Court Opinion

ID: 5113470
Source: CourtListenerOpinion
Date Created: 2021-10-02 17:44:25.828296+00
Date Added: 2024-06-11T08:21:42.753753
License: Public Domain

NANCY STEFFEN RAHMEYER, J.
I concur in the majority opinion but write further to address the public policy issue raised by Fuller. I begin this concurrence by also noting that a lease, such as the one at issue in this case, is both a conveyance and a contract. It is significant to remind the reader of that fact because it seems that in the modern lease the contract terms have dwarfed what used to be a land conveyance. These contract terms, including the exculpatory clause at issue in this case, are inserted into leases with no negotiation and no legal consideration, all to the detriment of the tenant.
If we were to analyze this Lease as a contract, we must look to the four corners of the agreement as a whole to review the language of the entire contract. Brewer v. Missouri Title Loans, 364 S.W.3d 486, 487, 492 (Mo. banc 2012). We would apply traditional Missouri contract law in looking at the agreement as a whole to determine the conscionability of the provisions of the agreement. Id. at 487. Furthermore, the contract language is to be strictly construed against the party claiming the benefit of the contract. Alack v. Vic Tanny Intern. of Missouri, Inc., 923 S.W.2d 330, 338 (Mo. banc 1996); Warren v. Paragon Technologies Group, Inc., 950 S.W.2d 844, 845 (Mo. banc 1997). “The purpose of the unconscionability doctrine is to guard against one-sided contracts, oppression and unfair surprise.” Brewer, 364 S.W.3d at 492-93. A review of this contract shows that it is as one-sided, oppressive, and unfair to the tenant as the contract in Brewer.
*109Unconscionability of a contract has two aspects, procedural and substantive: “[p]rocedural unconscionability relates to the formalities of making the contract, whether or not one of the parties exerted high pressure on the other party during the negotiations, misrepresented material facts to the other party, or had a significantly unequal bargaining power over the other”; “[s]ubstantive unconscionability focuses on the contract’s terms[,] whether or not they are unduly harsh.” Kansas City Urology, P.A. v. United Healthcare Services, 261 S.W.3d 7, 14-15 (Mo.App. W.D.2008). Our supreme court recognized that “unconscionability can be procedural, substantive or a combination of both. There is no need in all cases to show both aspects of unconscionability.” Ruhl v. Lee’s Summit Honda, 822 S.W.3d 136, 139 n. 2 (Mo. banc 2010). Further, “procedural uncon-scionability does not need to be significant when substantive unconscionability is present.” Shaffer v. Royal Gate Dodge, Inc., 300 S.W.3d 556, 559 (Mo.App. E.D.2009) (internal quotations omitted). If gross procedural unconscionability of a contract exists, not much evidence is required of substantive unconscionability for a contract to be unenforceable, and vice versa.1
There are two paragraphs in this Lease that offend our traditional notions of a conscionable agreement. Paragraph 22C purports to be a waiver by the tenant of a jury trial on any claims the tenant “may make that arises out of this [Ljease.” Paragraph 17, as set out in the majority opinion, purports to be a waiver by the tenant of any future claims against the landlord and further provides that the tenant agrees to indemnify the landlord for all claims of the tenant. The parties agreed that the contract was not negotiated nor was it negotiable. It was a “take it or leave it” lease for apartment rental.
Brewer is instructive on the issue of an unconscionable agreement. Brewer borrowed money from a title company. Brewer, 364 S.W.3d at 487. The agreement contained a clause that Brewer must resolve any claim against the title company in binding, individual arbitration governed by the Federal Arbitration Act. Id. No customer ever successfully renegotiated the terms of the contract, including the arbitration provisions, and although Brewer waived her right to litigate in court, the title company was allowed to use the judicial process to enforce its rights. Id. When Brewer brought a complaint against the title company in a class action suit, the title company filed a motion to dismiss and to compel arbitration. Id. at 488. The trial court found the class arbitration waiver unconscionable and unenforceable and further found that it would be difficult for a consumer to understand that there was a disparity of bargaining power, that the provision was one-sided because only customers gave up their rights while the title company did not. Id. The Supreme Court noted that “[t]he purpose of the uncon-scionability doctrine is to guard against one-sided contracts, oppression and unfair surprise” and that “[oppression and unfair surprise can occur during the bargaining process or may become evident later, when a dispute or other circumstances invoke the objectively unreasonable terms.” Id. at 492-93. “In either case, the uncon-*110scionability is linked inextricably with the process of contract formation because it is at formation that a party is required to agree to the objectively unreasonable terms.” Id. at 493. As in Brewer, the facts here demonstrate that the terms of the agreement are one-sided, oppressive, and non-negotiable.
We have long upheld the principle of personal responsibility for one’s actions. As long ago as 1892, our Supreme Court in Blanton v. Dold, 109 Mo. 64, 18 S.W. 1149, 1151 (1892), recognized the general principles of negligence in an employer-employee context:
It is familiar law, and need here be expressed but briefly, that the master is not bound to supply the latest or the best machinery or appliances for the work he undertakes; still less does he insure his employees’ [sic] safety. His obligation in this relation is to use such care as should characterize a person of common prudence in the same position that such machinery as is furnished be reasonably safe for the purpose to which it is intended to be devoted. The burden of proof was on plaintiff to establish, directly or by just inference, some want of care to which his injury might fairly and reasonably be traced.
