### IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON

PLANTERS GIN COMPANY v . FEDERAL COMPRESS & WA REHOUSE COMPANY, INC., ET AL


### . Rule 3 Appeal from the Circuit Court for Shelby County No. 88907-5 T.D. The Honorable Kay S. Robilio, Judge

No. W1999-02460-COA-R3-CV- Decided July 12, 2000

This case invol ves a c ommercial lease agreement which contained an exculpatory clause and a waive r of subrogation clause. The lessee suffered damage to goods stored in its warehouse when the roof of an adjacent warehouse owned by the lessor collapsed, leaking rainwater into the lessee’s warehouse. The lessee sued the lessor and its alarm service provider f or failing to notify the fire department

about the water leak or taking other appropriate action. The trial court granted summary judg ment in favor of the le

ssor and the alar

m company. The les see appeals. We affirm i n part , reverse in part, and remand, finding that the exculpat ory clause and th

e waiver of subr

ogation clause in the lease are inapplicable to claims arising from acts unrelated to the landlord-tenant relationship, and that the alarm company had no affirmative duty to protect or warn the lessee.

Tenn.R.Civ.P

. 3; Appeal as of Right; Judgment of the Circuit Court is Affirmed in part, Reversed in part, and Remanded

.

H OLLY K IRBY L ILLARD , J., delivered the opinion of the cour

t, in which W. F RANK C RAWFORD , P.J., W.S., and D AVID R. F ARMER , J., joined.

Allan B. Thorp, Memphis, Tennessee, for the appellant, Planters Gin Company

Michael B. Neal, Elizabeth J. Landrigan, Memphis, Tennessee, for the appellee, Feder

al Compress & Warehouse Company, Inc.

John Barry Burgess, Memphis, Tennessee, for the appellee, Wells Fargo Alarm Services, Inc.

OPINION

Defendant/Appellee

Federal Compress & Warehouse Company, Inc. (“Federal Compress”) leasedwarehouse space for the storage of cotton to Plaintiff/Appellant Planters Gin Company (“Planters Gin”). The lease defined the premises leased by Planters Gin, referred to as Building One and Building Two, as “61,188 Total Square Feet consisting of 37,500 Square Feet in Building No. 1 and 23,688 Square Feet in Building No. 2.” The lease was drafted by Federal Compress. Federal Compress also owned a third, vacant building, Building Three, which was adjacent to Buildings One-2-

and Two and not subject to the lease. Buildings One and Two were separated from each other

and from Building Three by brick firewalls, and each building had its own roof. All three buildings were equipped with a sprinkler system which was monitored by Defendant/Appellee Wells Fargo Alarm Services, Inc. (“Wells Fargo”) pursuant to a service agreement between Federal Compress a nd We l ls Fargo.

The lease between Planters Gin and Federal Compress contained the following paragraph, entitled “Upkeep of Premises”:

Lessee will at Lessee’s s ole expen se keep and maintain in good repair the entire leasedprem ises including interior walls, floors, ce

ilings, ducts, utilitie

s, air conditioning, heating and lighting and plumbing and also including the loading dock and any parking are

a exclusively

used by Lessee. Lessor

shall maintain the sprinkler sys tem, roof, foundations, and outside walls (not including doors and floo rs) ; however, Lessor

shall not be obliged to make any repair unless it sh all be notified in writing by Lessee of the need of such repair . . . .

On the evening of October 27
, 1996, a rainstorm caused a portion of the roof of Building Three to collapse. The roof collapsed onto the sprinkler system pipes in Building Three, causing the pipes to burst. Rainwater from the open roof

as well as water from the burst sprinkler system pipes flowed throughout the night into Building Thr ee and eventual

ly into Building Two, causing damage
to Planter Gin’s cotton stored in Building Two. Although Wells Fargo’s monitoring station received trouble signals throughout the evening, it failed to notify the fire department, Federal Compress, or anyone else of the trouble at the ware houses . Federal Compress employees discovered the water leak at 6:00 a.m. the next morning when they arrived for work.

