STATEMENT OF THE CASE
On 3/23/98, Seaco, Property Insurer for
Landlord as subrogee, filed a three-count complaint principally sounding in
negligence against its insured's tenant relating to a commercial fire loss
which occurred on 1/30/98. The tenant's
negligence allegedly caused a loss for which Seaco had paid the landlord some
$33,000. (A.5). Seaco sought a real
estate attachment or other equitable pre-judgment security under Mass. R. Civ.
P. 4.1 against the uninsured tenant, utilizing a Superior Court Rule 9A Motion
supported by an affidavit of its then-claims adjuster Michael Scott
(A.66). The motion was served in hand
to Defendant by the sheriff with both the complaint and paper discovery .
(A.10). The court, Neel, J., relying
upon the adjuster's affidavit[1],
indicated an attachment or other pre-judgment equitable relief would be
granted. The parties stipulated to
security, which the court approved and the Plaintiff recorded in the Worcester
Registry of Deeds[2].
(A.28).
The tenant moved for summary judgment and
Landlord's insurer filed an affidavit of Catherine Rudder (the new claims
adjuster) in opposition (A.107),
indicating that summary judgment for plaintiff under Mass. R. Civ. P.
56(c) was indicated. After a hearing in
August 24, 1999, the court, Botsford, J., took the matter under advisement, but
did not decide it.
Tenant filed a supplemental memo on July
29, 2002 (A.139), reciting new authority and anticipating a second hearing by a
different judge. Seaco filed a supplemental
memo on August 8, 2002, again requesting judgment for it under Mass. R. Civ. P.
56(c). (A.152). Hearing the motions on
November 20, 2002, Judge Graham found for Seaco, Landlord's insurer, on Jan 3,
2003 in the amount of the ad damnum. The defendant tenant timely
appealed. (A.165). Tenant‘s answers to
interrogatories 3 and 4 were part of the summary judgment record (A.54), but
the balance of his answers (A.45-A.52) and his Rule 36 responses
(A.108A-A.108D) were not.
Defendant Sxxxxxxx, an optometrist using
the firm name Txxxxxx Optical, Co., was a commercial tenant of some 2,300
square feet at premises owned by Plaintiff's insured Renzella (the landlord) at
the Nobscott Professional Building, located at 883 Edgell Road in Framingham. His written lease commenced on 6/7/87 (A.84)
and was then twice extended, finally expiring on May 31, 1993. (A.103). Tenant commenced renting approximately 1,100
square feet of the formerly demised premises in September of 1997. (A.68). On Jan. 30, 1998, a small fire ignited on
the premises, which was the subject of the Framingham Fire Dept incident
980611. (A.68). The report of
Framingham Fire Department Lieutenant Joseph Leone provides:
On
arrival Engine 7 used 2" line to extinguish small fire on counter that
was being held in check by two operating
sprinkler heads. Fire was in eyeglass store, basement level. Occupant stated
that he left a candle burning on 1/29 at approximately 1900 hrs when he left
for the night. Fire burned display
on counter but heavy smoke and water damage to store.
Water damage to basement with light smoke throughout building. (A.69).
Occupant Sxxxxxxx's deposition established
he was in sole control of the premises at the time relevant and the only person
who spoke to the fire department. (A120-123).
Article
8 § 1 of the expired lease (A.91) contained a broad indemnification of the
landlord, as the tenant was required to hold the landlord harmless from a host
of accidental or negligently caused losses.
Article 8 § 2 of the lease obligated the tenant to obtain a general
liability insurance policy naming the landlord (Plaintiff's insured) as an
additional insured. The Rudder
affidavit (¶ 4) provides that, had such a policy been in place as required, it
would have paid the instant loss. (A107).
Rudder’s exposition was set forth as uncontroverted fact 13 in the
summary judgment record under Superior court Rule 9A. (A.54).
The
tenant's failure below to move to strike any portion of the summary judgment
record insulates the trial court's judgment from attack where the hearing judge
did not abuse his discretion in considering the entire record. Infra at
p. 5.
The
insurer's affidavits referenced independently admissible evidence, including
the fire report and the tenant's critical admission, rendering the hearing
judge's ultimate finding unassailable. Infra at p. 10.
The
mutually dependent obligations of the landlord and the commercial tenant
arising from the expired lease prevented the tenant, who had materially
breached his obligation to maintain insurance coverage, from sheltering himself
from the instant subrogation suit. Infra at p. 24.
The
"lease" itself was unambiguous, and had the tenant complied with the
obligations arising therefrom, the tenant's liability insurer would have paid
the loss. Infra at p. 27.
Leaving
the loss with the negligently uninsured tenant is both fair and sound public
policy. Infra at p. 38.
I. THE DEFENDANT[3] FAILED BELOW TO MOVE TO STRIKE THE CATHERINE
RUDDER AND MICHAEL SCOTT AFFIDAVITS AT THE SUMMARY JUDGMENT STAGE, THEREBY
WAIVING ANY OBJECTIONS ON APPEAL; IN THE ABSENCE OF A MOTION TO STRIKE, THE TRIAL
COURT JUDGE PROPERLY EXERCISED DISCRETION IN CONSIDERING THE AFFIDAVITS.
The tenant’s appellate brief alleges that
Judge Graham relied upon the Rudder and Scott affidavits in finding that the
defendant negligently started the fire.
The tenant (Sxxxxxxx) further claims that such reliance was improper
because the affidavits did not comport with Mass. R. Civ. P. 56(e)’s
requirements that “supporting and opposing affidavits shall be made on personal
knowledge,” and that any attached documents referred to in an affidavit be
“sworn or certified.” The affidavits
contain references to attached reports from the State Fire Marshall and
Framingham Fire Department (collectively, the “fire reports”), which the tenant
erroneously contends were inadmissible out-of-court statements. Citing no authority or precedent for the
proposition and failing to attack specific paragraphs in either affidavit,
Sxxxxxxx claims that, despite the fact that no motion to strike or objection in
any form was ever tendered, the trial court judge erred because he should have
disregarded the information contained therein sua sponte, in the absence
of any motions to strike from the tenants.
