Mayfair Fabrics v. Henley

• Decision Date: 21 September 1967
• Docket Number: Nos. L--9594,L--4535,s. L--9594
• Citation: 97 N.J.Super. 116,234 A.2d 503
• Parties: MAYFAIR FABRICS, Plaintiff, v. Henry HENLEY et al., Defendants. William B. NATELL, Plaintiff, v. Henry HENLEY et al., Defendants.
• Court: New Jersey Superior Court

Page 116

97 N.J.Super. 116

234 A.2d 503

MAYFAIR FABRICS, Plaintiff, v. Henry HENLEY et al., Defendants.

William B. NATELL, Plaintiff, v. Henry HENLEY et al., Defendants.

Nos. L--9594, L--4535.

Superior Court of New Jersey

Law Division.

Sept. 21, 1967.

Robert F. Colquhoun, Bloomfield, for plaintiff, William B. natell.

H. Curtis Meanor, Jersey City, for defendant, William B. Natell (Lamb, Blake, Hutchinson & Dunne, Jersey City, attorneys).

Allan Maitlan, Newark, for Mayfair Fabrics (Feuerstein & Sachs, attorneys, Glickman & Valentine and Peter S. Valentine, Newark, of counsel).

ACKERMAN, J.S.C.

This matter is before the court on cross-motions for partial summary judgment made by William and Jean Natell, the owners and landlords of a commercial building located in Clifton, New Jersey, and by Mayfair Fabrics, Inc., the sole tenant of the building, and deals with the interpretation and effect of an exculpatory clause and provision for insurance in the lease between the parties. It is the sequel to the decision in Mayfair Fabrics v. Henley, 48 N.J. 483, 226 A.2d 602 (1967), which dealt with the construction of the same exculpatory clause.

The lease in question was for a five-year term and the annual rental was $10,000. It was entered into on April 15, 1963, and both parties had the benefit of advice of legal counsel in connection with the preparation and signing of the lease. Paragraph 28, a typewritten rider attached to the printed form of the lease, provided as follows:

'It is mutually agreed that the landlords will insure the building against fire and the tenant agrees to carry fire insurance upon all equipment and personal property used, placed or stored in, on or near, the leased premises and in no event shall the landlord be responsible or liable for loss or damage to the tenant's property by fire, explosion or otherwise. In the event that the hazards of the tenant's business makes it impossible for landlords to obtain fire insurance at standard rates covering the said building then this lease shall at the option of the landlord be null and void.'

When the building was originally erected, heat was provided by three space heaters hung from the ceiling of the premises. The tenant, which was engaged in the business of knitting and manufacturing cloth products, desired to install an overhead traveling crane to lift materials to and from the knitting machines. By paragraph 27 of the lease, the landlords agreed to relocate the space heaters in order that the crane might be installed. Before the tenant took possession under the lease in May 1963 the landlords, in compliance with the provisions in the lease, caused two of the heaters to be removed from their existing locations and stored for the summer. In August 1963 the tenant reminded the landlords that the heating units would have to be reinstalled in their new locations before the onset of cold weather, and the landlords engaged Henley, who did heating installation and service work, to perform this task. Henley commenced the reinstallation on August 7 with the aid of Natell, who helped primarily in the installing of jacks on the roof for the smoke stacks of the heaters and the roof patching in connection therewith. The work was not completed by Friday afternoon, August 9, 1963, when Natell and Henley left the premises. Early in the morning on August 10, while the tenant's factory operations were in progress with Jensen, an employee of the tenant, at work in the premises, a disastrous fire occurred which caused considerable damage to the landlords' building and to the tenant's property therein. The cause of the fire and the responsibility therefor are in dispute.

In accordance with their undertakings in paragraph 28 of the lease, both the landlords and the tenant had secured fire insurance. After the fire the landlords were paid $33,178.20 by their fire insurance carrier for damage to the building, and the tenant received $179,333.51 from seven insurance companies which had covered its property at the premises against loss by fire.

Late in 1963 two actions were commenced in this court which were subsequently consolidated. In the first action the landlords sued the tenant, among others, to recover for fire damage to the building, asserting that the fire resulted from the tenant's negligence. Damages sought to be recovered as set forth in the pretrial order were $33,178.20, the amount received by the landlords on their fire insurance, plus any rentals which might be due to the landlords and lost as the result of the fire. The second action was instituted by the tenant against Natell, the landlord, among others, claiming that the fire and the damage suffered by the tenant were caused by his negligence or faulty workmanship in connection with the removal and relocation of the heaters. Damages sought were $179,333.51, the amount recovered by the tenant on its fire insurance, plus the sum of $11,155.75 claimed as out-of-pocket losses not reimbursed by insurance payments, plus a lost profit claim of $60,728.83. The total damages sought by the tenant therefore amounted to approximately $251,200.

