Court Opinion

ID: 6581
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:18:57+00
Date Added: 2024-06-11T13:31:00.543074
License: Public Domain

United States Court of Appeals,

                          Fifth Circuit.

                           No. 93-3679.

    RESOLUTION TRUST CORPORATION, as Conservator for Security
Homestead Federal Savings Association, et al., Plaintiffs,

 Resolution Trust Corporation, as Receiver for Security Homestead
Federal Savings Association, Plaintiff-Appellant,

   International Surplus Lines Insurance Company, Intervenor-
Appellant,

                                 v.

  GASPER-VIRGILLIO a/k/a "Sonny" Virgillio, et al., Defendants-
Appellees.

                           Aug. 1, 1994.

Appeals from the United States District Court for the Eastern
District of Louisiana.

Before REYNALDO G. GARZA, DeMOSS and PARKER, Circuit Judges.

     ROBERT M. PARKER, Circuit Judge:

     Appellant   International   Surplus   Lines   Insurance   Company

("ISLIC") appeals the district court's granting of appellees'

motion for summary judgment and denial of appellants' motion to

alter or amend the judgment. The district court's ruling was based

on its conclusion that the unambiguous language in the lease

between Security Homestead Federal Savings Association ("Security

Homestead") and Susson, Inc. ("Susson") released Susson and its

successors, assigns, and employees from liability to the lessor and

its insurer for damages resulting from the fire.     For the reasons

set out below, WE REVERSE IN PART AND AFFIRM IN PART.

                   FACTS AND PROCEDURAL HISTORY

     On March 7, 1989, Security Homestead leased several units of

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a condominium regime known as Main Street Condominium ("Main

Street")    to    Susson.    The   lease     included    a    insurance   waiver

provision in Article VI, set forth in pertinent part:

      Lessor will keep the leased premises insured against loss or
      damage by fire, with the usual commercial extended coverage
      endorsements, and in the event of loss, neither lessor nor its
      insurer shall have any recourse against lessee, it being
      understood and agreed that the lessor assumes all risk of
      damage to its own property arising from any insured risk.

Main Street Condominium Association, Inc., a corporation created by

the co-owners of the condominium units of Main Street including

Security Homestead, obtained the fire insurance for Main Street

through ISLIC.

      Three days after the lease was signed, on March 10, 1989,

Susson entered into a joint venture agreement with H.G.P., Inc.

("H.G.P.") to operate a daiquiri shop, called Club Daiquiris, in

the Main Street condominium units Susson leased from Security

Homestead.       Susson had a 76.57 interest in the joint venture, and

H.G.P. had a 23.57 interest.           Susson and H.G.P. also entered into

a management agreement authorizing Susson to operate and manage

Club Daiquiris.

      On November, 13, 1989, a fire began in one of the units leased

to Susson and spread throughout the complex.                 At the time of the

fire, Gasper "Sonny" Virgillio ("Virgillio"), an employee acting on

behalf of Susan Roth, Susson, H.G.P., Inc. and the joint venture

formation of Club Daiquiris, was removing furnishings and fixtures

from the unit where the fire originated to prepare for the closing

of   Club   Daiquiris.      It   was    alleged   that   Virgillio's      use   of

combustible material to facilitate the removal of the fixtures

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contributed to the ignition and/or spread of the fire.    ISLIC paid

Security Homestead $571,528.88 for damages caused by the fire.    It

then filed a subrogation action via a Petition of Intervention.

     ISLIC intervened in the suit originally filed by Resolution

Trust Corporation ("RTC") as conservator for Security Homestead.

The suit was consolidated with four others arising out of the same

fire.   One of those suits was settled in state court.    The others

were removed to federal court by RTC.

     All defendants joined in a motion for summary judgment against

the claims of RTC and Intervenor ISLIC. The defendants argued that

the claims were barred by a waiver provision in the lease between

Security Homestead and Susson.        The district court granted the

summary judgment motion, and denied RTC and ISLIC's motion to alter

or amend the judgment.    The court entered a final judgment against

RTC and ISLIC.   Both RTC and ISLIC filed a notice of appeal, but

RTC later filed for voluntary dismissal of its appeal, which the

district court granted.

                          STANDARD OF REVIEW

     Review of a district court's ruling on a motion for summary

judgment is plenary. Lodge Hall Music, Inc. v. Waco Wrangler Club,

Inc., 831 F.2d 77, 79 (5th Cir.1987).     Although review is de novo,

the court of appeals applies the same standards as those that

govern the district court's determination.        Jackson v. Federal

Deposit Ins. Corp., 981 F.2d 730, 732 (5th Cir.1992).        Summary

judgment must be granted if the court determines that "there is no

genuine issue as to any material fact and that the moving party is

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entitled to a judgment as a matter of law."           FED.R.CIV.P. 56(c).