The trial court is granted wide latitude in
exercising its discretion in such matters, however, and unless a “gross
miscarriage of justice” would result, it is manifestly not required that
the trial court judge perform said task for a party choosing not to file such a
motion. Davis v. Sears, Roebuck & Co., 708 F.2d 862, 864 (1st
Cir. 1983) (“If a party submits an inadmissible affidavit and the opposing
party does not move to have it stricken, any objections to its consideration
are deemed to have been waived and it may properly be considered by the court
when ruling on the motion. Only to
prevent a gross miscarriage of justice will we depart from the application of
this rule.” [Emphasis added]), 10B C. Wright et al, Federal Practice and
Procedure, § 2738. In the instant
case, neither “gross injustice” nor a clear abuse of discretion resulted from
the trial court judge’s proper decision to allow the affidavits to enter into
the summary judgment record.
The tenant’s argument is fatally
flawed. Even assuming, arguendo,
that the affidavits were defective, the tenant would still not be
entitled to appellate relief. Where the
tenant did not move to strike either the Rudder or the Scott affidavit below,
the trial court properly considered the affidavits in the absence of such
motions. It is well established in
Massachusetts' case law that, absent a motion to strike, a judge has discretion
to rely on improper portions of an affidavit. Thorell v. ADAP, 54
Mass.App.Ct. 334 (2003), citing Madsen v. Erwin, 395 Mass. 715, 721
(1985), Fowles v. Lingos, 30 Mass.App.Ct. 435, 439 (1991) (“Without
motion to strike, relying on defective affidavits is left to court’s
discretion”), Stetson v. Board of Selectmen of Carlisle, 369 Mass. 755,
763 (1976) (“If a party does not move to strike the defective portion of an
opponent’s affidavit, in his discretion a judge may rely on the fact stated on
belief.”) Therefore, even if the
affidavits did not meet the standards established in Mass. R. Civ. P. 56(e)
because of the affiants’ alleged failure to set forth admissible facts based on
their personal knowledge, the affidavits were still properly considered
by the trial court.
A litany of cases proclaim that 1) an
opposing party must move to strike an affidavit that violates Rule 56(e) (which
was not done), 2) motions to strike presented for the first time on appeal are too
late (which has not been attempted), and 3) failure to bring a timely motion to
strike results in a waiver of the objection and means that the court may
consider defective affidavits (the tenant’s appellate brief contains no
averment that the trial court abused its discretion). Just two years ago, the Supreme Judicial Court definitively
stated in Patsos that, following a failure by the opposing party to
object in the trial court, summary judgment affidavits made on information and
belief (as opposed to the personal knowledge of the affiant) may be considered
in their entirety. Patsos v. First Albany Corporation, 433 Mass. 323,
324, n. 2 (2001) (“Because [defendant] did not object to any portion of Patsos’
affidavit, we may consider it in its entirety”), See also Madsen at 721 supra,
Stetson at 763 supra, American Express v. Allessandrini, 1979
Mass.App.Div. 269 (1979) (“Defendant, who failed to challenge affidavit made
upon information and belief for inadequacy under Rule 56(e), waived his
objection and therefore the trial court did not err in considering plaintiff’s
defective affidavit on the manner of summary judgment”), St. Paul Fire &
Marine Ins. Co. v. Boston Housing Authority, 25 Mass.App.Ct. 6, 8 n. 2
(1987) (“An affidavit that does not measure up to the standards of Rule 56(e)
is subject to a motion to strike, and formal defects are waived in the absence
of a motion or other objection”), Wright, et al, at 4 (“A party must move to
strike an affidavit that violates Rule 56(e).
The failure to do so will result in the waiver of the objection and, in
the absence of a gross miscarriage of justice, the court may consider the
defective affidavit. This principle
applies to affidavits containing evidence that would not be admissible at
trial, as well as to affidavits that are defective in form. . .A motion to
strike presented for the first time on appeal comes to late”), Devlin v.
School Committee of the City of Chelsea, 1993 WL 818629, 1 (Mass.Super.)
(“A motion to strike is the proper device for raising an insufficiency in an
affidavit submitted in opposition to a motion for summary judgment”).
As the tenant failed to move to strike or
otherwise object to either of the affidavits below, Sxxxxxxx waived his right
to object to the trial court’s consideration of the same now. Since Sxxxxxxx is barred from now objecting
to the Rudder and Scott affidavits due to any alleged Rule 56(e) defects, the
appellate court should find that the trial judge properly exercised his discretion
in considering the affidavits when granting summary judgment for the plaintiff.
II. NOTWITHSTANDING Sxxxxxxx’S FATAL FAILURE TO
MOVE TO STRIKE THE AFFIDAVITS NOW COMPLAINED OF, THEY COMPORT WITH RULE 56(e)
STANDARDS AND, AS SUCH, WOULD HAVE BEEN ADMISSIBLE IN THE SUMMARY JUDGMENT
RECORD ANYWAY.
Mass. R. Civ. P. 56(e) establishes the proper
form and content of affidavits:
Supporting and opposing affidavits shall
be made on personal knowledge, shall set forth
such facts as would be admissible
in evidence, and shall show affirmatively that the affiant is competent to testify to
the matters stated therein. Sworn or
certified copies of all papers or parts thereof referred to in an affidavit shall
be attached thereto or served
therewith.
Unpacking the statute’s language reveals four
distinct affidavit criteria. The first
requisite is that affidavits must be based on the personal knowledge of the
affiant; secondly, the information contained therein (as opposed to the
affidavits themselves, which are not admissible at trial) must be admissible in
evidence at trial; thirdly, the affiant must demonstrate his or her competence
to testify on the same matters at trial; and finally, any attached documents
must be sworn or certified copies, in order that their veracity may be readily
verified.
