U.S. Fire Ins. Co. v. Phil-Mar Corp.

• Decision Date: 26 December 1956
• Docket Number: PHIL-MAR,No. 34713,34713
• Citation: 166 Ohio St. 85,1 O.O.2d 212,139 N.E.2d 330
• Parties: , 1 O.O.2d 212 UNITED STATES FIRE INS. CO. et al., Appellants, et al., v.CORPORATION et al., Appellees; National Ins. Co. of Hartford, Appellant.
• Court: Ohio Supreme Court

Page 85

166 Ohio St. 85

139 N.E.2d 330, 1 O.O.2d 212

UNITED STATES FIRE INS. CO. et al., Appellants, et al., v. PHIL-MAR CORPORATION et al., Appellees National Ins. Co. of Hartford, Appellant.

No. 34713.

Supreme Court of Ohio.

Dec. 26, 1956.

Syllabus by the Court

Where a lease provides that on termination thereof the tenant shall return the property 'in as good condition and repair as the same shall be at the commencement of said term (loss by fire * * * excepted),' and where such lease provides further that, 'in the event that the fire insurance rate on the * * * premsies shall be increased by reason of lessee's occupancy thereof, over and above the fire rate fixed for the lessor's previous use and occupancy thereof, then the lessee shall pay to the lessor the additional premium by reason of such increase in insurance rate,' the lessor has relieved the lessee of liability for fire caused by his negligence and has no right of recovery against the lessee, and insurers of the lessor, being subrogated only to the rights of the lessor, also have no right of recovery against such lessee, although they have compensated the lessor for losses he sustained through lessee's negligence.

The J. Spang Baking Company, a corporation, by written lease leased two contiguous industrial buildings to Phil-Mar Corporation, a manufacturer of lamps and lamp shades. After the execution of the lease, the buildings were substantially destroyed by fire. For the purpose of this appeal, it is conceded that such fire was the result of the negligence of one of lessee's employees. The fire insurance on the buildings was maintained by the lessor, the risk being spread among several insurance companies.

The insurance companies having paid the loss to the lessor, the majority of them instituted this action, as subrogees of the lessor on its cause of action, against the lessee for the negligent causing of the fire, joining the other insurance companies and lessor as defendants. At the close of all the evidence the trial court, on motion, directed a verdict in favor of the lessee, on the ground that the lessee was released under the terms of the lease from its liability to the lessor for the negligent destruction of the leased premises.

That judgment was affirmed by the Court of Appeals, and the cause is before this court pursuant to the allowance of a motion to certify the record.

McCreary, Hinslea & Ray and Ansel B. Curtiss, Cleveland, for appellants.

Hahn, Loeser, Keough, Freedheim & Dean and William A. Lowry, Cleveland, for appellee Phil-Mar Corp.

MATTHIAS, Judge.

The rights of the appellant insurance companies being those of subrogees can rise no higher than those of the lessor subrogor, and thus in determining this action we must consider the rights, if any, the lessor has against the lessee.

The primary question raised by this appeal is whether a provision in the surrender clause of a lease, excepting therefrom 'loss by fire,' relieves the lessee from his common-law liability to the lessor for damages resulting from fire caused by the lessee's own negligence.

The provision in the lease, with which we are concerned, reads as follows:

'That lessee will deliver up and surrender to the lessor possession of the premises hereby leased upon the expiration of this lease or its termination in any way, in as good condition and repair as the same shall be at the commencement of said term (loss by fire and ordinary wear and decay only excepted).' (Emphasis added.)

We are thus directly confronted with the question as to what the parties intended by the phrase, 'loss by fire * * * excepted.'

It is a fundamental principle of law that a court in construing a written instrument must give words their common, ordinary and usual meaning, unless required to do otherwise by the instrument itself.

The term, 'loss by fire,' has, when considered in relation to policies of fire insurance, a definite meaning. As it is used in such policies the usual and ordinary meaning of such term is damage resulting from fire caused by act of God, accident or negligence.

Clearly, to the ordinary man, the phrase, 'loss by fire,' means just that--loss by fire caused in any manner other than by his own arson.

