Middlesex Mutual Assurance Company and Cedar Shores
          Condominium Association v. Delaware Electric Signal Company

                            C.A. no. 07C-12-005 THG

                       SUPERIOR COURT OF DELAWARE, SUSSEX

                           2008 Del. Super. LEXIS 334

                            July 18, 2008, Submitted
                          September 11, 2008, Decided

NOTICE:

   THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS
SUBJECT TO REVISION OR WITHDRAWAL.

PRIOR HISTORY:
   On Defendant Delaware Electric Signal Company's Motion for Summary Judgment.

DISPOSITION:    GRANTED IN PART AND DENIED IN PART

COUNSEL: Roger D. Landon, Esquire, Philip T. Edwards, Esquire, Murphy & Landon,
Wilmington, Delaware.

David C. Malatesta, Jr., Esquire, Kent & McBride, P.C., Wilmington, Delaware.

JUDGES: T. HENLEY GRAVES, RESIDENT JUDGE.

OPINION BY: T. HENLEY GRAVES

OPINION

   Pending before the Court is Defendant Delaware Electric Signal Company's
Motion for Summary Judgment. For the reasons stated herein, that motion is
granted in part and denied in part. With the exception of Plaintiffs' claim that
Defendant engaged in prohibited trade practices, Plaintiffs' claims are
dismissed.

Factual and Procedural Background

   On or about December 6, 2005, a fire began in and spread through the Cedar
Shores Condominium complex, located in Bethany Beach, Sussex County, Delaware.
At the time the fire broke out, a fire alarm system designed, installed, and
monitored by Delaware Electric Signal Company ("Delaware Signal") was in place.
The fire alarm system was designed, installed, and monitored pursuant to a
contract entered into by Cedar Shores Condominium Association ("Cedar Shores")
and Delaware Signal on or about October 30, 1997. At the time of the fire,
Middlesex Mutual Assurance Company ("Middlesex") insured the buildings that
comprise the Cedar Shores Condominium complex. The fire resulted in the complete
destruction of one of the complex's buildings and damage to several of the
complex's other buildings and structures. Pursuant to the terms of the Middlesex
policy, Cedar Shores was required to pay for the first $ 5,000.00 of the loss as
a deductible.

   On December 5, 2007, Middlesex and Cedar Shores (collectively, "Plaintiffs")
filed a seven-count Complaint against Delaware Signal. The first five counts
allege Delaware Signal improperly designed, installed, modified and monitored
the fire alarm system and that these failures support findings of breach of
contract and negligence. Plaintiffs also allege Delaware Signal engaged in
consumer fraud in that it misrepresented, concealed, suppressed and/or omitted
relevant material facts with regard to how the fire alarm system would be
installed and monitored. Finally, Plaintiffs contend Delaware Signal is strictly
liable for the damages arising out of the fire because the fire resulted from
Delaware Signal's lease of defective equipment to Cedar Shores.

   Delaware Signal answered the Complaint on February 1, 2008. On April 14,
2008, the parties appeared before Superior Court Commissioner Howard for a
scheduling conference. At that time, the parties told Commissioner Howard that
motions based upon the contract language could result in dismissal of the action
and that it would be judicially economical to proceed with dispositive motions
prior to the commencement of discovery. Commissioner Howard set a briefing
schedule.

   Delaware Signal's Opening Brief in Support of Its Motion for Summary Judgment
was filed on May 23, 2008. Plaintiffs filed an Answering Brief on July 1, 2008,
and Delaware Signal filed its Reply Brief on July 15, 2008. On July 18, the
Court heard oral argument from the parties and the matter was submitted for
decision. At the hearing conducted on July 18, 2008, the Court specifically
questioned Plaintiff's counsel regarding Plaintiffs' initial representation to
Commissioner Howard that the matter was ripe for decision. The Court observed
that, despite this initial representation, Plaintiffs objected to Delaware
Signal's Motion for Summary Judgment in large part based on their repeated
assertion that factual findings needed to be made by a trier of fact. After
discussion, Plaintiffs' counsel withdrew their assertion that factual findings
needed to be made and submitted to the Court that the issues, excluding the
allegation of a violation of the consumer fraud statute, are ripe for decision.

