General Mills v. Goldman, 14087.

• Decision Date: 09 November 1950
• Docket Number: No. 14087.,14087.
• Citation: 184 F.2d 359
• Parties: GENERAL MILLS, Inc. v. GOLDMAN (INDIANA LUMBERMENS MUT. INS. CO. OF INDIANAPOLIS, INDIANA, Intervener).
• Court: U.S. Court of Appeals — Eighth Circuit

184 F.2d 359 (1950)

GENERAL MILLS, Inc. v. GOLDMAN (INDIANA LUMBERMENS MUT. INS. CO. OF INDIANAPOLIS, INDIANA, Intervener).

No. 14087.

United States Court of Appeals Eighth Circuit.

September 19, 1950.

Rehearing Denied November 9, 1950.

A. Lyman Beardsley, Minneapolis, Minn., and D. E. Balch, Washington, D. C. (Frank J. Morley, Edward K. Thode, and Morley, Cant, Taylor & Haverstock, all of Minneapolis, Minn., were with them on the brief), for appellant.

Irving H. Green, Minneapolis, Minn. (Robins, Davis & Lyons and H. Z. Mendow, all of Minneapolis, Minn. were with him on the brief), for plaintiff-appellee.

W. M. Kronebusch, Minneapolis, Minn. (O'Brien & Kronebusch, Minneapolis, Minn., were on the brief), for intervener-appellee, Indiana Lumbermens Mut. Ins. Co. of Indianapolis, Indiana.

Before SANBORN, WOODROUGH and RIDDICK, Circuit Judges.

WOODROUGH, Circuit Judge.

This action was brought by Harry Goldman as plaintiff against General Mills, Inc., as defendant, to recover damages suffered by the owners of a manufacturing plant located on Hiawatha Avenue in Minneapolis through its destruction by fire on January 15, 1948. General Mills was in possession of and operating the plant as a tenant under a ten year lease at the time of the fire and the action was in tort based upon plaintiff's claim that the fire and resultant damages were caused by defendant's negligence. The defendant denied that the fire was caused by negligence on its part and pleaded that the terms of its lease excepted it from obligation to the lessor in the event of "loss by fire" of the plant and exonerated it from liability to the owners for the destruction of the property by the fire.¹ The plaintiff stood in the shoes of the owners of the property in respect to the claim against the defendant for damages by virtue of assignments and there was federal jurisdiction on account of diversity of citizenship. The law to be applied was that of Minnesota.

On the trial of the case the court determined as a matter of law that under the terms of the lease which except the tenant from obligation in the event of "loss by fire" of the leased plant the tenant was not excepted from liability for "loss by fire" if the fire occasioning the loss was caused by negligence on the part of the tenant. Defendant's position was and is that it does not know what caused the fire, but there was evidence that the fire started when a man named Ojala, in the course of his work as an employee of defendant, placed a hot, freshly cast aluminum pot in the sump of a Bullard machine for the purpose of cooling the casting. The sump contained a mixture of B-1 and kerosene and plaintiff claimed that the act was negligent and caused the fire. The court submitted the issue as to whether negligence of defendant was a proximate cause of the fire to the jury, and the jury returned a verdict on that issue in favor of the plaintiff,² which was sustained by the court over defendant's motion to set it aside for want of evidence to support it. The parties in open court stipulated to the effect that if defendant was liable the amount of liability should be fixed at $142,500. The court, in pursuance of its own determination that defendant was not excepted from liability by the terms of the lease if defendant's negligence caused the fire, the finding of the jury that defendant's negligence was a proximate cause of the fire, and the stipulation of the parties as to the amount of damages, entered judgment for plaintiff against defendant for $142,500 and costs.

General Mills appeals and contends for reversal among other things, that the undisputed evidence established that the lease provisions were drawn and were agreed to in contemplation of the mutual understanding of the parties that the risk of loss by fire of the demised premises would be carried by a fire insurance company and not by either of the parties to the lease. That the amount of the rental of $15,000 a year plus taxes was agreed to on that basis and therefore included the cost of fire insurance. That the true intent and meaning of the contract of lease between the landlords and the tenant in force and effect at the time of the fire was that the tenant should not be liable to the landlords for the loss by fire of the leased premises and that the exoneration from liability for loss by fire mutually agreed upon was not limited expressly or by implication to fire occurring without negligence but extended to and included fire caused by negligence of an employee of the tenant engaged in the manufacturing for which the premises were demised. That such contract was valid and binding upon the parties under Minnesota law and that the court erred in its determination that the tenant was not thereby exonerated from liability in the action. That the court erred in refusing to enter judgment for defendant.

