Dixie Fire & Casualty Co. v. Esso Standard Oil Co.

143 S.E.2d 279 (1965)

265 N.C. 121

The DIXIE FIRE & CASUALTY COMPANY, Plaintiff, v. ESSO STANDARD OIL COMPANY, Standard Oil Company of New Jersey, Humble Oil and Refining Company, and Esso Division of Humble Oil & Refining Company, Original Defendants, and Julian F. Head, Additional Defendant.

No. 696.

Supreme Court of North Carolina.

July 23, 1965.

*282 Jordan, Wright, Henson & Nichols, and Karl N. Hill, Jr., Greensboro, for plaintiff.

Smith, Moore, Smith, Schell & Hunter, and Richmond G. Bernhardt, Jr., Greensboro, for original defendant appellees.

MOORE, Justice.

Plaintiff assigns as error the ruling that the facts alleged in the complaint do not constitute as against the original defendants, Esso, a cause of action sounding in tort.

The ultimate facts stated are sufficient, if established, to support a finding that Head, the sublessee, was negligent and his negligence was a proximate cause of the damage to the building. Only the facts which constitute the negligence and the facts which establish such negligence as a proximate cause of the damage need be stated. There is no requirement that the pleader state its conclusions. On demurrer only facts properly pleaded are to be considered; legal inferences and conclusions of the pleader, if stated in the complaint, are to be disregarded. G.S. § 1-122; Gillispie v. Service Stores, 258 N.C. 487, 128 S.E.2d 762; Shives v. Sample, 238 N.C. 724, 79 S.E.2d 193.

It is apparent that the judge below was of the opinion, in consideration of all of the facts alleged, that the lessee, Esso, is not legally responsible to the lessor, Caveness, or his subrogee, plaintiff insurance company, for the damage to the demised property caused by the negligence of the sublessee, Head. Hence, the matter of responsibility on the part of the lessee is the ultimate question for decision.

Formerly a lessee was liable in an action for waste for damage to or destruction of buildings on land covered by the lease, even if the damage or destruction was the result of an accident or of the act of a stranger. See concurring opinion of Barnhill, J., (later C. J.) in Rountree v. Thompson, 226 N.C. 553, 555, 39 S.E.2d 523. Now by statute, G.S. § 42-10, in North Carolina a tenant "shall not be liable for damage occurring on the demised premises accidentally, and notwithstanding reasonable diligence on his part, unless he so contract."

The law as it now stands in this jurisdiction is stated in Winkler v. Apalachian Amusement Co., 238 N.C. 589, 79 S.E.2d 185, thus: "In every lease there is, unless excluded by the operation of some express covenant or agreement, an implied obligation on the part of the lessee to use reasonable diligence to treat the premises demised in such manner that no injury be done to the property, but that the estate may revert to the lessor undeteriorated by the wilful or negligent act of the lessee. The lessee's obligation is based upon the maxim sic utere tuo ut alienum non laedas. The lessee is not liable for accidental damage by fire; but he is liable if the buildings are damaged by his negligence. Moore v. Parker, 91 N.C. 275; Hollar v. Southern Bell Telephone & Telegraph Co., 155 N.C. 229, 71 S.E. 316; U. S. v. Bostwick, 94 U.S. 53, 24 L. Ed. 65; 32 Am.Jur., Landlord and Tenant, 669; 51 C.J.S. Landlord and Tenant § 261 P. 904."

In the lease in the instant case "Lessor agrees at Lessor's own cost and *283 expense to * * * make promptly any and all repairs to the demised property." If Esso is otherwise responsible to Lessor for the fire damage, this provision of the lease imposing upon Lessor the duty to make repairs at his own expense does not relieve Esso of its responsibility for the damage. As stated in Winkler v. Apalachian Amusement Co., supra: "Contracts for exemption from liability for negligence are not favored by the law, and are strictly construed against the party asserting it. The contract will never be so interpreted in the absence of clear and explicit words that such was the intent of the parties. Hill v. Carolina Freight Carriers Corp., 235 N.C. 705, 71 S.E.2d 133, where the authorities are cited." It is not reasonable to construe the covenant of the lessor to make repairs as meaning that the parties intended that lessor should repair damages caused by negligence for which lessee is responsible. We find no express covenant or agreement in the lease which excludes therefrom the implied obligation on the part of lessee to treat the demised premises in such manner that no injury be done to the property, and this obligation must be considered an effective provision of the lease.