The court continued:
[T]his court unanimously declared [in an 1870 case] that an employee “assumes the risk, more or less hazardous, of the service in which he is engaged; but he has a right to presume that all proper attention shall be given to his safety, and that he shall not be carelessly and needlessly exposed to risks not necessarily resulting from his occupation, and which might be prevented by ordinary care and precaution on the part of his employer.” That declaration is better recognized in the law to-day than at the time it was made. An express contract, in most solemn form, by an employe, [sic] exempting his master from liability for negligence in the performance of his personal duties towards the former, has been often declared in American courts illegal, its subject-matter being considered as contrary to a sound public policy.
(Emphasis added.)2
“Long established common law principles authorize courts to compel tort-fea-sors to compensate those they intentionally or negligently injure.” Townsend v. Townsend, 708 S.W.2d 646, 647 (Mo. banc 1986). Missouri adopted the common law by statute in 1825. Section 1, R.S. 1825 (currently section 1.010, RSMo 2000). The principle of personal responsibility for one’s actions is at the bedrock of our civilized society.
The language in this Lease contains language that TLC and all unidentified people including the “agents, employees, servants, invitees, successors and assigns” are not liable for their actions for “any cause whatsoever” “on or near the Premises.” The purported exculpatory clause in this case is more troubling because not only does it include claims that cannot be released in its general release language, but it also attempts to obtain indemnification from the tenant for injuries to its invitees if the invitee is injured by the landlord! Hypothetically, if a truck driver delivering a package to the tenant is injured when the landlord fails to put up a block to a sink*111hole somewhere on the property, this Lease claims the tenant must indemnify the landlord for the landlord’s own negligence. No reasonable person would agree to indemnify the landlord for an event totally out of the control of the tenant. “Our traditional notions of justice are so fault-based that most people might not expect such a relationship to be altered, regardless of the length of an exculpatory clause, unless done so explicitly. General language will not suffice.” Alack, 923 S.W.2d at 337.
Furthermore, the exculpatory clause as written in this Lease apparently waives “any actions” on the part of the landlord. That would include even the warranty of habitability. In Chiodini v. Fox, 207 S.W.3d 174, 176 (Mo.App. E.D.2006), a landlord claimed the tenant breached the contract. Fox, who had signed the lease prior to viewing the house, discovered exposed wiring in an unfinished billiard room. Id. at 175. The Eastern District of this Court noted, “It is well-settled in Missouri ‘that a landlord impliedly warrants the habitability of leased residential property.’ ” Id. at 176 (quoting Detling v. Edelbrock, 671 S.W.2d 265, 270 (Mo. banc 1984)). A landlord agrees to provide facilities and services that are “vital to the life, health, and safety of the tenant and to the use of the premises for residential purposes.” Moser v. Cline, 214 S.W.3d 390, 394 (Mo.App. W.D.2007).
Habitability is measured by community standards, generally reflected in local housing and property maintenance codes. In order to state a cause for breach of an implied warranty of habitability, the tenant must prove four elements: (1) entry into a lease for residential property; (2) the subsequent development of dangerous or unsanitary conditions on the premises materially affecting the life, health and safety of the tenant, (3) reasonable notice of the defects to the landlord; and (4) subsequent failure to restore the premises to habitability.
Chiodini, 207 S.W.3d at 176; see also, Kolb v. DeVille I Properties, LLC, 326 S.W.3d 896, 902-03 (Mo.App. W.D.2010) (where bedbug infestation was a breach of the implied warranty of habitability).
Likewise, in the Restatement (Second) of Torts, it has long been held that a plaintiff, who by contract or otherwise expressly agrees to accept a risk of harm arising from defendant’s negligent or reckless conduct, cannot recover, unless the agreement is invalid as contrary to public policy. Restatement (Second) of ToRts § 496B (1965). The question is whether the agreement is freely and fairly made, between parties who are in an equal bargaining position and there is no social interest in which they interfere. Id. If so, it will generally be upheld; however, there are certain agreements which will not be enforced:
c. ... [Wjhere the agreement is drawn by the defendant and the plaintiff passively accepts it, its terms will ordinarily be construed strictly against the defendant. In particular, general clauses exempting the defendant from all liability for loss or damage will not be construed to include loss or damage resulting from his intentional, negligent, or reckless misconduct, unless the circumstances clearly indicate that such was the plaintiffs understanding and intention.
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j. ... An express agreement for the assumption of risk will not, in general, be enforced where there is such disparity of bargaining power between the parties that the agreement does not represent a free choice on the part of the plaintiff. The basis for such a result is the policy of the law which relieves the *112party who is at such a disadvantage from harsh, inequitable, and unfair contracts which he is forced to accept by the necessities of his situation. The disparity in bargaining power may arise from the defendant’s monopoly of a particular field of service, from the generality of use of contract clauses insisting on the assumption of risk by all those engaged in such a field, so that the plaintiff has no alternative possibility of obtaining the service without the clause; or it may arise from the exigencies of the needs of the plaintiff himself, which leave him no reasonable alternative to the acceptance of the offered terms.