The lease between Pl

a n ters Gin and Feder

al Compress contai

ned an exculpato

ry clause requiring Planters Gin

to hold harmless and indemnify Federal Compress from liability for a

ny loss sustained by Planters Gin. The l ease also requir

ed Planters Gin to

obtain public liability insurance naming Federal Compress as an insured party and insurance covering the contents of

Buildings One and Two wit

h a waiver of

subrogation clause in favor of Federal Compress. Paragraph 25 of the lease, entitled “Damages and Accidents,” stated:

Lessee agrees to hold harmless and indemnify Lessor from and against any lia

bility

or loss . . . arising out o

f any cause asso

ciated with Lesse

e’s busin ess o r use of the premises. In addition, Lessee a gr ees to provide public liability insurance naming Lessor as additional insured to protect Lessor from risks customarily covered by such insurance . . . . Lessee also shall c arry contents coverage on its contents with a waiver of subrogation clause as to Lessor.

Pursuant to the lease, Planters Gin purchased a marine open cotton insurance po licy fro m Cotton Fire & Marine Underwriters which insured the cotton stored in Buildings One and Two. However, the insurance policy did not contain a waiver of subrogation clause as required by the lease.-3-

The alarm service contract between Federal Compre ss and Wells Fargo c ontained a provision limiting the duties and the liability of Wells Fargo. The contract stated:

It is understood and agreed by [Federal Compress] that Wells Fargo Alarm is not an insurer; that the s ums pa yable hereunder to Wells Fargo Alarm by [Federal Compre ss] are based upon th e value of servic

es offered and

the scope of li

abilit y undertaken and such sums are not re lated to the value of prop erty belonging to [Federal Compr ess] or to others located on [Federal Compress’s] premises . . . . [Fe deral Compress] agrees that Wells Fargo Alarm shall not be liable for any of [Federal Compress’s] losses or damages, i rrespective of origin, to per son or to property, whether directly or indirectly caused

by agreement or by negligent acts or omissions of Wells Fa

rgo Alarm, its age

nts or employees.

An insurance adjuster retained by Cotton Fire & Marine, Robert Prinz (“Prinz”), stated that Paragraph

25 of the lease conflicted with the marine open cotton insurance policy, such that “there may not have been

any insurance c

overage for the

loss of October 27 , 1996.” Prinz stat ed that, in accordance

with the insurance po li cy, Cotton Fire & Marine agreed to reimburse Planters Gin for its loss by “loan receipt” in the amount of $220,550.48 on the condition that Planters Gin file s

uit

“ ag ainst the party who it is believed owes for the loss, with the insurer to bear the expense of the litigation.”

On July 11, 1997, Planters Gin filed a lawsuit against Federal Compress and Wells Fargo. In the lawsuit, Plan

ters Gin alleged t

hat:

[a]s a direct and proximate result of the roof collapse, the burst water

pipes, and the failure of Wells Fargo to notify the fire d epartment, to

notify appropriate persons at Federal Compress, or to take other appropriate action, large quantities of water continued to flow into [Building Three,] such that water then flowed from [Building Three] into [Building Two] w here th e water d id substantial damage to Planter’s
cotton.
Planters Gin claimed that Federal Compress and Wells Fargo failed to exerc ise reasonable ca

re in discovering that the roof over Building Three had collapsed and that large amounts of water

were flowing from Building Three into Building Two. It sought dama ges of $250,000 ca

used as a result of the water leak.