Although it is immaterial given the
foregoing analysis regarding the effect of the defendant's failure to move to
strike the affidavits now complained of, they would have likely survived a
timely motion to strike anyway, as they satisfy the Rule 56(e)
requirements. To whatever extent the
trial court may have found a (non-existent) motion to strike meritorious, only
those offending paragraphs identified in the motion would have been excluded,
while the remaining portions would have properly entered into the summary
judgment record. See Proteon v. Digital Equipment Corp., 1999 WL 1336438
(Mass.Super.).
A. Both affidavits fulfill Rule 56(e)’s
personal knowledge requirement.
Mass. R. Civ. P. 56(e) requires that
summary judgment affidavits must be based on personal knowledge. While both Michael Scott (A. 66-67) and
Catherine Rudder’s affidavits (A. 107-108) contain references to the fire
department report, determinations therein regarding the cause of the fire, and
Sxxxxxxx’s unattended candle admission, neither Scott nor Rudder testified to
the fact that negligence had in fact occurred.
Instead, Rudder stated that she had personally reviewed the fire
examiner’s report in order to determine whether, if accurate, such a situation
would be covered under a standard commercial general liability (CGL)
policy.
In tardily raising personal knowledge
objections without any review of relevant case law, the tenant has
fundamentally misconstrued the content and purpose of the affidavits. As subrogation examiners, Michael Scott and
Catherine Rudder are experts whose jobs consist of reviewing accident or fire
reports and the like in order to see if a subrogation claim might lie. They have the requisite personal knowledge
of subrogation practices and insurance policies covering, inter alia, negligently
or accidentally started fires, which is the principal matter that they attest
to, consistent with Rule 56(e). Neither
affiant explicitly stated that a negligently started fire did in fact actually
occur (they did not need to, because the attached documents, admissible in
their own right, establish this). The
fact that Catherine Rudder incorporated by reference the fire department
reports is merely incidental. She cited
the reports simply as the factual starting point or hypothetical basis from
which she proceeded to analyze whether a CGL policy, such as the one that the
court below determined Sxxxxxxx was contractually required to have, would cover
losses caused by a tenant’s negligence.[4]
Thus, the Rudder affidavit was not offered in the summary judgment
record as negligence evidence, but rather merely to explain how a CGL policy
interacts with the facts of a case such as this one. The supporting documents, which alone suggest the defendant's
negligence, are themselves admissible (discussed infra).
Rudder’s affidavit is filled with qualifying language,
limiting her statements to matters within her personal knowledge (subrogation
suits and insurance matters). That the
scope of the affidavit is so circumscribed is readily apparent from her
language, which, tellingly, is never alluded to by the appellant. Rudder stated (note the hypothetical
language she utilized to form the basis upon which she offered her personal
knowledge pertaining to the contents of a CGL policy as applied to a negligence
case):
“I
am [a] subrogation examiner. . .I am familiar with the contents of a commercial
tenant’s general liability policy such as one that would have complied
with Article 8 of the expired lease…Had the tenant obtained a general
liability policy and named [the landlord] as an additional named insured. . .the
company which wrote that policy would have paid for the loss caused by
the tenant’s negligence such as (by way of example) leaving an
unattended candle [burning] overnight.”
(A.107).
To suggest that an expert affiant with
personal knowledge of relevant subject matter (in this case, the contents of a
CGL policy with respect to a commercial tenant’s negligence) cannot mention a
document or event in passing that they have reviewed and to which they are
asked to apply their knowledge is untenable.[5]
Indeed, this view was not endorsed by First
National Bank of Cape Cod v. North Adams Hoosac Savings Bank, 7
Mass.App.Ct. 790, 793 (1979) which found that an affidavit overcame objections
as to its alleged personal knowledge deficiencies and was admissible where the
affiant (a bank vice president) stated that he had personal knowledge of
relevant financing practices between his bank and a mortgage company and that
he had reviewed his bank’s business records of the subject transaction. The court held the affidavit admissible
insofar as it involved a review of business records. Reviewing business records, which the affiant discusses only in
connection with the financing matters of which he has personal knowledge, is
analogous to the instant situation, in which subrogation examiners review fire
department records only in connection with commenting on insurance issues of
which they have personal knowledge.
B. The facts contained in the affidavit (e.g.
the attached fire reports) would be admissible at trial and are therefore
properly a part of the summary judgment record.
Sxxxxxxx claims that the affidavits, taken
together with the reports they incorporate, constitute “clearly” inadmissible
totem pole hearsay, as the former were not based on personal knowledge and the
latter “must be considered hearsay evidence.”
The clarity of this proposition eludes the plaintiff, who first
established that the defendant’s failure to strike ends the inquiry, then
showed that the scope of the affidavits were confined to matters within the
personal knowledge of the affiants, and will proceed to demonstrate that the
officer making the fire report was competent to testify at trial as to the
content of the fire reports, that the fire reports need not have been sworn or
certified copies, and that the attached fire reports themselves are not
inadmissible hearsay at all, but rather would have been admissible at trial,
pursuant to the “official written records” exception to the procedural rule
prohibiting hearsay evidence.
1. The
attached fire reports were independently admissible and therefore need not have
been sworn or certified.
The tenant belatedly objected on appeal to
the affidavits’ incorporation of the attached fire reports, citing the fact
that the reports were not signed under oath and therefore “must be considered
hearsay evidence.” Indeed, Rule 56(e)
provides that any documents attached to an affidavit be “sworn or certified
copies”. [6]
Unsworn and uncertified documents attached to an affidavit are allowed,
however, if they would be otherwise admissible in court as documentary evidence
(e.g. documents attached to an affidavit are admissible to the extent that they
are independently admissible), and are therefore rightly included with
affidavits on summary judgment. Proteon v. Digital Equipment Corp., 1999
WL 1336438 at 1 (“[Plaintiff] objects to the documents attached to
[defendant’s] affidavit, because they are not sworn to or certified as Rule
56(e) requires. These documents would
be admissible in court as documentary evidence and so are properly part of the
summary judgment record. Motion to
strike affidavit and attachments denied”).
The procedural rule requiring affidavit
attachments to be sworn or certified is intended to ensure the veracity of
supplemental documents, just as the same is done with the affidavit itself via
the signature-under-oath mechanism.
