Swiss Colony, Inc. v. Promotion Fulfillment Corp., CIV. 3-96-CV-10091.

• Decision Date: 13 July 1998
• Docket Number: No. 3-96-CV-10148.,No. CIV. 3-96-CV-10091.,CIV. 3-96-CV-10091.,3-96-CV-10148.
• Citation: 32 F.Supp.2d 1088
• Parties: THE SWISS COLONY, INC., Plaintiff, v. PROMOTION FULFILLMENT CORP. and Swabasa, L.C., Defendants.
• Court: U.S. District Court — Southern District of Iowa

32 F.Supp.2d 1088

THE SWISS COLONY, INC., Plaintiff, v. PROMOTION FULFILLMENT CORP. and Swabasa, L.C., Defendants.

No. CIV. 3-96-CV-10091.

No. 3-96-CV-10148.

United States District Court, S.D. Iowa, Davenport Division.

July 13, 1998.

Richard William Strawbridge, Clausen, Miller, Gorman, Caffrey & Witous, P.C., Chicago, IA, John Stonebraker, McDonald, Stonebraker & Cepican, P.C., Davenport, IA, for Plaintiff.

Sean W. McPartland, Lynch, Dallas, Smith & Harman, Cedar Rapids, IA, for Defendants.

ORDER

LONGSTAFF, District Judge.

The Court has before it defendants' motion for summary judgment, filed June 1, 1998. Plaintiff resisted the motion June 12, 1998. Defendants filed a Reply on June 30, 1998. The motion is now fully submitted. The Court notes that all parties have requested oral argument on this matter, but finds such argument unnecessary.

I. BACKGROUND

The following facts either are not in dispute or are viewed in a light most favorable to plaintiff. Defendant SWABASA, L.C. ("Swabasa") is the owner of a large warehouse facility in Comanche, Iowa. Pursuant to a Lease Agreement dated June 20, 1994, Swabasa leased the entire facility to defendant Promotion Fulfillment Corporation ("PFC")("Swabasa Lease"). On April 14, 1994, PFC entered into a sublease of a portion of the facility with plaintiff ("PFC/Swiss Colony Lease").¹ On April 14, 1995, a fire originated in a portion of the warehouse occupied by PFC and spread to the adjacent area occupied by plaintiff. Plaintiff seeks damages from defendants for damage to plaintiff's property arising from the fire.

This action originally involved several plaintiffs who asserted claims as bailors of property. All claims other than Swiss Colony's have been settled.

In its original complaint, plaintiff also asserted claims as a bailor of property. However, as plaintiff and defendants agree, their relationship is actually that of landlord/tenant. Therefore, in its Second Amended Complaint ("Complaint"), plaintiff alleges several acts of negligence on the part of the defendants as owner and landlord of the warehouse.² Defendants have each moved for summary judgment on different theories: PFC claims that a waiver of subrogation clause in the PFC/Swiss Colony Lease releases it from any liability to plaintiff; Swabasa claims that since it had leased the premises to PFC, it owed no duty to plaintiff.

II. APPLICABLE LAW AND DISCUSSION

A. Summary Judgment Standard

Summary judgment is properly granted when the record, viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Walsh v. United States, 31 F.3d 696, 698 (8th Cir. 1994). The moving party must establish its right to judgment with such clarity that there is no room for controversy. Jewson v. Mayo Clinic, 691 F.2d 405, 408 (8th Cir. 1982). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue is "genuine," if the evidence is sufficient to persuade a reasonable jury to return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. 2505. "As to materiality, the substantive law will identify which facts are material.... Factual disputes that are irrelevant or unnecessary will not be counted." Id.

B. Whether Summary Judgment is Appropriate in Present Case

1. PFC's Motion

PFC essentially relies on one subparagraph of the PFC/Swiss Colony Lease as the basis for its motion for summary judgement. The relevant paragraph reads as follows:

9. PROPERTY INSURANCE. (a) Tenant will not do or omit the doing of any act which would invalidate any insurance, or increase the insurance rates in force on the premises. See Exhibit A attached.

(b) To the extent of all insurance collectible for damage to property, and to the extent permitted by their respective policies of fire and extended coverage insurance, each party hereby waives rights of subrogation against the other, regardless of fault.

The italicized language was typed onto a standard Iowa State Bar Association business lease form. It is PFC's position that paragraph 9(b) contains an unambiguous waiver of plaintiff's right to seek damages from PFC resulting from the fire.

Plaintiff responds that paragraph 9(b) cannot be properly interpreted without examining the Exhibit A referenced in the preceding subparagraph.³ In particular, plaintiff refers to paragraph 5 of the Exhibit, which reads as follows:

5. INSURANCE. Landlord's fire and casualty insurance policies shall provide either that tenant is an additional insured thereunder or that landlord and said insurer waive subrogation rights against tenant to the extent that the insurance proceeds cover any loss to the premises and/or landlord resulting from tenant's occupancy during the term.

