Opinion
110,865.
11-07-2014
Carolyn ABRAHAM, Appellant, v. PARAMOUNT ANTIQUE MALL, LLC, Appellee.
Nathanael W. Berg, of Hampton & Royce, LC, of Salina, for appellant. DanielJ. Buller, of Foulston Siefkin LLP, of Wichita, for appellee.
Nathanael W. Berg, of Hampton & Royce, LC, of Salina, for appellant.
DanielJ. Buller, of Foulston Siefkin LLP, of Wichita, for appellee.
Before LEBEN, P.J., ARNOLD BURGER, J., and DANIEL L. LOVE, District Judge, assigned.
MEMORANDUM OPINION
PER CURIAM.
This appeal concerns who bears the financial burden for the loss of Carolyn Abraham's property when a thief broke in and stole it from a booth Abraham leased at the Paramount Antique Mall, LLC (Paramount) in Wichita. Abraham sued Paramount, arguing it was legally responsible because it failed to properly maintain a security system on the mall. The district court entered summary judgment for Paramount, finding the plain language of the parties' contract exonerated or exculpated Paramount from liability for any losses resulting from theft.
The material facts are undisputed. This case concerns obligations arising under a “Dealer Contract” (the Contract) entered into in September 2007 by Abraham and Paramount, through its general manager, Diane Vaughan. Under the Contract, Abraham paid rent of $71 per month for booth and showcase space at the Paramount, out of which Abraham sold antiques and collectibles. The Contract is the only agreement setting forth the rights and obligations of the parties.
Paragraph 7 of the Contract is key here. That paragraph appears under a heading titled “RESPONSIBILITIES OF THE MALL.' “ Its first sentence provides that Paramount agreed to: “Carry appropriate insurance to cover the building structure from storm damage & fire and liability insurance that covers all the common areas of the mall .” Paragraph 7 continues: “Each dealer is advised to carry their own property and liability insurance for their ‘leased’ booth area and all of [its] contents. The mall's insurance does not cover any of the dealer's items from theft, fire, mishandling, etc.” Abraham (the dealer) personally initialed a space next to the end of paragraph 7—the only place in the contract where she was required to do so.
FACTUAL AND PROCEDURAL BACKGROUND
This case is the result of a theft from Abraham's booth that took place during the overnight hours of February 25, 2013, after a burglar cut a hole in the outside wall of the mall to access a storeroom. Video surveillance showed the burglar then entered the main aisle of the mall, proceeded directly to Abraham's booth, smashed the glass showcase, took some antique coins and jewelry, and ran out of the building without taking items from any other booth. Abraham sued Paramount for her losses, generally alleging it was “responsible to maintain the building, including theft prevention.”
Shortly thereafter, Paramount moved for summary judgment, arguing the risk-allocating provisions of paragraph 7 established as a matter of law that it was not liable for Abraham's damages from the theft. In response, Abraham disagreed with Paramount's interpretation of the contract on alternative grounds. First, she argued that rather than a lease, the Contract established a bailment; and, as the bailee, Paramount owed her a common-law duty to prevent theft, independent of any duty arising under the Contract. Abraham further insisted the language of paragraph 7 could not be strictly construed to exclude Paramount's liability for the negligent safekeeping of her property. In reply, Paramount disputed Abraham's characterization of the Contract as a bailment. Regardless, it reiterated its position that it was not liable under the plain language of paragraph 7.
Following a hearing, the district court entered summary judgment for Paramount. Highly summarized, the court found the Contract is a lease, not a bailment. It then held the plain language of paragraph 7 absolved Paramount of any liability for Abraham's losses, regardless of her specific theory of liability. Once the district court denied Abraham's motion to reconsider, she filed this timely appeal.
ANALYSIS
In her first issue on appeal, Abraham reiterates her contention that the Contract was a bailment, not a lease. Paramount suggests Abraham is precluded from raising this argument because she admitted the Contract is a lease and that she pays monthly rent by failing to controvert those statements of fact in Paramount's motion for summary judgment. Turning to the merits, Paramount asserts the plain terms of the Contract refute Abraham's attempt to classify the Contract as a bailment rather than a lease.
The legal effect of a written instrument is a question of law. Thus, this court conducts de novo review in construing the Contract without any deference to the district court's construction. See Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011).
Our Supreme Court has defined a “bailment” as “ ‘a delivery of property for some particular purpose on an express or implied contract that after the purpose has been fulfilled the property will be returned to the bailor, or dealt with as he directs.’ “ M. Bruenger & Co. v. Dodge City Truck Stop, Inc., 234 Kan. 682, 685, 675 P.2d 864 (1984) (quoting 8 C.J.S., Bailments § 1 ). The term bailment “ ‘imports the delivery of personal property by one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed, and the property returned or duly accounted for when the special purpose is accomplished, or kept until the bailor reclaims it.’ “ 234 Kan. at 685 (quoting 8 Am.Jur.2d, Bailments § 2 ).
