Glazer v. Crescent Wallcoverings, Inc.

• Decision Date: 05 December 1994
• Docket Number: No. A94A1753,A94A1753
• Citation: 215 Ga.App. 492,451 S.E.2d 509
• Parties: GLAZER et al. v. CRESCENT WALLCOVERINGS, INC. et al.
• Court: Georgia Court of Appeals

Page 509

451 S.E.2d 509

215 Ga.App. 492

GLAZER et al. v. CRESCENT WALLCOVERINGS, INC. et al.

No. A94A1753.

Court of Appeals of Georgia.

Dec. 5, 1994.

Long, Weinberg, Ansley & Wheeler, M. Diane Owens, Margie M. Eget, Atlanta, for appellants.

Drew, Eckl & Farnham, Clayton H. Farnham, M. Reid Acree, Jr., Todd A. Schweber, Mozley, Finlayson & Loggins, William D. Harrison, Bennett, Callahan & Schloegel, Michael T. Bennett, Atlanta, for appellees.

POPE, Chief Judge.

We granted this interlocutory appeal to address a question of first impression: Where a tenant and landlord agree in a commercial lease not to sue each other for fire damage covered by insurance, can other allegedly negligent parties sued by the tenant (or his insurer) for such damage nonetheless seek contribution from the landlord? The trial court answered this question in the positive and denied the landlord's motion for summary judgment. We disagree and reverse.

This case arises out of a fire in an office building. Plaintiffs, who are not parties to this appeal, are insurers of tenants who suffered property damage in the fire. Plaintiffs initially sued appellants Glazer and Emerik Properties Corporation (referred to collectively herein as "landlord"), alleging that landlord was negligent in the construction, maintenance and operation of the building. They also sued appellees Crescent Wallcoverings, Inc., GenCorp., Inc., and Square-D Company (referred to collectively herein as the "product defendants"), ¹ alleging that the product defendants had each manufactured or supplied products used in the building which were defective and caused or contributed to the rapid spread of the fire. Landlord moved for summary judgment based on a "Waiver of Subrogation" clause in each tenant's lease which provided that the landlord and tenant waived the right to sue each other for property damage covered by insurance, regardless of whose negligence caused the damage. After landlord sent tenants an abusive litigation letter pursuant to OCGA § 51-7-80 et seq., tenants moved to voluntarily dismiss their claims against landlord. The trial court granted this motion over landlord's objection, and then dismissed landlord's motion for summary judgment as moot.

Plaintiffs' claims against the product defendants remained pending, of course, and in the meantime the product defendants had filed cross-claims for contribution against landlord. Landlord moved for summary judgment on the product defendants' claims for contribution, too. Landlord argued there could be no contribution because it could not be a joint tortfeasor with the product defendants as a matter of law, while the product defendants argued that their right to contribution should not be compromised by a lease agreement to which they were not a party. The trial court agreed with the product defendants and denied landlord's motion.

1. As a preliminary matter, we address the dissent's contention ² that the "Waiver of Subrogation" clauses landlord relies upon are unenforceable under OCGA § 13-8-2(b). In pertinent part, this Code section provides that an agreement relative to the construction or maintenance of a building which purports to indemnify the promisee for damages resulting from the promisee's negligence is unenforceable as a matter of public policy. However, our Supreme Court has recognized that parties to a building-related contract (such as a lease) can agree to look solely to insurance to cover their losses without violating this statute, and that an intent to do so is the "well-recognized meaning" of a "waiver of subrogation" clause. See Tuxedo Plumbing, etc., Co. v. Lie-Nielsen, 245 Ga. 27, 28 (1), 262 S.E.2d 794 (1980). Such an agreement does not violate the statute because it does not indemnify the promisee, but instead "shifts the risk of loss to the insurance company regardless of which party is at fault. [Cit.]" Id. at 29(2), 262 S.E.2d 794.

The landlord and tenants in this case demonstrated their clear intent to look solely to insurance by inserting the following clause in their leases: "Waivers of Subrogation. Each of the parties hereto waives any and all rights of recovery against the other ..., for loss or damage to such waiving party or its property ... arising from any cause insured against under the standard form of fire insurance policy...." (Latter emphasis supplied.) The dissent nonetheless suggests that the waiver of subrogation clauses are unenforceable because the leases did not also include a specific requirement that one or both parties obtain insurance. The Supreme Court in Tuxedo Plumbing and the Court of Appeals in subsequent cases inferred an intent to look solely to insurance from the inclusion of mandatory insurance provisions, regardless of whether the indemnification clauses in question mentioned insurance. See Tuxedo Plumbing, 245 Ga. at 28-29, 262 S.E.2d 794; Terrace Shopping Center Joint Venture v. Oxford Group, 192 Ga.App. 346 384 S.E.2d 679 (1989); McAbee Constr. Co. v. Ga. Kraft Co., 178 Ga.App. 496, 343 S.E.2d 513 (1986). This does not mean, however, that there can never be a clear intent to look solely to insurance in the absence of a mandatory insurance provision. As in any situation involving the construction of a contract, magic words are not required, and the goal of the court is to look for the intent of the parties. See McAbee Constr., 178 Ga.App. at 498, 343 S.E.2d 513.

