Court Opinion

ID: 9748186
Source: CourtListenerOpinion
Date Created: 2023-08-27 15:54:25.877673+00
Date Added: 2024-06-11T07:25:32.531624
License: Public Domain

Jim Gunter, Justice. This case arises from an order from the Benton County Circuit Court granting a motion for summary judgment filed by appellees, Diamond Equipment & Supply Co. (“Diamond”) in a personal-injury action brought by appellants, Michael R. Jordan and Rachel Jordan. We affirm the trial court’s ruling. On October 31, 2001, appellant Michael L. Jordan, who is engaged in the business of light construction and landscaping, was involved in a landscaping project on the premises of a customer. The project required that appellant transport loose materials to the top of a slope, so he went to Diamond to rent a Bobcat Model 763 skid-steer loader (“Bobcat loader”) for this purpose. Diamond is engaged in the business of renting and leasing various items of equipment and tools to the public. While at Diamond, Jordan sought the advice from Diamond personnel as to the appropriate machine for the task, and based on that information, Jordan elected to rent the Bobcat loader and a trailer for one day. Jordan entered into a contract with Diamond for the leasing of the Bobcat loader and the trailer and signed a rental agreement, which contained an exculpatory clause. Jordan signed the invoice and paid a fee totaling $185.87 for the lease of the equipment for the one-day period. That same day, after obtaining the Bobcat loader, Jordan returned to his landscaping project. During the course of his job, the Bobcat loader became top-heavy and overturned backward and flipped several times down the sloped terrain. As a result, Jordan suffered a severe impact to his spine, which caused permanent spinal-cord injuries. On May 12, 2003, Jordan and his wife, Rachel, brought a negligence action against Diamond. On June 26, 2003, Diamond answered, and on April 23, 2004, Diamond filed a motion for summary judgment, arguing that under Ark. R. Civ. P. 56, the trial court should rule as a matter of law in favor of Diamond. On May 4, 2004, the Jordans responded to Diamond’s motion for summary judgment, arguing that the language in the clause “does not exculpate Diamond from the consequences of its own negligence in connection with its acts and omissions in connection with the rental of the Bobcat loader . . . [.]” The Jordans contended that the language in the provision does not exculpate Diamond from the failure to provide adequate instructions and warnings, and that the agreement is void for lack of mutuality of obligation. They further alleged that the provision is void for lack of consideration, and that the boilerplate language in the agreement violates public policy. On May 11, 2004, Jordan filed a first amended and substituted complaint upon a theory of negligence for (1) failure to take into account in advising Jordan of the appropriate machine for the conditions and circumstances under which he intended to use it; (2) failure to adequately instruct Jordan as to the safe operating procedures and conditions upon which the machine could be safely operated; (3) failure to advise Jordan of the stability characteristics of the machine and of the difference in distribution of weight bias in loaded versus unloaded conditions; (4) failure to warn Jordan that the Bobcat loader was unsuited for use of loading or unloading materials upon an inclined surface, which could have been reasonably anticipated by Diamond; (5) failure to warn Jordan that the Bobcat loader was suitable for use, including loading and unloading, only on relatively flat surfaces; and (6) failure to instruct and educate its personnel as to the proper operating procedures of skid-steer loaders and of the stability characteristics of these machines. Jordan sought damages for past and future pain, mental anguish, past and future medical expenses, past loss of earning and working time, past and future impairment of earning capacity, and permanent physical impairment and disability. His wife, Rachel Jordan, sought damages for loss of consortium. An order was filed on May 14, 2004, dismissing with prejudice separate defendant Clark Equipment, the manufacturer of the Bobcat, including its unincorporated business unit, Bobcat Company. On June 28, 2004, the trial court entered an order granting Diamond’s motion for summary judgment. The Jordans filed a motion to amend the order granting summary judgment on July 6, 2004, and the trial court denied that motion. From the order granting summary judgment, the Jordans bring this appeal. We articulated the standard of review for summary-judgment cases in O’Marra v. Mackool, 361 Ark. 32, 