Lloyd v. Service Corp. of Alabama, Inc.

• Citation: 453 So.2d 735
• Parties: 39 UCC Rep.Serv. 65 Patricia H. LLOYD v. SERVICE CORPORATION OF ALABAMA, INC., a corporation. 82-409.
• Decision Date: 08 June 1984
• Court: Alabama Supreme Court

Page 735

453 So.2d 735

39 UCC Rep.Serv. 65

Patricia H. LLOYD v. SERVICE CORPORATION OF ALABAMA, INC., a corporation.

82-409.

Supreme Court of Alabama.

June 8, 1984.

James W. May, Birmingham, for appellant.

Jasper P. Juliano, of McDaniel, Hall, Parsons, Conerly, Scott & Lusk, Birmingham, for appellee.

EMBRY, Justice.

This is an appeal occasioned by a Jefferson County trial court's grant of summary judgment against Patricia H. Lloyd in a tort action.

I

The circumstances from which the conflict developed are as follows: On 1 April 1979, Patricia Lloyd, a young Birmingham woman, leased an apartment at Shadowood Circle, a residential apartment complex owned by John T. Strain. The printed form lease agreement which Lloyd signed contained the following clause:

"As a part of the consideration hereof, the lessee hereby covenants and agrees to hold the Lessor, the Lessor's Rental Agents, and the Servants and Employees of either, free and harmless from any and all liability for claims for damages, or other claims for personal injury, or death, sustained by Lessee, or sustained by any other person, while on the leased premises or adjacent thereto during the terms of this lease as the result of negligence, or other conduct of the lessor, or of the Lessor's Servants, Agents or Employees."

Such is generally known as an "exculpatory clause." It operates to release the lessor from liability for future negligent conduct, so that he or she can negligently cause the lessee injury, yet avoid the otherwise fixed legal responsibility to compensate the lessee.

After moving into the apartment, Lloyd realized the sliding glass patio door in her apartment had been installed improperly so that the locking mechanism was operable from the outside. Also, because the door slid on the wrong runner, it did not open and shut properly. Due to this defective installation, there was an exposed and open area around the glass. Lloyd notified Strain of these problems on a number of occasions, but he did not repair the door.

On 8 September 1980, Strain assigned to Service Corporation of Alabama, Inc. (Service), his leasehold rights, title, and interest in Shadowood Circle Apartments. Service began immediately to convert the apartments into condominiums, but allowed Lloyd to remain in her apartment under the preexisting lease. As part of this conversion, Service removed the draperies from almost all of the units in Lloyd's building.

On 29 September 1980, Lloyd was awakened early in the morning by a burglar. When encountered, the burglar fled as he had entered, through Lloyd's bedroom window, which he had unlocked from the outside.

Lloyd immediately reported the incident to the police. The next day she complained to Service, requesting that it take the following steps to provide security for her apartment: 1) replace her sliding glass door so that the locking mechanism could not be disengaged from the outside; 2) place screens on all the windows to prevent entrance through the apartment windows; and 3) replace the draperies in the empty units. Service did not make any of the repairs at that time, but eventually began to rehang the draperies.

During the last week of November 1980, Lloyd repeatedly observed a strange man on the premises near her apartment and reported the incidents to a deputy sheriff, who investigated the man. Lloyd notified Service employees of this investigation and asked that Service make the repairs which she had previously requested. Service did not accommodate Lloyd's requests.

On 27 December 1980, Lloyd was assaulted and raped in her apartment. The rapist entered Lloyd's apartment by disengaging the locking mechanism on the sliding glass door from the outside.

Subsequently, Lloyd filed a complaint in Jefferson County Circuit Court against Service Corporation. In her complaint, she alleges that Service was negligent in failing and refusing to repair the defective sliding glass door. She alleges that Service's negligence proximately caused the physical injury and emotional distress she suffered because she was raped. A later amendment to that complaint further alleges that Service Corporation's negligence in providing security proximately caused her injuries.

Service filed a motion to dismiss and a subsequent motion for summary judgment based upon the presence of the exculpatory clause in Lloyd's lease. After hearing oral arguments, the trial court granted summary judgment in favor of Service based on the presence of the exculpatory clause in the lease agreement. That court entered final judgment in accordance with Rule 54(b), ARCP. Lloyd appealed to this court. She contends the trial court erred in granting summary judgment in favor of Service based on the exculpatory clause.