Given this rationale, the Proteon exception for independently
admissible documents would also apply to official written records (which are
admissible as a different hearsay exception).
Official written records are admissible as hearsay exceptions precisely
because of their inherent trustworthiness, which stems from the officials’
public duty to report accurately and the considerable risk that any errors or
fabrications would be exposed due to the public’s right to inspect such
records. See Hon. William Young, et al, 20 Mass. Prac. Evidence, §
803.8, 1 (West Publishing, 2d ed.).
Given these built-in safeguards, Massachusetts admits official written
records into evidence as exceptions to the rule barring hearsay. Commonwealth
v. Slavski, 245 Mass. 405, 415 (1923) (“One of the acknowledged exceptions
to [hearsay] is that public records are competent evidence when of probative
value respecting an issuable [sic] fact”).
2. All
primary facts contained in the fire report would have been admissible at trial
pursuant to the official written records exception to hearsay.
Where it is the duty of a public official to
make a record of a primary fact, such record will be received in evidence in
proof of the existence of that fact. Young, et al. at 3. In this case, the fire report was prepared
pursuant to an official duty proscribed in M.G.L. 148 § 2, and portions of it
are therefore admissible in evidence under the official written statement exception
to the hearsay rule, which in turn indicates their appropriateness in the
summary judgment record below.
The leading case on the subject is Commonwealth
v. Slavski, which sets forth the relevant standards for official written
records in terms of what portions may and may not be admissible as exceptions
to the hearsay rule: “A record of a primary fact made by a public officer in
the performance of official duty is…prima facie evidence as to the existence of
that fact, but records of investigations and inquiries conducted by public
officers concerning causes and effects and involving the exercise of judgment
and discretion, expressions of opinion, and making conclusions are not
admissible as evidence as public records.” Commonwealth v. Slavski, at
417. In short, the official written
records hearsay exception authorizes admission of the record of a primary fact
(as opposed to opinions or conclusions) made by a public officer in the course
of official duty. In re Adoption of George, 27 Mass.App.Ct. 265, 272
(1989). Primary facts are defined as
those facts which can be “recorded without recourse to discretion and
judgment,” chiefly sensory impressions requiring little reflection, such as
dates, times, weather conditions, and the like. Id. Thus, Sxxxxxxx’s admission within the fire
report would have been admissible as a primary fact.[7]
In summary, as a recognized exception to the
rule against hearsay, the fire report would have been admissible at trial with
respect to the primary facts contained therein. Further, as a document admissible of its own accord, the fire
report did not need to be sworn or certified.
To the extent that the court finds to the contrary on the latter (or any
other) point, the defendant must still be barred from relief because both the
affidavits and the attached fire reports appropriately entered into the summary
judgment record at the trial court judge’s discretion in the absence of any
motion to strike brought by the defendant below. Overturning the summary judgment and granting Sxxxxxxx a trial
absent a timely objection would squander the trial court’s resources where the
only evidence offered on the negligence point is precisely that evidence
already properly in the summary judgment record via the fire report.
C. Sxxxxxxx’s
statement to a fire department official, contained in the fire report, that he
left a candle burning in his store overnight is admissible.
Extra-judicial statements made by a defendant
are admissible as party admissions. Commonwealth v. Piecuch, 49
Mass.App.Ct. 1116 (2000). No motion to
strike was brought below.[8] The defendant’s statement was admissible as
a primary fact (an observation free of any reflection or characterization) in the fire report under
the official written records exception to the hearsay rule. Sxxxxxxx's admission was also admissible as
the statement of a party opponent. Flood
v. Southland Corp., 33 Mass.App. 287, 294-295 (1992) echoes the
well-settled rule that admissions of a party to litigation can be used against
him: “The statements made out of court
by a party-opponent are universally deemed admissible, when offered against
him. . .[because] when offered against the party, admissions have the same
logical status as a witness’ self-contradiction. . .The party opponent is
discredited when it appears that on some other occasion he has made a statement
inconsistent with his present claim.” Id., See also Mattoon v. City
of Pittsfield, 56 Mass.App.Ct. 124, 137 (2002) (“Any statement of a party
is admissible against him if not objectionable on grounds other than
hearsay”). Further, Commonwealth v.
Martin spoke to the precise issue at hand while upholding a trial court
ruling admitting an out-of-court admission made by a defendant: “Whether the
relevance of those statements was far outweighed by their potential for
prejudice was a matter “entrusted to the trial judge’s discretion and the
ruling will not be disturbed except for palpable error.” Commonwealth v.
Martin, 47 Mass.App.Ct. 240, 246 (1999).
Taken together, then, the appropriate entry
onto the record of the defendant’s candle-burning admission and the location of
the fire (primary facts contained in the fire examiner’s report) were ample
evidence on the summary judgment record for the judge to infer negligence and
render summary judgment for the plaintiffs.
III. THE TRIAL JUDGE CORRECTLY RULED THAT THE
LEASE PROVISIONS IN CONTROVERSY WERE DEPENDENT COVENANTS, AND AS SUCH, THE DEFENDANT CANNOT BE SHELTERED FROM LIABILITY BY THE “NO SUBROGATION” CLAUSE WHILE SIMULTANEOUSLY BREACHING HIS CONTRACTUAL OBLIGATION TO ABIDE BY THE "LEASE’S" INSURANCE REQUIREMENTS.