Fed eral Compre ss filed a motion for summary judgment, a

rguing that Paragr

aph 25 of its lease withPlanters Gin alloc

ated the risk of lo ss or damage to the c otton stored in Buildi

ng Two to Planters Gin. Federal Compress asserted that, in

light of the clause

, Planters Gin

could not recover against F ederal Compress for any loss or damage. Wells Fargo also filed a motion for summar y judgment, arguing that the pr ovisio ns in Wells Fargo’ s alarm service c ontract with Fede

ral Compress relieved it of any liability for loss or damage suffered by Planters Gin. The trial court entered orders granting summary judgment in favor o f both Federal Comp

ress and Wells Far

go. From these

orders, Planters Gin now ap

peals.-4-

As to Federal Compress, Planters Gin contends on appeal that Paragraph 25 of its lease does not apply under these circumstances because the claim against Federal Compress arises out of the land owner’s negligence regarding property adjacent to the leased property, not negligence of th e landlord regarding the le

ased property. Pl

anters Gin also co

ntends that the pro

visions contained i

n Paragraph

25 do not relieve Federal Compress of liability for its own negligence because they do not specify that Federal Compr ess is to be indemnified against liability arising out of its own negligence. Federal Compress argues on appeal that Planters Gin’s lawsuit against it violated Paragraph 25 of the lease because

it is in effect a subrogation claim, since Planters Gin was paid by its insurer in the form of a “loan receipt,” a loan without inter est to be repaid only out of the proceeds of any recovery against Federal C

ompress.

As to Wells Fargo, Plan

ters Gin argues o

n appeal that the t

rial court erre

d in dismissing its action against Well

Fargo because W

ells Fargo had a du

ty to Planters Gin de

spitethe absence of a contractual relationship betweenthe Planters Gin and Wells Fargo. Planters Gin contends that the alarm service contract between

Wells Fargo and Federal Compress does not relieve Wells Fargo of liability to Planters Gin.

Planters Gin first argues that the trial court erred in granting summary judgment in favor

of Federal Compress. Planters Gin asserts that the subject of the lease was Buildings One and Two and that Paragraph 25 shou

ld not release Fed

eral Compress fr

om lia bi lity for negligence occurring on property not subject to the lease. Planters Gin argues that the negligent conduct alleged in this case, the failure to maintain the roof over Buildin g Three and to monitor the sprinkler system, was committed by Federal Compress in its capacity as an adjacent landowner and not as the lessor of the property which was subject to the lease. Planters Gin asserts that Pa ragraph 25 was n

ot intended to apply to acts committed a s an adjacent lan

downer. It notes t

hat a contract is to be construed against its author, in this ca

se, Federal Compr

ess.

Federal Compress argues that Parag raph 25 was intended to place all risk of loss upon Planters Gin and to relieve Federal Compress

from responsib

ility for any and all losses to the
contents stored in Planters Gin’s le ase space, howe

ver caused. Fede

ral Compress also

argues that maint aining the roof over Building Three and the sprinkler system are “natural activities” for a landlord and precisely the types of risks Paragraph 25 was designed to allocate to Planters Gin.

A motion for summary judgment should be granted when the movant demonstrates that there

are no genuine issues of material fact and that the moving party is entitled to a judgment as a matter of law. See Tenn.R.Civ.P. 56.04. The party moving fo r summary judgment bears the burden of demonstrating that no genuine issue of material fact exists. See Bain v. Wells , 936 S.W.2d 618, 622 (Tenn.1997). On a motion for summary judgment, the court must take the strongest legit imate view of the evidence in

fav or of the nonmoving party, allow all reasonable inferences in favor of that party, and discard all countervailing evidence. See id. In Byrd v. Hall, 847 S.W.2d 208 (Tenn.1993), our Supreme Court stated:

Once it is shown by the moving party that there is no genuine issue of material fact, the nonmoving pa

rty must then demonstrate, by affidavits or discovery materials, tha t-5-

there is a genuine, material fact dispute to warrant a trial. In this regard, Rule 56.05 provides that the nonmoving party cannot simply rely upon his pleadings but mus t set forth specific f

acts showing that th

ere is a genuine issue of material fact for trial.

Id. at 211 (citations omitted) (emphasis omitted).

