Milner Hotels, Inc. v. Norfolk & Western Ry. Co.

• Decision Date: 20 May 1993
• Docket Number: Civ. A. No. 1:91-1078.
• Citation: 822 F. Supp. 341
• Court: U.S. District Court — Southern District of West Virginia
• Parties: MILNER HOTELS, INC., a Kentucky corporation authorized to do business in the State of West Virginia, Plaintiff, v. NORFOLK & WESTERN RAILWAY COMPANY, a Virginia corporation authorized to do business in the State of West Virginia, and Norfolk Southern Corporation, its parent company, Defendants.

822 F. Supp. 341

MILNER HOTELS, INC., a Kentucky corporation authorized to do business in the State of West Virginia, Plaintiff, v. NORFOLK & WESTERN RAILWAY COMPANY, a Virginia corporation authorized to do business in the State of West Virginia, and Norfolk Southern Corporation, its parent company, Defendants.

Civ. A. No. 1:91-1078.

United States District Court, S.D. West Virginia, at Bluefield.

May 20, 1993.

J.W. Feuchtenberger, Stone, McGhee, Feuchtenberger & Barringer, Bluefield, for plaintiff.

Wade T. Watson, Sanders, Watson & White, Bluefield, for defendants.

OPINION

FABER, District Judge.

I.

The Milner Hotel, constructed near the turn of the century, is located directly across Princeton Avenue from the Norfolk Southern railroad yard in downtown Bluefield, West Virginia. In 1977, the Norfolk & Western Railway Company ("N & W" or "railroad"), now a subsidiary of Norfolk Southern,¹ entered into a contract with Milner Hotels, Inc. ("the Milner") to house and feed its transient train crews and other nonresident employees. This contract, as most recently amended in 1989, required the N & W to pay to the Milner $20.25 per day for each room occupied by a railroad employee, but not less than an amount sufficient to cover sixty room occupancies or $1,215.00 per day. This contract with the N & W provided essentially all of the Milner's business. The hotel had 102 rooms and approximately ninety of these were set aside at all times for the railroad's use. The hotel appears to have actually discouraged other business.

In exchange for the N & W guaranteeing occupancy, the hotel agreed to provide certain services as set forth in section 1 of the contract which reads, in pertinent part:

The services to be performed at said Hotel by the Operator for Railroad's employees include the following....

(d) Maintaining at all times good, clean and sanitary conditions throughout the said hotel;

(e) Observing and complying with all local, state or federal laws and regulations pertaining to the operation of the said Hotel....

Section 10 of the contract was its termination clause. Section 10, as amended, provided:

This agreement shall continue in full force and effect from month to month until terminated by either party giving to the other party at least thirty (30) days prior written notice. However, in the event of any default by either party hereto in the performance of its obligations hereunder which is not cured within 30 days of receipt of notice thereof, the other party may, in addition to other remedies available, terminate this agreement.

At about 7:30 a.m. on March 10, 1991, a Sunday morning, a fire broke out on the second floor of the Milner, apparently caused by an electrical malfunction in an oil heater. The fire was quickly contained and damage from the blaze was limited to a few rooms on the second floor. Smoke damage, however, permeated the entire building and there was extensive water damage from efforts to put out the fire.

The railroad removed all of its employees from the hotel pending repair of the damage. The Milner immediately began to clean and deodorize the building and told the railroad it would be available for reoccupancy in a few days. The railroad had received complaints from its employees about the condition of the Milner and these complaints escalated after the fire. The railroad insisted on a thorough inspection of the building before it would allow reoccupancy by its employees.

