Sears, Roebuck & Co. v. Poling

• Decision Date: 05 March 1957
• Docket Number: No. 49013,49013
• Parties: SEARS, ROEBUCK AND COMPANY, Inc., Appellant, v. Mignon B. POLING, Harry L. Poling and William N. Cramblit, Appellees.
• Court: Iowa Supreme Court

Page 462

81 N.W.2d 462

248 Iowa 582

SEARS, ROEBUCK AND COMPANY, Inc., Appellant, v. Mignon B. POLING, Harry L. Poling and William N. Cramblit, Appellees.

No. 49013.

Supreme Court of Iowa.

March 5, 1957.

Jones, White & Johnson, Ottumwa, for appellant.

Gilmore, Dull & Keith, Ottumwa, for appellees.

GARFIELD, Justice.

The question presented by this appeal is whether terms of a written lease relieve plaintiff, lessee of defendants' building, from liability for its destruction by fire resulting from plaintiff's negligence.

The case comes here on plaintiff's appeal, granted by us under rule 332, from an adverse adjudication of law points under rule 105, Rules of Civil Procedure, 58 I.C.A.

Plaintiff Sears, Roebuck & Co. (we call it 'Sears') sued defendants Cramblit and Poling at law for damages. The nature of that action is not now material. The disputed issue arises from defendants' counterclaim, plaintiff's answer to counterclaim, and defendants' reply to the answer. The counterclaim states that on January 14, 1948, a brick building owned by defendants, occupied by Sears as tenant under a written lease, was substantially destroyed by fire caused by Sears' negligence in cutting two openings, 6 by 8 feet in size, in the firewall on the east side of the building; the fire spread to defendants' building from the one east of it through these openings; defendants were damaged in the sum of $75,000 for which they ask judgment. Copy of the lease is attached to the counterclaim.

Sears' answer to the counterclaim admits: its occupancy of the building under the lease, it cut openings in the east wall as a means of access to the building east of it which Sears also then used, fire started in the east building and spread to defendants' building, causing damage thereto. The answer denies Sears was negligent and denies the fire spread to defendants' building through the openings in the wall.

About 16 months later Sears amended its answer by alleging the written lease relieves it from liability for the fire irrespective of whether it was caused by its negligence, defendants agreed in the lease to insure the building against loss by fire 'for the full insurable value,' they did procure fire insurance on the building and collected the full amount they procured, if defendants failed to procure or collect insurance in the amount the lease requires they are estopped from claiming damages from Sears growing out of defendants' breach of terms of the lease.

By reply to Sears' answer defendant-owners alleged: the lease is on a printed form prepared by Sears, the language it relies upon is ambiguous as to its legal effect and should be construed strictly against Sears, the parties did not intend to relieve Sears from liability for destruction of the building by its negligence, the lease interpreted as a whole does not relieve Sears from such liability. Defendants' reply also states they did procure and collect fire insurance in the sum of $25,000 but the value of the building and defendants' loss amounted to $75,000.

Amendments to defendants' reply allege that pursuant to clause 15 of the lease they caused it to be terminated on January 19, 1948, Sears acquiesced therein and never became entitled to any of the insurance proceeds, by reason of said cancelation of the lease clauses 13 and 15 of the lease became inoperative and Sears is estopped from relying on them.

The reply as amended also alleges: the lease could not have been intended to release Sears from liability for negligence for the reason the annual rent of $3,000, plus taxes insofar as they exceeded $719.30 per year, was only about 4 per cent of the value of the leased premises and insufficient to show an intent that it furnished added consideration for the alleged release of liability; on the date of the lease (March 9, 1944) the annual cost of insurance for the full insurable value was $667.50; such cost increased to $1,072.50, July 31, 1946; after this increase the rent returned only about 1.6 per cent of the value of the premises after payment of taxes and deduction of premiums on insurance for the full value. (As previously stated, defendants insured the building for only one third its value.)

The trial court's adjudication of law points was in response to defendants' application that all points of law raised by Sears' amendment to answer to counterclaim and defendants' reply thereto as amended be adjudicated, pursuant to rule 105, R.C.P. The trial court ruled the terms of the lease do not relieve Sears from liability for damages from fire caused by its negligence.

Although, as stated, Sears has denied it was negligent it concedes for purposes of this appeal such negligence in causing the fire must be assumed. It also concedes other well-pleaded allegations of defendants are to be considered as true.

It is apparent terms of the lease that bear on this controversy are of vital importance. We quote them here: 'Third: Tenant agrees that * * * upon the termination of this lease the demised premises will be in substantially as good condition as received, loss by fire, tornado, earthquake or any unavoidable casualty and ordinary wear and tear excepted.

