Court Opinion

ID: 770902
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:41:33+00
Date Added: 2024-06-11T17:55:53.784790
License: Public Domain

230 F.3d 835 (6th Cir. 2000)
Lexington Insurance Company, as subrogee of New Plan  Realty Trust, Plaintiff-Appellee,v.F.W. Woolworth Company, Defendant-Appellant.
No. 99-3609
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Argued: June 22, 2000Decided and Filed: November 1, 2000

Appeal from the United States District Court for the Southern District of Ohio at Cincinnati.  No. 98-00001--Jack Sherman, Magistrate Judge.
Bradley L. Snyder, ROETZEL & ANDRESS, Columbus, Ohio, Elliott R. Feldman, COZEN & O'CONNOR, Philadelphia, Pennsylvania, for Appellee.
Thomas J. Gruber, McCASLIN, IMBUS  & McCASLIN, Cincinnati, Ohio, for Appellant.
Before: NELSON, BOGGS, and DAUGHTREY, Circuit Judges.
OPINION
DAVID A. NELSON, Circuit Judge.

1
A shopping mall tenant appeals here from a judgment in favor of its landlord's  casualty insurance carrier on a subrogation claim asserted against the tenant in the wake of a fire that damaged the leased  premises.

2
A jury returned a verdict in favor of the tenant. The district court was ultimately persuaded, however, that terms of the  lease obligating the tenant to indemnify the landlord against all claims for personal injury or property damage arising out of  the use and occupancy of the demised premises were sufficiently unambiguous to require the tenant to bear the loss  occasioned by the fire even though the lease required the landlord to keep the premises fully insured against damage by fire  and to repair or rebuild the leased structure should fire damage occur.

3
Upon de novo review, we conclude that the district court's construction of the lease cannot properly be said to have been  compelled as a matter of law. We shall therefore vacate the judgment n.o.v. and remand the case for entry of judgment on  the verdict in favor of the tenant.

4
* The defendant, F.W. Woolworth Co., was a long-time tenant at a Springfield Township, Ohio, shopping mall known as  the Brentwood Plaza. Woolworth's original landlord, Brentwood Plaza, Inc., had disposed of its interest in the mall by the  time of the fire, and an entity called New Plan Realty Trust had succeeded Brentwood as landlord. New Plan Realty carried  property damage and business interruption insurance written by the plaintiff, Lexington Insurance Company.

5
The fire broke out during business hours on January 13, 1997, when an unknown patron set fire to some artificial  flowers that Woolworth was displaying for sale inside the store. Although fire extinguishers were available, none of the  Woolworth employees on duty at the time had been trained in their use. The fire caused extensive damage, and the parties  have stipulated that Lexington paid New Plan Realty a total of $995,265.13 for repair of the building, removal of debris,  and loss of rental income.

6
Invoking diversity jurisdiction, Lexington sued Woolworth in federal district court for recovery of an amount equal to the insurance settlement. The complaintasserted two causes of action, one sounding in negligence and the other in contract.

7
The case was tried to a jury of eight, a magistrate judge presiding by agreement between the parties, and the jury  returned a verdict in which it found that Woolworth had not been negligent and had not broken its lease with New Plan  Realty. Renewing a motion made at the close of all the evidence, Lexington asked the court to direct entry of judgment in  the insurance company's favor as a matter of law. The court denied the motion as to the negligence claim but granted it as  to the contract claim. With prejudgment interest calculated at a rate of $272.67 per day, the final judgment came to well  over $1 million. Pursuant to a stipulation that an appeal would lie directly to our court, Woolworth filed a timely notice of  appeal to the Sixth Circuit.

II

8
Lexington's contract claim was based solely on an indemnity provision (Article 19) in the lease that Woolworth had  entered into in 1955 with New Plan Realty's predecessor in interest. In Article 19, the full text of which is set forth in the  margin,1 Woolworth agreed to indemnify the landlord against "any and all claims and demands," whether claims and  demands for personal injury, for loss of life, or for property damage, as long as the injury, loss, or damage occurred within  the demised premises and arose out of the tenant's use of the premises. The tenant's obligation to indemnify the landlord  was subject to an exception for claims and demands arising out of acts or omissions by the landlord itself, and there was a  reciprocal undertaking by the landlord to indemnify the tenant against claims and demands for personal injury, loss of life,  and property damage arising out of acts or omissions of the landlord or out of the tenant's use of the shopping mall's  common facilities.

