Court Opinion

ID: 2968315
Source: CourtListenerOpinion
Date Created: 2015-09-22 04:48:32.817739+00
Date Added: 2024-06-11T15:28:33.745858
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

ALLSTATE INSURANCE COMPANY, a/s/o      
Hunters Ridge Condominium
Owners Association, Incorporated,
                Plaintiff-Appellant,
                 v.                             No. 05-1859
JENNIFER FRITZ; CLAY NICHOLAS
PENDLETON; SARAH ELIZABETH KUHN
NELSON,
               Defendants-Appellees.
                                       
           Appeal from the United States District Court
      for the Western District of Virginia, at Charlottesville.
                Norman K. Moon, District Judge.
                          (CA-03-94-3)

                      Argued: May 24, 2006

                      Decided: June 26, 2006

         Before NIEMEYER and MOTZ, Circuit Judges,
             and HAMILTON, Senior Circuit Judge.

Affirmed in part, reversed in part, and remanded by published opin-
ion. Judge Niemeyer wrote the opinion, in which Judge Motz and
Senior Judge Hamilton joined.

                            COUNSEL

ARGUED: Martin P. Duffey, COZEN O’CONNOR, Philadelphia,
Pennsylvania, for Appellant. Humes Jefferson Franklin, III, WHAR-
2                  ALLSTATE INSURANCE CO. v. FRITZ
TON, ALDHIZER & WEAVER, P.L.C., Staunton, Virginia; Caroline
D. Bragg, CATTANO LAW FIRM, Charlottesville, Virginia, for
Appellees. ON BRIEF: James W. Barkley, Elizabeth M. Ayyildiz,
MORIN & BARKLEY, Charlottesville, Virginia, for Appellant. John
P. Cattano, CATTANO LAW FIRM, Charlottesville, Virginia, for
Appellee Jennifer Fritz.

                              OPINION

NIEMEYER, Circuit Judge:

   While attending James Madison University in Harrisonburg, Vir-
ginia, Jennifer Fritz and Sarah Nelson signed a lease for Apartment
H of a 12-unit apartment building owned by Hunters Ridge Condo-
minium Owners Association, Inc. ("Hunters Ridge" or "Owner"). In
the early morning hours of May 12, 2002, during the term of the
lease, a fire erupted on the wooden balcony of Fritz and Nelson’s
apartment, causing over $700,000 in property damage to Apartment
H and to the apartment building.

   Allstate Insurance Company, Hunters Ridge’s property insurer,
paid the loss, and, as subrogee of Hunters Ridge, commenced this
action against Fritz, Nelson, and Clay Pendleton, who had been
Fritz’s guest at Apartment H. Before the fire, Pendleton had been
refinishing the stock of his gun on the apartment’s balcony, using lin-
seed oil, and officials believed that a spontaneous combustion of a lin-
seed oil-soaked rag was the cause of the fire. In the suit, Allstate
contended that all three defendants were liable for negligence in caus-
ing the fire and that Nelson and Fritz were also liable under the terms
of their lease. After discovery, Pendleton settled with Allstate, and
Nelson and Fritz filed motions for summary judgment. The district
court granted their motions, reading the lease as absolving Fritz and
Nelson of all negligence liability and concluding that, in any event,
Allstate had failed to present evidence sufficient to show that Fritz
and Nelson were negligent.

   On Allstate’s appeal, we affirm the district court’s conclusion that
the evidence in the record is insufficient to prove negligence on the
                    ALLSTATE INSURANCE CO. v. FRITZ                        3
part of Fritz and Nelson. But we conclude that the lease nonetheless
imposes liability on Fritz and Nelson for damage to Apartment H
caused by any negligence of Pendleton, their guest. Accordingly, we
reverse that portion of the district court’s judgment and remand for
further proceedings on the tenants’ lease liability.