Id.

TLC admitted that this contract was not negotiable and could not be modified even if the tenant asked. Thus, there was no negotiation between the parties. “ ‘In Missouri, an adhesion contract, as opposed to a negotiated contract, has been described as a form contract created and imposed by a stronger party upon a weaker party on a ‘take this or nothing basis,’ the terms of which unexpectedly or unconscionably limit the obligations of the drafting party.’ ” Grossman v. Thoroughbred Ford, Inc., 297 S.W.3d 918, 921 (Mo.App. W.D.2009) (quoting Swain v. Auto Servs., Inc., 128 S.W.3d 103, 107 (Mo.App. E.D.2003)). Even assuming there was negotiation, the public policy of Missouri is that all contracts should be negotiated in good faith. “It is unconscionable to take advantage of an unequal bargaining position and obtain a contract or term which results in a gross disparity of values exchanged.” 15 Mo.Code Regs. Ann. Unconscionable Practices 60-8.080 (2013).
We have codified that belief in the Uniform Commercial Code (“UCC”). Specifically, “Section 407.020 has at all times proscribed deceptive or fraudulent acts in connection with the sale of merchandise[.]” Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 768 (Mo. banc 2007). Although the UCC may not have direct application to consumer real estate leases, the philosophy expressed there has valid application here.
Section 434.100 provides additional support that Missourians have a right to expect good faith in contract negotiation. Section 434.100.1 states, in part, “in any contract or agreement for public or private construction work, a party’s covenant, promise or agreement to indemnify or hold harmless another person from that person’s own negligence or wrongdoing is void as against public policy and wholly unenforceable.” It defies belief to think that the legislature would provide for good faith in contracts between people with equal bargaining power and for public contracts but force tenants to accept contracts with no negotiation and an absence of good faith from landlords who are allowed to escape any liability for their future negligence.3
The exculpatory clause in this case is far more egregious than the clause in Brewer. As opposed to the clause in Brewer, this clause did not just involve a method of resolving disputes between the parties. Thus, the clause in this Lease does not provide for an alternative method of dispute resolution, it calls for no remedy at all for the tenant but all remedies to be available to the landlord. This clause prevented any action or claims be brought against the landlord. This defies our Constitution. *113Article 1, Section 14, of the Missouri Constitution provides “That the courts of justice shall be open to every person, and certain remedy afforded for every injury to person, property or character[.]”
TLC argues that the clause in this Lease also makes the tenant liable for the landlord’s negligence to others, not only in the apartment unit but in the common areas even though the landlord referred to the common areas as its duty in Paragraph 6. The tenant cannot control the common areas. To shift the risk of liability to the tenant for all common areas is outside the understanding of any reasonable person.
We have yet to consider the policy implications of upholding these types of exculpatory clauses in residential leases. The first case which addressed the exculpatory clause and which has been cited for the broad principle that exculpatory clauses are not against public policy is Alack v. Vic Tanny Intern. of Missouri, Inc., 923 S.W.2d 330 (Mo. banc 1996). Alack was a case involving a general exculpatory clause contained in a health club contract. Id. at 332. We also note that, as explained in Milligan v. Chesterfield Village GP, LLC, 239 S.W.3d 613, 621 n. 7 (Mo.App. S.D.2007):
even Alack’s, dissenters expressed strong personal and policy concerns with exculpatory clauses[.] 923 S.W.2d at 339-40 (Limbaugh, J., dissenting), at 342 (Robertson, J., dissenting and joined by Covington, J.). There are yet stronger reservations as to residential leases, especially adhesion leases of low-income housing. Mr. Alack, if unwilling to give up his legal rights against Vic Tanny, might have joined a different health club or the local Y, bought his own exercise equipment, or simply forgone his exercise plans. Thus, freedom of contract outweighed the public policy disfavoring a health club’s exculpatory clause. Id. A low-income family cannot forgo housing, yet may be unable to buy a home, have few rental options, and lack any power to bargain away onerous lease terms. As more low-income lessors add exculpatory clauses to their lease forms, low-income lessees’ “freedom of contract” may become increasingly illusory.
Warren v. Paragon Technologies Group, Inc., 950 S.W.2d at 845, involved the language in a non-liability clause which was tried to a jury. Nevertheless, in Warren, the court cited Alack for the general principle that exculpatory clauses were not against public policy but then stated, “[a]l-though the validity of a non-liability clause is a question of law for the court, [ ] the court can reach this question only after the parties comply with the applicable pleading and evidence requirements.” Id. at 845.4
This Court, in Milligan, citing to Warren and Alack, decided that the point “makes a narrow claim. It asserts, as a matter of law, [the exculpatory clause] is unenforceable because ‘from any cause whatsoever’ does not expressly exclude intentional torts, gross recklessness, or ac*114tivities involving the public interest.” Milligan, 239 S.W.3d at 616. In Milligan, this Court was not asked nor did it consider whether the lease at issue was unconscionable or against the public policy of the State of Missouri.
It is time to address the very real issues facing Missourians who are injured by the negligence of their landlords. This Lease was partially a conveyance. TLC agreed to convey the premises of M303 to Fuller for a period of time and Fuller agreed to pay the fair market value for the conveyance. The additional contract language contradicts our common law and statutory provisions of good faith and fair dealing in the bargaining of contracts. An unconscionable contract is one that “no man in his senses, not under delusion, would make, on the one hand, and which no fair and honest man would accept on the other.” Hume v. U.S., 132 U.S. 406, 10 S.Ct. 134, 136, 33 L.Ed. 393 (1889). The average consumer would not understand that signing a lease for the rental of an apartment unit would effectively negate all prior negligence law and allow the landlord to show no regard for the tenant’s safety. This clause is clearly unconscionable and, as such, is against public policy.