204 S.W.3d 49 (2005), where we stated: Summary judgment should be granted only when it is clear that there are no genuine issues of material fact to be litigated, and the party is entitled to judgment as a matter of law. Riverdale Development Co. v. Ruffin Building Systems Inc., 356 Ark. 90, 146 S.W.3d 852 (2004); Craighead Elec. Coop. Corp. v. Craighead County, 352 Ark. 76, 98 S.W.3d 414 (2003); Cole v. Laws, 349 Ark. 177, 76 S.W.3d 878 (2002). The burden of sustaining a motion for summary judgment is the responsibility of the moving party. Pugh v. Griggs, 327 Ark. 577, 940 S.W.2d 445 (1997). Once the moving party has established a prima facie entitlement to summary judgment, the non-moving party must meet proof with proof and demonstrate the existence of a material issue of fact. Id. On appellate review, we determine if summary judgment was appropriate based on whether the evidence presented by the moving party in support of its motion leaves a material fact unanswered. George v. Jefferson Hosp. Ass’n Inc., 337 Ark. 206, 987 S.W.2d 710 (1999). We view the evidence in the light most favorable to the non-moving party, resolving all doubts and inferences against the moving party. Adams v. Arthur, 333 Ark. 53, 969 S.W.2d 598 (1998). O’Marra, supra. For their first point on appeal, the Jordans argue that the trial court should have denied the enforcement of the exculpatory clause in Diamond’s agreement upon the grounds of public policy. In response, Diamond contends that the exculpatory clause is enforceable, conforms to Arkansas public policy, and the trial court properly upheld the exculpatory clause. The trial court ruled in its June 28, 2004, order: The warranties and liability paragraph on the back side of the one page document is an exculpatory clause which requires strict scrutiny by this court. In performing that scrutiny, the court has looked at the location of the paragraph; the fact that the paragraph is set apart and is conspicuous; the language used in the paragraph is clear and unambiguous; the language in the exculpatory clause sets out what negligent liability is to be avoided in very clear language; the circumstances surrounding the execution of this contract which involved the plaintiff approaching the defendant, Diamond Equipment and Supply Company, and soliciting the use of this equipment, and paying a fairly meager sum for the rental of the equipment. In applying the factors set forth in Finagin v. Arkansas Development Finance Authority,... the court finds that Mr. Jordan knew the potential liability that was released, he benefitted from the activity causing the liability (he was being paid for this landscaping job); and the contract was fairly entered into. An exculpatory contract is one where a party seeks to absolve himself in advance of the consequences of his own negligence. Finagin v. Arkansas Development Finance Authority, 355 Ark. 440, 139 S.W.3d 797 (2003). Contracts that exempt a party from liability for negligence are not favored by the law. Plant v. Wilbur, 345 Ark. 487, 47 S.W.3d 889 (2001); Farmers Bank v. Perry, 301 Ark. 547, 787 S.W.2d 645 (1990); Middleton & Sons v. Frozen Food Lockers, 251 Ark. 745, 474 S.W.2d 895 (1972); Arkansas Power & Light Co. v. Kerr, 204 Ark. 238, 161 S.W.2d 403 (1942); Gulf Compress Co. v. Harrington, 90 Ark. 256, 119 S.W. 249 (1909). This disfavor is based upon the strong public policy of encouraging the exercise of care. Plant, supra. However, such exculpatory contracts are not invalid per se. Plant, supra. Because of the disfavor with which exculpatory contracts are viewed, two rules of construction apply to them. First, they are to be strictly construed against the party relying on them. Plant, supra. Second, we have said that it is not impossible to avoid liability for negligence through contract, but that, to avoid such liability, the contract must at least clearly set out what negligent liability is to be avoided. Plant, supra. Further, we have held that when we are reviewing such a contract, we are not restricted to the literal language of the contract, and we will also consider the facts and circumstances surrounding the execution of the release in order to determine the intent of the parties. Finagin, supra. We upheld exculpatory clauses in Edgin v. Entergy Operations, Inc., 331 Ark. 162, 961 S.W.2d 724 (1998), and Plant, supra. In Edgin, a security guard was employed by Wackenhut Corporation to work at Entergy’s nuclear plant in London. While on the job, the security guard sustained injuries, and she filed suit in tort against Entergy. Her employment agreement with Wackenhut contained an exculpatory clause, which read in pertinent part, “I hereby waive