Walton v. Fujita Tourist Enterprises Co., Ltd., C5-85-725

• Decision Date: 14 January 1986
• Docket Number: No. C5-85-725,C5-85-725
• Parties: Florence G. WALTON, et al., Respondents, v. FUJITA TOURIST ENTERPRISES CO., LTD. Defendant, Pacific Delight Tours, Inc., Respondent, Northwest Airlines, Inc., Appellant.
• Court: Minnesota Court of Appeals

Page 198

380 N.W.2d 198

Florence G. WALTON, et al., Respondents, v. FUJITA TOURIST ENTERPRISES CO., LTD. Defendant Pacific Delight Tours, Inc., Respondent Northwest Airlines, Inc., Appellant.

No. C5-85-725.

Court of Appeals of Minnesota.

Jan. 14, 1986.

Review Denied March 21, 1986.

Syllabus by the Court

1. A contract clause exonerating a party from liability will be strictly construed against the benefited party. The exculpatory clause is void as against public policy when there is a disparity of bargaining power between the parties, the services involved are essential, and the clause is ambiguous in scope.

2. A joint venture existed between appellant and defendant when they both contributed money, property, time, employees, and effort, had a proprietary interest and right of mutual control, shared the profits, and their contract showed that the parties in fact entered into a joint venture.

3. In a joint venture, the individual defendants are jointly liable as a unit because of their mutual undertaking for a common purpose and their right of direction and control over the enterprise, even though there is no actual physical control or such control was never exercised.

4. When appellant and defendant were found jointly liable, their contributions to the damage award were correctly determined in proportion to the percentage of negligence attributable to each, provided however, that each remains jointly and severally liable for the whole award.

5. In a non-jury trial, a judge's questioning of an attorney during closing arguments does not deprive the party of a fair trial.

Richard T. Wylie, Minneapolis, for respondents, Florence G. Walton, et al.

Michael P. McDonough, Minneapolis, for respondent, Pacific Delight Tours, Inc.

Douglas J. Muirhead, Minneapolis, for appellant, Northwest Airlines, Inc.

Heard, considered, and decided by CRIPPEN, P.J., and WOZNIAK and LANSING, JJ.

OPINION

CRIPPEN, Judge.

The trial court found defendant Pacific Delight Tours, Inc. 50% negligent, appellant Northwest Airlines, Inc. 30% negligent, and respondent Florence Walton 20% negligent for injuries suffered by Walton while on a familiarization "fam" tour sponsored by Pacific Delight and Northwest Airlines for travel agents. Following a separate trial on damages, judgment was entered declaring the joint liability of Northwest and Pacific Delight for 80% of Walton's damages. Walton and Pacific Delight reached a settlement agreement as to Pacific Delight's portion of the damages. Northwest appeals from the judgment and from the denial of the motion for a new trial. Respondent requests review of the trial court's denial of prejudgment interest. We affirm.

FACTS

Respondent Walton, a travel agent, fell and injured her ankle on some stairs in a hotel in Japan where she was staying. Walton had gone to Japan in 1976 on a 10-day familiarization trip sponsored jointly by appellant Northwest and defendant Pacific Delight. Fam trips are common in the travel industry; travel agents pay a nominal amount (Walton paid $199), and the airline and tour "wholesaler" provide transportation and accommodations, as well as tours of tourist attractions potentially of interest to travel agency customers. By participating in these fam trips, travel agents such as Walton gain firsthand information about the hotels and tours that they sell to the retail customers.

Walton arranged to go on the trip to Japan by responding to an offer sent to her by Northwest. She signed the document setting forth the itinerary and the terms and conditions of the offer and submitted the required fee. The trial court held that an exculpatory clause contained in that document was unenforceable as against public policy. That clause reads:

Responsibility: The responsibility and liability of Northwest Airlines Inc. (Northwest) is limited to that of a common carrier and arises in connection with this tour only while Northwest is acting as a common carrier. Northwest may act as agent for owners or contractors who provide other transportation or services relating to this tour. All tickets and tour orders are issued subject to the terms, conditions and responsibilities under which such other transportation or other services are offered or provided, and Northwest shall not be liable for any loss, damage, or injury or death relating thereto.