Discussion

Standard of Review

   This Court will grant summary judgment only when no material issues of fact
exist, and the moving party bears the burden of establishing the non-existence
of material issues of fact. Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
Once the moving party has met its burden, the burden shifts to the non-moving
party to establish the existence of material issues of fact. Id. at 681. Where
the moving party produces an affidavit or other evidence sufficient under
Superior Court Civil Rule 56 in support of its motion and the burden shifts, the
non-moving party may not rest on its own pleadings, but must provide evidence
showing a genuine issue of material fact for trial. Super. Ct. Civ. R. 56(e);
Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S. Ct. 2548, 91 L. Ed. 2d
265 (1986). If, after discovery, the non-moving party cannot make a sufficient
showing of the existence of an essential element of his or her case, summary
judgment must be granted. Burkhart v. Davies, 602 A.2d 56, 59 (Del. 1991), cert.
denied, 504 U.S. 912, 112 S. Ct. 1946, 118 L. Ed. 2d 551 (1992); Celotex Corp.,
supra. If, however, material issues of fact exist, or if the Court determines
that it does not have sufficient facts to enable it to apply the law to the
facts before it, summary judgment is inappropriate. Ebersole v. Lowengrub, 54
Del. 463, 180 A.2d 467, 470, 4 Storey 463 (Del. 1962).

Merits

I. Contract Enforceability

   Delaware Signal cites the contract language in defense of Plaintiffs' claims
and in support of its Motion for Summary Judgment. The contract is a two-sided
one page document. The first page of the contract is straightforward and
consists of four paragraphs and the signature lines. The fourth paragraph reads
as follows:


        (4) DELAWARE SIGNAL'S LIABILITY. Delaware Signal does not represent
     or warrant that the alarm system may not be compromised or
     circumvented; that the system will prevent any loss by burglary,
     hold-up, fire or otherwise; or that the system will in all cases
     provide the protection for which it is installed or intended.
     Subscriber acknowledges that Delaware Signal is not an insurer, that
     Subscriber assumes all risk for loss or damage to Subscriber's
     premises or to its contents; that Delaware Signal has made no
     representations or warranties, nor has Subscriber relied on any
     representations or warranties, express or implied, except as set forth
     herein and Subscriber acknowledges that he has read and understands,
     particularly paragraphs 18 and 19 of this agreement which sets [sic]
     forth Delaware Signal's obligation and maximum liability in the event
     of any loss or damage to Subscriber.



   Paragraphs 18 is irrelevant to the dispute between the parties. However,
Paragraph 19 is relevant and reads as follows:


        (19) DELAWARE SIGNAL NOT AN INSURER AND LIQUIDATED DAMAGES. It is
     understood and agreed by and between the parties hereto that Delaware
     Signal is not an insurer. Insurance, if any [sic] will be obtained by
     the Subscriber. Charges are based solely upon the value of the
     services provided for, and are unrelated to the value to the
     Subscriber's property or the property of others located in
     Subscriber's premises. The amounts payable by the Subscriber are not
     sufficient to warrant Delaware Signal assuming any risk of
     consequential or other damages to the Subscriber due to Delaware
     Signal's negligence or failure to perform. The Subscriber does not
     desire this contract to provide for the liability of Delaware Signal
     and Subscriber agrees that Delaware Signal shall not be liable for
     loss or damage due directly or indirectly to any occurrence or
     consequences therefrom, which the service is designed to detect or
     avert. From the nature of the services to be performed, it is
     impractical and extremely difficult to fix the actual damages, if any,
     which may proximately result from the failure on the part of Delaware
     Signal to perform any of its obligations hereunder, or the failure of
     the system to properly [sic] operate with the resulting loss to the
     Subscriber. If Delaware Signal should be found liable for loss of
     damage due to a failure on the part of Delaware Signal or its systems,
     in any respect, its liability shall be limited to the refund to
     Subscriber of an amount equal to the aggregate of six (6) monthly
     payments, or to the sum of Two Hundred Fifty ($ 250.00) Dollars,
     whichever shall be less, as liquidated damages and not as a penalty,
     and this liability shall be exclusive. The provisions of this
     paragraph shall apply in the event loss or damage, irrespective of
     cause or origin, results directly or indirectly to person or property
     from the performance or non-performance of the obligations set forth
     by the terms of this contract, or from negligence, active, or
     otherwise, of Delaware Signal, its agents or employees.



