Mat Sys. Inc. v. Atchison Properties Inc.Atchison Properties Inc. v. Mat Sys. Inc.

• Decision Date: 02 July 2010
• Docket Number: 2090091.
• Citation: 54 So.3d 371
• Parties: MAT SYSTEMS, INC., d/b/a Corporate Design Systemsv.ATCHISON PROPERTIES, INC.Atchison Properties, Inc.v.MAT Systems, Inc., d/b/a Corporate Design Systems.
• Court: Alabama Court of Civil Appeals

54 So.3d 371

MAT SYSTEMS, INC., d/b/a Corporate Design Systems
v.
ATCHISON PROPERTIES, INC.Atchison Properties, Inc.
v.
MAT Systems, Inc., d/b/a Corporate Design Systems.

2090091.

Court of Civil Appeals of Alabama.

July 2, 2010.

[54 So.3d 372]

I. David Cherniak and Rick A. La Trace of Johnstone, Adams, Bailey, Gordon & Harris, L.L.C., Mobile, for appellant/cross-appellee MAT Systems, Inc., d/b/a Corporate Design Systems.Bert P. Taylor and Abigail Lounsbury Morrow of Taylor Ritter, P.C., Orange Beach, for appellee/cross-appellant Atchison Properties, Inc.MOORE, Judge.

MAT Systems, Inc., d/b/a Corporate Design Systems (“MAT”) appeals from a judgment entered on a jury's verdict

[54 So.3d 373]

awarding MAT $880 in damages against Atchison Properties, Inc. (“Atchison”). MAT asserts that the trial court erred in excluding from the jury's consideration its request for compensatory damages based upon the replacement-cost of damaged products, that the amount of damages awarded to compensate MAT for its cleanup and storage expenses was insufficient, and that the trial court erred in admitting into evidence certain of Atchison's exhibits. Atchison cross-appeals, asserting that the trial court erred in denying its motion for a judgment as a matter of law (“JML”) as to all claims asserted against it. We affirm.

Background

In 1991, Atchison purchased property located at 1100 Dauphin Street in Mobile. Atchison, through its principal, Tony Atchison (“Tony”), acted as a general contractor and hired subcontractors to renovate the property. In connection with those renovations, Atchison hired a subcontractor to remove an old sprinkler system from the property. In preparing to have the sprinkler system removed, Tony contacted the Board of Water and Sewer Commissioners of the City of Mobile d/b/a Mobile Area Water and Sewer (“MAWSS”) and requested that water service to the sprinkler system be discontinued. MAWSS responded to that request, and, according to Tony, he observed an employee of MAWSS access an underground valve located in the City's right-of-way and “turn off” the water service to the sprinkler system.

Believing the water supply to have been permanently terminated, Atchison's subcontractor removed most of the pipes to the old sprinkler system. Certain of the pipes, however, were left in the building. At least one of those pipes, six inches in diameter and visible to all who viewed the property, remained connected to the City's water supply, although the water supply had been turned off. That pipe was not permanently capped or equipped with a shut-off valve on the premises to prevent the flow of water into the pipe from the City's water line because, Tony stated, he believed that MAWSS had permanently terminated the water supply to the sprinkler system.

Atchison's renovations were completed and it began leasing the renovated property in the mid–1990s. In 1998, MAT became interested in leasing the renovated property. According to Tony McCain, one of MAT's principals, MAT was engaged in the business of selling “custom-manufactured” commercial office furniture, cubicles, architectural walls, and flooring. After inspecting the renovated property and having Atchison perform additional work on the renovated property to suit MAT's needs and design plans, MAT and Atchison entered into a commercial lease of the property (hereinafter referred to as “the leased premises”).¹ Even after Atchison had performed MAT's requested changes to the leased premises, the remaining six-inch pipe from the sprinkler system remained visible in the warehouse near the top of a warehouse wall. MAT then began using the leased premises and continued to do so without problem until May 2005.

On May 10, 2005, MAWSS undertook to replace an old fire hydrant in the vicinity of the leased premises. To replace the hydrant, MAWSS's employees were required to turn off the water servicing the hydrant. MAWSS replaced the hydrant and then restored the water service. In

[54 So.3d 374]

restoring the water service to the hydrant, the MAWSS employee also returned the valve controlling water service to the leased premises to the “on” position although that valve had been in the “off” position when MAWSS began working in the area. As a result, water service to the old sprinkler system was restored and water began flowing from the City's water supply to those pipes remaining in the leased premises. Water entered the leased premises through the pipe on the wall of MAT's warehouse, where MAT was storing products that MAT had previously sold to its customers and that its customers were not using at that time.