'Thirteenth: Landlord hereby agrees * * * at his expense to keep said demised premises insured at all times during the term hereof against destruction or damage by fire or tornado for the full insurable value thereof, said insurance, in the event of loss during said term * * * to be payable to Landlord and Tenant as their interests appear under the Fifteenth Clause hereof. * * *

'Fifteenth: * * * In the event the demised premises are hereafter * * * rendered wholly unfit for their accustomed uses, by fire, tornado, earthquake, or any casualty, then either party hereto shall have the right to terminate this lease * * * by giving to the other party hereto, within ten (10) days after the happening of such casualty, written notice of such termination; if said notice be given within said * * * period, this lease shall terminate, as aforesaid, * * *; in the event said notice be not given within said * * * period, this lease shall not terminate, but Landlord shall, at his own expense, promptly repair and rebuild said premises and restore the same to substantially the condition in which they were immediately prior to the happening of such casualty, and rent shall abate from the date of such casualty until said premises are so repaired, rebuilt and restored.

'If Landlord fails to promptly repair, rebuild or restore said premises as herein provided, then Tenant shall have the right * * * to terminate this lease by giving Landlord written notice of such termination, or Tenant, at its sole option, may repair, rebuild or restore the demised premises; and if Tenant elects to repair, rebuild or restore said premises, Tenant shall have the further right to collect and use for that purpose all or so much as may be necessary of the insurance upon the demised premises payable by reason of such damage or destruction, and Landlord shall pay Tenant upon demand the expense incurred by Tenant in so repairing, rebuilding or restoring said premises * * * less any insurance received by Tenant as above provided for; * * *.

'Rider, Page 1 * * *

'Fourth: Tenant shall secure the written approval of landlord before any building exterior structural changes or alterations are made. * * *.'

In connection with this last provision it seems to be conceded for present purposes Sears did not secure defendants' written approval before making the openings in the east wall.

In general Sears contends and defendants deny the above terms of the lease are clear and unambiguous and determine the rights of the parties in favor of nonliability of Sears. Resort to rules of construction and extrinsic circumstances, Sears asserts and defendants deny, is therefore unnecessary and improper.

I. It is true, as Sears argues, it is not contrary to public policy, where the public interest or some statutory prohibition is not involved, for parties to a lease to agree that one of them is relieved from liability for future negligence in causing a fire. Indeed the public policy of freedom of contract is best served by enforcing such a provision. Griswold v. Illinois Central Ry. Co., 90 Iowa 265, 57 N.W. 843, 24 L.R.A. 647; Hartford Fire Ins. Co. v. Chicago, M. & St. P. R. Co., 175 U.S. 91, 20 S.Ct. 33, 44 L.Ed. 84; Santa Fe, P. & P. R. Co. v. Grant Bros. Const. Co., 228 U.S. 177, 188-189, 33 S.Ct. 474, 57 L.Ed. 787, 793; Commercial Union Assur. Co. v. Foley Bros., 141 Minn. 258, 169 N.W. 793, 794; Kansas City Stock Yards Co. v. A. Reich & Sons, Mo., 250 S.W.2d 692, 698. See also Restatement Contracts, sections 574-5; Annotation, 175 A.L.R. 8, 13-15; 17 C.J.S., Contracts, § 262.

While defendants concede it is not ordinarily contrary to public policy for parties to contract for freedom from liability for negligence, they properly remind us that the issue here is whether this lease contains such a contract.

II. In most cases contract provisions that are subject to construction, which a party claims relieve him from liability for his own negligence, particularly active negligence, are strictly construed against him. They are not held to cover such negligence unless the intention to do so is clearly expressed. Fields v. City of Oakland, 137 Cal.App.2d 602, 291 P.2d 145, 149; Freddi-Gail, Inc., v. Royal Holding Corp., 34 N.J.Super. 142, 111 A.2d 636, 637; Winkler v. Appalachian Amusement Co., 238 N.C. 589, 79 S.E.2d 185, 190; Carstens v. Western Pipe & Steel Co., 142 Wash. 259, 252 P. 939, 941; Annotation, 175 A.L.R. 8, 18, 89-92; 17 C.J.S., Contracts, § 262; 51 C.J.S., Landlord and Tenant, § 414. See also Oscar Ruff Drug Co. v. Western Iowa Co., 191 Iowa 1035, 181 N.W. 408, 15 A.L.R. 962.

Referring to 'broad exculpatory provisions relieving the landlord from liability for damages' from various causes, the annotation 175 A.L.R. 8, 89, states: 'With but few...