9
It is clear to us, notwithstanding Woolworth's contention to the contrary, that the property damage caused by the fire was  damage "arising out of" Woolworth's use and occupancy of the leased premises. The fire was lit by a patron who had  entered the premises as a business invitee of Woolworth, after all, and the combustible material to which the patron set fire  was merchandise being offered for sale in the store. Woolworth argues that it is in the retail business, not the arson  business. That is true - but it is also true, unfortunately, that intentional or negligent destruction of merchandise and other  property by customers is one of the business risks retailers necessarily assume when they set up shop.

10
It is far less clear to us that anyone has asserted "claims and demands" against New Plan Realty within the meaning of  that phrase as used in the indemnity provision of the lease - and the commitment to indemnify, under the plain language of  Article 19, applies only with respect to "claims and demands." The insurance company has not shown that any claim or  demand was made for personal injuries or loss of life, and the only conceivable claim or demand against New Plan Realty  with respect to property damage would be a demand by Woolworth that the landlord fulfill its own contractual obligations  under the very lease pursuant to which the landlord'ssubrogee seeks to hold Woolworth liable.

11
The pertinent contractual obligations of the landlord are set forth primarily in Article 24 of the lease, which is captioned  "Damage to Premises." In that article, three of the four paragraphs of which are quoted in the margin,2 the landlord agrees  to keep the shopping mall's buildings fully insured against loss or damage by fire. The landlord further agrees that if  buildings are damaged or destroyed by fire, the landlord, proceeding with due diligence, will repair or restore the same.  Additional obligations are set forth in Article 23, "Repairs," portions of which are also quoted in the margin.3

12
It is conceivable, we suppose, that the contractual benefits conferred on the tenant in Articles 23 and 24 were intended to  be largely negated by the indemnity obligation assumed by the tenant in Article 19. It is conceivable, in other words, that  although the landlord promised to buy fire insurance and to repair or restore the building in the event of damage or  destruction by fire - with the rent to abate while the building was being put back in shape - a demand by the tenant that the  landlord keep the promises it made in the lease was nonetheless intended, because of Article 19, to be tantamount to the  tenant's saying "never mind, I shall indemnify you and save you harmless from and against my own demand that you do  what you promised to do." Under this seemingly paradoxical view of the lease, the primary purpose of Articles 23 and 24  was simply to identify the landlord as the party responsible for shouldering the administrative burden of arranging for  restoration or repair in the first instance, while one of the purposes of Article 19 was to identify the tenant as the party  ultimately responsible for bearing the cost of the work and for making up the abated rent.

13
If the lease had really been intended to assign these costs to the tenant, we confess ourselves at something of a loss to  understand why the lease should not have required the tenant to buy insurance rather than requiring the landlord to do so.  But be that as it may, the more important question is whether the language of the lease admits of an alternative  interpretation. We think it does.

14
The alternative view, of course, is that Articles 23 and 24 were intended toassign costs of the sort at issue here to the  landlord, backed up by insurance, with the tenant being obligated to provide indemnification only against claims and  demands for costs that the lease did not expressly assign to the landlord. This strikes us as the better interpretation4 - and  arguably it is one that should have prevailed as a matter of law. At the very least, however, the conflicting interpretations  we have described suggest that the lease is ambiguous - and given the procedural posture in which the case comes to us,  with a jury already having held that Woolworth committed no breach of its obligations under the lease, the ambiguity is  enough to carry the day for Woolworth5.

15
Lexington cites various rules of contractual interpretation - e.g., the "plain meaning" rule and the rule that the contract  must be construed as a whole - in an attempt to show that there is no ambiguity. When these general principles are  considered in the factual context presented here, however, it seems to us that they bolster Woolworth's case more than  Lexington's. The "plain meaning" of the last sentence of Article 23, for example, as quoted in footnote 3, supra, strikes us  as irreconcilable with Lexington's argument that Articles 23 and 24 were merely intended to make the landlord responsible  for assuming the administrative burden of arranging for repairs in the first instance.

16
In addition to relying on general rules of construction in its effort to persuade us that no ambiguity exists, Lexington  cites two decisions in support of the proposition that "[c]ourts uniformly have interpreted indemnity provisions as applying  to direct claims by a lessor against a lessee for damage to leased property." The cases cited by Lexington in this connection  are Stychno v. Ohio Edison Co., 806 F.Supp. 663 (N.D. Ohio 1992), and Hartford Fire Ins. Co. v. Chicago Tunnel  Terminal Co., 12 Ill. App.2d 539, 139 N.E.2d 770 (1956). Neither case is on point.