II

Lloyd acknowledges, as indeed she must, that this is a request for reexamination and reconsideration of our treatment, in Alabama, of exculpatory clauses in residential leases as valid and enforceable. She contends, because such clauses are typically part of adhesive contracts, that they are not truly bargained for, and that their enforcement is against the public interest.

Service argues that modification of our present law is not needed and points to this court's strong policy in favor of freedom of contract. Service contends that change, even if needed, should be initiated by our Legislature. We have supplied ample authority to support these arguments. ¹

Exculpatory contract provisions have, in various other circumstances, been found by this court to be void on the grounds of being contrary to public policy. See Alabama Great So. R.R. v. Sumter Plywood Corp., 359 So.2d 1140 (Ala.1978); Housing Authority of Birmingham District v. Morris, 244 Ala. 557, 14 So.2d 527 (1943); Smith v. Kennedy, 43 Ala.App. 554, 195 So.2d 820 (1966), cert. den., 280 Ala. 718, 195 So.2d 829 (1966). The rationale behind these holdings is that such clauses tend to encourage negligence and, in circumstances where there is a strong public interest to discourage negligence, the clauses should be unenforceable.

As Service Corporation notes, in Alabama, residential leases have consistently been characterized as not involving the public interest and exculpatory clauses therein as not violative of public policy. Lloyd begs our reconsideration of this issue and our acknowledgement that, at least when not fairly bargained for between parties having substantially equal bargaining power, exculpatory clauses in residential leases are violative of public policy in Alabama.

A single, but two-pronged, issue is presented. First, whether there is, at this time, a public policy justification for modification of the law in Alabama regarding the enforcement of exculpatory clauses in residential leases. Second, whether such a change, if needed, should originate with the judiciary.

III

The issue whether it is contrary to the public interest to allow escape from liability in a specific situation involves a complex of considerations. Among the factors we will consider and which other courts have considered in order to make such a determination regarding residential leases are: whether the service provided by the underlying contract is one necessary to the public; whether a significant number of people are compelled to seek the service; whether the transaction places one party to the contract under the control of the other and subject to his or her carelessness; the relative bargaining power of the parties and whether there is stated legislative policy against judicial enforcement of "unconscionable" contracts. See Henrioulle v. Marin Ventures, Inc., 20 Cal.3d 512, 573 P.2d 465, 143 Cal.Rptr. 247 (1978), and Weaver v. American Oil Co., 257 Ind. 458, 276 N.E.2d 144 (1971).

First, it is clear we no longer live in an era of the occasional rental of rooms in a home or over the corner store. The rental industry provides a basic necessity of life, shelter, to thousands of inhabitants of this state. ² Approximately 30% of the total occupied housing units in the state are rental units. ³ In Birmingham, the state's largest metropolitan area, approximately 47% of the total housing units are rental units. ⁴

It requires no imagination to see that the rental industry is now a major commercial enterprise which directly touches the lives of thousands of people who depend on it for shelter. If the rental industry was small, the effect of the use of exculpatory clauses in residential leases would be minuscule. However, the existence of a large number of leases containing exculpatory clauses affects thousands of citizens who are concerned with the quality and safety of housing offered for rent in the state. See, e.g., McCutcheon v. United Homes Corp., 79 Wash.2d 443, 486 P.2d 1093, 1098 (1971).

Second, it is evident that modern residential lease transactions subject tenants to the carelessness of the landlord. That has not always been true. During the past several decades, there have been occurring important societal changes in relationships between landlords and tenants in Alabama. In the past, many Alabama tenants were farmers. In agrarian situations, land, not housing, was the important part of a rental arrangement. A tenant would rent a property "as is," but he had the right to improve the dwelling.

Since simple carpentry and construction skills were part of a farmer's basic knowledge in that area, it was easy for him to make his house "livable," according to the standards of the day. He did not need to know about plumbing, electricity, elevators, or other modern necessities. In comparison, as is illustrated by Patricia Lloyd's circumstances, the modern urban tenant is almost totally dependent upon the landlord to make repairs and is vulnerable to his or her refusal to do so.

Third, the very nature and effect of the exculpatory clause makes clear the lack of bargaining power on the part of the tenant when negotiating a lease agreement. In his special concurrence in Taylor v. Leedy...