Summary judgment is appropriate only when the facts and the legal conclusions drawn from the facts reasonab

ly permit only one conclusion. See Carvell v. Bottoms , 900 S.W.2d 23, 26 (Tenn. 1995). Since only questions of law are involved, there is no presumption of correctness regarding

a trial court’s grant of summary judgment. See Bain , 936 S.W.2d at 622. Therefore, our review of the trial court’s gra

nt of summary judgme

nt is de novo on the record be fore thiscourt. See Warren v. Estate of Kirk , 954 S.W.2d 722, 723 (Tenn. 1997).

The cardinal rule

in interpreting written instruments is to ascertain the intention of the parties and to give effect to that intention consistent with legal principles. See Burks v. Belz-Wilson Properties
, 958 S.W.2d 773, 776 (Tenn. Ct. App. 1997). When clear contract language reveals the intentof the parties, there is no need to apply rules of construction. See Warren v. Metro. Gov’t of Nashville and Davidson Count y , 955 S.W.2 d 618, 623 (Tenn. Ct. App. 1997). A cont

ract is ambiguous only when it is of uncertain meaning and may fairly be understood in more ways than
one; a strained construction may not be placed on the language used to find an ambiguity where none exists. See Empress Health and Beauty Spa, Inc. v. Turner , 503 S.W.2d 188, 190-91 (Tenn. 1973). We are to consider the agreement as a whole in determining whether the meaning of the con tract is clear or ambiguous. See Gredig v. Tennessee Farmers Mut. Ins. Co., 891 S.W.2d 909, 912 (Tenn. Ct. App.1994). Ambiguous language is construed most strongly against the author of the language. See Burk s, 958 S.W.2d at 777 (citing Fuller v. Orkin Exterminating Co. , 545 S.W.2d 103, 107 (Tenn. Ct. App. 1975)); see also Chazen v. Trailmobile, Inc. , 384 S.W.2d 1, 4 (Tenn. 1964) (stating that a lease is to be construed most strongly against the drafter of the instrument).

In Interested Underwriters at Lloyd’s v. Ducors, Inc. , 478 N.Y.S.2d 285 (App. Div. 1984) (Silverman, J., dissenting) aff’d 491 N.Y.S.2d 620, 481 N.E.2d 252 (N.Y. 1985), the landlord and
tenant entered into a commercial lease agreement containing an exculpatory clause requiring a waiver of subrogation. Id. at 286. The clause provided:

[n]othing contained hereinabove shall relieve Tenant from liability from fire or other casualty. Notwithstanding the foregoing, each partyshall look first to any insurance in its favor

before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that

such insurance is in force and

collectible and to

the extent permitted by law, Landlord and Tenant each hereby releases and waives all right of recovery against the other or anyone claiming through or under each of them by way of subrogation or otherwise.

Id. at 286. The pre mises leased by the tenant were adjacent to vacant premises owned by the landlord. See id. at 286. A fire occurred on the landlord’s vacant property causing damage to the premises leased by the tenant. The tenant’s insurer reimbursed the tenant for its losses but then sued1 The Ducors court observed tha t, under the landlord’s broad interpretation of the waiver of subrogation clause, recovery by the tenant against the landlord would be barred even if, for example, the landlord was in the construction business and cau sed the tenant to suffer damages at the lease premises as a result of his use of dynamite in blasting at a constru ction site miles away. Id. at 287.

-6- the landlord through its right of subrogation to recover the amount paid to the tenant. See id. at 286. The landlord argued

that the waiver of

subrogation claus

e contained in the

lease barred recovery by the tenant against the landlord for any damages or losses. See id. at 286.