and forever release any rights I might have to make claims or bring suit against any client or customer of Wackenhut for damages based upon injuries which are covered under . . . Workers’ Compensation statutes.” We held: Appellants argue that the agreement in this case does not specifically set out what negligent liability is to be avoided. We disagree. We are persuaded by Appellee’s argument that the agreement is clear and unambiguous and only releases the clients of Wackenhut from liability for work-related injuries sustained by a Wackenhut employee that are covered by the workers’ compensation statutes. By signing the employment application, an employee is not forfeiting his or her right to receive any compensation for work-related injuries; rather, the employee is merely agreeing to waive an additional remedy against a client of Wackenhut in exchange for employment with Wackenhut. In this respect, we cannot say that the agreement violates public policy by discouraging the employer or its clients from exercising reasonable care. Nor can we say that the language of the agreement did not clearly identify what the employee was giving up in exchange for employment. The employer is not attempting to escape liability entirely, but is, instead, attempting to shield its clients from separate tort liability for those injuries that are covered by workers’ compensation, unlike the agreements at issue in Farmers Bank and Firstbank. Furthermore, our interpretation of this agreement is not inconsistent with the sound public policy considerations that form the basis of our workers’ compensation laws. Edgin, supra. Thus, we held that the exculpatory clause at issue specifically set out what negligent liability was to be avoided and that the language of the exculpatory clause was clear and unambiguous. Id. In Plant, supra, appellant Plant signed an agreement before entering a pit area of a racetrack operated by appellee Wilbur. The document, which was a form used by racetracks across the country, was titled, “Release and Waiver ofLiability and Indemnity Agreement.” We held that the clause was enforceable, noting that it contained certain key phrases such as “releases,” “discharges,” “covenants not to sue,” and mentioned claims for negligence in three different places. In taking the “total transaction” approach, we affirmed the trial court’s consideration of the circumstances surrounding the execution of the document, such as the fact that Plant had signed the document on other occasions, was not forced to sign the document, and had equal bargaining power. We also considered the fact that the activity involved was recreational in nature. Id. Further, in our review of exculpatory clauses, we outlined three factors in Finagin, supra, where we said: [W]e note that an exculpatory clause may be enforced: (1) when the party is knowledgeable of the potential liability that is released; (2) when the party is benefitting from the activity which may lead to the potential liability that is released; and (3) when the contract that contains the clause was fairly entered into. Id. Under the foregoing authority, we must strictly construe the exculpatory contract against Diamond, and we must ask whether Diamond clearly sets out what negligent liability is to be avoided. We must also apply the Finagin factors to the exculpatory clause in Diamond’s agreement in order to determine if it is enforceable. We now turn to the agreement between Jordan and Diamond. It contains the following exculpatory clause entitled, “Warranties and Liability,” and provides: Diamond Equipment Rental and Supply, Inc. is not responsible for injuries or damages sustained in the use of these items whether the damages are due to neglect, mechanical failure, or any other cause whatsoever, regardless of who happens to be operating the equipment. The lessee assumes full liability from the time the equipment is rented until it is returned. The lessee accepts the items in the “as is” condition and does hereby absolve and reheve lessors from any liability by reason of or resulting from the condition of the rented items. Lessee binds and obligates himself to hold lessors free and harmless from any and all liability from any claims of third persons in connection with or arising out of the condition or use of the rented items. Any repairs made to items listed in this contract by anyone other than a lessor or its employee shall be the sole responsibility of the lessee, unless written authority for said repairs is granted by Diamond Equipment Rental and Supply, Inc.  