANCE CORPORATION, Limited, Appellant, v. GREENVILLE BUSINESS MEN'S ASSOCIATION.
• Court: Pennsylvania Supreme Court

Page 620

224 A.2d 620

423 Pa. 288

EMPLOYERS LIABILITY ASSURANCE CORPORATION, Limited, Appellant, v. GREENVILLE BUSINESS MEN'S ASSOCIATION.

Supreme Court of Pennsylvania.

Nov. 22, 1966.

Rehearing Denied Dec. 27, 1966.

Albert E. Acker, Cusick, Madden, Joyce, Acker & McKay, Sharon, for appellant.

Geo. Hardy Rowley, Voorhies, Dilley, Keck & Rowley, Greenville, for appellee.

Before BELL, C.J., and ROBERTS, MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN, JJ.

OPINION

JONES, Justice.

This is an appeal from the entry by the Court of Common Pleas of Mercer County of a judgment of nonsuit in a trespass action.

On December 28, 1962, Greenville Business Men's Association (Association), was the owner of a building known as Building 4 located in the Reynolds Development Pymatuning Township, Mercer County. Section 4 of that building had been under lease for several years to McGinnis Brothers, Inc., manufacturers of outdoor street Christmas decorations.

On December 28, 1962, under a written lease, the Association leased on a month to month basis beginning January 1, 1963, Section 3 of its building--which adjoined Section 4--to Blazon, Inc., (Blazon), for industrial uses, 'including warehousing packaging and shipping' and, in accordance with the terms of the lease Blazon entered into possession of Section 3.

An automatic fire sprinkler system ran through both Sections 3 and 4 of the building. On February 12, 1963, that portion of the sprinkler system located in Section 4 'became activated without fire and caused flooding' in Section 4 which 'resulted in water flooding under the door, into the building occupied by (Blazon), depositing about five (5) inches of water in said building' and causing water damage to Blazon's merchandise stored therein. ¹

As stated in the opinion of the court below the 'sprinkler system failed when a joint broke due to the failure of (the Association) to prevent moisture from forming in the system and the pipes being at such a level that when (the Association) failed to supply heat to the building leased (Section 4), the joint broke and water which supplied the 'dry' water sprinkler system fell onto the floor of the adjoining section (Section 3)' causing damage to Blazon's goods.

For several years prior to February 2, 1963 and on that date, Employers Liability Assurance Corporation, Ltd., (Employers), insured Blazon against loss or damage to Blazon's property caused by water. After Blazon's property had been damaged, Employers paid Blazon $14,852.20 for its damages and received an assignment from Blazon of any rights which Blazon had against the Association to recover for the damages incurred.

By complaint filed, Employers instituted a trespass action against the Association in the Court of Common Pleas of Mercer County. ² The Association filed an answer to the complaint in which, after averring that the sprinkler system was under the control not only of the Association but also of all its tenants, including Blazon, it averred that Blazon, by execution of the lease, had released the Association from all liability to its property arising from any negligence of the Association. By way of reply, Blazon averred that the lease was not in effect when the damage occurred, that its possession was without benefit of the written lease and that the release contained in the written lease did not apply to the damages suffered and, in the alternative, even if the written lease was in effect, the Association was still liable because it failed to disclose to Blazon a malfunction which had existed in its sprinkler system prior to the execution of the lease, a condition which it knew or should have known.

The matter came on for trial before a court and a jury and, at the conclusion of Employers' case, the court entered a compulsory nonsuit. Later, the court refused to remove the nonsuit and judgment was entered in favor of the Association and against Employers. The propriety of such action is presented on this appeal.

Resolution of the issue before us depends upon the applicability and construction of an exculpatory clause-typewritten into the Printed lease between the parties--which provided: '(The Association) shall not be responsible and (Blazon) agrees, for any damages occurring to the property of (Blazon).' The Association contends--and the court below agreed--that this provision of the lease precluded any liability for negligent conduct by the Association to Blazon, or its assignee, Employers.