Abraham contrasts this with a “lease,” which she notes has been defined as an “ ‘[a]greement under which owner gives up possession and use of his property for valuable consideration and for definite term.’ “ Black's Law Dictionary 889 (6th ed.1990). But the definition does not stop there. Rather, it continues where Abraham leaves off, stating: “[a]nd at the end of the term owner has the absolute right to retake, control and use the property.” Black's Law Dictionary 889.
According to Abraham, her lack of control over Paramount's premises establishes this was a bailment rather than a lease. More specifically, Abraham contends she “simply placed her personal property items in booths for Paramount to sell.” In support, Abraham cites only the term of the Contract that provides Paramount is responsible for granting her “ ‘access to enable cleaning and restocking of booths and showcases.’ “ She maintains this distinction “matters because a bailee has a specific common-law duty to prevent theft.” See M. Bruenger & Co., 234 Kan. 236, Syl. ¶ 3 (generally recognizing that “[t]he bailee in a bailment for mutual benefit must use ordinary care in safeguarding the property in order to prevent its damage or theft”).
The distinction between a lease and a bailment is arguably one without legal significance under the facts of this case. As discussed in more detail below, even if this was a bailment, Kansas law provides that the parties could agree to exempt or exculpate Paramount of any liability for its duty to safeguard the property. So the issue to be decided here boils down to whether, under the undisputed facts, the parties intended to do just that under the Contract. That issue is separately addressed below.
This court finds, as the district court found, under its plain terms, the Contract is for Abraham's rental of booth space to sell her items. There is nothing to indicate Abraham delivered her personal property to Paramount and Paramount accepted that property with the intent to return it to Abraham. Moreover, nothing indicates Paramount ever took any action which would manifest its intent to exercise custody over Abraham's property. On the contrary, the terms of the Contract indicate Abraham is responsible for maintaining control over her property in her rented booth space.
At least one other jurisdiction has considered and rejected a similar bailment argument in the context of a claim involving property stolen from rented booth space at an outdoor flea market. See Bess v. Traders World, Inc., No. CA2001–06–062, 2001 WL 1652810 (Ohio App.2001) (unpublished opinion). In that case, the Ohio Court of Appeals concluded that “[t]he subject matter of the parties' contract is the rental of space where the inventory was deposited, not personal property as required in a contract for bailment.” 2001 WL 1652810, at *4. This same reasoning applies to the facts of this case to support a holding that there was no bailment here.
In her other issue on appeal, Abraham maintains that the Contract cannot be strictly construed to hold the parties intended to absolve Paramount of all liability resulting from a theft. Accordingly, she insists summary judgment was inappropriate.
Where there are no disputed facts and the appellate court is required to interpret and give legal effect to a written contract, appellate review of an order regarding summary judgment is de novo. Wittig v. Westar Energy, Inc., 44 Kan.App.2d 216, 221, 235 P.3d 535 (2010), rev. denied 292 Kan. 969 (2011).
This court applies the same standards as those applied by the district court in deciding whether summary judgment is appropriate. To affirm the summary judgment, this court must find the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. To do so, this court must resolve all facts and inferences that may reasonably be drawn from the evidence in favor of Abraham, the party against whom the summary judgment was sought. If reasonable minds could differ as to the conclusions drawn from the evidence, then this court must deny summary judgment. See O'Brien v. Leegin Creative Leather Products, Inc., 294 Kan. 318, 330, 277 P.3d 1062 (2012).
The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the contract language without applying rules of construction. Stechschulte v. Jennings, 297 Kan. 2, 15, 298 P.3d 1083 (2013). Contracts should not be interpreted merely by isolating one particular sentence or provision, but by construing and considering the entire instrument from its four corners. The law favors reasonable interpretations, and results that vitiate the purpose of the terms of the agreement to an absurdity should be avoided. Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 963, 298 P.3d 250 (2013).
To reiterate, the parties' arguments center on paragraph 7 of the Contract, which provides:
“[Paramount will] [c]arry appropriate insurance to cover the building structure from storm damage & fire and liability insurance that covers all the common areas of the mall.
Each dealer [Abraham] is advised to carry their own property and liability insurance for their ‘leased’ booth area and all of [its] contents. The mall's [Paramount] insurance does not cover any of the dealers items from theft, fire, mishandling, etc.”
The issue is whether this is an exculpatory clause that entitles Paramount to summary judgment on Abraham's claim, which Abraham clarifies in her reply brief is that Paramount is liable “in permitting the theft as a bailee.”