The demised property was sublet by Esso to Head." * * * the sublessees (sic) liability runs only to the lessee who in turn is responsible to the lessor. * * * There is no privity of contract between the lessor and sublessee." 3A Thompson on Real Property, s. 1210, pp. 52, 53; Dunn v. Barton and Hazelton, 16 Fla. 765; Garbutt & Donovan v. Barksdale-Pruitt Junk Co., 37 Ga.App. 210, 139 S.E. 357. "A subletting, although assented to by the lessor, does not in any way affect the liability of the original lessee on the covenants of the lease unless there is a surrender and substitution of tenants. * * The original lessee is responsible for any violation of the covenants of the lease by the sublessee, whether or not he knew of such violation * * *." 51 C.J.S. Landlord and Tenant § 47, p. 578; Burke v. Bryant, 283 Pa. 114, 128 A. 821; Rourke v. Bozarth, 103 Okl. 133, 229 P. 495.

In McGaff v. Schrimshire, Tex.Civ.App., 155 S.W. 976, lessee sublet property. There was no agreement by lessor that lessee should be released. The property was damaged by the sublessee. It was held that lessee was liable to lessor for the damages.

In Barkhaus v. Producers' Fruit Co., 192 Cal. 200, 219 P. 435, plaintiff leased to defendant an orchard; defendant-lessee covenanted to keep the trees in healthy condition and plaintiff-lessor reserved the right to supervise the care of the orchard. The property was subleased, and defendant retained the right of control and supervision. The trees were damaged by neglect and improper methods and procedures. Held: "The defendant (lessee) * * * continued to be obligated to the plaintiff (lessor) upon the covenants of the original lease."

Bishop v. Associated Transport, Inc., 46 Tenn.App. 644, 332 S.W.2d 696, is in most material respects legally and factually analogous to the case at bar. The sublessee deliberately set fire to and destroyed the buildings on the demised premises. Lessor sued lessee to recover damages for the burning. The original lease provided that lessee might sublet the property "provided that the Lessee shall nevertheless remain liable to Lessor for the performance of all of the terms and conditions on Lessee's part to be performed" under the lease. Lessee "had no knowledge of the unlawful act of Jess Wilson (sublessee) and such act was not permitted by defendant (lessee)." The court declared that "the question of responsibility on the part of lessee is the ultimate question for decision here." and addressing itself to certain aspects of the case said:

"When the lessee subleased to Jess Wilson, the second covenant of the lease (dealing with sublettingquoted above) operated to render the lessee liable to the lessor for the performance of all the terms and conditions of the *284 contract in the hands of the sub-lessee, and we think that the fact that Wilson, the sub-lessee, may have acted without the permission of the lessee in destroying the property, is not determinative of the questions here involved." Parentheses added. "We think that where the leased premises were destroyed by fire which was deliberately set by the lessee or by one for whose violation of the covenants of the lease the lessee is liable, there was a breach of the covenant to return the premises in good repair * * *. "As is stated in 32 Am.Jur. 339 and in many cases, a subletting does not in any manner affect the liability of the lessee to his lessor for the performance of the covenants of the lease, and especially is this true where the lease, as in the case at bar, provides that the lessee shall remain responsible, and where the lessor has no control whatsoever over the selection of the sublessee."

It seems there is as strong, if not stronger, grounds for liability of the lessee to the lessor in the case at bar than in the Bishop case. The lease provides that "Lessee may sublet all or any part of the premises but no such subletting shall release the Lessee from its obligation" under the lease. One of lessee's obligations was "to treat the premises demised in such manner that no injury be done to the property." Esso did not assign its lease to Head; it merely sublet the property. Lessor did not agree to accept Head as tenant as a substitute for Esso, and did not agree to release Esso from its obligation. Lessor did not agree that Esso might delegate its duty to Head and thereby be relieved of responsibility. Lessor did not reserve the right to select the sublessee or to pass upon his qualifications or financial responsibility. These matters were left entirely to Esso. Lessor looked to Esso for the reasonable care and protection of the property in the manner of its use, and Esso agreed to assume the responsibility. The acts of negligence alleged arose in the course of the use of the premises for the purpose for which it was leased. It was within the power and privilege of Esso to bind the sublessee to protect it with respect to its obligation to lessor. It is true that the sublessee was not the agent of Esso in the ordinary sense, and Esso's liability to lessor is not based on the principle of respondeat superior. But it is also true that Esso put sublessee in possession and control of the property and assumed the risk that sublessee might breach the covenants, express and implied, by which Esso had bound itself in its solemn contract with lessor. Liability of Esso to lessor was imposed by breach of the implied covenant that waste would not be committed by negligence in the use of the propertythe observance of the covenant being a duty which, by terms of the lease, Esso could not delegate to a sublessee so as to relieve it of responsibility.