The court in Ducor’s held that the lease agreement should be construed in light of the limited legal relationship into which the parties had entered by executing the lease agreement, namely, that of landlord and tenant. Id. at 287. The court noted that, throughout the lease, the parties were referred to exclusively as “landlord” and “tenant.” Id. at 287. It also fou nd that the par ties’ respective rights and duties under the lease limited the risks allocated between them to those arising
outof the landlord’s ow

nership and the te

nant’s use of the lease premises. It found no evidence that the parties intend

ed to allocate al

l possible risks of loss between them to insurers, and pa

rticularly
notrisks arising from acts “wholly unrelated to the landlord and tenant relationship and committed by a third-party who happens to be the landlord.” 1 Id. at 287. Consequently, the court held that the parties intended only “to waive their subrogation rights against each other for risks arising out of the relationship

to which they were committing themselves, viz. , landlord and tenant, and no other.” Id. ;
see also Milli

can of Washi

ngton, Inc. v. Wienker Carpet Service, Inc. , 722 P.2d 861, 862-863 (Wash

. Ct . App. 1986) (holdi ng that waiver of

subrogation in comm

ercial lease a

pplied only to damages or losses to property subject to the lease).

In this case, the legal relationship into which Planters Gin and Federal Compress entered by executing the lease a greement was tha t of “lessor” and

“lessee.” The l

ease defined the

lease premises as Building One and Building Two. Throug hout t he le ase, and in Parag

raph 25 in particular, Federal Compress and P lanters Gin are referred to almost exclusively as “lessor” and “lessee.” The lease does not refer to the parties’ rights and duties with respect to property not subject
to the lease. Ambiguities in a contract are to be construed against the party who drafte

d it, in this
case, Federal Compress. See Burks , 958 S.W.2d at 777; see also Ducor’s
, 478 N.Y.S.2d at 277-278, and Millican , 722 P.2d at 866. The lease agreement must be con strued in light of the legal relationship

into which the parties entered by executing the lease. See Ducors , 478 N.Y.S.2d at 287. Consequently, we find that the parties intended that Paragraph 25 of the lease, the excu

lpatory clause and the requirement of a waiver of subrogation rights, pertain only to risks arisingout of the lessorlessee relationship. Accordingly , the grant of summary judgment to Federal Compress must be reversed.

Our holding as to Parag raph 25 of the lease pretermits Planters Gin’s argument that the exculpatory clause in Paragraph 25 does not release Federal Compress from its ow

n liability, as well

as Federal Compress’ argument that the lawsuit by Planters Gin is in e f fect a subrogati

on claim which violates Paragra

ph 25, despit

e the “loan recei

pt” arrangemen

t between Planter

s Gin and its insurer.-7-

Planters Gin also argues on appeal that the trial court erred in granting summary judgment in favor of Wel ls Fargo. Planters G in asserts that We

lls Fargo owed a co

mmon law tort duty to Planters Gin, apart from a ny contractual ob

ligation, to warn or

to take other act

ion once it

had notice of trouble at Planters Gin’s warehouse, noting that the burden on Wells Fargo was slight and the risk of harm to Planters Gin was foreseeable. Planters Gin argues that failure of Wells Fargo to do s o was negligence. Wells Fargo argues that it owed no duty to Planters Gin to act on its behalf.

To establish negligence, the plaintiff must prov e each of the fo

llowing elements: ( 1) a duty of care owed by the defendant to the plaintiff, (2) conduct by the de fendant falling below the applicable

standard of care amounting to a breach of that duty, (3) an injury or loss, (4) causation in fact, and (5) proximate, or legal, cause. See McClung v. Delta Square Ltd. Partnership , 93 7 S.W.2d 891, 894 (Te

nn. 1996); McCall v. Wilder ,913 S.W.2d 150, 153 (Tenn. 1995).

The existence of a du

ty of care owed by the

defendant to the plaintiff is a question of law for the court which requires consideration of whether “the interest of the pla intiff which has suffered invasion was entitled to legal protection at the hands of the defendant.” Bradshaw v. Daniel
, 854 S.W.2d 865, 870 (Tenn. 1993) (quoting W. Page Keeton et al. , Prosser and Keeton on the Law of Torts § 37 at 236 (5th ed. 1984)).

