Millican of Washington, Inc. v. Wienker Carpet Service, Inc.

• Decision Date: 21 July 1986
• Docket Number: No. 13964-9-I,13964-9-I
• Citation: 44 Wn.App. 409,722 P.2d 861
• Parties: MILLICAN OF WASHINGTON, INC., Respondent/Cross Appellant, v. WIENKER CARPET SERVICE, INC., Appellant/Cross Respondent.
• Court: Washington Court of Appeals

Page 409

44 Wn.App. 409

722 P.2d 861

MILLICAN OF WASHINGTON, INC., Respondent/Cross Appellant, v. WIENKER CARPET SERVICE, INC., Appellant/Cross Respondent.

No. 13964-9-I.

Court of Appeals of Washington,

Division 1.

July 21, 1986.

David Tewell, Russell Love, Tewell, Thorpe & Findlay, Inc., Seattle, for Millican of Washington, Inc

Andrew Gauen, Merrick, Hofstedt & Lindsey, David Decourcy, Seattle, for Wienker Carpet Service, Inc.

SWANSON, Judge.

Wienker Carpet Service, Inc. (Wienker) appeals the superior court judgment holding that the waiver of subrogation clause in its lease with Millican of Washington, Inc. (Millican) is effective to bar recovery by Millican against Wienker only for insured losses to the Wienker leasehold premises, thereby allowing Millican to seek recovery for damages to premises not described in the lease. Millican cross-appeals from the judgment, claiming that the waiver was unenforceable against it based upon a want of consideration since Wienker's insurance policies did not allow such a waiver of subrogation of rights. We affirm.

By a lease dated January 29, 1977 Millican leased to Wienker a 6100 square-foot, later a 7100 square-foot, area of the western portion of the 13,200 square-foot Both the 1977 and the 1980 leases contained an identical clause entitled "Waiver of Subrogation," which was set forth as paragraph 28 in the 1980 lease and provides as follows:

                building located at 4618--14th Avenue N.W., Seattle, Washington.   When the lease expired after one year, Wienker exercised its option to renew the lease for another two years.   When the two-year period expired, Millican and Wienker signed a second lease that was dated January 30, 1980.   Barry Hawley, a real estate broker, secured Wienker as a tenant for the leasehold premises in 1977 and, acting as Millican's [722 P.2d 863] agent, provided the lease forms and arranged for the execution of both the January 29, 1977 and the January 30, 1980 leases
                

The Lessor and Lessee hereby release and waive for the duration of this lease and any extension or renewal thereof, their respective entire rights of recovery against each other, and/or their respective agents and invitees responsible for any losses resulting from perils of fire and other coverages provided by their respective casualty insurance policies issued to either Lessor or Lessee in effect at times of losses; provided that such waiver and release shall apply only in the event such agreement does not prejudice the insurance afforded by such policies.

Hawley had personally typed this clause on the printed forms for the two leases.

On August 13, 1981, a natural gas explosion and fire at the Wienker warehouse damaged the Wienker leasehold and other portions of the same building as well as other property owned by Millican. Millican's insurance company reimbursed Millican for some but not all of its losses. Wienker's insurance company paid Wienker for its losses. Millican filed an action for damages against Wienker, Washington Natural Gas Company (WNG), and Wienker's employee, Ken Kurtz, and his wife. Wienker denied liability and asserted a counterclaim against Millican, a cross-claim against WNG, and a third-party claim against the City of Seattle for its losses. Wienker now appeals and Millican cross-appeals the judgment entered that the The principal issues in this appeal are (1) whether the waiver of subrogation clause was unenforceable against Millican because of a failure of consideration and (2) if the waiver of subrogation clause was enforceable against Millican, whether it barred recovery by Millican against Wienker only for insured losses on the Wienker leasehold premises described in the parties' lease.

waiver of subrogation clause in the lease applied only to insured losses to the Wienker leasehold premises described in the January 30, 1980 Millican-Wienker lease. ¹

ENFORCEABILITY OF CLAUSE

We conclude that the waiver of subrogation clause was enforceable against Millican. This issue is not moot, as Wienker contends, for Wienker has not shown that Millican's settlement with Washington Natural Gas and the City of Seattle fully compensated Millican for any additional damages to which it might be entitled were it successful in its cross-appeal.

Millican assigns error to the trial court's conclusion of law 2, which states that "Subject to paragraphs 3-5 below, the 'Waiver of Subrogation' clause is effective and enforceable as between Millican and Wienker." Millican claims that the unchallenged finding of fact 10 is that the waiver of subrogation clause was intended to be for the lessor's and lessee's mutual benefit, yet Wienker's primary and excess insurance policies did not allow Wienker to waive its subrogation rights against Millican, findings of fact 16 and 17, so that the clause was unenforceable against Millican due to a want of consideration. Wienker disagrees and assigns error to findings 16 and 17, which state:

16. Wienker's insurance policy with Royal Insurance Co. did not allow Wienker to waive its subrogation rights against Millican.