Here, the clear, unambiguous language of the exculpatory clause states that Diamond “is not responsible for injuries or damages sustained in the use of these items whether the damages are due to neglect, mechanical failure, or any other cause whatsoever, regardless of who happens to be operating the equipment.” Diamond specifically states that it is not liable for damages sustained during the use of its equipment by the lessee due to “neglect, mechanical failure, or any cause whatsoever.”  Under a “total transaction” approach, as articulated in Plant, supra, we note that Jordan solicited Diamond’s business by inquiring about the appropriate equipment for his landscaping project, getting instruction from Diamond personnel on how to operate the Bobcat loader, signing the agreement, and paying $185.87 in exchange for renting the Bobcat loader and a trailer for one day.  Moreover, all three Finagin factors are satisfied in the present case. First, it appears that Jordan was knowledgeable of the potential liability that is released when he signed the contract with Diamond. The front of the invoice contains not only the price of the rental equipment, but a statement that reads, “Customer has received complete safety instructions,” which Jordan initialed. Another statement on the front of the invoice reads, “See Damage Waiver on Reverse Side. I hereby accept the damage waiver,” and Jordan initialed the “yes” line. Jordan signed this agreement.  Second, Jordan benefitted from the activity of leasing the Bobcat loader and the trailer in that the equipment helped him perform his job. Jordan used the equipment for the purpose of completing a landscaping job on the day of his injury.  Third, it appears that the contract was entered into fairly. Jordan offered no evidence of fraud, duress, undue influence, lack of capacity, mutual mistake, or inequitable conduct sufficient to void the contract. Additionally, there is no evidence that Jordan attempted to change the terms of the contract. In sum, the language of Diamond’s exculpatory clause is written in simple and clear terms that are free from legal jargon. It is not inordinately long or complicated. As an experienced, full-time landscaping contractor, Jordan admitted in his deposition that he intended to rent a piece of equipment to enable him to complete his job, and that in his discussions with Diamond personnel, they instructed him how to operate the Bobcat loader. After those discussions, he entered into an agreement to rent the Bobcat loader. Ultimately, Jordan is bound to know the contents of the contract that he signed. Carmichael v. Nationwide Life Ins. Co., 305 Ark. 549, 810 S.W.2d 39 (1991).  Therefore, in strictly construing this agreement against Diamond, and in taking the “total transaction” approach in Plant, supra, as well as the Finagin factors into account, we cannot say that the exculpatory clause contravenes public policy. We conclude that the exculpatory clause clearly sets out what negligent liability is to be avoided. For their second point on appeal, the Jordans argue that the exculpatory clause in Diamond’s contract is void for lack of mutuality of obligation. Specifically, Jordan contends that the terms of the provision do not impose an obligation upon Diamond and that any such obligation is imposed upon him as the lessee. In response, Diamond argues that mutuality of obligation is not required to enforce the exculpatory clause at issue. The essential elements of a contract are: (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligations. Tyson Foods, Inc. v. Archer, 356 Ark. 136, 142, 147 S.W.3d 681, 684 (2004). We have recognized that mutuality of contract means that an obligation must rest on each party to do or permit to be done something in consideration of the act or promise of the other; thus, neither party is bound unless both are bound. The Money Place v. Barnes, 349 Ark. 411, 78 S.W.3d 714 (2002); Showmethemoney Check Cashers, Inc. v. Williams, 342 Ark. 112, 27 S.W.3d 361 (2000). A contract, therefore, that leaves it entirely optional with one of the parties as to whether or not he will perform his promise would not be binding on the other. Id.; see also Townsend v. Standard Indus., Inc., 235 Ark. 951, 363 S.W.2d 535 (1962). Diamond cites Guinn v. Holcombe, 29 Ark. App. 206, 780 S.W.2d 30 (1989), for the following proposition regarding mutuality of obligation: The validity of a contract does not always depend upon mutuality of obligation. Mutuality of obligation is ordinarily required in contracts where the parties exchange a promise for a promise, and each must be bound or neither is bound. It becomes a nonissue when consideration has otherwise been conferred upon one of the parties. A promise in exchange for performance does not require mutuality of obligation. Eustice