Dut y of care is “the legal obligation owed by defendant to plaintiff to co nform to a reasonable

person standard

of care for protection against unreasonable risks of harm.” McClung v. Delta Square Ltd. Partnership , 937 S.W.2d 891, 894 (Te nn. 1996); see also McCall v. Wilder , 913 S.W.2d 150, 153 (Ten n. 1995). The “imposition of a legal duty reflects society’s contemporary policies and soci al requirements concerning the right of individuals and the general public to be protected from another’s act or conduct.” McClung , 937 S.W.2d at 894-895. “Indeed, it has been stated that ‘ duty is not sacrosa nct in itself, but is o

nly an expression

of the sum total of th

ose considerations of policy which lead the law to say that the plaintiff is entitled to protection.’ ” Id. (quoting W. Page Keeton et al. , Prosser and Kee ton on the Law of To

rts § 53 at 358 (5th ed. 1984)).

Although all persons have a duty to use reasonable care to r efrain from

conduct that will foreseeably

cause injury to others, as a general rule, one person owes n

o affirmative dut

y to protect

or warn others endangered by the conduct of a third party. See Bradshaw , 854 S.W.2d at 870; Newton v. Tinsley , 970 S.W.2d 490, 492 (Tenn. Ct. App. 1997). In explaining the reluctance to find nonfeasance a basis of liability, the Tennessee Supreme Court has stated:

In determining the existence of a duty, courts have distinguished between action and inaction. Professor Prosser has commented that “the reason for the distinction may be said to lie in the fact that by ‘misfeasance’ the defend ant has created a n ew risk of harm to the plaintiff, w

hile by ‘nonfeasa

nce’ he has at le

ast made his situation no worse, and has merely failed to benefit him by interfering in his affairs.”

Bradshaw , 854 S.W.2d at 870 (quoting Prosser and Keeton § 56, at 373 (5th ed. 1984)).2 Planters Gin d oes not argue t

hat it is a thir

ty party ben eficiary of the alarm services contract between Wells Fargo and Federal Compress, or that the alarm se rvices contract

gave ris e to a “special relationship” between Wells Fargo and Planters Gin that would create an affirmative duty by Wells Fargo
to act. See Bradshaw v. Daniel , 854 S.W.2d 865, 871 (Tenn. 1 993) (citing, inter alia
, Restatement (Second) of Torts § 315

(1964)). Con

sequently, we

do not addres s these argumen ts in this appea

l.

-8- In this case, Wells Fa

rgo agreed in its a

larm services co

ntract with Feder

al Compress to monitorthe premises subject to Federal Compress’ lease with Planters Gin. Planters Gin claims that Wells Fargo owes a common law tort duty to Planters Gin to warn or to take other action once it had notice of trouble at Planters Gin’s warehouse. 2 However, under the circumstances of this case, we
must hold that Wells Fargo ha

s no affirmative c

ommon law duty to ac

t, to protect or warn Planters Gin. See Bradshaw , 854 S.W.2d at 870. Accordingly, we affirm the trial court’s grant of summary judgment in favor of Wells Fargo.

In summary, we find that Paragraph 25 of the lease between Planters Gin a nd Fed eral Compress is inapplicable to actions not arising out of the lessor-lessee relationship. Consequently, the trial court’s grant of

summary judgment to Federal Compress is reversed and the cause remanded for further proceedings consistent with this Opinion. We find that Wells Fargo had no affirmative

common law duty to act to protect or warn Planters Gin. Therefore, the t rial court’s grant of summary judgment to Wells Fargo is affirmed.

The decision of the trial court is affirmed in part, reverse

d in part, and remand

ed as set forth above. Costs are taxed equally to Appellant Planters Gin and to Appellee Federal Compress, for which execution may issue if necessary.

HOLLY KIRBY LILL ARD, J. W. FRANK CRAWFORD, P. J., W.S. DAVID R. FARMER, J.