17. Wienker's policy with Industrial Indemnity Insurance Co. did not allow Wienker to waive its subrogation rights against Millican.

The general rule is that a contract's interpretation is a question of law. Kelly v. Aetna Cas. & Surety Co., 100 Wash.2d 401, 407, 670 P.2d 267 (1983). Absent disputed facts, the construction of a contract is determined as a matter of law, and the appellate court is in as good a position as the trial court to interpret a contract's meaning. Yeats v. Estate of Yeats, 90 Wash.2d 201, 204, 580 P.2d 617 (1978); Jones Assocs., Inc. v. Eastside Props., Inc., 41 Wash.App. 462, 465-66, 704 P.2d 681 (1985). Conclusions of law incorrectly denominated as findings of fact are subject to appellate review. Woodruff v. McClellan, 95 Wash.2d 394, 396, 622 P.2d 1268 (1980); White v. Wilhelm, 34 Wash.App. 763, 768, 665 P.2d 407, rev. denied, 100 Wash.2d 1025 (1983).

Here Millican's argument fails. First, a basic principle of contract law is that consideration sufficient to support one promise is sufficient to support any number of promises, and each written term of a contract need not be bargained for. Lyall v. DeYoung, 42 Wash.App. 252, 257, 711 P.2d 356 (1985); Fortner v. Fannin Bank in Windom, 634 S.W.2d 74, 77 (Tex.App.1982); Restatement (Second) of Contracts § 80(1) and comment a, at 204 (1981); 1 S. Williston, Contracts § 137A, at 594 (3d ed. 1957).

Further, the waiver of subrogation clause at issue here contains a proviso that "such waiver and release [of rights of recovery for certain losses] shall apply only in the event such agreement does not prejudice the insurance afforded by such policies." Here the unchallenged conclusion of law 6, which becomes the law of the case, see Detonics ".45" Assocs. v. Bank of California, 97 Wash.2d 351, 353, 644 P.2d 1170 (1982), states: "Neither Wienker's nor Millican's insurance coverage was prejudiced by the waiver of subrogation clause." Support for conclusion of law 6 is found in the [T]he doctrine of subrogation only places the insurer in possession of such rights against third parties as the insured could himself enforce, and it therefore follows that if, prior to the execution of the contract of insurance, the insured has executed another contract releasing certain third parties from any liability which might be incurred by them in case of a loss, such release will also be binding upon the insurer, in the absence of proof that such release was made to defraud the insurer.

                unchallenged finding 24 that "Wienker's insurance company paid Wienker for losses suffered by Wienker."   Absent a finding of prejudice to the parties' insurance coverage, the waiver of subrogation clause was effective
                

(Footnotes omitted.) 16 G. Couch, Insurance § 61:194, at 251-52 (rev. ed. 1983); accord, Pelzer Mfg. Co. v. Sun Fire Office, 36 S.C. 213, 15 S.E. 562 (1892).

Here Wienker's insurance policies, which were effective from July 1, 1981 to July 1, 1984, including the time of the explosion and fire, were executed after the Millican-Wienker lease was renewed on January 30, 1980. Further, the record reveals no showing that the waiver was made to defraud Wienker's insurers. Since the subrogation doctrine places the insurer in possession of such rights against third parties as the insured himself could enforce, Wienker's waiver of subrogation rights in its lease with Millican, prior to the issuance of its primary and excess insurance policies and absent a showing of fraud, bound its insurers. Thus the waiver of subrogation clause was valid and enforceable against Millican.

APPLICATION OF CLAUSE

The next issue is whether the waiver of subrogation clause barred recovery by Millican against Wienker only as to insured losses on the Wienker leasehold premises described in the parties' lease. Millican argues that the waiver of subrogation clause is ambiguous as to whether it applies only to insured losses and only to the Wienker leasehold premises and that an exculpatory clause that relieves a party from liability for negligence must be explicit and specific and strictly construed, with any doubts resolved against the party trying to escape liability.

Wienker claims that the clause's broad language that Millican released its "entire rights of recovery" against Wienker for "any losses" resulting from the "perils of fire" bars Millican's recovery from Wienker for losses on all of its properties, including properties not covered by the Millican-Wienker lease. Wienker assigns error to the following of the trial court's findings of fact and conclusions of law:

20. The "Waiver of Subrogation" clause in the two leases is ambiguous.

21. The parties intended the "Waiver of Subrogation" clause to apply only to the Wienker leasehold premises described in the Millican-Wienker Leases.

22. The parties did not intend for the "Waiver of Subrogation" clause to apply to losses that...