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United Employers Insurance Co. v. Mentor

September 9, 1996

UNITED EMPLOYERS INSURANCE COMPANY, GARY AND DIANE JOHNSON, D/B/A JOHNSON'S THRIFTWAY; AND GOLDEN YUAN PO, INC., D/B/A GOLDEN GRILL MOGOLIAN RESTAURANT, RESPONDENTS/CROSS-APPELLANTS
v.
JOSEPH P. MENTOR, D/B/A MENTOR COMPANY; MENTOR COMPANY, INC., JOYIA RUBENS AND DAVID RUBENS, D/B/A DONUTS, ETC.; PUGET SOUND POWER & LIGHT COMPANY; AND JOHN AND JANE DOES I-XX, APPELLANTS/CROSS-RESPONDENTS, JOSEPH P. MENTOR; AND MUTUAL OF ENUMCLAW INSURANCE COMPANY, APPELLANTS/CROSS-RESPONDENTS, V. PUGET SOUND POWER & LIGHT COMPANY, APPELLANTS/CROSS-APPELLANT.



Appeal from Superior Court of King County. Docket No: 92-2-27727-3. Date filed in Superior Court: August 16, 1996. Superior Court Judge signing: Hon. Sharon Armstrong.

Petition for Review Denied April 2, 1997,

Walter E. Webster. WE Concur: H. Joseph Coleman, Ann L. Ellington.

The opinion of the court was delivered by: Webster

WEBSTER, J. -- Commercial leases often exclude lessor liability for damage sustained by the lessee. We must decide the scope of such a clause: does it exclude liability for the lessor's tortious act in any capacity? For in this case, the lessor was also a licensed electrical contractor whose faulty work caused a fire at his shopping center. Because its principal purpose was to establish the legal relationship of lessor and lessee, and the liability exclusion does not allocate risk of the lessor's separate commercial enterprise, we hold that the lessees may recover for the lessor's negligent acts extraneous to his capacity as lessor. Therefore, we reverse the trial court's summary judgment in favor of the lessor. In addition, we find no error relating to the lessees' claim against an electrical utility, and therefore affirm that judgment.

FACTS

Joseph Mentor owned a shopping center. In addition to being a landlord, Mentor was a registered electrical contractor and an electrician. Gary and Diane Johnson, and Golden Yuan Po, Inc. leased portions of Mentor's shopping center to conduct their respective businesses. The pre-printed leases limited the lessor's liability for damages resulting from fire:

ACCIDENTS

8. All personal property on said leased premises shall be at the risk of Lessee. Lessor or Lessor's agents shall not be liable for any damage, either to person or property, sustained by Lessee or others caused by any defects, now in said premises or hereafter occurring therein, or due to the building in which the leased premises are situate, or any part of appurtenance thereof, because out of repair, or caused by fire or by bursting or leaking of water, gas, sewer or steam pipes, or from any act or neglect of employees, co-tenants or other occupants of said building, or any other persons, including Lessor or Lessor's agent, or due to the happening of any accident from whatsoever cause in and about said building. Lessee agrees to defend and hold Lessor and Lessor's agents harmless from any and all claims for damages suffered or alleged to be suffered in or about the leased premises by any person, firm, or corporation.

A fire broke out in a storage space, and damaged the spaces which the Johnsons and Golden Yuan Po leased. The Johnsons' insurer, United Employers Insurance, paid their insurance claim. The insurer, the Johnsons, and Golden Yuan Po, Inc. subsequently sued Joseph Mentor ["Mentor"] and Puget Sound Power & Light in tort. As against Mentor, the complaint alleged that his substandard electrical work caused the fire. Mentor denied liability, and asserted paragraph 8's limitation of liability as an affirmative defense. As against Puget Sound Power & Light ["Puget Power"], the complaint alleged vicarious liability as the principal of unknown agents or contractors, negligence, strict liability, and product liability. Puget Power denied liability, and interposed its tariff, filed with the Washington Utilities and Transportation Commission, as an affirmative defense.

The court granted Mentor summary judgment against the plaintiffs, holding that paragraph 8's limitation of liability precluded the tort action. Puget Power then amended its answer to assert a contribution cross-claim against Mentor. On further motion, the court ruled that material issues of fact precluded summary judgment for Mentor on Puget Power's contribution claim, and that Puget Power's tariff excluded liability attributable to a customer's fault unless the customer acted as Puget Power's agent.

The jury, by special verdict, found that Mentor's installation of a current transformer caused 75% of the plaintiff's damages, and Mentor's other electrical work caused 25% of the damages. The jury also found that Mentor was acting as Puget Power's agent when installing the current transformer. The court entered a judgment in favor of United Employers Insurance and Golden Yuan Po against Puget Power for 75% of the total damages, reflecting Puget Sound's vicarious liability for Mentor's installation of the current transformer. The court also entered a contribution judgment in favor of Puget Power and against Mentor for the sum of the two principal judgment amounts entered in favor of United Employers and Golden Yuan Po.

Discussion I. Scope of Landlord's Liability Under the Exculpatory Clause When United Employers sued Mentor, he interposed an exculpatory clause from the lease as an affirmative defense. The trial court held that the clause precluded United Employer's suit. The lessees cross-appeal, contending that the clause does not preclude a lawsuit against Mentor while he was acting in the capacity of an electrical contractor. Because our construction of the lease will affect our Disposition of other assignments of error, and because Mentor's liability is fundamental to this litigation, we will address the exculpatory clause first.

We must interpret the lease to determine its effect on the lessees' claims. Courts interpret contracts by giving meaning to the symbols of expression used by the parties. *fn1 The parties's words are interpreted in the context of the entire agreement. *fn2 And the interpretation adopted must be consistent with the principal purpose for which the parties entered into the agreement. Further, the court will require a high standard of clarity for exculpatory clauses: although such clauses are enforceable in commercial transactions, the law disfavors promises not to sue in the future. *fn3 Through this process of interpretation, we will determine the agreement between the parties. We then construe the agreement, determining its legal effect.

The agreement begins with the words "THIS LEASE." Its first paragraph provides that "the Lessor does hereby lease to Lessee, and Lessee does hereby lease from Lessor, those certain premises . . ." The following paragraphs address use of the property, the term, rent, repairs, utilities, accidents, care of premises -- in short -- topics relating to a legal relationship between lessor and lessee. ...


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