Court Opinion

ID: 2781456
Source: CourtListenerOpinion
Date Created: 2015-02-24 16:04:00.286033+00
Date Added: 2024-06-11T11:28:20.252326
License: Public Domain

Feb 24 2015, 9:48 am

ATTORNEYS FOR APPELLANT                                    ATTORNEY FOR APPELLEE
Jon C. Abernathy                                           Jeffrey S. Zipes
Andrew B. Janutolo                                         Coots Henke & Wheeler, P.C.
Goodin Abernathy, LLP                                      Carmel, Indiana
Indianapolis, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Meridian North Investments                                February 24, 2015
LP,                                                       Court of Appeals Cause No.
                                                          49A02-1405-PL-311
Appellant-Defendant,
                                                          Appeal from the Marion Superior
        v.                                                Court
                                                          Cause No. 49D02-1210-PL-39036

Anoop Sondhi DDS, MS,                                     The Honorable Theodore M. Sosin,
                                                          Judge
Appellee-Plaintiff.

Barnes, Judge.

Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015                  Page 1 of 11
                                              Case Summary
[1]   Meridian North Investments, LP (“Meridian North”) appeals the trial court’s

      denial of its motion for summary judgment against Anoop Sondhi, D.D.S.,

      M.S. (“Dr. Sondhi”). We affirm.

                                                       Issue
[2]   The restated issue before us is whether Dr. Sondhi personally is bound by

      exculpatory provisions in a lease with Meridian North that Dr. Sondhi signed

      on behalf of his orthodontic practice.

                                                       Facts
[3]   In 1995, Meridian North agreed to lease space in an office building in

      Indianapolis to Anoop Sondhi, D.D.S., M.S., P.C. Dr. Sondhi signed the

      Lease as President of the named tenant, Anoop Sondhi, D.D.S., M.S., P.C. In

      2002, the Lease was renewed. At that time, Dr. Sondhi signed the Lease as

      President of Sondhi Orthodontics, P.C. In 2009, the Lease again was renewed.

      At that time, Dr. Sondhi signed the Lease as President of Sondhi-Biggs

      Orthodontics, P.C. (“Sondhi-Biggs”); the Lease was co-signed by the Vice-

      President of Sondhi-Biggs, Jeffrey Biggs.

[4]   The Lease contained the following provision, Section 6.1, regarding

      maintenance of the premises by Meridian North:

              Services to the Leased Premises. The Landlord shall provide:

      Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015   Page 2 of 11
                                                     *****
              (f) Maintenance and Repair of the Common Areas in a good and
              orderly condition including, but not limited to, lawn and shrub care,
              snow removal.
              Landlord shall make reasonable efforts to provide the foregoing
              services, but in no event shall Landlord be liable for damages, nor shall
              the Rental abate due to any failure to furnish, or any delay in
              furnishing, any of the foregoing services which are caused by
              Landlord’s inability to secure electricity, fuel, supplies, machinery,
              equipment, or labor, or which [sic] caused by necessary repairs or
              improvements, nor shall the temporary failure to furnish any such
              services be construes [sic] as a constructive evictions [sic] of the Tenant
              or relieve Tenant from the duty of observing and performing any of the
              provisions of this Lease.
      App. p. 54-55.

[5]   In addition, the Lease contained the following exculpatory clause, Section 9.5:

              Landlord’s Non-Liability. Landlord shall not be liable to Tenant, or
              any other person in the Leased Premises or in the Building by the
              Tenant’s consent, invitation or license, express or implied, for any
              damage either to person or property sustained by reason of the
              condition of the Leased Premises or the Building, or any part thereof,
              or arising from the bursting or leaking of any water, gas, sewer or
              steam pipes, or due to any act or neglect of a co-tenant or other
              occupant of the Building or other person therein, or due to any
              casualty or accident in or about the Building.
      Id. at 57.

[6]   On the morning of December 22, 2010, Dr. Sondhi was injured when he

      slipped and fell on a patch of ice outside the office building as he was about to

      enter the building. Dr. Sondhi sued Meridian North, alleging it had been

      negligent in failing to keep the common areas of the office building free from ice

      and had breached its contractual obligation to clear ice from the premises.

      Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015       Page 3 of 11
      Meridian North moved for summary judgment, asserting that the Lease

      exculpated it from liability for Dr. Sondhi’s injuries. The trial court denied

      Meridian North’s motion. Meridian North sought and obtained permission for

      an interlocutory appeal from this ruling.

                                                    Analysis
[7]   We review the granting or denial of summary judgment using the same

      standard as the trial court: summary judgment is appropriate only where the

      designated evidence shows that there is no genuine issue of material fact and

      the moving party is entitled to judgment as a matter of law. TP Orthodontics,

      Inc. v. Kesling, 15 N.E.3d 985, 990 (Ind. 2014). “All facts and reasonable

      inferences drawn therefrom are construed in favor of the non-moving party.”

      Id. In order to be entitled to summary judgment, a movant bears the initial

      burden of demonstrating the absence of any genuine issue of fact on a

      determinative issue. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). If the

      movant does so, the nonmovant then bears the burden of coming forward with

      contrary evidence showing an issue for the trier of fact. Id.

[8]   This case centers primarily upon interpretation of the Lease between Meridian

      North and Sondhi-Biggs: namely, whether the Lease exculpates Meridian

      North from liability for Dr. Sondhi’s injuries, even if Meridian North was

      negligent or breached the Lease by failing to remove ice from outside the office

      building. Interpretation of a contract generally is particularly appropriate for

      resolution by summary judgment because it concerns a question of law.

      Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015   Page 4 of 11
       Vincennes Univ. ex rel. Bd. of Tr. of Vincennes v. Sparks, 988 N.E.2d 1160, 1165

       (Ind. Ct. App. 2013), trans. denied.

[9]    Meridian North contends the Lease, specifically Sections 6.1 and 9.5, is

       unambiguous and properly exculpates it from liability for Dr. Sondhi’s injuries.

       Indiana law allows parties to a commercial lease, where there is equal

       bargaining power between the parties, to allocate risks and burdens between the

       landlord and tenant and permits the inclusion of exculpatory clauses absolving

       a landlord of liability to a tenant for the landlord’s own negligence. See Franklin

       Fire Ins. Co. v. Noll, 115 Ind. App. 289, 298-99, 58 N.E.2d 947, 951 (1945); see

       also Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1130 (Ind. 1995); cf. Ransburg v.

       Richards, 770 N.E.2d 393, 402-03 (Ind. Ct. App. 2002) (holding exculpatory

       clause in residential lease between sophisticated landlord and unsophisticated

       tenant violated public policy), trans. denied. Dr. Sondhi concedes that he is a

       sophisticated party, that he actively negotiated the Lease’s terms, and that the

       Lease is governed by this general principle of law.

[10]   However, as Dr. Sondhi notes, the Lease is not between him and Meridian

       North; it is between Sondhi-Biggs and Meridian North. Dr. Sondhi signed the

       Lease in his capacity as President of the corporation. In Indiana, it is well-

       settled that, when an agent discloses the identity of his principal and does not

       exceed his or her authority when contracting on the principal’s behalf, the agent

       is not personally bound by the contract unless the agent agrees to be so bound.

       Fiederlein v. Boutselis, 952 N.E.2d 847, 859 (Ind. Ct. App. 2011). Additionally, it

       is clear that “a corporation is a legal entity separate and distinct from its

       Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015   Page 5 of 11
       shareholders and officers.” Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228,

       1231-32 (Ind. 1994). “Although a corporation acts only through its agents,

       officers, shareholders, and employees, it is the corporate entity that is legally

       responsible for those acts.” Id. at 1232. Thus, Dr. Sondhi personally was a

       third party to the lease, not a tenant.

[11]   The Lease here purports to absolve Meridian North of liability not only for

       damages sustained by the tenant, which would be Sondhi-Biggs, but also “any

       other person in the Leased Premises or in the Building by the Tenant’s consent,

       invitation or license, express or implied . . . .” App. p. 57. In Vernon Fire & Cas.