   Paragraph 20, also found on the second page of the contract, reads:


        (20) SUBROGATION. Subscriber does hereby for himself and any
     parties claiming under him, release and discharge Delaware Signal from
     and against all hazards covered by Subscriber's insurance, it being
     expressly understood and agreed that no insurance company or insurer
     will have any right of subrogation against Delaware Signal.



   Delaware Signal moves for summary judgment on the grounds that the limitation
of liability/liquidated damages clause and the waiver of claims/subrogation
clause bar Plaintiffs' claims. In response, Plaintiffs argue the contract
provisions should not be given effect because the clauses cited are
"unconscionable, not conspicuous, and at most, represent a contract of
adhesion." Plaintiffs' Answering Brief at 4. I discuss the arguments in turn.

A. Unconscionability

   Plaintiffs' primary argument against enforcement of the contract language
cited above is that the limitation of liability/liquidated damages and waiver of
claims/subrogation clauses are unconscionable. As previously noted, Plaintiffs'
counsel submitted at oral argument that the issue of unconscionability is ripe
for decision.

   Delaware courts have upheld the enforceability of similar clauses. See
Donegal Mut. Ins. Co. v. Tri-Plex Sec. Alarm Sys., 622 A.2d 1086 (Del. Super.
1992). In Donegal, the Superior Court carefully traced the history of and the
distinction between limitation of liability clauses and liquidated damages
clauses. In that case, the court concluded the contract contained a limitation
of liability clause, though that determination was not pivotal to its analysis.
622 A.2d at 1089 (observing, "in cases such as these involving commercial
parties, it has been held that there is no difference between a liquidated
damages clause, or exculpatory clause, and a liability limitation clause"). Like
the contract at issue in Donegal, the contract between Cedar Shores and Delaware
Signal is not lengthy and the language concerning the limitation of liability is
clear. Moreover, the contract language emphasizes Delaware Signal's limited
liability in paragraph (4) of the contract and paragraph (4) cross-references
paragraph (19) of the contract, which is even more specific regarding the
limitation. Paragraph (4) is located on the first page of the paragraph, just
above the signature line of the contract. Finally, the language of the clause
upheld in Donegal is virtually identical to the one in this case. See also
Rob-Win, Inc. v. Lydia Sec. Monitoring, Inc., 2007 WL 3360036 (Del. Super. Apr.
30, 2007) (upholding a similar limitation of liability/liquidated damages
clause); Tandy Corp. v. Fusco Props., L.P., 1996 Del. Super. LEXIS 168, 1996 WL
280774 (Del. Super. Apr. 10, 1996) (enforcing contractual limitation of
liability/liquidated damages and waiver of claims/subrogation clauses).

   It is apparent that Plaintiffs seek to hold Defendant entirely responsible
for the loss arising from the fire. Its argument is unreasonable based upon the
language of the contract. The language limiting Defendant's liability is not
unreasonable in view of the service Defendant was rendering, which was risk
reduction as to life and property, not risk elimination. The contract recognized
that, although sometimes things do go wrong, Defendant was not an insurer. In
light of the foregoing facts, I can see no reason to declare the clause
contained in Delaware Signal's contract unconscionable.

   I also find the waiver of claims/subrogation clause to be enforceable. Like
the limitation of liability/liquidated damages clause, the waiver of
claims/subrogation clause at issue is similar in scope, clarity and intent as
those clauses upheld by Delaware courts in the past. See Tandy, 1996 Del. Super.
LEXIS 168, 1996 WL 280774; St. Catherine of Sienna Catholic Church v. J.R. Pini
Elec. Contractors, Inc., 2000 Del. Super. LEXIS 293, 2000 WL 1211146 (Del.
Super. June 27, 2000), aff'd 781 A.2d 695 (Del. 2001). I find the waiver of
claims/subrogation clause is not unconscionable as a matter of law.