The
trial court judge rightly found that Sxxxxxxx’s failure to abide by Article 10
§ 1 (requiring fire insurance for Sxxxxxxx’s personalty) and Article 8 § 2
(requiring Sxxxxxxx to maintain public liability and property damage insurance)
of the lease prohibits him from demanding enforcement of Article 10 § 2 (a
prohibition of subrogation lawsuits if both parties had obtained
insurance). As Sxxxxxxx acknowledged in
his appellate brief, the finding that the commercial lease covenants were
mutually dependent (that is, the enforcement of one provision depends on the
observance of the others) stems directly from a recent Supreme Judicial Court
case that declared, “We abandon the common-law rule of independent covenants in
commercial leases in favor of the modern rule of mutually dependent covenants
as reflected in the Restatement (Second) of Property (Landlord & Tenant) §
7.1 (1977). . .We adopt the rule of mutually dependent covenants for commercial
leases. . .” Wesson v. Leone Enterprises, Inc., 437 Mass. 708, 709, 716
(2002). As Wesson succinctly and
unequivocally laid the issue to rest, the tenant does not even attempt to
challenge the trial court judge’s finding in this case. In point of fact, after recounting the
devastating holding, rather than attempt to distinguish the instant case or
claim that the trial court judge erred in any way, the tenant simply lamented
the “irony” of his misfortune regarding Wesson’s timing in a footnote.
(FN 2 notes that “if the papers had not been misplaced for several years. . .[Wesson
would not have yet been decided and] the court would have applied the common
law of independent covenants. . .”)
Alas, the papers were misplaced, Wesson was decided
in the meantime, and the case is incontrovertibly on point, unequivocal, good
law, jurisdictionally controlling, retrospectively applicable[9], and wholly determinative of the issue at
hand. As such, the appellant does not
contest the fact that the trial court judge ruled correctly. He may no longer seek refuge in the lease’s
no-subrogation clause, which is unavailing because Sxxxxxxx breached the
contract by failing to abide by the lease’s concomitant insurance requirements.
IV. AS THE "LEASE" UNAMBIGUOUSLY
OBLIGATED Sxxxxxxx TO CARRY A CGL INSURANCE POLICY, WHICH COVERS ACCIDENTAL
FIRES, SUMMARY JUDGMENT WAS APPROPRIATE BECAUSE, AS A COMMERCIAL TENANT,
Sxxxxxxx WAS NOT AN IMPLIED CO-INSURED ON THE LANDLORD’S FIRE POLICY, AND IS
THUS NOT SHIELDED FROM SEACO’S SUBROGATION SUIT.
Freshly vulnerable to the instant subrogation
lawsuit upon the trial court’s finding that the lease provisions were mutually
dependent, the defendant sought alternative refuge under the “implied
co-insureds” rule, but the hearing judge found that Sxxxxxxx did not qualify as
an implied co-insured of Seaco.
Ignoring critical distinctions between the
cases relied on and the instant one, the appellant cited Peterson v. Silva,
428 Mass. 751 (1999), Lumber Mut. Ins. Co. v. Zoltek Corp., 419 Mass.
704 (1995), and Lexington Ins. Co. v. All Regions Chem. Labs, Inc., 419
Mass. 712 (1995), in unsuccessfully maintaining below that he was entitled to
summary judgment as an implied co-insured of Seaco on the landlord’s fire
insurance policy because there was no express provision in the lease to the
contrary. After correctly finding none
of these cases analogous to the present case (the first involves residential
rather than commercial tenants and the lease did not expressly require the
tenant to maintain his own insurance policy indemnifying the landlord as
Sxxxxxxx’s lease did; unlike Sxxxxxxx, the tenant in the second case paid a
portion of the landlord’s insurance premiums; and in the third case, the
tenant’s co-insured status was inferred from the language of a yield-up clause,
which does not exist in the present case), the trial judge properly looked to
the holding in Seaco v. Barbosa (a substantially similar case involving
a subrogation suit by a landlord’s insurer for fire damage caused by a
commercial tenant’s negligence), which changed the default co-insured rule as
applied to commercial tenancies and, in so doing, restored the common law
principle that “a person is liable for his own negligent acts, absent an
express agreement to the contrary.” Seaco v. Barbosa, 435 Mass. 772, 775
(2002).
Citing the sophistication of commercial
tenants and their tendency to purchase liability insurance (as Sxxxxxxx was
expressly required to do), Barbosa held that it can no longer be assumed
that a commercial tenant is not liable for his own negligence and covered
by his landlord’s insurance policy as a matter of course, save only for cases
in which an express lease provision unambiguously states otherwise. Instead, a court must “look to the terms of
the lease and other evidence to ascertain the intent of the parties” with
respect to a commercial tenant’s liability for his own negligence. Id.
at 779. When examining the lease to
glean the parties’ intent, the factors courts look to include whether a tenant
is obligated to carry liability insurance and whether a given lease contains
indemnification language by the tenant (both are present here), with either
finding supporting a subrogation claim by a landlord’s insurer against a
tenant. John G. Neylon, Tenant As Implied Coinsured on Landlord’s Fire
Policy: Exoneration From Negligence or Rational Public Policy?, 35 Business
Law Review 82, 95 (2002).
Thus applying the correct legal precedent,
the trial court judge properly followed Barbosa’s dictate and examined
the lease terms in order to determine the parties’ intent regarding Sxxxxxxx’s
liability for negligently causing fire damage and, consequently, whether he
enjoyed co-insured status with Seaco, the landlord’s insurer. If the lease revealed that the parties
intended that Sxxxxxxx not be liable for negligently started fires, or
that he was otherwise an implied co-insured, then Seaco would be barred from
bringing this subrogation action. Upon
engaging in the analysis and finding that Sxxxxxxx was not an implied co-insured
under the lease, however, the court below correctly found that the instant
lawsuit was brought properly.
Further, since the interpretation of a
contract (both leases and insurance policies) is a question of law rather than
fact, the trial judge also rightly noted that the issue (whether Sxxxxxxx, as a
commercial tenant, enjoyed co-insured status with Seaco) is one for the court
to resolve and is therefore appropriately adjudicated at the summary judgment
stage. See Allstate Ins. Co. v. Bearce, 412 Mass. 442, 446-447 (1992).