This inspection was conducted on March 15, 1991, by representatives of the railroad and of the Milner and by Chief R.M. Poe of the Bluefield Fire Department. A detailed written memorandum of the inspection was prepared which documents numerous violations of electrical and fire codes and identifies the presence of crumbling, friable asbestos at several locations in the hotel. G.O. Turner, Pollution Control Coordinator for Norfolk Southern, who was present for the inspection, advised that airborne transmission or tracking by service personnel and occupants could spread fibrous particles of asbestos from virtually any area where it was located to all other areas of the hotel. The general manager and resident manager of the hotel were informally advised by F.A. Williams, Jr., Superintendent of Terminals for Norfolk Southern, that these conditions would have to be remedied before the railroad would allow its employees to reoccupy the hotel. A written copy of the memorandum of the inspection setting out the railroad's position with regard to reoccupancy was provided to Derek Arbogast, General Manager of the Milner, within a week of the inspection. Admitting that it was not in compliance with the codes and that the repair work needed to be done, the Milner obtained several estimates from contractors for completion of the electrical repairs and removal of the asbestos. Estimates of the total cost of this work ranged from $60,000 to $120,000. The estimates themselves reflect the extent of work necessary to bring the hotel up to applicable code standards and to remove or otherwise abate the asbestos problem. An estimate obtained from Hico Specialty Contractors refers to asbestos pipe insulation in the fifth floor hallway, in the basement mechanical room and in a basement room adjacent to the mechanical room; it also refers to boiler insulation and ceiling plaster which may contain asbestos. An estimate obtained from Allied Refrigeration, Inc. to complete the electrical repairs stated: "This is a very difficult job to estimate because of the magnitude of upgrading necessary."

Before it undertook to have the work done, the hotel asked the railroad for assurances that the railroad would reoccupy the building upon completion of the work. The railroad refused to give such assurances and, on April 9, 1991, mailed written notice to the hotel that it was terminating the Agreement. In its Complaint, the Milner admits receiving this written notice on April 11, 1991. The notice complies in all respects with the notice provisions of the contract. Thereafter, the hotel's owners elected not to complete the repairs, but instead sold the hotel and its contents at public auction. The auction was held on April 26, 1991, and realized the total sum of $56,000 for the building and its contents.²

In this civil action, originally filed in the Circuit Court of Mercer County, West Virginia, and removed by defendants to this court, plaintiff Milner Hotel seeks damages for breach of contract. The Milner first maintains that the contract obligates the railroad to pay for rental of rooms at the contract rate and to compensate Milner for lost revenues from food service and concessions from the date of the fire until May 11, 1991, the date the termination was effective, regardless of the fact that the hotel was not occupied by the railroad's employees at any time after the March 10, 1991 fire.

Second, the Milner charges that the railroad wrongfully terminated the contract, causing the plaintiff a loss of revenues for food, lodging and concessions, and forcing the Milner to sell the hotel at a significant loss. The Milner maintains that the fire damage was corrected by April 1, 1991, at which time the hotel was restored to habitability in spite of continuing code violations and the presence of friable asbestos. The Milner contends that there was no indication that the hotel would have to be closed because of the code violations and that it would have made the necessary repairs if the defendant had returned its personnel to the hotel. The Milner also contends that the railroad had been planning to terminate the contract for some time prior to the fire and seized upon the fire as an excuse to do what it wanted to do all along. The Milner demands judgment in a sum in excess of $644,000.

The railroad has moved for summary judgment, contending that it had the right to terminate the Agreement and that the plaintiff was itself in breach of its obligations under Section 1 of the Agreement. Summary judgment is appropriate only when, viewing the facts and the inferences to be drawn therefrom in the light most favorable to the non-moving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Miller v. Leathers, 913 F.2d 1085 (4th Cir. 1990), cert. denied, 498 U.S. 1109, 111 S.Ct. 1018, 112 L.Ed.2d 1100 (1991). A fact is deemed "material" if proof of its existence or non-existence would affect the disposition of the case under applicable law. Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment should be cautiously invoked so that no litigant will be deprived of a trial on a disputed issue of material fact. Tunstall v. Brotherhood of Locomotive Firemen, 69 F.Supp. 826 (E.D.Va.1946), aff'd, 163 F.2d 289 (4th Cir. 1947), cert. denied, 332 U.S. 841, 68 S.Ct. 262, 92 L.Ed. 413 (1947). However, the entry of summary judgment is, upon motion, mandated against a party who fails to make a showing sufficient to establish the existence of an essential element of its case on which it will hear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

II.

Section 10 of the Agreement, as amended, gives the parties an absolute right to terminate it upon thirty days written notice. No cause for termination is necessary. It is undisputed that the railroad gave written notice of termination and that this notice was received by the Milner on April 11, 1991. The Agreement, therefore, ended on May 11, 1991. While the railroad has argued that the second sentence of Section 10 providing for notice of default and subsequent termination on failure to cure was also triggered by the railroad's actions, the court deems it unnecessary to consider that argument. It seems clear beyond question that the absolute right to terminate on thirty days written notice provided for in the first sentence of Section 10, as amended, was properly...