Vesta Fire Ins. Corp. v. Milam & Co. Constr., Inc.

Decision Date27 August 2004
Citation901 So.2d 84
CourtAlabama Supreme Court
PartiesVESTA FIRE INSURANCE CORPORATION v. MILAM & COMPANY CONSTRUCTION, INC., et al. Wausau Insurance Company v. Milam & Company Construction, Inc., et al. Landmark Electric Company, Inc. v. Vesta Fire Insurance Corporation. Sentry Heating & Air Conditioning v. Vesta Fire Insurance Corporation et al. Wausau Insurance Company v. Milam & Company Construction, Inc., et al. Landmark Electric Company, Inc. v. Wausau Insurance Company et al. Sentry Heating & Air Conditioning v. Wausau Insurance Company.

Tom E. Ellis of Law Offices of Tom E. Ellis, L.L.C., Birmingham, for Vesta Fire Insurance Corporation.

Mark T. Dietrichs and David C. King of Swift, Currie, McGhee & Hiers, LLP, Atlanta, Georgia; and J. Bentley Owens III of Starnes & Atchison, Birmingham, for Wausau Insurance Company.

Michael L. Jackson of Wallace, Jordan, Ratliff & Brandt, L.L.C., Birmingham, for Milam & Company Construction, Inc.

Freddie N. Harrington, Jr., of Clark & Scott, P.C., Birmingham, for Landmark Electric Company, Inc.

Jeffrey E. Friedman, P. Thomas Dazzio, Jr., and Lee T. Patterson of Friedman, Leak & Bloom, P.C., Birmingham, for Sentry Heating & Air Conditioning.

Walter J. Price III and Anna-Katherine Bowman of Huie, Fernambucq & Stewart, LLP, Birmingham, for Lenz-Ramseur, Inc.

Jack J. Hall, Jr., of Hall, Conerly & Bolvig, P.C., Birmingham, for Sure Air, Ltd.

HARWOOD, Justice.

These cases are the result of a fire that destroyed a video rental store in Bessemer on July 24, 1998. Vesta Fire Insurance Corporation ("Vesta") insured the premises for the owner of the building, and Wausau Insurance Company ("Wausau") insured the store's inventory for Hollywood Entertainment Corporation ("Hollywood"), which owned the inventory. Vesta and Wausau sued, as subrogors of their respective insureds, Landmark Electric Company, Inc. ("Landmark"); Milam & Company Construction, Inc. ("Milam"); Sentry Heating & Air Conditioning ("Sentry"); Sure Air, Ltd.; Lenz-Ramseur, Inc.; and DesignWorx, Inc., alleging that the defendants, as contractors and subcontractors responsible for the construction or maintenance of the building that housed the video rental store, had negligently designed, constructed, and maintained the building and thereby had caused the fire that destroyed the building and its contents. The plaintiffs alleged that the defendants had improperly installed and maintained the electrical components in the air-conditioning system and that that improper installation and maintenance had caused the fire. Vesta filed its action in January 1999, and Wausau filed its action in July 2000. Both plaintiffs asserted substantially the same claims; those included claims of negligence, breach of warranty, and claims under the Alabama Extended Manufacturer's Liability Doctrine ("AEMLD"). The trial court consolidated the two cases for adjudication.

After extended discovery, the defendants filed motions for a summary judgment. After a hearing, the trial court entered a summary judgment for each defendant against both plaintiffs. The summary judgments as to the plaintiffs' claims were based on the trial court's determination that the plaintiffs' conduct had resulted in spoliation of the evidence. In addition, the trial court held that the plaintiffs' claims against Lenz-Ramseur were due to be dismissed on the additional ground that the plaintiffs had presented no expert evidence indicating that Lenz-Ramseur had done anything that had resulted in the fire. As to Landmark, the trial court found additionally that no warranty existed between the plaintiffs and Landmark and that the plaintiffs' breach-of-warranty and negligence claims against Landmark were subsumed in their AEMLD claims against that defendant. The trial court entered a summary judgment for DesignWorx, the architect for the building, on Vesta's claim alleging that it had failed to conduct an inspection of the building based on its finding that Hollywood had assumed all duties of inspection.1

In addition to the plaintiffs' claims, Sentry had filed cross-claims against Sure Air, and the trial court entered a summary judgment for Sure Air as to those cross-claims.2 The plaintiffs appealed. Landmark and Sentry cross-appealed, arguing that they were entitled to summary judgments on grounds other than spoliation of the evidence. The remaining appellees also assert that the summary judgments in their favor are supportable on grounds other than spoliation. We reverse and remand.