B. Conspicuousness

   Plaintiffs also argue that the contract language should not be enforced
because the clauses that Delaware Signal cites in defense to Plaintiffs' claims
were not conspicuous. "Conspicuous" is defined in 6 Del. C. § 1-201 as follows:


        "Conspicuous", with reference to a term, means so written,
     displayed, or presented that a reasonable person against which it is
     to operate ought to have noticed it. Whether a term is "conspicuous"
     or not is a decision for the court. Conspicuous terms include the
     following:


             (A) A heading in capitals equal to or greater in size
          than the surrounding text, or in contrasting type, font, or
          color to the surrounding text of the same or lesser size;
          and

             (B) Language in the body of a record or display in larger
          type than the surrounding text, or in contrasting type, font
          or color to the surrounding text of the same size, or set
          off from surrounding text of the same size by symbols or
          other marks that call attention to the language.





6 Del. C. § 1-201(10).

   As previously noted, the contract at issue is a two-sided piece of paper. The
first page consists of four paragraphs, numbered (1) through (4). The second
page, or reverse side, of the document contains paragraphs numbered (5) through
(24). The paragraphs found on the first page of the contract appear in larger
type than those on the second page. Paragraph (4) on the first page specifically
draws attention to paragraphs (18) ("DELAWARE SIGNAL'S OBLIGATION") and (19)
("DELAWARE SIGNAL NOT AN INSURER AND LIQUIDATED DAMAGES"), which are found on
the second page. The heading of each paragraph, including paragraph (20)
("SUBROGATION"), is in all capital letters and clearly identifies the subject
matter covered by the following paragraph. The combination of these factors
leads the Court to the conclusion that the contract terms are conspicuous as a
matter of law.

C. Contract of Adhesion

   Plaintiffs next assert that the contract between the parties is an adhesion
contract. An "adhesion contract" is defined as "A standard-form contract
prepared by one party, to be signed by the party in a weaker position, usu. a
consumer, who adheres to the contract with little choice about the terms."
Black's Law Dictionary 342 (8th ed. 2004). A contract of adhesion is different
from a negotiated contract but that fact does not automatically render it
unenforceable. Plaintiffs argue that, because Cedar Shores is an organization
comprised of homeowners and because Cedar Shores was put in a
"take-it-or-leave-it" position, the contract is unconscionable. I find
Plaintiffs' argument without merit. The contract between the parties differs
from an insurance contract, for example, where the courts have strongly
construed the contract against the drafter and in favor of the insured. See,
e.g., Hallowell v. State Farm Mut. Auto. Ins. Co, 443 A.2d 925 (Del. 1982). Even
in the insurance contract context, however, the more permissible rules of
construction are not applied unless there is some ambiguity in the policy
language. Here, as set forth above, the Court finds the contract language clear
and unambiguous. I can find no basis for treating this contract as an
unconscionable contract of adhesion.

II. Violation of Prohibited Trade Practices Act

   Plaintiffs allege Delaware Signal violated 6 Del. C. § 2513 in that it
"misrepresented, concealed, suppressed and/or omitted relevant material facts in
regards to how the fire alarm system would be installed and monitored, and in
the capabilities of the fire alarm system to meet the needs, demands and
expectations of Plaintiff Cedar Shores." Delaware Signal argues the limitation
of liability clause/liquidated damages clause forecloses recovery under a
consumer fraud theory. Delaware Signal relies upon the holding in Rob-Win in
making this argument. In that case, the court held the limitation of
liability/liquidated damages clause limited recovery in the event of the
defendant's ordinary negligence and in the event of the defendant's gross
negligence. The court did so because the clause at issue in that case limited
liability for all claims "whether in contract, tort or equity, including, but
not limited to, any general, direct, special, incidental, exemplary, punitive
and or consequential damages, irrespective of cause." Rob-Win, 2007 WL 3360036,
at *6.

   To date, no specific information has been put before the Court concerning the
details of any misrepresentations, concealments, suppressions or omissions or
the timing thereof. Because I read the limitation of liability/liquidation
damages clause to apply to claims arising out of the parties' contractual
obligations but not, necessarily, to those proceeding the creation of the
parties' contractual obligations, I conclude the matter is not yet ripe for
consideration.