The considerations upon which the trial court determined that the general law of negligence was applicable to the action and that the lease provisions covering loss by fire did not except the defendant from liability for the loss by fire of the manufacturing plant if the fire was caused by negligence attributable to the defendant are set forth in the opinion of the court which accompanied its order denying defendant's motion for judgment or in the alternative for new trial. In the opinion the court correctly stated the settled law in Minnesota that whether the lease provisions exempted defendant from loss by fire caused by its negligence depended upon the intent of the parties to the contract and that that intent was to be determined by reading the contract as a whole in the light of the subject matter, surrounding circumstances, the objects and purposes and the natural meaning of the language used. The court also recognized, as the undisputed evidence conclusively showed, that "the understanding was that plaintiff assumed the responsibility for the insurance coverage on the building for fire * * *" and that the landlords did take out the fire insurance and that on proof of the "loss by fire" the insurance company paid the full amount of the insurance in a sum exceeding the landlord's total investment in the property. But the court noted and stressed the fact that "the lease does not require the lessor to carry any insurance" and that it contained no express agreement that the lessor would pay the fire insurance premiums out of the rentals. It concluded that "the insurance obligations of the plaintiff do not aid defendant here" and it attached no significance favorable to defendant to any of the evidence in the record concerning the contemplated and executed coverage of the risk of "loss by fire" by the fire insurance company. On the contrary, it approached the inquiry as to what was in the minds of these parties and what they meant in respect to the happening of loss by fire of the leased property from considerations of abstractly possible meanings of "loss by fire" in the paragraph of the lease where the words are found and of the public policy involved in contracting against obligation for one's own negligence and of whether the word "fire" in the lease ought to be strictly construed against or liberally construed in favor of the tenant. Through its approach and course of reasoning it came to the conclusion that the parties did not intend that the tenant should be relieved from liability for a loss by fire if the fire occurred in the ordinary way in which fires in manufacturing plants occur³ but that they meant that the tenant should be so relieved only if the fire occurred in some such extraordinary way not illustrated by example as to present nothing on which a jury could find negligence as a cause thereof. The interpretation so put upon the covenant of the lease for exemption of the lessee from liability for loss by fire reduced the covenant for exemption as a practical matter to triviality so far as General Mills was concerned and the unfortunate destruction by fire led to an award to plaintiff of some $30,000 more than his predecessors in interest had invested in the property the year before.

But we think the court erred in attempting to ascribe an intent and meaning to the exception of loss by fire provision of this lease independent of the mutual understanding of the parties when the lease was entered into that loss by fire should be provided against by fire insurance coverage and that the conclusion and judgment the court arrived at were erroneous.

It may be true that a covenant in a lease that the tenant shall be excepted from obligation to the landlord for loss by fire does not absolutely in all circumstances relieve the tenant from liability for fire caused by its negligence. Though the word "fire" in the phrase is unqualified and inclusive and therefore unambiguous, the courts may, as they have in instances cited in the court's opinion and in the briefs, consider whether a contracting for exemption from liability for one's own negligence should not be favored or enforced by courts or is contrary to public policy and they have by "strict construction" — that is, by giving the word "fire" a narrower meaning than it has in common parlance, excluded negligently caused fires from such an exemption.

But there is no public policy in Minnesota inimical to resort to fire insurance covering loss by fire occurring with or without negligence and there is no reason for applying any "strict construction" to a lease entered into in contemplation of having a fully appreciated and guarded against fire risk carried by an insurance company. The undisputed evidence in this case presents exactly that situation. The landlords here agreed that the tenant should not be liable to pay for "loss by fire" because it was understood between them that fire insurance would be taken out and a fire insurance company would be required to pay for any "loss by fire" occurring on the premises during the term of the lease. Such insurance company...