As pointed out in Sxxxxxxx’s appellate brief,
the lone caveat to the latter proposition stems from Barbosa’s note that
“where. . .the [lease] has terms that are ambiguous, uncertain, or equivocal in
meaning, the intent of the parties is a question of fact to be determined at
trial.” Barbosa at 779. Thus,
only when the terms of a lease are found to be ambiguous does a case resist
summary judgment resolution. Although
the tenant is now attempting to manufacture ambiguity regarding the lease’s
personal property insurance provision (Article 10 § 1) in order to create a
triable issue of fact, the fact remains that ambiguity exists only when a
lease’s language is truly susceptible to more than one meaning. See Lumbermens
Mutual Casualty Co. v. Offices Unlimited, Inc., 419 Mass. 466 (1995). Further, “Ambiguity is not created simply
because a controversy exists between parties, each favoring an interpretation
contrary to the other.” Id. The
tenant here, however, avers precisely to that type of “ambiguity”. He confuses the parties’ contrasting
interpretations of the language with legitimately equivocal text. Borrowing once again from Lumbermen
and applying it to the case at hand, “There are no material facts in dispute
relevant to whether the terms of [Sxxxxxxx’s would-be insurance] policy afford
coverage for the tort claim. The
resolution of this issue depends on the proper interpretation of the term
[“public liability insurance”]. . .and, therefore, raises only a question of
law.” Id. at 465.
Finding no such ambiguity surrounding the
plain and ordinary meaning of the lease’s public liability insurance
requirement, the trial judge properly resolved the case at the summary judgment
stage, rendering judgment for the plaintiff.
The tenant’s belated attempt to characterize the lease’s insurance
provisions as ambiguous does not make it so, as it ignores the fact that
“public liability insurance” connotes a standard CGL policy, which insures
against any “unexpected occurrences,” including, of course, accidental fires.
See Vappi v. Aetna Casualty & Surety Co., 348 Mass. 427, 432 (1965)
(“The [Supreme Judicial Court] will be slow to adopt any narrow construction of
the term ‘accident’ that will limit or defeat any coverage fairly intended to
be given by a policy described by the insurer in such broad terms as
‘comprehensive general liability policy’”). Therefore, the lower court was
correct in so ruling, as it will be shown that no ambiguity exists in the
lease, and as such, the case was appropriately and properly decided on summary
judgment.[10]
A. A
standard form CGL policy, such as the one that the defendant was obligated to
have, covers accidental fires such as the one in question.
In attempting to contrive ambiguity in this
manifestly straightforward lease in order to avoid the summary judgment already
rendered against him, the tenant simply restates the Article 10 provisions
requiring Sxxxxxxx to insure his personalty against fire damage and prohibiting
subrogation actions. The plaintiff,
however, has never disputed that Sxxxxxxx was expressly required to insure his
personal property against fire. He
was. He did not. That breach of contract was largely
immaterial to the issue at hand, as it did not damage Seaco or its
insured. Sxxxxxxx’s failure to abide by
Article 8 § 2’s requirement that he carry public liability and property damage
insurance, however, is the breach that bars him from now availing himself of the
lease’s “no subrogation” clause, in accordance with Wesson’s holding
that commercial lease provisions are dependent clauses. Sxxxxxxx’s duty to insure against accidental
fires stems from Article 8 § 2’s “public liability insurance” requirement, set
forth in part below:
The
Tenant agrees to maintain in full
force, during the term hereof, a policy
of
public liability and property damage insurance
under which the Landlord [is]
named
as [an] insured, and under
which
the
insurer agrees to indemnify and hold
the
landlord harmless. . .from and against
all cost, expense and/or liability arising out of or based upon. . .claims, accidents.
. .and damages. [Emphasis supplied]
(A.91).
While conceding that Sxxxxxxx was obligated
to provide public liability and property damage insurance, the tenant seizes on
the absence of any language in this portion of the lease explicitly mentioning
a duty for Sxxxxxxx to insure against negligently started fires. As heretofore discussed, on the heels of the
Supreme Judicial Court’s holding in Barbosa, the absence of an explicit
clause assigning liability to a commercial tenant for negligently started fires
no longer gives rise to the presumption that he is not liable for such events. Barbosa
at 779. In any event, such language
does not appear because it is unnecessary: negligently started fires are
already covered within the “occurrence” penumbra of a standard CGL insurance
policy, which is the type of policy denoted by the phrase “public liability and
property damage insurance.” As such,
there was no need to specifically mention fire damage, as it would have been an
exercise in redundancy, given that fires are amongst the innumerable
eventualities encompassed by the sweeping and liberally interpreted term “accident”
used in CGL policies.[11] See Vappi, 348 Mass. at 432, Beacon
Textiles Corp. v. Employers Mut. Liability Ins. Co. of Wis., 355 Mass. 643,
645 (1969) (“The term ‘accident’ is to be broadly construed in a policy
insuring against damage by accident”).
The tenant confessed to firefighters that
he left a candle burning in his store overnight. The landlord never claimed that the fire was set deliberately,
but rather avers only that it was set negligently, which is precisely the type
of unexpected “occurrence” covered by the CGL policy that Sxxxxxxx was required
to
have. “As policies of liability insurance are
designed to cover an insured’s tort liability, it follows that acts of
negligence on the part of the insured are covered events. . .Protection against
liability for negligence is the principal purpose of liability policies.” Lee
Russ & Thomas Segall, Couch on Insurance, 7 Couch on Ins. § 103:19
(3rd ed., West 2003). The
CGL policy that Sxxxxxxx was supposed to possess would have covered a
negligently started fire.[12] Therefore, the trial judge did not err in
his summary judgment ruling that Sxxxxxxx was not an implied co-insured on the
landlord’s insurance policy and that Seaco was consequently able to bring the
instant subrogation action.
B. Catherine Rudder set forth in an
uncontroverted affidavit that CGL policy would have covered the fire.
Sxxxxxxx neither disputed nor presented
countervailing authority rebutting Catherine Rudder’s unchallenged affidavit
contention that the public liability and property damage insurance contemplated
by Article 8 § 2 of the lease would have covered a fire loss caused by the
tenant’s negligence. In fact, this was
Agreed Fact No. 13. (A. 54). The tenant’s
protest regarding the lease’s failure to use the magic word “fire” in its
insurance provisions ignores the fact that the lease language (“public
liability insurance”) connotes a CGL policy, which covers damages caused by
unintentional (negligent) accidents, including fires. The Rudder affidavit, properly a part of the summary judgment
record, set forth these agreed facts.