Plaintiff asserts that this language is meant as a replacement for paragraph 9(b), and, therefore, nullifies the mutual waiver of subrogation contained therein.

The Exhibit A attached to the standard lease form originated from an earlier agreement between PFC and plaintiff, an Offer to Lease dated April 5, 1994, signed by both parties. Plaintiff's vice president of human resources and general counsel drafted the Offer to Lease and requested that when the parties executed the standard lease form, parts of the Offer were to be incorporated in the final lease. Thus, paragraph 5 of Exhibit A is identical to paragraph 4 of the Offer to Lease. Both parties agree that the April 14 Lease is the final expression of their agreement.

The standard form contains several apparently random references to Exhibit A. None of the references indicate a specific paragraph of the Exhibit, nor do any of them follow from stricken language. The form has several blank spaces which are not followed by any reference to Exhibit A. Finally, a Paragraph 17 is typed onto the face of the form as follows: "17. OTHER TERMS. See Exhibit A attached."

The dispute at hand involves the different claims of the parties as to the significance of paragraph 5 of the Exhibit. Plaintiff contends that it supplants and replaces paragraph 9(b), thus eliminating the waiver of its right of subrogation; PFC argues that paragraph 5 merely gives it the option of either naming Swiss Colony as a beneficiary of its insurance policies or waiving any right of subrogation in the event of harm. PFC also contends that paragraph 5 does not affect plaintiff's waiver contained in paragraph 9(b). The issue is one of contract interpretation.

In a diversity case, a federal court looks to state law in determining issues of contract law. See Gibbons v. Graves Construction Co. Inc., 727 F.2d 753, 755 (8th Cir.1984); see also Prudential Ins. Co. v. Rand & Reed Powers P'ship, 972 F.Supp. 1194 (N.D.Iowa 1997), aff'd, 141 F.3d 834 (8th Cir.1998). "A lease is both a contract and a conveyance. Therefore, [Iowa courts] look to ordinary contract principles when construing a lease." Dickson v. Hubbell Realty Co., 567 N.W.2d 427, 430 (Iowa 1997).

Exculpatory clauses, such as those contained in paragraph 9(b) and paragraph 5 waiving subrogation rights, are enforceable in Iowa. See Huber v. Hovey, 501 N.W.2d 53, 55 (Iowa 1993); Advance Elevator Co., Inc. v. Four State Supply Co., 572 N.W.2d 186, 188 (Iowa Ct.App.1997). Thus, the only question which remains is whether, pursuant to paragraph 9(b), plaintiff has waived its right to collect damages from PFC.

"[I]n the construction of written contracts, the cardinal principal is that the intent of the parties must control; and except in cases of ambiguity, this is determined by what the contract itself says." Dickson, 567 N.W.2d at 430 (citing Iowa R.App. P. 14(f)(14)). "Ambiguity exists when, after application of pertinent rules of interpretation to the face of the instrument, a genuine uncertainty exists concerning which of two reasonable constructions is proper. The test for ambiguity is an objective one: `Is the language fairly susceptible to two interpretations?'" Iowa Fuel & Minerals, Inc. v. Iowa State Board of Regents, 471 N.W.2d 859, 863 (Iowa 1991) (citations omitted).

If contract language is found to be ambiguous, the ambiguity is to be construed strictly against the drafter of the language. Id. Plaintiff and defendants each claim that the other is the drafter of the terms under scrutiny here. However, where both parties to the agreement are represented by competent legal counsel, this doctrine of contra proferentem (against the party who proffers a thing) is inapplicable. Kinney v. Capitol-Strauss, Inc., 207 N.W.2d 574, 577 (Iowa 1973). See also Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 692 (8th Cir.1997), cert. denied, ___ U.S. ___, 118 S.Ct. 629, 139 L.Ed.2d 609 (U.S. Dec. 15, 1997). In their briefs on this motion, Plaintiff and PFC make numerous references to negotiations which occurred between their respective attorneys with respect to the PFC/Swiss Colony Lease. Therefore, the Court declines to interpret paragraph 9(b), paragraph 5 or their integration in a light which is unfavorable to either party.

Interpretation of the contract, as distinguished from construction, involves determining the meaning of the words themselves. Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp., 266 N.W.2d 22, 25 (Iowa 1978). As a general rule, in interpreting a contract, a court may properly consider extrinsic evidence, including the situation of the parties and any antecedent negotiations. Id. Both PFC and plaintiff make extensive references to depositions which clarify their situation and the negotiations leading up to the execution of the final PFC/Swiss Colony Lease. Nevertheless, this evidence should only be considered if it is...