There is further evidence of Esso's assumption of liability to lessor for damage in the nature of waste arising from negligence in the use of the property. The lease provides as follows: "Lessee covenants and agrees to indemnify and save Lessor harmless from any and all claims, (and) demands * * * on account of damage or injury * * * to property of Lessee, its agents, servants or other party or parties caused by or due to the fault or negligence of lessee, its sublessee and assigns in the operation of the service station." Taking the allegations of the complaint to be true, as we must in testing the complaint by demurrer, the building was injured by the negligence of Esso's sublessee "in the operation of the service station," lessor has borne the loss and is entitled to be indemnified by Esso. The building is "property of * * * other party or parties," and Esso had a property right therein. Esso's liability does not depend upon this indemnity agreement, but it is sufficient within itself to support liability.

*285 An action for waste may be brought before the expiration of the term. 51 C.J.S. Landlord and Tenant § 262b, p. 906. "The nature of the wrongful act or omission for which a remainderman is entitled to recover for waste is a tort. Though the acts of a tenant are tortious in their nature, they may also be breaches of his contract with his landlord for which the tenant will be responsible in an action ex contractu. * * * An action may be one of tort purely, although the existence of a contract may have been the occasion or furnished the opportunity for committing the tort. It would be sufficient to allege the making of a lease, the entry of the lessee, the good condition of the premises, and the injury caused by the bad management of the lessee. Such a cause of action is one sounding in tort and not in contract." 3A Thompson on Real Property, s. 1279, pp. 397-398.

"Ordinarily, a breach of contract is not a tort, but a contract may create the state of things which furnishes the occasion of a tort. The relation which is essential to the existence of the duty to exercise care may arise through an express or implied contract. * * * The sound rule appears to be that where there is a general duty, even though it arises from the relation created by, or from the terms of, a contract, and that duty is violated, either by negligent performance or negligent nonperformance, the breach of the duty may constitute actionable negligence." 38 Am.Jur., Negligence, s. 20, pp. 661, 662. The lease and subletting created relationships and duties, the negligence resulting in damage gave rise to the cause of action. The action alleged sounds in tort and may be maintained on the theory of negligence.

It is suggested that the action is barred by failure of lessor and plaintiff to give notice as provided by the following clause of the lease: "Anything herein contained to the contrary notwithstanding, Lessor agrees not to exercise any landlord's remedies against Lessee by reason of any default unless and until Lessor shall have given to Lessee written notice by registered mail of the default and unless Lessee shall have failed to remedy such default within a period of thirty (30) days from the giving of such notice." We do not agree that the present action is barred by failure to give notice. The use of the words "landlord's remedies" and "default" and the allowance of only 30 days to remedy default, indicate that the parties had in mind the landlord's possessory remedy. For a list of landlord's possessory remedies at common law, see 32 Am.Jur., Landlord and Tenant, s. 1008, pp. 845, 846. In this jurisdiction the remedy is by proceeding in summary ejectment. G.S. §§ 42-26 to 42-37. See also G.S. § 42-8. The parties did not contemplate the construction or extensive repair of a burned building within a 30-day period. See Bishop v. Associated Transport, Inc., supra.

An insurance company paying a loss is subrogated to the rights of the insured against the third person tort-feasor causing or responsible for the loss, to the extent of the amount paid, both by the provision of G.S. § 58-176 and under equitable principles. Winkler v. Apalachian Amusement Co., supra.

There are questions which may cause concern to one interested in the procedures following the institution of this action and the filing of the complaint: (1) Whether the holding of Olive, J., overruling demurrer precluded the later ruling of Walker, S. J., sustaining demurrer; (2) whether it was proper to bring in the sublessee as an additional defendant on the theory that he had expressly contracted to indemnify Esso; and (3) whether plaintiff should have been required to make an election of remedies before its evidence was in. These questions are not presented by exceptions and assignments of error and are not discussed in the briefs. We express no opinion with respect thereto, and this case does not constitute authority or precedent on any of these points.

*286 The ruling of the court on plaintiff's motion to amend the complaint is not res judicata. If so advised, any of the parties may hereafter move in superior court for leave to amend the pleadings. Overton v. Overton, 260 N.C. 139, 132 S.E.2d 349. "The doctrine of res judicata does not apply to ordinary motions incident to the progress of the trial." 1 Strong: N.C. Index, Courts, s. 9, p. 656.

The judgment below sustaining the demurrer ore tenus is

Reversed.

PARKER, J., took no part in the consideration or decision of this case.