v. Meytrott, 100 Ark. 510, 140 S.W. 590 (1911); Carrico v. Delp, 141 Ill. App. 3d 684, 95 Ill. Dec. 880, 490 N.E.2d 972 (1986); Leeson v. Etchison, 650 S.W.2d 681 (Mo. App. 1983); Brack v. Brownlee, 246 Ga. 818, 273 S.E.2d 390 (1980). See Restatement (Second) of Contracts § 79 (1981). Guinn, 29 Ark. App. at 211, 780 S.W.2d at 33 (emphasis added). Mutuality of obligation involves the exchange of promises, and mutuality of obligations becomes “a nonissue” when performance is given. Id. In Showmethemoney, supra, and similar check-casher cases, we held that there was no mutuality of obligation because the customer contracted to arbitrate, while the check-cashing company had the option of arbitrating or filing suit in court.  In the present case, there is an exculpatory clause rather than an arbitration agreement. Here, mutuality of obligations became a nonissue because consideration was given by both parties at the time that the agreement was executed. Jordan fulfilled his obligation by signing an invoice and paying a rental fee of $185.87 to Diamond as consideration for Diamond’s leasing the Bobcat loader and trailer to him and putting him in possession of the leased equipment for a period of twenty-four hours in order to fulfill his responsibility for the landscaping project. Because the validity of the lease agreement between Jordan and Diamond depends upon performance by both of the parties, mutuality of obligations becomes a nonissue. For their third point on appeal, the Jordans argue that the exculpatory clause was not supported by consideration. Specifically, the Jordans, citing Capel v. Allstate Ins. Co., 78 Ark. App. 27, 77 S.W.3d 533 (2002), argue that while there was consideration for the rental equipment, the exculpatory clause is a collateral undertaking for which additional consideration is required.  This point on appeal is procedurally barred as it was not raised below. The Jordans never made the argument to the trial court that the exculpatory clause constitutes a collateral undertaking that requires additional consideration. In their reply brief, the Jordans maintain that they presented the argument in their motion for summary judgment and brief in support. Paragraph 8 of their motion for summary judgment states, “Plaintiffs further contend that the provision referred to in paragraph 5 above is void for lack of consideration.” However, they do not make the “collateral undertaking” argument. It is well settled that we will not address arguments raised for the first time on appeal. Miner v. State, 342 Ark. 283, 288, 28 S.W.3d 280, 283 (2000). For these reasons, we are precluded from considering this point on appeal. For their fourth point on appeal, the Jordans argue that the exculpatory clause was excluded from the contract. Specifically, the Jordans make the argument that because of the type size and placement on the back of the invoice, in addition to the fact that it was “a provision buried in the boilerplate on the reverse side of an invoice issued in a routine transaction,” the agreement lacks “the degree of conspicuity to justify it from being considered as a matter of law an objective indicator of Jordan’s agreement. We have said that one is bound under the law to know the contents of the papers he signs, and he cannot excuse himself by saying that he did not know what the papers contained. Carmichael v. Nationwide Life Ins. Co., 305 Ark. 549, 810 S.W.2d 39 (1991). In considering the motion for summary judgment, the trial court had before it Jordan’s agreement with Diamond where Jordan initialed that he “hereby accepted] the damage waiver,” which was “on the reverse side.” Jordan also signed the agreement on a signature line below the following: “Signature denotes full acceptance of the agreement including waver [sic] of notice of theft. *(See reverse side.)*” Thus, there were two references to the reverse side of the agreement on the front page that Jordan signed. Additionally, in his deposition, Jordan made reference to his signature on the contract and said, “There is something that has a lot of small writing on the back of the contract that I signed, but I cannot specifically say it would have been on the back.”  