                                      I

   In early 2001, Fritz and Nelson signed an 11-1/2 month lease for
Apartment H at 1366 Hunters Road in Harrisonburg, to commence on
August 15, 2001, and continue until July 30, 2002. Apartment H was
a second-floor apartment and one of 12 apartments in the building.
The lease designates Fritz and Nelson collectively as the "Tenant" and
refers to Apartment H as the "property" leased. Thereafter, the lease
refers to "property" and "premises" interchangeably. The lease pro-
vides, unremarkably, that "Tenant shall not remodel or make any
structural changes, alterations or additions to the premises"; that
"Tenant shall be responsible for general upkeep of the premises"; and
that "at the expiration of the lease term Tenant shall surrender the
premises in as good condition as they were at the commencement of
this lease." If during the lease the premises were to be rendered "to-
tally unfit for occupancy" by reason of a number of enumerated exter-
nal forces, including fire and act of God, the lease provides that its
term would immediately cease. During the term of the lease, however,
the "Tenant [was] responsible for . . . all costs for repairs . . . resulting
from . . . negligent actions or omissions of Tenant or Tenant’s
guests." As to that obligation, as well as every other obligation in the
lease, Paragraph 25 provides that "if two or more individuals shall
execute this lease as ‘Tenant,’ the liability of each such individual to
pay rent and perform all of Tenant’s obligations hereunder shall be
deemed to be joint and several." That paragraph was modified by an
"Addendum," which provides that "each Tenant that signs a Lease
Agreement for the above stated property [Apartment H] during the
term of this lease shall be jointly and equally responsible for any and
all damages to the Property." The lease provides that it is to be con-
strued according to Virginia law.

   On May 11, 2002, during the term of the lease, Pendleton asked
Fritz, who was his friend, if he could use Apartment H to clean his
Civil War reenactment equipment, which he had been storing in
4                  ALLSTATE INSURANCE CO. v. FRITZ
Fritz’s storage locker. Even though neither Fritz nor Nelson was
going to be at the apartment that day, Fritz gave Pendleton permission
to use the apartment to clean his gear. During that day, Pendleton
washed his uniform, cleaned his utensils, and refinished the stock of
his replica musket. To do the refinishing, Pendleton stripped the var-
nish off the stock with a varnish stripper sprayed from an aerosol can,
sanded it, and applied linseed oil to it. To remove the stripper from
the stock and to apply the linseed oil, Pendleton used rags made from
a cotton tee shirt. When he had finished, at around 8:00 p.m., Pendle-
ton left the rags on the balcony, together with the aerosol can and the
can of linseed oil.

   Between midnight and 1:30 a.m. on May 12, 2002, both Fritz and
Nelson returned to the apartment. Before going to bed, Nelson
smoked a cigarette on the balcony, which she claims to have extin-
guished in a water-filled ashtray. At around 4:00 a.m., a smoke alarm
woke Nelson, and her screams woke Fritz. When they discovered a
fire on their balcony, they called 911 and fled the building. The fire
did substantial damage not only to Apartment H but also to the apart-
ment building before it was extinguished.

   Fire investigators concluded that the most likely cause of the fire
was a spontaneous combustion of the linseed oil-soaked rag that
Pendleton had left on the wooden balcony. Linseed oil releases heat
as it oxidizes, and if rags soaked in the oil are not properly ventilated,
the heat can increase to the ignition temperature of the rags.

   After paying Hunters Ridge $700,000 for the loss, Allstate com-
menced this action against Fritz, Nelson, and Pendleton, claiming that
they were liable to Hunters Ridge for the loss. Specifically, Allstate
alleged that Pendleton was negligent in using and disposing of the lin-
seed oil. It alleged that Fritz and Nelson were negligent in permitting
Pendleton to use the linseed oil in their apartment and in failing to
supervise him and inspect his work area. Allstate alleged that all three
defendants should have known that linseed oil constitutes a fire haz-
ard and that each could have prevented the fire. Finally, Allstate
alleged that Nelson and Fritz were responsible for the property dam-
age under the terms of their lease with Hunters Ridge.