       Ins. Co. v. Graham, 166 Ind. App. 509, 336 N.E.2d 829 (1975), we addressed a

       lease agreement that contained nearly identical language purporting to

       exculpate the lessor from liability for injury to any person on the premises “by

       the Lessee’s consent, invitation or license, express or implied . . . .” We held:

       “Third persons not parties or privy to such a contract are not bound by it. . . .

       Thus a third party injured upon the premises might properly recover against

       lessor for lessor’s negligence.” Vernon Fire, 166 Ind. App. at 512-13, 336 N.E.2d

       at 832. This principle has been repeated in a number of other cases, such as

       Morris v. McDonald’s Corp., 650 N.E.2d 1219 (Ind. Ct. App. 1995). Indeed, our

       supreme court has stated, “A person cannot limit his or her tort law duty to

       third parties by contract.” Rhodes v. Wright, 805 N.E.2d 382, 385 (Ind. 2004);

       see also Dutchmen Mfg., Inc. v. Reynolds, 849 N.E.2d 516, 524 (Ind. 2006)

       (“Parties [to a contract] cannot by agreement transfer risk from themselves to

       non-parties.”).

       Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015   Page 6 of 11
[12]   Granted, these cases did not concern an injured third party who signed a lease

       in his or her representative capacity for a corporation. Although Vernon Fire

       suggests the possibility that a person who is “privy” to a lease may be bound by

       a landlord exculpatory clause, the statement was dicta, as there was no issue of

       privity in that case. No Indiana case has directly addressed a situation such as

       the one here. New York, however, follows Indiana’s rule regarding the

       unenforceability of lease exculpatory clauses against third parties; that state’s

       highest court did, some time ago, address a situation very similar to this one in

       Griffen v. Manice, 59 N.E. 925 (N.Y. 1901). In that case, the secretary of a

       corporation attested to a lease entered into between the corporation and a

       building owner. The lease contained a landlord exculpatory clause, which the

       building owner sought to enforce after the secretary was killed in an elevator

       accident and the secretary’s estate sued the building owner. Although the court

       presumed that the secretary, by attesting to the lease, was aware of its contents

       and assented to its terms, it held the exculpatory clause did not bar the estate’s

       action against the building owner. Griffen, 59 N.E.at 929. The court stated,

       “the lease does not purport to apply to the personal rights of the officers or

       employees of the lessee.” Id. The court also observed that the death resulted

       from “the general invitation of the [building owner] to persons having business

       to transact in the building. The fact that [the secretary] was in the employ of

       the tenant did not limit his rights.” Id.

[13]   We find Griffen persuasive here. Although Dr. Sondhi signed the lease, the

       lease exclusively governs the business relationship between Meridian North and

       Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015   Page 7 of 11
       Sondhi-Briggs. Sondhi-Briggs is a legal entity separate from Dr. Sondhi. The

       injury arose from Meridian North’s implied invitation for business invitees to

       use the common areas to enter and exit the office building.

[14]   Although Meridian North does not contend that Dr. Sondhi signed the lease in

       his personal capacity, it does argue that we should pierce the corporate veil and

       hold that that Sondhi-Biggs is not truly separate from Dr. Sondhi and,

       therefore, Dr. Sondhi personally is also a tenant under the Lease and is bound

       by the exculpatory clauses. “Indiana courts are reluctant to disregard a

       corporate entity, but will do so to prevent fraud or unfairness to third parties.”

       Winkler, 638 N.E.2d at 1232. “The burden is on the party seeking to pierce the

       corporate veil . . . to establish ‘that the corporation was so ignored, controlled

       or manipulated that it was merely the instrumentality of another, and that the

       misuse of the corporate form would constitute a fraud or promote injustice.’”

       Id. (quoting Gurnik v. Lee, 587 N.E.2d 706, 710 (Ind. Ct. App. 1992)). It may be

       appropriate to disregard the corporate form and pierce the corporate veil if a

       corporation is functioning as an alter ego or mere instrumentality of an

       individual or another corporation. Reed v. Reid, 980 N.E.2d 277, 301 (Ind.

       2012).