This clause purports to render the Association immune from liability for 'any damage occurring to the property of (Blazon).' Generally speaking, an exculpatory clause is valid if: (a) 'it does not contravene any policy of the law, that is, if it is not a matter of interest to the public or State * * *.' (Dilks v. Flohr Chevrolet Inc., 411 Pa. 425, 433, 192 A.2d 682, 687 (1963) and authorities therein cited); (b) '(the contract is) between persons relating entirely to their own private affairs' (Dilks v. Flohr Chevrolet, Inc., supra, pp. 433, 434, 192 A.2d p. 687); (c) 'each party is a free bargaining agent' and the clause is not in effect 'a mere contract of adhesion, whereby (one party) simply adheres to a document which he is powerless to alter, having no alternative other than to reject the transaction entirely.' (Galligan v. Arovitch, 421 Pa. 301, 304, 219 A.2d 463, 465) (1966). ³

Assuming, Arguendo, that the instant exculpatory clause satisfies all three conditions and is valid, our case law requires that, even if valid, an exculpatory clause must meet certain standards. 'Despite the general Validity of exculpatory provisions, certain standards have been established which must be met before an exculpatory provision will be interpreted and construed to relieve a person of liability for his own or his servants' acts of negligence.': Dilks v. Flohr Chevrolet, Inc., supra, 411 Pa. p. 434, 192 A.2d p. 687.

Such standards are: (1) contracts providing for immunity from liability for negligence must be construed strictly since they are not favorites of the law (Galligan v. Arovitch, supra, 421 Pa. p. 303, 219 A.2d 463; Crew v. Bradstreet Co., 134 Pa. 161, 169, 19 A. 500, 7 L.R.A. 661 (1890); (2) such contracts 'must spell out the intention of the parties with the greatest of particularity' (Morton v. Ambridge Borough, 375 Pa. 630, 635, 101 A.2d 661, 663 (1954)) and show the intent to release from liability 'beyond doubt by express stipulation' and '(n)o inference from words of general import can establish it' (Perry v. Payne, 217 Pa. 252, 262, 66 A. 553, 557, 11 L.R.A., N.S., 1173 (1907); (3) such contracts must be construed with every intendment against the party who seeks the immunity from liability (Crew v. Bradstreet, supra, 134 Pa. p. 169, 19 A. 500); (4) the burden to establish immunity from liability is upon the party who asserts such immunity (Dilks v. Flohr Chevrolet, Inc., supra, 411 Pa. p. 436, 192 A.2d 682).

Employer's basic contention is that the exculpatory clause in this lease 'does not have the effect of exculpating (the Association) from liability * * *, principally because the condition which it contends caused the negligence, viz. the failure to keep the water pipes at the proper level, or to keep the building heated so that the water in the low places in the pipes would not freeze, Occurred prior to the entering into of the lease.' (Emphasis supplied). ⁴

In Baldwin v. McEldowney, 324 Pa. 399, 404, 188 A. 154 (1936) and Strothman v. Houggy ex ux., 186 Pa.Super. 638, 142 A.2d 769 (1958), the respective Courts held that the exculpatory clauses in the leases which they were then construing had no retrospective effect and did not relieve from liability for negligent conduct which took place prior to the execution of the lease. However, in both Baldwin and Strothman, the immunity from liability provided therein expressly referred to negligent conduct which arose During the term of the several leases; for that reason neither Baldwin nor Strothman is directly apposite to the case at bar.

Saewitz v. Levittown Shopping Center, Inc., 34 Pa.Dist. & Co.2d 499 (1963) presents a much more apposite situation. There, it was averred that the damage to Saewitz' goods had occurred by reason of the bursting of a water pipe and that the lessor had failed to disclose the dangerous condition of this pipe of which it had knowledge in the period antedating the lease between the parties. The lessor relied upon an exculpatory clause in the lease. ⁵ Judge Satterthwaite, in a well-considered opinion, stated: 'Accordingly, and on the assumption that plaintiffs...