  After discovery, Pendleton settled with Allstate, and Allstate dis-
missed its claims against Pendleton. Fritz and Nelson filed motions
                   ALLSTATE INSURANCE CO. v. FRITZ                      5
for summary judgment, which the district court granted. The court
concluded that the lease, "taken as a whole, indicates that the parties
intended that tenants should not be liable for fires caused by their own
negligence." Alternatively, the court concluded that "if Defendants
were liable for fires created by their negligence, Plaintiff’s case would
not survive summary judgment [because] there is simply not suffi-
cient evidence from which the jury could find that either Fritz or Nel-
son acted negligently." With respect to liability imposed by the lease
on the tenants for the negligence of their guests, the court concluded
that the relevant lease provision was "inescapably aimed at the nor-
mal, day-to-day maintenance that is necessary to keep the apartment
functional, good looking, and clean. . . . This limited maintenance lan-
guage is entirely silent upon more serious matters such as destruction
of the premises by fire."

  From the district court’s judgment in favor of Fritz and Nelson,
Allstate filed this appeal.

                                    II

   Allstate contends that the district court erred as a matter of law (1)
in construing the lease to eliminate tenants’ liability for "fires caused
by their own negligence," and (2) in concluding that the provision
imposing liability on "Fritz and Nelson for [their guests’ negligence
was] not applicable here because . . . it only applie[d] to negligence
relating to day-to-day minor maintenance and repairs." Allstate argues
that insofar as the district court reached those conclusions by implica-
tion from clauses in the lease that provide (1) that the tenant need not
obtain first-party property insurance for the building and (2) that
destruction of the property by fire, act of God, or other external
source ends the lease, the court simply misread those clauses. Finally,
Allstate contends that the district court also misread the lease in limit-
ing the tenants’ obligation for guests’ negligence to simple day-to-day
maintenance matters.

   At the outset, we agree with the district court that Virginia law
applies and that, in particular, the principles of Monterey Corp. v.
Hart, 224 S.E.2d 142 (Va. 1976), are directly relevant. In Monterey,
the tenant negligently burned down an apartment building, leading the
landlord to sue the tenant’s estate for damages. The court announced
6                   ALLSTATE INSURANCE CO. v. FRITZ
the principle that a tenant’s common law liability for losses due to his
negligent, reckless, or willful acts is preserved absent a provision in
the lease to the contrary. In the case before us, however, the district
court flipped the presumption and noted that because no provision in
the Hunters Ridge lease expressly addressed Fritz and Nelson’s com-
mon law liability for negligently started fires, Fritz and Nelson’s com-
mon law liability for negligently started fires was abrogated. The
district court stated that because the lease "conspicuously chooses not
to state that tenants remain liable for destructive fires caused by their
own negligence, despite several golden opportunities to do so," Fritz
and Nelson had no common law responsibility for negligence.

   Of course, that application of Monterey is inconsistent with Monte-
rey, which requires an express provision in a lease only to modify,
expand, or abridge the tenant’s common law negligence liability. If
the lease is silent about common law liability, the liability is pre-
served. In this case, the lease does not abrogate negligence liability;
rather, it explicitly reinforces that liability. Paragraph 7(b) of Fritz and
Nelson’s lease with Hunters Ridge provides that Fritz and Nelson are
responsible for "all costs for repairs . . . resulting from . . . negligent
actions or omissions of [themselves] or [their] guests." The district
court dismissed the applicability of this provision because the provi-
sion "when taken in its context" does not address the "issue of
destruction of property due to negligently caused fire"; rather, the
court concluded, all of the tenants’ obligations under Paragraph 7 are
"inescapably aimed at the normal, day-to-day maintenance that is nec-
essary to keep the apartment functional, good looking, and clean."

   This conclusion, however, simply ignores the plain language of
Paragraph 7. The tenants’ obligations under Paragraph 7 are stated in
full as follows:

     7. MAINTENANCE AND REPAIRS. Tenant shall be
     responsible for general upkeep of the premises, together
     with any furnishings and window coverings (if provided by
     Owner), including, but not limited to, waxing of floors, reg-
     ular and routine vacuuming, cleaning of carpets and furni-
     ture, cleaning kitchen appliances and bathroom fixtures, and
     any other work which contributes to the general good
                   ALLSTATE INSURANCE CO. v. FRITZ                      7
     appearance, repair, and cleanliness of the premises. Further,
     Tenant is responsible for:

          (a) Yard work and snow and ice removal unless
          premises is located in an apartment or condomin-
          ium complex or in a planned development where
          these services may be provided by Management.
          Tenant shall not allow grass to exceed 3 inches.
          Management reserves the right to have grass cut at
          the tenant’s expense, if not maintained.