Unlike the cases cited above, the contractual waiver clauses in this case are explicitly labeled as "Waiver of Subrogation" clauses, clearly contemplate the existence of insurance, and by their terms do not apply in the absence of insurance. Thus, a mandatory insurance provision is unnecessary to show the parties' intent to look solely to the insurer.

Central Warehouse, etc., Corp. v. Nostalgia, Inc., 210 Ga.App. 15, 435 S.E.2d 230 (1993) is distinguishable, as the waiver clause in that case (which was not labeled "waiver of subrogation") applied to all damages from insurable rather than insured causes. Since the waiver clause in that case did not necessarily contemplate the purchase of insurance and did not by its terms limit its applicability to situations in which there was insurance, the absence of a mandatory insurance provision rendered the waiver unenforceable; but these circumstances are not present here. To the extent that language in Central Warehouse suggests an intent to shift the risk to the insurer can only be expressed by a separate mandatory insurance provision, see 210 Ga.App. at 16-17, 435 S.E.2d 230, that language is disapproved. The "Waiver of Subrogation" provisions in the leases at issue here are not indemnification clauses void under OCGA § 13-8-2(b), and are therefore enforceable.

2. We now return to the primary issue in this case: Given the enforceability of the "Waiver of Subrogation" provisions agreed to by the tenants and landlord, do they preclude the product defendants from seeking contribution from landlord? The product defendants could have a right to contribution from landlord only if they are compelled to pay a liability for which they and landlord are equally bound. See Klausman v. Klausman, 186 Ga.App. 669, 670, 368 S.E.2d 185 (1988); OCGA § 23-2-71. In denying landlord's motion for summary judgment, the trial court relied on Marchman & Sons, Inc. v. Nelson, 251 Ga. 475, 306 S.E.2d 290 (1983), in which the Supreme Court held that the parties' joint liability did not have to be actually established by a judgment for contribution to be possible, and that the plaintiff's voluntary dismissal with prejudice as a result of a settlement with some defendants did not preclude the settling defendants from suing the non-settling defendants for contribution. Unlike plaintiffs in this case, however, the plaintiff in Marchman had a viable cause of action against the non-settling defendants when the suit began; the only bar to adjudication of the non-settling defendants' joint liability was the plaintiffs' dismissal of the case with prejudice.

Here, the tenants and landlord agreed not to sue each other before any loss occurred, so no cause of action by plaintiffs against landlord ever arose. Thus, this case is more analogous to cases in which we have held that a party who cannot be sued by a plaintiff due to spousal immunity or the exclusive remedy provision of the Workers' Compensation Act also cannot be brought in as a third-party defendant on a claim for contribution. See Southern R. Co. v. Brewer, 122 Ga.App. 292, 176 S.E.2d 665 (1970) (spousal immunity); Central of Ga. R. Co. v. Lester, 118 Ga.App. 794, 803(2), 165 S.E.2d 587 (1968) (workers' compensation). The product defendants attempt to distinguish these cases on the grounds that spousal immunity and the exclusive remedy provision of the Workers' Compensation Act are both bars to liability which are based on public policy, while the landlord relies instead on a contractual provision. A review of these cases shows, however, that the extension of the immunity to third-party situations was based not on public policy, but instead on a conceptual reality: contribution may only be sought from a joint tortfeasor, so where a party could not have been a joint tortfeasor as a matter of law at any time after the cause of action arose, contribution is not possible. For the same reason, the product defendants' argument that the tenants and landlord could not waive their "right" to contribution by agreement is without merit; since the product defendants and landlord never were or could have been jointly liable to plaintiffs, the product defendants had no "right" to contribution to be waived.

If plaintiffs had not voluntarily dismissed their action against landlord, landlord's motion for summary judgment based on the "Waiver of Subrogation" clause should have been granted. See Division 1. And if that motion for summary judgment had been granted, the product defendants clearly would not have been able to...