Jordan v. Diamond Equipment & Supply Co.

Decision Date28 April 2005
Docket NumberNo. 04-1113.,04-1113.
Citation207 S.W.3d 525
CourtArkansas Supreme Court
PartiesMichael L. JORDAN and Rachel Jordan, Appellants, v. DIAMOND EQUIPMENT & SUPPLY CO., Appellees.

Blair & Stroud, by: H. David Blair, Batesville, and The Nixon Law Firm, by: David G. Nixon, Fayetteville, for appellants.

Bassett Law Firm, by: Curtis L. Nebben, Fayetteville, for appellee.

JIM GUNTER, Justice.

This case arises from an order from the Benton County Circuit Court granting a motion for summary judgment filed by appellees, Diamond Equipment & Supply Co. ("Diamond") in a personal-injury action brought by appellants, Michael R. Jordan and Rachel Jordan. We affirm the trial court's ruling.

On October 31, 2001, appellant Michael L. Jordan, who is engaged in the business of light construction and landscaping, was involved in a landscaping project on the premises of a customer. The project required that appellant transport loose materials to the top of a slope, so he went to Diamond to rent a Bobcat Model 763 skid-steer loader ("Bobcat loader") for this purpose. Diamond is engaged in the business of renting and leasing various items of equipment and tools to the public. While at Diamond, Jordan sought the advice from Diamond personnel as to the appropriate machine for the task, and based on that information, Jordan elected to rent the Bobcat loader and a trailer for one day. Jordan entered into a contract with Diamond for the leasing of the Bobcat loader and the trailer and signed a rental agreement, which contained an exculpatory clause. Jordan signed the invoice and paid a fee totaling $185.87 for the lease of the equipment for the one-day period.

That same day, after obtaining the Bobcat loader, Jordan returned to his landscaping project. During the course of his job, the Bobcat loader became top-heavy and overturned backward and flipped several times down the sloped terrain. As a result, Jordan suffered a severe impact to his spine, which caused permanent spinal-cord injuries.

On May 12, 2003, Jordan and his wife, Rachel, brought a negligence action against Diamond. On June 26, 2003, Diamond answered, and on April 23, 2004, Diamond filed a motion for summary judgment, arguing that under Ark. R. Civ. P. 56, the trial court should rule as a matter of law in favor of Diamond.

On May 4, 2004, the Jordans responded to Diamond's motion for summary judgment, arguing that the language in the clause "does not exculpate Diamond from the consequences of its own negligence in connection with its acts and omissions in connection with the rental of the Bobcat loader . . . [.]" The Jordans contended that the language in the provision does not exculpate Diamond from the failure to provide adequate instructions and warnings, and that the agreement is void for lack of mutuality of obligation. They further alleged that the provision is void for lack of consideration, and that the boilerplate language in the agreement violates public policy.

On May 11, 2004, Jordan filed a first amended and substituted complaint upon a theory of negligence for (1) failure to take into account in advising Jordan of the appropriate machine for the conditions and circumstances under which he intended to use it; (2) failure to adequately instruct Jordan as to the safe operating procedures and conditions upon which the machine could be safely operated; (3) failure to advise Jordan of the stability characteristics of the machine and of the difference in distribution of weight bias in loaded versus unloaded conditions; (4) failure to warn Jordan that the Bobcat loader was unsuited for use of loading or unloading materials upon an inclined surface, which could have been reasonably anticipated by Diamond; (5) failure to warn Jordan that the Bobcat loader was suitable for use, including loading and unloading, only on relatively flat surfaces; and (6) failure to instruct and educate its personnel as to the proper operating procedures of skid-steer loaders and of the stability characteristics of these machines. Jordan sought damages for past and future pain, mental anguish, past and future medical expenses, past loss of earning and working time, past and future impairment of earning capacity, and permanent physical impairment and disability. His wife, Rachel Jordan, sought damages for loss of consortium.

An order was filed on May 14, 2004, dismissing with prejudice separate defendant Clark Equipment, the manufacturer of the Bobcat, including its unincorporated business unit, Bobcat Company.

On June 28, 2004, the trial court entered an order granting Diamond's motion for summary judgment. The Jordans filed a motion to amend the order granting summary judgment on July 6, 2004, and the trial court denied that motion. From the order granting summary judgment, the Jordans bring this appeal.