          (b) All costs for repairs or maintenance resulting
          from the reckless or negligent actions or omissions
          of Tenant or Tenant’s guests or pets (if pets
          allowed see No. 10 hereof).

          (c) Damages to premises (or adjacent property)
          caused by bursting pipes from failure to discon-
          nect hoses or turning off outside hydrant in cold
          weather or Tenant’s failure to keep sufficient heat
          operating during cold periods, stoppage of water
          closets, drains, or sewer systems.

          (d) Damages resulting from the use of supplemen-
          tal heating equipment. Tenant understands that
          Management discourages the use of such supple-
          mental equipment and that Tenant uses it at his
          own risk.

(Emphases added).

   First, the title of Paragraph 7 indicates that the paragraph addresses
"maintenance and repairs" as distinct concepts. Second, the text of the
paragraph confirms the distinction, imposing separate obligations on
the tenants for each, even though the obligations partly overlap. Spe-
cifically, the first sentence gives the tenants the responsibility to per-
form maintenance generally, providing that the tenant is responsible
for "general upkeep of the premises" and similar performance respon-
sibilities. The second sentence addresses the costs of both mainte-
8                  ALLSTATE INSURANCE CO. v. FRITZ
nance and repairs, stating, "Further, Tenant is responsible for . . . all
costs for repairs or maintenance . . . resulting from . . . negligent
actions." There is nothing in the second sentence that limits the ten-
ants’ responsibility to pay costs for only day-to-day maintenance
costs. Indeed, the second sentence obligates the tenant to pay the costs
of both maintenance and repairs. This is made clear not only by the
language of subparagraph 7(b) but also by subparagraphs (c) and (d),
which explicitly make the tenants responsible for the sort of cata-
strophic damages that the district court believed Paragraph 7’s title
and first sentence belied. What is clear is that the performance of
"maintenance" and the payment of costs of "repairs or maintenance"
are unambiguously treated as distinct obligations imposed on tenants
by Paragraph 7. And the obligation to pay costs is not only for routine
maintenance but also for repairs of all kinds resulting from tenants’
negligence.

   In short, Paragraph 7(b) expressly and unambiguously affirms the
tenants’ common law liability for their own negligence. The district
court’s inquiry should have begun and ended with this provision when
addressing Fritz and Nelson’s negligence. Instead, the district court
placed the cart before the horse by finding, first, no provision specifi-
cally dealing with responsibility for fire negligence, then limiting
Paragraph 7(b) to be consistent with the inference drawn from that
silence, namely, that the lease exculpates the tenants of their common
law liability for fire due to negligence. The reason no provision
addresses the narrow matter of tenants’ fire negligence is that Para-
graph 7(b) broadly encompasses all negligence.

   Furthermore, because the second sentence of Paragraph 7 is not
limited to performing maintenance, but also addresses the cost of all
repairs (both serious repairs and maintenance repairs), the court also
erred in failing to recognize the tenants’ contractual liability for their
guests’ negligence. Although this duty was one of those common law
duties abrogated in Virginia by statute, see Va. Code Ann. § 55-226
(2005) (providing that a lessee "without fault or negligence on his
part" shall not be held liable for damage to leased buildings), that stat-
utory provision expressly allows for such liability if there is an
express lease provision "showing it to be the intent of the parties that
[the tenant] should be so bound." Id.; see also Monterey, 224 S.E.2d
at 144. The Hunters Ridge lease could not be clearer in providing that
                   ALLSTATE INSURANCE CO. v. FRITZ                      9
the tenants are liable for "all costs . . . resulting from the reckless or
negligent actions or omissions of . . . Tenant’s guests." Accordingly,
we hold that Fritz and Nelson are contractually liable to pay the costs
for repairs resulting from the reckless or negligent actions or omis-
sions, if any, of Pendleton.