The trial court thus examined the unchallenged evidence and rightly
concluded that the defendant was required to retain insurance for negligently
started fires.
V. SUMMARY
JUDGMENT SHOULD BE AFFIRMED ON THE STRENGTH OF INDEPENDENT GROUNDS AS WELL.
On appeal from a grant of summary
judgment, an appellate court may consider any ground supporting the judgment. Muldoon
v. LaChance Financial Services, Inc., 2002 Mass.App.Div. 46 (2002). Likewise, an appellate court may uphold a
correct ruling by a trial court on a ground different from that relied on by
the trial court. Eastern Products Corp. v. Continental Gas Co., 58
Mass.App.Court. 16 (2003). In the
instant case, summary judgment was granted by the trial court for the plaintiff
upon the findings that the lease’s subrogation prohibition clause was
inapplicable, that Sxxxxxxx was not an implied co-insured, and, finally, that
the defendant – who made an admissible party admission that he left a candle
burning overnight on the night of the fire – negligently caused the fire in
question. The ruling was supported by
ample evidence in the summary judgment record, and the defendant does not
contend that the trial judge abused his discretion. Therefore, the summary judgment ruling should be affirmed on its
own terms. In addition to being correct
and adequately supported on the record, however, the judgment should be upheld
on the basis of the tenant’s breach of the lease. While the plaintiff maintained that the expired lease was of no
import, the trial court found that the old lease provisions still governed the
obligations of the parties at the time of the fire and the tenant breached its
insurance provisions[13]. The subrogated plaintiff would have been allowed,
if necessary, to amend the original complaint to include the landlord's breach
of contract claim. Indeed Seaco, part
of a class of insurers for landlords, was an intended third party beneficiary
of the tenant's promise to carry liability insurance. Such insurers' rates are set based upon their
net loss experience (i.e. losses are net of subrogation recoveries.) Hence, leaving the loss from the negligently
started fire with the negligently uninsured tenant comports with public policy
because landlords' premiums do not reflect a free ride for tenants undertaking
to insure this risk at his expense.[14] Therefore, a judgment entered on behalf of
the plaintiff would be inevitable on remand on the independent strength of both
his subrogated and independent breach of contract claims.
CONCLUSION
For all of the foregoing reasons,
the trial court did not err and the judgment of the Superior Court should be
affirmed.
Respectfully submitted,
Seaco
Insurance Co.
by
its attorney
______________________ JOHN G. NEYLON
BBO
# 371020
NEYLON
& O'BRIEN, P.A.
101
Tremont Street
Suite
504
Boston,
MA 02108
(617)
542.9091
[1]
which satisfied Mass. R. Civ. P. 4.1(h) and incorporated the report of
the Framingham Fire Department containing admissions by tenant.
[2]
Defendant unsuccessfully sought to dismiss counts II and III of the
complaint.
[3] Hereinafter referred to as the “tenant” or
“Sxxxxxxx”.
[4] Sxxxxxxx’s obligation to maintain property
and public liability insurance stems from the lower court’s finding that
Article 8 of the lease was still binding upon both the landlord and the tenant. Sxxxxxxx did not controvert Agreed Fact No.
13 (A. 54), which stated that such insurance would cover the loss and “trump”
Seaco’s coverage of the landlord.
[5] When an affidavit or a portion thereof is
challenged in summary judgment proceedings, the proponent of the affidavit may
substitute a deposition in place of the affidavit. As the affidavits were never challenged, no need for such a
substitution by the plaintiff ever arose.
[6] Rule 56(e)’s requirement that documents
attached to affidavits be sworn or certified copies is a variation on the “best
evidence” rule. Had Sxxxxxxx not
allowed some five years and a summary judgment to elapse before first objecting
to the attached fire report on the grounds that it was neither sworn nor a
certified copy, the plaintiff could simply have requested leave to amend the
affidavit and provided a certified copy of the fire report. That Sxxxxxxx did not so object and provide
the plaintiff with a reason to do so should not now afford him an evidentiary
exclusion that would not have been availing originally.
[7]
While Massachusetts courts have found that fire reports are not
admissible at criminal trials insofar as they contain opinions or professional
judgments about the cause of a fire, the author of the instant fire report
could offer the same opinion if subject to cross examination at trial. Therefore, the fire report’s recordation of
Sxxxxxxx’s admission that he left a burning candle unattended overnight (the
official simply recorded an observance, which was further admissible as the
admission of a party opponent), as well as the location of the fire (display
counter), inter alia, would be admissible at trial as primary facts
within the official written reports exception to hearsay. The summary judgment record is designed to
preview the evidence that would be available at trial, in order to determine
whether any genuine issues of material fact exist. Absent any countervailing evidence or alternative theory offered
by the tenant, the attached fire report reveals that the plaintiff would have
been able to establish at trial that Sxxxxxxx negligently caused the fire. Had a timely objection to the fire report
been sustained, rather than barring the evidence altogether, the plaintiff
could have simply introduced Lieutenant Joseph Leone (the official who made the
report) via either his affidavit, a deposition to obtain summary judgment , or
as a live expert witness at trial to testify to the cause of the fire. Given
the foregoing, while the fire report itself would have been admissible at trial
to an extent sufficient to validate the trial judge’s negligence finding and
summary judgment grant, the content of the reports, including the cause of the
fire, would have also been admissible at trial through expert testimony. Affidavits of available witnesses are not
admissible at trial, therefore the Rule 56(e) requirement that facts set forth
in an affidavit must be admissible in evidence applies to the facts themselves
rather than the affidavits. See Wright & Miller at 1. Therefore, while the attached fire reports
are admissible at the summary judgment stage as to the primary facts contained
therein and consequently rightly attached to the affidavits in question, the
substance of the remaining portions of the fire report, in particular the
portion citing a candle as the source of the fire, could have entered into
evidence anyway if needed, through the testimony of the fire official making
the report. See Middlesex Supply, Inc. v. Martin & Sons, Inc., 354
Mass. 373, 374 (1968) (Probable cause of fire statement contained in fire
report is inadmissible opinion evidence, however, if the official is available
for cross-examination at trial, he may testify to the same.) Only the report “by itself” would not
have been admissible as to the cause of the fire. Id. [Italics added.] Given that substantial portions of the report are admissible
evidence, taken together with the admissibility of Sxxxxxxx’s party-opponent
admission that he left a candle burning in the store overnight and the defendant’s
total failure to offer an alternative theory as to the source of the fire,
there is no remaining genuine issue of fact and a trial would be an exercise in
redundancy.