We articulated the standard of review for summary-judgment cases in O'Marra v. Mackool, 361 Ark. 32, 204 S.W.3d 49 (2005), where we stated:

Summary judgment should be granted only when it is clear that there are no genuine issues of material fact to be litigated, and the party is entitled to judgment as a matter of law. Riverdale Development Co. v. Ruffin Building Systems Inc., 356 Ark. 90, 146 S.W.3d 852 (2004); Craighead Elec. Coop. Corp. v. Craighead County, 352 Ark. 76, 98 S.W.3d 414 (2003); Cole v. Laws, 349 Ark. 177, 76 S.W.3d 878 (2002). The burden of sustaining a motion for summary judgment is the responsibility of the moving party. Pugh v. Griggs, 327 Ark. 577, 940 S.W.2d 445 (1997).

Once the moving party has established a prima facie entitlement to summary judgment, the non-moving party must meet proof with proof and demonstrate the existence of a material issue of fact. Id. On appellate review, we determine if summary judgment was appropriate based on whether the evidence presented by the moving party in support of its motion leaves a material fact unanswered. George v. Jefferson Hosp. Ass'n Inc., 337 Ark. 206, 987 S.W.2d 710 (1999). We view the evidence in the light most favorable to the non-moving party, resolving all doubts and inferences against the moving party. Adams v. Arthur, 333 Ark. 53, 969 S.W.2d 598 (1998).

O'Marra, supra.

For their first point on appeal, the Jordans argue that the trial court should have denied the enforcement of the exculpatory clause in Diamond's agreement upon the grounds of public policy. In response, Diamond contends that the exculpatory clause is enforceable, conforms to Arkansas public policy, and the trial court properly upheld the exculpatory clause.

The trial court ruled in its June 28, 2004, order:

The warranties and liability paragraph on the back side of the one page document is an exculpatory clause which requires strict scrutiny by this court. In performing that scrutiny, the court has looked at the location of the paragraph; the fact that the paragraph is set apart and is conspicuous; the language used in the paragraph is clear and unambiguous; the language in the exculpatory clause sets out what negligent liability is to be avoided in very clear language; the circumstances surrounding the execution of this contract which involved the plaintiff approaching the defendant, Diamond Equipment and Supply Company, and soliciting the use of this equipment, and paying a fairly meager sum for the rental of the equipment.

In applying the factors set forth in Finagin v. Arkansas Development Finance Authority, . . . the court finds that Mr. Jordan knew the potential liability that was released, he benefited from the activity causing the liability (he was being paid for this landscaping job); and the contract was fairly entered into.

An exculpatory contract is one where a party seeks to absolve himself in advance of the consequences of his own negligence. Finagin v. Arkansas Development Finance Authority, 355 Ark. 440, 139 S.W.3d 797 (2003). Contracts that exempt a party from liability for negligence are not favored by the law. Plant v. Wilbur, 345 Ark. 487, 47 S.W.3d 889 (2001); Farmers Bank v. Perry, 301 Ark. 547, 787 S.W.2d 645 (1990); Middleton & Sons v. Frozen Food Lockers, 251 Ark. 745, 474 S.W.2d 895 (1972); Arkansas Power & Light Co. v. Kerr, 204 Ark. 238, 161 S.W.2d 403 (1942); Gulf Compress Co. v. Harrington, 90 Ark. 256, 119 S.W. 249 (1909). This disfavor is based upon the strong public policy of encouraging the exercise of care. Plant, supra.

However, such exculpatory contracts are not invalid per se. Plant, supra. Because of the disfavor with which exculpatory contracts are viewed, two rules of construction apply to them. First, they are to be strictly construed against the party relying on them. Plant, supra. Second, we have said that it is not impossible to avoid liability for negligence through contract, but that, to avoid such liability, the contract must at least clearly set out what negligent liability is to be avoided. Plant, supra. Further, we have held that when we are reviewing such a contract, we are not restricted to the literal language of the contract, and we will also consider the facts and circumstances surrounding the execution of the release in order to determine the intent of the parties. Finagin, supra.

We upheld exculpatory clauses in Edgin v. Entergy Operations, Inc., 331 Ark. 162, 961 S.W.2d 724 (1998), and Plant, supra. In Edgin, a security guard was employed by Wackenhut Corporation to work at Entergy's nuclear plant in London. While on the job, the security guard sustained injuries, and she filed suit in tort against Entergy. Her employment agreement with Wackenhut contained an exculpatory clause, which read in pertinent part, "I hereby waive and forever release any rights I might have to make claims or bring suit against any client or customer of Wackenhut for damages based upon injuries which are covered under . . . Workers' Compensation statutes." We held:

Appellants argue that the agreement in this case does not specifically set out...

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