                                  DISCUSSION

     ISLIC contends that the district court's conclusion that the

lease between Security Homestead and Susson expressly intended to

relieve Susson from liability cannot be reconciled with the plain

language of the "Deposit" and "Surrender" provisions of the lease.

Specifically, ISLIC argues that these provisions require Susson,

the lessee, to pay Security Homestead, the lessor, for damages to

the leased premises caused by Susson. The wording of the "Deposit"

and "Surrender" provisions also modifies the language of the waiver

provision so that it must be interpreted to impose liability on

Susson   when   a   fire   on   the   leased   premises   results   from   the

negligent actions of Susson or its agents.           Absent an unequivocal

statement of an intention to waive the lessor's right to recovery

on the lessee's negligent conduct, ISLIC argues that Louisiana law

presumes that the waiver provision does not relieve lessee from

liabilities for its own negligence.            Therefore, because employee

Virgillio's negligence in removing the fixtures caused the fire,

Susson is responsible for the damage to the units under the lease

and is not released from liability under the waiver provision.              In

addition, ISLIC argues that the joint venture between Susson and

H.G.P. does not make H.G.P. a successor or assign to Susson's

rights under the lease because the joint venture contract did not

explicitly state such an intention.

     ISLIC further contends that the waiver provision in the lease

does not extend to Susson's officers and employees because the

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lease does not contain language referring to officers, agents,

employees or servants of the lessee.           Therefore, Virgillio's

individual liability for his negligent conduct in causing the fire

damage to the condominium units is not affected by the waiver

provision because he is an employee, not a named insured.

           We find the reasoning of the Louisiana Supreme Court in Home

Ins. Co. of Illinois v. National Tea Co., 588 So. 2d 361 (La.1991),

applies in this case.          The language of the waiver provision

expressly requires the lessor to provide fire insurance, and it

states that the lessor "assumes all risk of damage" arising from

any insured risk.       It seems apparent that "[a]s plainly expressed

in the lease, the parties' clear intent was to shift the risk of

fire loss to Lessor's fire insurer."       Home Ins. Co., 588 So. 2d at

364.       Even if the fire was caused by the negligent acts of Susson,

it does not shift the burden of risk back to Susson because

Security Homestead assumed all risk of damage arising from any

insured risk.       That risk includes the risk of damage arising from

Susson's negligence in causing a fire.       Id.1

           As for the successor issue, the Louisiana Supreme Court held

in Woodlawn Park Ltd. v. Doster Constr. Co., Inc., 623 So. 2d 645,

648 (La.1993), that if the agent enters into a contract for the

benefit of an undisclosed principal, the principal may be held

       1
      We have previously held that Louisiana law does not require
an unequivocal statement of an intention to waive a lessor's
rights to recovery on a lessee's negligent conduct. See In re
Incident Aboard the D/B Ocean King, 758 F.2d 1063, 1068 (5th
Cir.1985) (Louisiana law does not require the "magic words" in
order for an indemnity provision to cover the indemnitee's own
negligence).

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liable under the contract.     The joint venture between Susson and

H.G.P. to open Club Daiquiris ratified the lease between Security

Homestead and Susson once monthly rental payments were continued by

the product of the joint venture.      At that point, the joint venture

became the successor of Susson.          Therefore, we hold that the

district court did not err in concluding that the waiver provision

in the lease bars a claim by Security Homestead's fire insurer,

ISLIC, against Susson or its succeeding joint venture with H.G.P.2

         The waiver provision in the lease between Security Homestead

and Susson, however, does not apply to the officers or employees of

Susson.     The release provision in Home Ins. Co. explicitly stated

that the lessor would "release and discharge the Lessee, its

agents, successors and assigns from any and all claims and damages

whatsoever from any cause resulting from or arising out of any

fire...."     Home Ins. Co., 588 So. 2d at 363.      In this case, the

waiver provision of the lease between Security Homestead and Susson

fails to include any language referring to agents, employees,

servants or officers. Therefore, we hold that the waiver provision

does not apply to Susson or its successor's employees or officers

because the lease fails to explicitly include employees, agents,

     2
      While the waiver provision of the lease allocates the
liability for damage caused by fire as between Security Homestead
and Susson, it does not allocate liability as between Security
Homestead and any third parties. Neither does the waiver
provision, nor any other provision in the lease, indemnify Susson
for claims of others who were damaged by Susson's negligent acts.
Home Ins. Co., 588 So. 2d at 366. Therefore, the waiver provision
does not affect the subrogation rights of ISLIC with regard to
the condominium unit owners who were not parties to the lease
between Security Homestead and Susson.

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servants, or officers in the language of the waiver provision.

                           CONCLUSION

     We therefore REVERSE and REMAND the district court's ruling

with regard to the applicability of the waiver provision in the

lease between Security Homestead and Susson.   We AFFIRM the ruling

in all other respects.

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