17
Stychno involved the assertion of a claim by a landowner against the Ohio Edison Company, a former owner of the land,  for property damage arising from improper disposal of hazardous wastes. Ohio Edison filed a third-party complaint against  a sometime tenant - the party that had actually generated the hazardous material - seeking indemnification under a provision  of the lease in which the tenant had agreed to "defend, indemnify and save [Ohio Edison] harmless from and against any  and all claims, demands, damages, actions or cause of actions . . . growing out of lessees' use of said premises . . . ." The Stychno court simply held that the lease obligated the tenant to indemnify Ohio Edison with respect to the claims asserted  against that company by the current owner of the land. The Stychno case is obviously inapposite here, no claim comparable  to that asserted against Ohio Edison having been asserted against the landlord in the case at bar. The situations would be  analogous if Brentwood Plaza, Inc., were seeking indemnification from Woolworth with respect to a claim asserted by New  Plan Realty, but that is not this case.

18
Hartford Fire is likewise inapposite. The lease at issue there contained an indemnity clause obligating the tenant to save  the landlord harmless from, first of all, "any and all loss or damage which [thelandlord] may incur or suffer on account of  injury to or destruction of its property . . . ." The indemnity clause then went on to provide that the tenant should also save  the landlord harmless "from any and all claims for liability to any person . . . whenever such loss, damage or injury shall be  caused by . . . the use or operation of [the leased property]." The Hartford Fire court ordered indemnification under the first  part of the clause, which has no counterpart in the case at bar, and not under the second part, which provided for  indemnification with respect to "claims." The Hartford Fire opinion contains no indication, moreover, that the damage in  question there was damage which the landlord itself had contracted to repair. Hartford Fire simply is not comparable to the  case before us here.

19
Unpersuaded that Lexington's proffered reading of the lease is one that must be accepted as a matter of law, we VACATE the judgment in favor of Lexington and REMAND the case with instructions to enter judgment on the verdict in  favor of Woolworth.

Notes:

1
 "Art. 19. The Tenant during the term hereof shall indemnify and save harmless the Landlord from and against any  and all claims and demands whether for injuries to persons or loss of life, or damage to property, occurring within the  demised premises and arising out of the use and occupancy of said demised premises by the Tenant, excepting  however such claims and demands whether for injuries to persons or loss of life, or damage to property, caused by  acts or omissions of the Landlord. The Landlord during the term hereof shall indemnify and save harmless the Tenant  from and against any and all claims and demands whether for injuries to persons or loss of life, or damage to  property, arising out of acts or omissions of the Landlord or arising out of the Tenant's use of the 'Common Facilities'  as defined in Articles 15 and 16 hereof."

2
 "Art. 24. The Landlord agrees that it will keep the buildings on said 'Entire Premises' insured against loss or  damage by fire, to the full fair insurable value thereof.
"The Landlord further agrees that if said buildings are damaged or destroyed by fire at any time after the date of  this lease, or if, after such date, said buildings are damaged or destroyed through any other cause not directly  attributable to the negligence of the Tenant, the Landlord will proceed with due diligence to repair or restore the same  to the same condition as existed before such damage or destruction, and as soon as possible thereafter (but not prior  to the beginning of the term of this lease, unless acceptable to the Tenant) will give possession to the Tenant of the  same space as is herein demised without diminution or change of location.
* * *
"In the event of damage or destruction of the building on the premises herein demised, rent and additional rent,  if any, shall abate from the date of such damage or destruction until the Landlord has repaired or restored said  building and has delivered to the Tenant the demised premises in the manner and in the condition provided in this  article."

3
 "Art. 23. The Landlord agrees to make and pay for all repairs, structural or otherwise, to the exterior of the  building on the demised premises. . .and also to make and pay for all repairs to the interior of said building which  may be of a structural nature and which are not made necessary by any unusual use of the demised premises by the  Tenant . . . . Anything in this lease to the contrary notwithstanding the Landlord agrees that if in an emergency it shall  become necessary to promptly make any repairs hereby required to be made by the Landlord, the Tenant may at its  option proceed forthwith to have such repairs made and pay the cost thereof. The Landlord agrees to pay the Tenant  the cost of such repairs on demand, and that if not so paid the Tenant may deduct the amount so expended by it from  rent due or to become due."

4
  The parties agree that Ohio law governs this dispute. Under Ohio law, specific contractual provisions control  conflicting general provisions. See, e.g., Monsler v. Cincinnati Cas. Co., 598 N.E.2d 1203, 1209 (Ohio Ct. App. 1991). To  the extent that there may be some measure of tension between Article 19, which is a general indemnity provision, and  Articles 23 and 24, which specifically address fire damage and repairs, the latter provisions should control.

5
  The resolution of contractual ambiguities is a matter for the jury. See Cincinnati Ins. Co. v. Control Serv. Tech., Inc.,  677 N.E.2d 388 (Ohio Ct. App. 1996) (finding ambiguity in lease as to whether insurance company could proceed against  tenant for its negligence in causing a fire and remanding for jury's consideration).