[8] At the real estate attachment
hearing, the motion judge agreed with plaintiff's counsel as to the provenance
of the fire report and the effect of the tenant's admission. That likely explains Sxxxxxxx's failure to
argue the point at the summary judgment stage.
[9] Before announcing its retroactive
applicability, Wesson recounted in great detail the history and
rationale behind the gradual shift from the outdated independent covenants rule
to the current dependent lease covenants rule, noting in part, “The premise
underlying the continued viability of the independent covenants rule is that a
commercial lease is a conveyance of property where the right to possession of
the land constitutes the chief element of the exchange. This premise no longer comports with the
reality of the typical modern commercial lease, which is intended to secure the
right to occupy improvements to the land rather than the land itself.” Wesson
v. Leone, 437 Mass. at 720. The
court then declared that its holding would bind commercial landlords and
tenants who, like, the instant parties, had already entered into a lease prior
to the ruling. “Ordinarily, judicial
changes to contract and property law are applied prospectively only, ‘primarily
because of concern for litigants and others who have relied on existing
precedents.’ Such concerns are. . .not
the circumstances of the rule we adopt in this case. The abandonment of the rule of independent covenants in
commercial leases has been foreshadowed at lease since our 1973 decision in Boston
Housing Authority v. Hemingway, in which we abandoned the rule in
residential leases. In the interim, the
Restatement (Second) of Property (Landlord and Tenant) (1977) adopted the rule
of dependent covenants, and the lack of continued vitality in Massachusetts of
the rule of independent covenants has been foreshadowed in cases decided by the
Appeals Court [references omitted]. In
these circumstances, commercial landlords and tenants have had ample warning
and opportunity to anticipate such a change and to incorporate appropriate
provisions in their lease agreements.
The concern for reliance on unquestioned precedent is simply not present
here.” Id., at 721 n. 26. In point of fact, Article 15 § 4
of the lease addressed this issue, declaring "Each term. . .shall be
construed to be both a covenant and a condition." (A.98) As the lease had stated that each clause
therein was both a covenant and a condition, the breach of a clause condition
would have brought about the same result even without Wesson's holding.
[10] The defendant attempts to rely on his own
breach of contract (failing to procure liability insurance coverage) to create
the very ambiguity that would save him from an adverse summary judgment ruling. Had the defendant not breached the terms of
the lease and instead purchased a CGL policy as required, the court could
simply look to its terms to resolve the issue at hand.
[11] Agreed Fact No. 13 (A. 54) and Rudder’s
affidavit establish that the contemplated CGL policy covers the instant
fire. For decades, the Insurance
Services Office (ISO) has published standard CGL policy forms, leading to a substantial
uniformity in such policies. Joseph G. Blute et al., Commercial Liability
Insurance Coverage: The Basics in Five Sessions, 12 (MCLE, Inc. 1993). The most recent ISO CGL policy declares that
an insurer will pay “those sums that the insured becomes legally obligated to
pay as damages because of. . .property damage to which this insurance applies.
. .caused by an occurrence.” 1998 ISO Occurrence CGL Policy § 1.1(a),
1.1(b)(1) (Insurance Services Office, Inc. 1997). The term “occurrence,” in turn, refers to an “accident” which
results in “property damage neither expected nor intended from the standpoint
of the insured.” Id., Robert A. Buhlman, Massachusetts Liability
Insurance Manual, “Comprehensive and Commercial General Liability
Policies”, § 4.5.1, p. 4-4 (Janice Rowan et al., eds., MCLE, Inc. 2000). Further, “the requirement that the. .
.damage be ‘neither expected nor intended’ by the insured is meant [only] to
exclude coverage for intentional injury or damage.” Id. at 4-5. Accidents, then, are used in liability
insurance polices to refer to “unexpected happenings without intention or
design,” including “unintended or unforeseen consequences of reckless or
negligent acts.” Beacon Textiles Corp. v. Employers Mut. Liability Ins. Co.,
355 Mass. 643, 646 (1969), Jefferson Ins. Co. of New York v. Nat. Union Fire
Ins. Co. of Pittsburgh, 42 Mass.App.Ct. 94, 96 n. 5 (1997), citing Liberty
Mut. Ins. Co. v. Tabor, 407 Mass. 354, 358 (1990). In other words, any unintentional
accident causing damage not specifically excluded is covered by a CGL
policy. Therefore, the plaintiff need
not prove that Sxxxxxxx himself negligently started the fire: any fire
accidentally started on the tenant’s premises is covered by such a policy.
[12] The “owned property exclusion” would
not have prevented Sxxxxxxx from recouping fire damages from his would-be CGL
insurance provider. Said exclusion is
set forth in ¶ j(1) of the policy, and OSI's standard CGL policy explicitly
states, “Exclusions 'c. through n.' do not apply to damage by fire to premises
rented to you.” Buhlman at 4-15. Since ¶ j(1) does not apply where rental property is damaged by fire, the
owned property exclusion is inapplicable to the instant case. Because CGL policies cover all non-excluded
accidents and occurrences, Sxxxxxxx's insurer would have paid for his fire
damage losses.
[13] Appellee's reference to the
"lease" throughout this brief references those obligations that the
landlord and tenant were subject to resulting from their tenancy-at-will
relationship.
[14] Seaco's counsel treats this at
35 Business Law Review 82, n. 11, 93, and 106.