Fireman's Fund American Ins. Co. v. Almacenes Miramar, s. 80-1016

• Decision Date: 15 June 1981
• Docket Number: Nos. 80-1016,80-1028,s. 80-1016
• Parties: FIREMAN'S FUND AMERICAN INSURANCE COMPANY, et al., Plaintiffs, Appellees, and Master's International, Inc., Plaintiff, Appellant, v. ALMACENES MIRAMAR, INC., et al., Defendants, Appellees. FIREMAN'S FUND AMERICAN INSURANCE COMPANY et al., Plaintiffs, Appellants, v. ALMACENES MIRAMAR, INC., et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 21

649 F.2d 21

FIREMAN'S FUND AMERICAN INSURANCE COMPANY, et al., Plaintiffs, Appellees, and Master's International, Inc., Plaintiff, Appellant, v. ALMACENES MIRAMAR, INC., et al., Defendants, Appellees.

FIREMAN'S FUND AMERICAN INSURANCE COMPANY et al., Plaintiffs, Appellants, v. ALMACENES MIRAMAR, INC., et al., Defendants, Appellees.

Nos. 80-1016, 80-1028.

United States Court of Appeals First Circuit.

Argued Feb. 5, 1981.

Decided May 13, 1981.

Rehearing Denied June 15, 1981.

Paul E. Calvesbert and Harry A. Ezratty, San Juan, P. R., with whom Jimenez & Fuste, San Juan, P. R., was on brief, for plaintiffs, appellants.

Antonio Montalvo Nazario, Hato Rey, P. R., with whom Segurola, Montalvo & Lugo, Hato Rey, P. R., was on brief, for appellees Credito E. Inversiones de San Miguel and National Insurance Company.

Before CAMPBELL, BOWNES and BREYER, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

On August 19, 1976, fire completely destroyed a warehouse building in San Juan, Puerto Rico, that was owned by Credito E Inversiones de San Miguel, Inc. (Credito). Part of the building was leased to Almacenes Miramar, Inc. (Almacenes) and used by the lessee as a bonded and public warehouse. Credito, Almacenes and their insurers were sued in federal district court by three insurers, and one uninsured owner of goods that were stored with Almacenes and destroyed in the fire. Jurisdiction was based on the diverse citizenship of the parties. On the last day of trial, but before the case went to the jury, the defendants moved for a directed verdict, which was granted by the district court as to Credito and its insurer. The case against Almacenes and its insurer was submitted to the jury, which in a special verdict found that Almacenes had been negligent but that its negligence was not the proximate cause of the plaintiffs' losses. Judgment was therefore entered in favor of Credito, Almacenes and their insurers. Plaintiffs now appeal, arguing first that the district court erred in directing a verdict for Credito and, second, that it improperly instructed the jury on an issue concerning Almacenes' negligence. We affirm.

We begin with a review of the evidence in the light most favorable to the plaintiffs. See Manning v. Grimsley, 643 F.2d 20 at 22 (1st Cir. 1981).

Credito E Inversiones de San Miguel, Inc. is a Puerto Rico corporation engaged in the real estate business, and particularly in the leasing of offices and buildings. Credito owned a warehouse building in San Juan, described as,

"a steel structure over driven piles, of reinforced concrete beams with terracota walls, steel doors, and aluminum roofing with fiberglass insulation. This building also (had) roofs (one half waters) on three (3) sides of the building and reinforced concrete floors with a floor area of approximately 52,500 square feet."

As of the date of the fire, August 19, 1976, the building was leased to five tenants: Richardson-Merrell Interamericas, Inc. (by lease of March 8, 1971, renewed August 24, 1973 and August 29, 1975); Perez Distributors (by lease of January 26, 1972); Caribbean Bankers Life Insurance Co. (by lease of January 1, 1976); My Line Cosmetics (by lease of March 30, 1976); and Almacenes Miramar, Inc. (by lease of April 28, 1976). The different portions of the building occupied by the tenants were, at least at some points, separated by walls of cement blocks reaching part way to the ceiling, with chain link fencing on top.

The tenants used the building for storage of their own or others' goods. Perez Distributors and My Line Cosmetics kept cosmetics and gift items in their portions of the building. Caribbean Bankers stored old files. Richardson-Merrell stored a variety of pharmaceutical products, including large amounts of Vicks VapoRub and Cepacol. Almacenes Miramar used its space as a bonded and public warehouse and stored for its clients, among other things, pianos, organs, barrels of mackerel, procelain, metal and ceramic goods, and tires.