   Because Fritz and Nelson are responsible for the negligence of
Pendleton only by reason of the lease, we conclude that the extent of
that responsibility is limited to damage to the "property," which is
defined by the lease to be Apartment H. It would make no sense to
accommodate Allstate’s contention that Paragraph 7 of the lease
imposes liability on Fritz and Nelson for Pendleton’s negligence in all
respects, even beyond Apartment H. If this were so, Fritz and Nelson
would become contractually liable for the costs of repairs to Hunters
Ridge’s service truck if Pendleton ran into the truck on the street
while Pendleton was their guest. We conclude that the obligation in
Paragraph 7(b) may reasonably be construed only to obligate the ten-
ants for repairs to Apartment H — the "property" covered by the
lease.

   Finally, it is worth noting that Fritz and Nelson signed an Adden-
dum to the lease in which they agreed to be "jointly and equally
responsible for any and all damages to the property." This Addendum
is significant because, even though Pendleton was a personal guest of
Fritz and not Nelson, Nelson is nonetheless responsible as a tenant to
pay the cost of repairs caused by the negligence of a guest of "Ten-
ant," defined to be both Fritz and Nelson.

    In sum, the Hunters Ridge lease does not absolve Fritz and Nelson
of their common law negligence liability; in fact, it expressly affirms
it. In addition, the lease extends the tenants’ liability insofar as it
imposes liability on them for the negligence of their guests. But this
lease-created liability is limited to the cost of repairs for the unit
leased, not for the entire building. Finally, because Fritz and Nelson
are both the "Tenant," they are "jointly and equally" responsible for
each other’s obligations under the lease.

  In light of these conclusions, we reverse the district court’s inter-
pretation of the lease and that portion of its judgment insofar as the
court found for Fritz and Nelson on Allstate’s claims on the lease. We
10                   ALLSTATE INSURANCE CO. v. FRITZ
remand this case to the district court for the determination of whether
Pendleton was negligent and, if so, what damages Pendleton caused
to the unit. To the extent that Allstate has already received some
funds from Pendleton for the loss, the district court will need to
address whether credit should be given for those funds with respect
to Allstate’s contract claims against Fritz and Nelson and in what
amount.

                                   III

   The district court also granted summary judgment to both Fritz and
Nelson on Allstate’s common law negligence claims. Reviewing the
record, we agree with the district court that Allstate failed to present
evidence sufficient to show that either Fritz or Nelson was personally
negligent. Accordingly, we affirm that portion of the district court’s
judgment.

   In so affirming, we recognize that only Nelson filed a motion for
summary judgment on the negligence claim against her. Yet finding
no evidence of negligence against Fritz, the district court sua sponte
also entered summary judgment on Allstate’s negligence claim in
favor of her. Allstate now argues that we should vacate the summary
judgment in favor of Fritz because Allstate lacked the opportunity to
brief the merits of its negligence claim against her.

   District courts have an inherent power to grant summary judgment
sua sponte so long as the party against whom summary judgment is
entered has notice "sufficient to provide [it] with an adequate oppor-
tunity to demonstrate a genuine issue of material fact." U.S. Develop-
ment Corp. v. Peoples Fed. Sav. & Loan Ass’n, 873 F.2d 731, 735
(4th Cir. 1989) (emphasis added). In this case Allstate did have such
notice and opportunity based on Fritz and Nelson’s motions for sum-
mary judgment on the lease claims. Because the lease establishes a
joint obligation on both tenants for damages resulting from either ten-
ant’s negligent actions, a claim that Allstate advanced, both tenants’
motions for summary judgment on Allstate’s claim for breach of con-
tract gave Allstate the opportunity to address Fritz’s negligence.

     Accordingly, the judgment of the district court is
 ALLSTATE INSURANCE CO. v. FRITZ     11
AFFIRMED IN PART, REVERSED IN PART, AND
  REMANDED FOR FURTHER PROCEEDINGS.