On appeal, the plaintiffs argue that the summary judgments were improper because there were genuine issues of material fact as to the cause of the fire. The defendants argue that the plaintiffs' investigators who examined the premises immediately after the fire retained only those materials they thought were relevant to their investigatory conclusions and that the premises and remaining evidence were demolished before the plaintiffs filed their respective actions; the defendants assert that the plaintiffs' failure to preserve relevant evidence resulted in the loss of evidence critical to the defense.

Our review of a summary judgment is de novo.

"In reviewing the disposition of a motion for summary judgment, `we utilize the same standard as the trial court in determining whether the evidence before [it] made out a genuine issue of material fact,' Bussey v. John Deere Co., 531 So.2d 860, 862 (Ala.1988), and whether the movant was `entitled to a judgment as a matter of law.' Wright v. Wright, 654 So.2d 542 (Ala.1995); Rule 56(c), Ala.R.Civ.P. When the movant makes a prima facie showing that there is no genuine issue of material fact, the burden shifts to the nonmovant to present substantial evidence creating such an issue. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797-98 (Ala.1989). Evidence is `substantial' if it is of `such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved.' Wright, 654 So.2d at 543 (quoting West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala. 1989)). Our review is further subject to the caveat that this Court must review the record in a light most favorable to the nonmovant and must resolve all reasonable doubts against the movant. Wilma Corp. v. Fleming Foods of Alabama, Inc., 613 So.2d 359 (Ala.1993); Hanners v. Balfour Guthrie, Inc., 564 So.2d 412, 413 (Ala.1990)."

Hobson v. American Cast Iron Pipe Co., 690 So.2d 341, 344 (Ala.1997). Further, in determining whether the summary judgments for the defendants were proper on the ground of spoliation of the evidence, we consider whether the trial court exceeded its discretion in entering the summary judgments. See, e.g., Cincinnati Ins. Co. v. Synergy Gas, Inc., 585 So.2d 822 (Ala.1991); Iverson v. Xpert Tune, Inc., 553 So.2d 82 (Ala.1989); and Copenhagen Reinsurance Co. v. Champion Home Builders Co., 872 So.2d 848 (Ala. Civ.App.2003), all discussed infra.

The record shows that in January 1997, pursuant to an agreement with Hollywood, A & M Bessemer, LLC ("A & M"), contracted with Milam to construct a Hollywood Video video rental store at the West Lake Mall in Bessemer. The agreement between A & M and Hollywood provided that A & M owned the physical structure, i.e., the building housing the video rental store, and Hollywood owned the contents, i.e., the video media that would be rented or sold to the public. Hollywood employed DesignWorx as the architect for the building, and Milam, as the general contractor, employed various subcontractors, including Landmark. Landmark was to perform specified electrical work. The heating, ventilation, and air-conditioning ("HVAC") system for the building was provided and installed by Lenz-Ramseur, doing business as Standard Heating and Air Conditioning, Ltd., and Sure Air was to provide service and maintenance for the HVAC. Sure Air subsequently subcontracted with Sentry for Sentry to perform the service and maintenance under Sure Air's agreement with Hollywood.

While the store was being built, Landmark constructed the circuitry necessary to supply electrical power to the HVAC; that circuitry included a "service disconnect" (a fuse box located on the side of the building) and a "unit disconnect" (a fuse box located on the HVAC unit). Although design plans originally called for a "York" brand HVAC unit, Hollywood substituted a "Trane" brand unit. The Trane HVAC unit was installed by Lenz-Ramseur and Lenz-Ramseur performed some preliminary tests on the unit; thereafter, Sentry performed the maintenance on the unit. In addition to regular maintenance checks, Sentry's work included replacing a bad condenser fan motor, a "rainshield," and a "blade" in December 1997, reconnecting a wire leading to compressor number one on May 19, 1998, and installing on July 1, 1998, split bolts3 to repair a problem Sentry's service technician believed related to an internal electrical terminal strip that was causing a circuit breaker for the compressor to trip. With respect to the July 1, 1998, repair, Sentry's service technician, Lance Langley, had been called to the store because the HVAC was not working properly; he determined that compressor number two was not working because that circuit breaker for that compressor had been tripped. He tested the unit and discovered a voltage imbalance, which he testified he corrected by installing the split bolts. He further testified that after the repair, he conducted tests that showed that the voltage imbalance had been corrected, and he noted that the unit "ran fine" after the repair. Other problems noted during the operation of the building involved flickering and buzzing in the neon-lighting system.

As a result of the fire, Vesta paid A & M $468,192 pursuant to its insurance policy and became...

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