III. Strict Liability

   Finally, Plaintiffs argue Delaware Signal is strictly liable for any damages
arising out of the lease of defective equipment. In support of their argument,
Plaintiffs cite to the cases Martin v. Ryder Truck Rental, Inc., 353 A.2d 581,
587 (Del. 1975), and Eby v. Thompson, 2005 Del. Super. LEXIS 149, 2005 WL
1653988 (Del. Super. Apr. 20, 2005) 1. The Court concludes those cases do not
require the Court to find lessors are subject to strict liability under Delaware
law. Rather, the Court concludes that the adoption of Article 2A of the Uniform
Commercial Code ("UCC") preempts the application of strict liability in the
lease context. My reasoning follows a brief recitation of the case law.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -1
Plaintiffs' reliance on Eby v. Thompson is misplaced. The facts in that case
presented a choice of law question for the court. Any discussion of the benefits
of one forum over another was pure dicta.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   In 1976, prior to the passage of Article 2A of the UCC, the Supreme Court of
Delaware held that strict liability principles apply to bailments and leases
absent any legislative preemption. Martin v. Ryder Truck, 353 A.2d 581.

   Subsequently, the Supreme Court had occasion to consider the interaction
between strict liability principles and the UCC in the context of commercial
sales. Cline v. Prowler Indus. of Maryland, Inc., 418 A.2d 968 (Del. 1980). In
Cline, the Court held that Article 2 of the UCC preempts a common law claim
premised on strict liability. In reaching this conclusion, the Court traced the
history of both the UCC and the common law claim of strict liability. The Court
observed that, while other state courts have held that the adoption of the UCC
(and its implied warranty provisions) does not preempt the application of the
strict liability doctrine, those courts have so held because those states have
made and preserved a distinction between the contractual nature of a UCC claim
and the tort nature of a strict liability claim. The Court distinguished
Delaware because Delaware law has melded the two claims through its adoption of
the UCC. Title 6, Section 2-318, for example, extends the benefit of implied
warranties to "any natural person who may reasonably be expected to use, consume
or be affected by the goods" (emphasis added) and includes personal injuries
among contemplated consequential damages. Moreover, the Court noted that
Delaware has retained the defenses of disclaimer, notice, and the contract of
statute of limitation in its adoption of the UCC. Accordingly, the Cline Court
concluded that the Legislature sought to distinguish Delaware UCC law as it
relates to contracts of sale from the developing doctrine of strict liability in
other states. Cline, 418 A.2d at 979.

   This Court holds that the Legislature's adoption of Article 2A of the UCC in
1992 served to preempt the doctrine of strict liability as it pertains to
leases. My reasoning tracks that of the Cline analysis. Specifically, the policy
reasons for preempting strict liability in sales cases are also present with
respect to cases involving leases. The following provisions, which were cited by
the Cline Court, are set forth in both Article 2 and Article 2A of Delaware's
version of the UCC: (1) privity of contract between the parties is not required
(6 Del. C. § 2-318; 6 Del. C. § 2A-216); (2) personal injury damages are
included as consequential damages (6 Del. C. § 2-318; 6 Del. C. § 2A-216); (3)
the contracting parties are permitted to disclaim warranties (6 Del. C. § 2-316;
6 Del. C. § 2A-214); (4) the effect of acceptance and notice of breach
requirements thereafter are spelled out (6 Del. C. § 2-607; 6 Del. C. § 2A-516);
and (5) a statute of limitations is provided (6 Del. C. § 2-725; 6 Del. C. §
2A-506). Any policy reason for treating the lessor/lessee relationship
differently from the buyer/seller relationship is trivial in the face of the
similarities between the Articles. Finally, the Official Comment to the Uniform
Commercial Code provides some guidance:


        The Article on Sales provided a useful point of reference for
     codifying the law of leases. Many of the provisions of that Article
     were carried over, changed to reflect difference in style, leasing
     terminology or leasing practices. Thus, the official comments to those
     sections of Article 2 whose provisions were carried over are
     incorporated by reference in Article 2A, as well; further, any case
     law interpreting those provisions should be viewed as persuasive but
     not binding on a court when deciding a similar issue with respect to
     leases.


Uniform Commercial Code § 2A-101 cmt., p. 662 (2004) (emphasis added).
Accordingly, Plaintiffs' final defense to Delaware Signal's Motion for Summary
Judgment fails as well.

Conclusion

   For the reasons set forth above, Defendant's Motion for Summary Judgment is
granted, with the exception of the prohibited practice claim.

   IT IS SO ORDERED.

   T. Henley Graves