Appellant also argues that this issue is ripe for the common-law maxim, expressio unius est exclusio alterius, which means that the expression of one implies the exclusion of others. Appellant provides no analysis how this maxim is applicable to the present case. Thus, in concluding, we hold that Jordan offered no evidence, or “proof with proof,” that he did not know what he was signing when he entered into the lease agreement with Diamond. For these reasons, we affirm on this point. For their fifth point on appeal, the Jordans argue that the trial court erred in determining that the terms of the provision expressly described the liability that was to be avoided. On this issue, the trial court ruled that “the language in the exculpatory clause sets out what negligent liability is to be avoided in very clear language.” As discussed in point one, we have held in Edgin, supra, and Plant, supra, that those exculpatory clauses were valid. In Edgin, supra, we concluded that the employer was not attempting to escape liability entirely, but that it was attempting to shield its clients from separate tort liability for those injuries that are covered by workers’ compensation. Similarly, in Plant, supra, we held that an agreement releasing racetrack owners from liability for injuries sustained in the restricted area of a racetrack was valid. See also Miller v. Pro-Transportation, 78 Ark. App. 52, 77 S.W.3d 551 (2002) (holding that the exculpatory clause clearly and specifically set out the negligence that was to be avoided — that negligent liability for any injuries that the applicant may suffer while riding as a passenger in appellee’s motor vehicle); National Union Fire Insurance Company of Pittsburg, Pennsylvania v. Guardtronic, 76 Ark. App. 313, 64 S.W.3d 779 (2002) (holding that the exculpatory clause sets out what negligence is to be avoided in that it is not the intention of the parties that appellees assume responsibility for any loss occasioned by “malfeasance or misfeasance in the performance of the services under the contract, or for loss or damage from fire.” Id.)  In the present case, we hold that the trial court’s ruling is correct. Here, Diamond’s lease agreement states that it “is not responsible for injuries or damages sustained in the use of these items whether the damages are due to neglect, mechanical failure, or any other cause whatsoever, regardless of who happens to be operating the equipment. [Jordan] assumes full liability from the time the equipment is rented until it is returned.” This language releases Diamond from liability from any injuries due to “neglect, mechanical failure, or any cause whatsoever.” Based upon this analysis, Jordan has failed to offer proof with proof that a fact-question exists, as the language of the exculpatory clause contemplate his negligence for which Diamond seeks to avoid liability. For these reasons, we affirm on this point. For their sixth point on appeal, the Jordans argue that the exculpatory clause is unconscionable. Specifically, they contend that there is a question of material fact on this issue. In support of their argument, the Jordans cite Ark. Code Ann. §§ 4-2A-103 and -108 (Repl. 2001). Unconscionability originated as an equitable doctrine. See 1 S. White & R. Summers Uniform Commercial Code § 4-2 (3d ed. 1988). The doctrine has been applicable in law courts in this state at least since the adoption of the Uniform Commercial Code in 1961. Act 185 of 1961, § 2-302. In the case at bar, it is doubtful at best that Ark. Code Ann. § 4-2-302 is strictly applicable, because Article 2 of the Code ordinarily applies only to transactions in goods. Ark. Code Ann. § 4-2-102. Nevertheless, the Code section on unconscionability has frequently been applied by analogy in non-code settings. See Restatement (Second) of Contracts § 208 comment a (1979). We have stated that in assessing whether a particular contractual provision is unconscionable, the courts review the totality of the circumstances surrounding the negotiation and execution of the contract. National Union, supra (citing State v. R & A Inv. Co., 336 Ark. 289, 985 S.W.2d 299 (1999)). Two important considerations are whether there is a gross inequality of bargaining power between the parties and whether the aggrieved party was made aware of and comprehended the provision in question. Id.  Here, we have already determined that the exculpatory clause was available for Jordan to read when he signed and initialed the agreement. Further, we have no evidence before us that there was gross inequality of bargaining power, considering that Jordan sought out the services of Diamond and paid for the rental equipment after being shown how to operate it. Nor do we find where Jordan met proof with proof on the question of comprehending the provision at issue. By signing the document, it appears that he did.  Based upon the foregoing analysis in light of Finagin, supra, as well as our well-established standard of review regarding motions for summary judgment, we hold that the trial court properly granted Diamond’s motion for summary judgment. Accordingly, we affirm. Hannah, C.J., and Glaze and Imber, JJ., dissent.