As was said by the court in General Mills, Inc., v. Goldman, 8 Cir., 184 F.2d 359, 366, 'it is very clear in the light of all the provisions of the lease, the circumstances of its execution and the understanding about fire insurance coverage to which the lease was related that by the provision that on termination of the lease the tenant should return the property in good condition 'loss by fire * * * excepted' the parties meant a loss by fire such as is always meant when men are talking about or figuring on the risk of it in business dealings--i. e., the 'loss by fire' which always is insured against in ordinary course and against which the landlords here intended to and did take out insurance in an amount greater than the owners' investment.'

However, in the construction of any written instrument the primary duty of the court is to determine and give effect to the intention of the parties.

To determine such intention here, we must examine the various provisions of the lease to see whether the parties intended to limit the meaning of the phrase, 'loss by fire,' or intended in fact to relieve the lessee from its common-law liability.

Considering first the surrender clause in which such phrase is incorporated, we find that the complete phrase is 'loss by fire and ordinary wear and decay only excepted.' Thus it is apparent upon the face of the lease that, although the parties qualified the exception as to wear and decay to mean ordinary wear and decay, they made no such qualification as to loss by fire. The lease does not say loss by ordinary fire or non-negligent fire, but merely loss by fire, with no qualification or limitation. The parties, had they so desired, could easily have qualified such provision as they did with 'wear and decay.' The parties having directly qualified a part of the exception, their failure to do so with the remainder indicates that their apparent intent was to put no qualification or limitation on fire losses. In other words, they apparently intended to relieve the lessee from liability for any fire loss.

That the parties understood the qualifications as to negligence is clearly shown by the provision in the lease, relating to destruction of the leased premises, wherein it is provided that, 'if the said premises shall without fault or neglect on lessee's part be destroyed or so injured by the elements or other cause as to be unfit for occupancy and such destruction or injury could reasonably be repaired within thirty (30) days,' such repairs shall be made by the lessor. Here the parties clearly provided for a situation involving negligence.

The following further provision in the lease clearly indicates that the purpose of such clause was to relieve the lessee from liability for loss by fire, without any qualifying exceptions:

'In the event that the fire insurance rate on the building on the above demised premises shall be increased by reason of lessee's occupancy thereof, over and above the fire rate fixed for the lessor's previous use and occupancy thereof, then the lessee shall pay to the lessor the additional premium by reason of such increase in insurance rate for the unexpired portion of the term of the within lease on only so much of the principal amount of the fire insurance coverage on said building as does not exceed $75,000. Such additional premium shall be paid to the lessor upon its demand and upon its submission to the lessee of the proper evidences indicating such increase in rate.'

It is clear from this provision that the parties recognized that lessee's business was much more dangerous and hazardous in regard to fire than that of the previous user, and that there was a distinct possibility that fire insurance rates would be increased under the lessee's use. Thus, in the event of such an increase, lessee agreed to pay the increased cost of insurance. Clearly under this section of the lease it was contemplated that the lessor would carry insurance on the property and look to the insurance for compensation for any loss by fire. If the parties had intended otherwise, there would have been no reason for such provision.

The record shows that there was an increase in premiums, and that lessee paid such increase.

Thus, considering the lease as a whole and in particular those provisions relating to destruction and insurance and the fact that the phrase, 'loss by fire,' is unqualified and unlimited, it is apparent that under the circumstances of this case the parties intended to relieve the lessee from its common-law liability to the lessor for loss by fire.

The rights of the appellant insurance companies being those of subrogees and rising no higher than those of the lessor, the lessor having released the lessee from liability, it follows that the judgment of the Court of Appeals is correct, and it is affirmed.

Judgment affirmed.

WEYGANDT, C. J., and ZIMMERMAN, STEWART, BELL, and TAFT, JJ., concur.

HART, Judge.

I am obliged to dissent from the majority opinion and the judgment in this case. I regret the length of this dissenting opinion but it seems necessary to express my viewpoint owing to the importance and intricacies of the problems.

The three parties--the lessor-insured, the lessee and the insurers--being circumstanced, legally related and interested in the implications of this action, let us take a look at the terms of the lease to which the lessor-insured and the lessee were parties to determine their intention and the expression of that intention in the lease itself.

The lease between Spang and Phil-Mar was entered into on April 14, 1948, to become effective May 1, 1948, for a period of five years. The words of the surrender clause to be construed are: 'That lessee will deliver up and...