. In Brewer, a majority of our Supreme Court indicated that future Missouri judicial decisions should "limit review of the defense of unconscionability” to "a discussion of facts relating to unconscionability impacting the formation of the contract.” 364 S.W.3d at 492 n. 3. Although, for ease of discussion, I use the traditional phrases of "procedural un-conscionability” and “substantive uncon-scionability” in my concurring opinion, I limit my discussion of the facts to those facts that relate to unconscionability impacting the formation of the Lease.

. Although the term public policy is difficult to define, "it is generally said to be that principle of law which holds that no one can lawfully do that which tends to be injurious to the public or against the public good; it is synonymous with the 'policy of the law’ and ‘the public good.’ ” Brawner v. Brawner, 327 S.W.2d 808, 812 (Mo. banc 1959), overruled on other grounds by Townsend v. Townsend, 708 S.W.2d 646, 649-50 (Mo. banc 1986).

. In Missouri, according to the 2010 census, there are 1,669,216 people living in renter-occupied housing units, or approximately one-third of the total population living in housing. Available at http://factfin.der2. census.gov/faces/tahleservices/isf/pages/ product view.xhtml?pid=DEC-10-DPJDPDPl (last visited on June 3, 2013).

. I consider the holding of Warren to be confusing. The trial court refused to enforce a non-liability clause and the cause was heard by a jury. Although citing to Alack for the proposition that a non-liability clause was not void, nonetheless, the cause was remanded for a new trial despite the clause. The focus of the decision was whether the landlord had met its burden to prove its affirmative defense of release, and, if so, whether, in light of the jury’s verdict for the tenant and the Supreme Court’s intervening decision in Alack, the tenant should be permitted an opportunity to retry the case. Warren, 950 S.W.2d at 845-46. The court in Warren apparently did not reach the issue of unconscionability of the exculpatory clause, but focused only on the propriety of such clauses in the context of public policy.