Both parties rely on our Supreme Court's discussion of the interpretation of exculpatory clauses under Kansas law in New Hampshire Ins. Co. v. Fox Midwest Theatres, Inc., 203 Kan. 720, 457 P.2d 133 (1969). A pause to discuss the facts and holding in that case is warranted for context.
In New Hampshire Insurance, several insurance companies (Plaintiffs) filed a subrogation action to recover damages they paid to their insured, the lessor of a theater, as a result from a fire in the theater. The theory of liability was that the fire was caused by the negligence of the defendant lessee's employees. In support of its motion for summary judgment, the defendant lessee argued, in pertinent part, that it was not liable under a provision of the lease, which provided: “ ‘Lessee covenants and agrees that Lessee will keep and maintain, at Lessee's expense, the interior of the leased premises in good and sufficient repair, ... ordinary wear and tear and damage by fire or casualty being expressly excepted. ’ “ 203 Kan. at 722. Plaintiffs responded that the exculpatory provision could not be interpreted as the defendant lessee suggested because the parties did not clearly and specifically “agree to exonerate the defendant-lessee from its negligence.” 203 Kan. at 724. The district court agreed with the defendant and granted it summary judgment.
On appeal, Plaintiffs reiterated their argument that a strict construction of the lease did not support a finding that the exculpatory clause specifically applied under these circumstances. In disagreeing, our Supreme Court acknowledged that it has held that “exculpatory contracts are not favored in the law and are to be strictly construed.” 203 Kan. at 726. But it also “recognized that exculpatory agreements voluntarily entered into by parties standing on equal footing are enforceable as between the contracting parties themselves.” 203 Kan. at 726. In other words, our Supreme Court stressed that “[t]he rule of strict construction ... must give way where it is plain that such construction of a contract does not convey the true intention of the parties.” 203 Kan. at 726. Its reasoning continued:
“The rule of strict construction does not require that the language used be strained or distorted in order to exclude provisions which the parties clearly intended to bring within its scope. More specifically, the requirement that an exculpatory contract be strictly construed means simply that the court will not extend its terms to situations not plainly within the language used. But at the same time, such contracts are to be fairly and reasonably construed and will not be given such a narrow and strained construction as to exclude from their operation situations plainly within their scope and meaning.
“We ... do not believe the rule of strict construction is available to thwart or defeat the obvious intent of the parties to the lease agreement.” 203 Kan. at 726–27.
Abraham argues that, by applying these principles here, this court should find summary judgment inappropriate because the Contract does not even discuss and, therefore, cannot evidence any intent by the parties to exculpate Paramount of any liability for its negligence. In support, Abraham argues that strictly construing the terms of the portion of the contract that included paragraph 7 reveals that the parties only intended to detail how “Paramount provides all services that accompany the sale of the merchandise to the public.” Abraham maintains that while one of those responsibilities
“likely includes security, the District Court interpreted the ‘advice’ to obtain insurance as an exculpatory provision. But the ‘advice’ provision does not address Paramount's common-law duty to safeguard the property, and there is no specific exculpatory language (e.g. such as ‘While the Mall provides security, the Mall is not responsible for theft by third parties caused by its negligence.’).”
Paramount responds that Abraham effectively asks this court to ignore paragraph 7, which is inappropriate. It instead urges this court to interpret paragraph 7 as “a risk-allocating provision that clearly defines (and limits) the extent of each party's obligation to carry insurance, and hence the obligation to bear the risk of various kinds of loss.” More specifically, Paramount argues that when the second and third sentences of paragraph 7 are read together, “it is clear that Abraham bears the risk of loss caused by intentional or negligent conduct and must either bear it personally or ‘carry property ... insurance’ to protect ‘all of [the booth's] contents' from losses.” Following the reasoning of our Supreme Court in New Hampshire Insurance, Paramount contends:
“Paragraph 7 shows that the parties understood and appreciated the risk of theft of the contents of Abraham's booth because they agreed that in the event of theft Abraham's insurance, not Paramount's insurance, would cover any losses to Abraham's booth or its contents. Foregoing such insurance was Abraham's risk, and if she chose to take that risk, any losses she suffered were hers alone .”
Abraham replies that Paramount is misconstruing her claim against it as one for theft as opposed to liability for negligence in permitting the theft as bailee. If paragraph 7 exculpates Paramount from all liability related to any theft, however, it is not clear why this would matter.
Paramount's interpretation of the lease is found to be correct. The plain language of paragraph 7 reflects the parties' intent concerning who will be responsible for what as a result of storm damage, “theft, fire, mishandling, etc.”: Paramount is responsible for the building structure and all common areas of the mall if it is damaged by a storm or fire; Abraham is responsible for her booth area and all of its contents regardless of how it is damaged.
Accordingly, this court holds that by either theory of liability advanced by Abraham, Paramount was entitled to summary judgment. We affirm the judgment of the district court.
Affirmed.