The landlords, defending the action brought by the tenant, set up as an affirmative defense, among others, that the exculpatory clause provided for in paragraph 28 relieved them from liability to the tenant. They moved for summary judgment thereon, and in support thereof filed an affidavit by William Natell to the effect that they were being defended by Utica Mutual Insurance Company on a liability policy which contained a $50,000 property damage limit for each accident. The affidavit stated that Natell had relied upon the validity of the exculpatory clause in determining that the property damage liability limit in the policy was satisfactory for his needs, and further stated that he considered the $50,000 limit in the liability policy to be adequate to cover any potential liabilities to 'others aside from Mayfair Fabrics.'

The trial court denied the motion for summary judgment, holding that there was a factual issue as to whether the loss suffered by the tenant resulted from activity encompassed by the landlord-tenant relationship or was the result of acts of Natell performed in a capacity other than as landlord. Relying upon the decision in W. F. Zimmerman v. Dagett & Ramsdell, Inc., 34 N.J.Super. 81, 111 A.2d 793 (Law Div.1955), the court held that if the acts of Natell were not performed in his capacity as landlord, the exculpatory clause in the lease would not be applicable to release Natell from liability, and it therefore concluded that there was a factual issue which required a plenary trial.

Upon appeal the Supreme Court reversed in Mayfair Fabrics, supra, holding that it was clear that the activity of Natell, upon which the tenant's claim against the landlords was founded, was in his capacity as landlord and not otherwise, and further holding that the exculpatory clause in paragraph 28 was valid and not violative of any public policy in this State. Noting that the lease was a commercial lease and that the terms had been negotiated with the aid of counsel, the court ruled that the parties were not in unequal bargaining positions and that the clause was a valid private contractual arrangement between the parties providing for mutual reciprocal obligations to insure their respective properties against damage by fire and distributing the risks of loss between them. The court concluded that the clause relieved the landlords of liability to the tenant for its direct property damage, but declined to pass upon the question whether the tenant's claim for loss of business profits was barred by the clause, saying:

'The exculpatory clause, after providing that the tenant would carry fire insurance 'upon all equipment and personal property used, placed or stored in' the leased premises, set forth that in no event would the landlord be responsible for fire damage 'to the tenant's property.' Question has been raised by some members of the Court as to whether, in the light of the quoted language, it may properly be said that the agreement of the parties contemplated a bar sufficiently comprehensive to include that part of the plaintiff's complaint which seeks damages for loss of prospective 'business profits.' Cf. Stanley Co. of America v. Hercules Powder Co., 16 N.J. 295, 314, 108 A.2d 616, 45 A.L.R.2d 1106 (1954); Henry Clay v. City of Jersey City, 74 N.J.Super. 490, 498, 181 A.2d 545 (Ch.Div.1962). affirmed 84 N.J.Super. 9, 200 A.2d 787, (App.Div.1964), certif. denied 43 N.J. 264, 203 A.2d 717 (1964). Since that question has not been briefed or argued, we do not pass on it and the plaintiff remains free to pursue it before the trial court.' (48 N.J., at p. 490, 226 A.2d at p. 606).

Upon remand, the two motions for summary judgment now before the court were filed. The landlords move for summary judgment that paragraph 28 bars the tenant's suit against them for loss of business profits. The tenant moves for summary judgment that the landlords are barred by the provisions of the same paragraph from suing the tenant for the property damage to the building caused by the fire.

I

With respect to the tenant's motion, it is of course apparent that, although there is express language in paragraph 28 relieving the landlords from liability to the tenant, there is no corresponding language which clearly and explicitly relieves the tenant from liability to the landlords for damage to their property. It is the court's conclusion that the clause nevertheless has that effect.

The rule generally enunciated with respect to the construction and interpretation of exculpatory clauses and provisions allocating the risk of loss between landlord and tenant, which normally favor the landlord, is that they are closely scanned and given a strict construction against the landlord, who usually has the superior bargaining position. Kuzmiak v. Brookchester, 33 N.J.Super. 575, 111 A.2d...