The building was to a limited extent secured against theft and fire. It was surrounded by a six-foot chain link fence with padlocked gates and lit at night by four exterior lights. Unlike some other nearby buildings, it had no private guards. Police, however, patrol the area. The building lacked a sprinkler system and fire or smoke alarms, but was equipped, according to Ernesto del Castillo Guerra, the vice-president and manager of Almacenes, with 20 fire extinguishers and two 75-foot hoses. Del Castillo also stated that at closing time, the valves on the propane tanks of the forklifts used in the warehouse were closed and all electricity to the warehouse was shut off.

Prior to the fire that destroyed the building, there had been two, and possibly more, break-ins. After being informed of them by the lessees, Bartolome Morell, the administrator of Credito, had the fence surrounding the building repaired and sought to help the tenants obtain a private guard service. Richardson-Merrell balked at the expense of hiring guards, and the matter was dropped. Perez Distributors, apparently on its own initiative, subsequently installed a burglar alarm.

Of the five leases executed by Credito, only Richardson-Merrell's provided that the lessee was not,

"to store or handle within the leased premises any merchandise or article that may constitute an abnormal fire or other hazard to the unleased portion of the property or its tenant or to neighboring properties."

Credito's administrator, Bartolome Morell, acknowledged having checked "to find out what particular type of products were to be stored" by Richardson- Merrell, but stated that he did not at the time consider pharmaceuticals to be a hazard. According to expert testimony offered at the trial, however, the alcohol content of the Vicks VapoRub in the quantity stored by Richardson-Merrell (about 22 tons), was the equivalent of 5,000 gallons of gasoline in terms of "burning power." The same expert testified that Vicks burns "at about 200 or 300 degrees" Farenheit. By comparison, he indicated that paper and wood burn at about 400 degrees Farenheit and concrete loses structural strength at about 800 degrees. Labels on the individual bottles of Vicks warned, "To avoid possibility of fire, never place vapor rub jar in any container in which you are heating water." About 1,000 gallons of Cepacol, which, according to the expert, is 14 percent alcohol, were being stored by Richardson-Merrell at the time of the fire. The expert also explained that the combustibility of alcohol decreases significantly when it is mixed with noncombustible materials.

The cause of the fire that destroyed Credito's building on August 19, 1976 apparently remains unknown, but a police report strongly suggests, and the parties assume, that it was arson.

"(T)he area was inspected and it could be noticed that one of the unloading half doors of Perez Distributors seems to have been forced and some wood planks have been put so as to avoid the door from closing down. That will allow any person to go inside the warehouse. This half door is toward one end of the building and in front of the abandoned lot. A small gate made of the same material was also found in front of this half door and in the rear part of the cyclone fence.

"This gate had a padlock which will not allow it to be opened, but at the same time it showed the hinges to have been broken and it was set aside. This will allow any person to go inside the field through the abandoned lot. We performed a search all through the abandoned lot and could take notice at various sites of some merchandise such as; two pens in their pink and black card board and plastic box, a plastic see-through bag which had inside a great number of crystal figures and two card board boxes with various kinds of thermometers. There was also found various empty card board boxes of different sizes."

The fire broke out in the area of the building leased to Perez Distributors. It spread to Richardson-Merrell's space and from there to the remainder of the building. An expert estimated at trial that when it reached Richardson-Merrell's part of the building, the fire was burning at about 1,000 degrees and was high enough to melt the roof. According to a memorandum from Credito's administrator to the company's principal stockholder reporting a conversation between Mr. del Castillo and the Fire Chief,

"before the fire reached the area of the building occupied by RICHARDSON MERRELL, the firemen had hopes of controlling the fire and preventing that it spread to the other part of the building. Unfortunately, that did not occur, since when the flames reached the area of RICHARDSON MERRELL, the fire spread very rapidly due to the chemical products which that company had in its warehouse and the high content of alcohol in them."

Based on the above, appellants argue that had the district court not directed a verdict for Credito, the jury could have found the company negligent for failing to take adequate precautions against criminal intrusions and fire. Appellants contend that Credito should have provided guards to ward off would-be thieves and arsonists. They further argue that Credito had a duty either to install some form of protection against fire (a sprinkler system, alarms or a watchman) or somehow reduce the enhanced risk of fire posed by Richardson-Merrell's pharmaceuticals. We treat the latter contentions first, ¹ applying throughout the law of Puerto Rico.

Appellants base their argument that Credito could have been found negligent for failing to equip its building with fire protection equipment ² on article 1802 of the Puerto Rico Civil Code, which provides that,

"A person who by an act or omission causes damage to another through fault or negligence shall be obliged to repair the damage so done. Concurrent imprudence of the party aggrieved does not exempt from liability, but entails a reduction of the indemnity."

P.R. Laws Ann. tit. 31, §...