The co-sponsoring of fam trips by Northwest and Pacific Delight began as early as 1971. The firms shared the revenues from the trips and both firms contributed money, property, time, employees, and effort to organize the trips and market them to travel agents. Although it was not introduced into evidence, the two firms also had a written contract regarding the fam trips.

A Northwest employee accompanied the tour group on each trip, and such an employee was on the trip with Walton in Japan. Apart from that employee's presence, however, Northwest's "physical" involvement with the trip itself was limited to the air transportation. The ground transportation, hotel accommodations, sightseeing tours, etc., were all handled by Pacific Delight. In the case of fam trips to Japan, local law required the involvement of a Japanese agency for all the ground activities there. Pacific Delight arranged for this through Fujita Tourist Enterprises, a Japanese corporation. (Because the trial court in this case found no jurisdiction over Fujita, it was involved as a defendant in name only.)

The hotel where Walton's accident occurred had been included by Northwest and Pacific Delight in earlier tours. Although the individual Northwest employee who was on Walton's trip had never been to the hotel before, other Northwest agents had been at the hotel during previous tours. Fujita employees, as Pacific Delight's agents in Japan, had been in the hotel on various occasions.

On the day of her accident, Walton and the other tour members, including the Fujita and Northwest employees, ascended the staircase where Walton later fell down. They had gone up the stairs on the way to the hotel's restaurant. After lunch at the restaurant, Walton returned by herself to look for a bathroom. The stairs were located just on the other side of a door, and Walton fell when she walked through the doorway and slipped on the top step. The evidence indicated the top step was narrower than the others.

Following a trial on the liability issues, the trial court found that Walton's injuries were principally caused by the negligence of all defendants, as joint venturers, due to their failure to provide reasonably safe facilities for the use of their customers. The trial court found that Pacific Delight was 50% negligent, Northwest was 30% negligent, and Walton was 20% negligent for failing to maintain a minimal lookout for such dangers.

A trial on damages followed, and Walton was awarded $100,490.64, reduced by 20% for her negligence, for a net award of $80,392.51, plus interest from the date of the judgment. The trial court denied Walton's posttrial motion for prejudgment interest. Northwest appeals from the judgment and from the order denying a new trial, and Walton seeks review of the trial court's order denying the prejudgment interest.

ISSUES

1. Did the trial court err in finding the exculpatory clause in the contract to be unenforceable?

2. Did the trial court err in finding the existence of a joint venture between Northwest and Pacific Delight?

3. Did the trial court err in finding Northwest was negligent?

4. Was Northwest deprived of a fair trial because of the trial judge's interruptions during closing arguments?

ANALYSIS

1. Exculpatory clauses are valid in certain circumstances, but are not favored in the law. Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 923 (Minn.1982). A clause exonerating a party from liability will be strictly construed against the benefited party. If the clause is ambiguous in scope it will not be enforced. Id.

In evaluating exculpatory clauses, the courts approach the policy considerations on a case-by-case basis. Id. The court in Schlobohm adopted a two-prong test for analyzing the policy for a case. First, the court reviews the disparity of bargaining power between the two parties. Second, the court considers the "types of services being offered or provided (taking into consideration whether it is a public or essential service)." Id.

The trial court here relied on both parts of the Schlobohm test. First, the court stated that the agreement between Northwest and Walton was not bargained for, noting the offer's "by invitation only" quality. The court also noted that the document was prepared unilaterally by Northwest, creating a "take it or leave it" situation. Second, the court stated that participation in such fam trips is necessary for the business success of an agent and that Northwest's size gave it a virtual monopoly on such trips. The court said that the "services tendered were unique and unavailable elsewhere" and were of "practical necessity" to Walton and other travel agents.

The trial court's analysis is compelling. First, the trial court's assessment of the disparity of bargaining power between Walton and Northwest accurately depicts the relationship between travel agents and providers of fam trips. Second, Northwest, a major airline headquartered in the Twin Cities, is the region's primary provider of air trips to the Orient. Travel agents who forego Northwest's trips will not be very able to market the trips to their own customers without some basis upon which to recommend them. Northwest's various services could not be obtained elsewhere.

In addition, the exculpatory clause is ambiguous in scope. It maintains that Northwest "may act as agent for owners or contractors who provide other transportation or services," but subsequently disclaims liability for losses relating to other transportation or services.

For these reasons, we conclude that the trial court properly found the exculpatory clause to be unenforceable.

2. The...