MAWSS's employees immediately noticed water flowing from under the warehouse door and returned the valve to the off position. MAT was notified of the situation within minutes of the water intrusion. According to MAT's employees and Tony, water again entered the warehouse through that same pipe several days later.

After approximately seven weeks,² Southern Commercial Installations, Inc. (“SCI”), acting on behalf of MAT, emptied the contents of the warehouse, disposing of certain products and storing other products for MAT until January 2007. Although SCI was owned and operated by Wayne Maurin, a full-time employee of MAT, MAT claimed that it had incurred significant costs in emptying the warehouse, cleaning the warehouse, and storing the damaged products off-site. MAT also claimed that, as the bailee of the products in the warehouse, it was liable to its customers for the damaged products and, thus, entitled to recover compensatory damages based upon the cost to replace those damaged products.

On June 1, 2006, MAT sued Atchison asserting claims of breach of the lease agreement, negligence, and trespass on the case.³ MAT's claims against Atchison were tried before a jury beginning on August 31, 2009. At the close of all the evidence, Atchison moved for a JML in its favor as to all claims or, alternatively, as to MAT's request for recovery of replacement-cost damages. The trial court denied Atchison's motion for a JML as to all claims, but it granted that motion as to MAT's request for replacement-cost damages. The trial court submitted MAT's breach-of-contract, negligence, and trespass claims to the jury; the trial court instructed the jury that, if it found in favor of MAT on the negligence or trespass claims, it could award MAT damages only for those costs reasonably incurred by MAT to empty and clean the warehouse and for storing the damaged products. On September 3, 2009, the jury returned a verdict in favor of MAT on the negligence and trespass claims; the jury awarded MAT $880 in damages. The jury found in favor of Atchison on the breach-of-contract claim.

On September 17, 2009, MAT moved, pursuant to Rule 59, Ala. R. Civ. P., for a new trial or, alternatively, to alter or amend the judgment. Although Atchison responded to MAT's postjudgment motion, Atchison did not seek postjudgment relief

[54 So.3d 375]

from the denial of its motion for a JML. On October 9, 2009, MAT filed its notice of appeal with the Alabama Supreme Court; however, that appeal was held in abeyance pending the disposition of MAT's postjudgment motion. See Rule 4(a)(5), Ala. R.App. P. On October 23, 2009, the trial court denied MAT's pending postjudgment motion and MAT's appeal ripened. The Alabama Supreme Court transferred MAT's appeal to this court, pursuant to Ala.Code 1975, § 12–2–7(6). Atchison then filed its cross-appeal.

On appeal, MAT challenges the propriety of the JML entered in favor of Atchison on MAT's request for replacement-cost damages; MAT argues that, as a result of that JML, MAT's request for damages based upon the replacement costs of the damaged products was improperly excluded from the jury's consideration. MAT also asserts that it was entitled to a new trial because, it argues, the jury awarded it insufficient damages to compensate it for the costs it incurred to clean the warehouse and to store the damaged products. Finally, MAT asserts that the trial court erred in admitting into evidence certain of Atchison's exhibits. In its cross-appeal, Atchison asserts that the trial court erred in denying its motion for a JML as to all the claims asserted against it.

Atchison's Cross–Appeal

We first address Atchison's cross-appeal, because the resolution of the cross-appeal is potentially dispositive of MAT's appeal. The trial court allowed MAT's claims for breach of the lease agreement, negligence, and trespass on the case to go to the jury. In its preverdict motion for a JML, and again on appeal, Atchison argues that it was absolved of all liability by virtue of the exculpatory language included in the commercial lease executed by MAT and Atchison and that, as a result, none of MAT's claims should have gone to the jury.⁴ In response to Atchison's motion for a JML, MAT argued that Atchison was not entitled to the benefit of the exculpatory language because, under Alabama law, a lessor may not rely on exculpatory language in a lease when, at the time the landlord-tenant relationship arose, the lessor knew or had reason to know of the risks associated with a latent defect and failed to disclose those risks to the lessee.

We agree with MAT that, under applicable Alabama law, if substantial evidence was presented on the question whether Atchison, as the lessor, knew or had reason to know of the latent defect at issue and failed to disclose that defect to MAT, as the lessee, at the time the lease was executed, Atchison was not entitled to the protections afforded it by the exculpatory language in the lease. See, e.g., Taylor v. Leedy & Co., 412 So.2d 763, 764 (Ala.1982) ( “Exculpatory clauses ... exonerate the landlord from liability for his own future negligence, ... not for concealment of a known latent defect which subsequently causes injury.... [A] latent defect is an exception to the coverage of an exculpatory clause.”).

Thus, in ruling on Atchison's motion for a JML, i.e.,...