                When determining whether a shareholder is liable for corporate acts,
                our considerations may include: (1) undercapitalization of the
                corporation, (2) the absence of corporate records, (3) fraudulent
                representations by corporation shareholders or directors, (4) use of the
                corporation to promote fraud, injustice, or illegal activities, (5)
                payment by the corporation of individual obligations, (6) commingling
                of assets and affairs, (7) failure to observe required corporate

       Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015      Page 8 of 11
               formalities, and (8) other shareholder acts or conduct ignoring,
               controlling, or manipulating the corporate form.
       Id.1 Other considerations may include whether corporate assets were treated as

       personal assets by a shareholder and whether there has been an attempt to

       deceive third parties. Winkler, 638 N.E.2d at 1232. Additionally, because it is a

       highly fact-sensitive inquiry, piercing of the corporate veil should occur on

       summary judgment only “‘in extraordinary circumstances.’” Reed, 980 N.E.2d

       at 301 (quoting Community Care Ctrs., Inc. v. Hamilton, 774 N.E.2d 559, 570 (Ind.

       Ct. App. 2002), trans. denied).

[15]   Meridian North has made no argument, nor presented any evidence, that it was

       fraudulently misled about the capacity in which Dr. Sondhi signed the lease. It

       also has presented no evidence that there was any improper disregard of

       corporate formalities by Dr. Sondhi or Sondhi-Biggs. What Meridian North’s

       argument boils down to is that Dr. Sondhi and Sondhi-Biggs are

       interchangeable because Sondhi-Biggs is a small professional corporation for

       Dr. Sondhi’s practice of orthodontics that Dr. Sondhi founded, that bears Dr.

       Sondhi’s name, and of which Dr. Sondhi is president. If we accepted this

       argument, the corporate form of numerous professional corporations in this

       state, such as medical and legal practices, could and would be ignored

       1
         Other factors that may be considered in some cases include whether (1) similar corporate names were used;
       (2) multiple corporations shared common officers, directors, and employees; (3) the business purposes of the
       corporations were similar; and (4) the corporations were located in the same offices and used the same
       telephone numbers and business cards. Reed, 980 N.E.2d at 302. These factors are irrelevant here, as we are
       not considering whether two separate corporations should be treated as one.

       Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015                      Page 9 of 11
       routinely. That is not a tenable result, and it is contrary to the laws providing

       for the creation of such corporations and their recognition as legal entities

       separate from their creators, shareholders, and officers. Similarly, Meridian

       North contends that Dr. Sondhi “is avoiding all of the liabilities under the

       Lease which he negotiated.” Appellant’s Br. p. 12. We do not believe that Dr.

       Sondhi personally incurred liabilities or obligations under the Lease, as opposed

       to Sondhi-Biggs. We also are not persuaded by Meridian North’s claim that the

       exculpatory clauses are entirely ineffective if they cannot be applied to Dr.

       Sondhi personally. The clauses still would apply to damages sustained by

       Sondhi-Biggs.

[16]   There is insufficient evidence on summary judgment to pierce the corporate veil

       and make Dr. Sondhi interchangeable with Sondhi-Biggs. As such, Meridian

       North has failed to establish that Dr. Sondhi is effectively the tenant under the

       Lease and is personally bound by the exculpatory clauses. Dr. Sondhi’s

       personal injury claim against Meridian North may proceed.2

       2
         Because we have concluded that Dr. Sondhi is not personally bound by the exculpatory clauses, we need
       not address the parties’ alternative arguments regarding whether the clauses absolved Meridian North of
       liability for its own negligence and whether they applied to the area of the premises where Dr. Sondhi slipped
       and fell. Additionally, the Lease contains an indemnification clause that may ultimately require Sondhi-
       Biggs to indemnify Meridian North for Dr. Sondhi’s damages. Although Meridian North argued before the
       trial court that this clause should effectively bar Dr. Sondhi’s lawsuit, it has not done so on appeal.

       Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015                      Page 10 of 11
                                                  Conclusion
[17]   The trial court properly denied Meridian North’s motion for summary

       judgment. We affirm.

[18]   Affirmed.

       May, J., and Pyle, J., concur.

       Court of Appeals of Indiana | Opinion 49A02-1405-PL-311| February 24, 2015   Page 11 of 11