GOLDEN ISLAND JEWELRY, ZOUHAIR ALAYAN, and MARWAN ISLAND a/k/a MARWAN
ALAYAN, Plaintiffs-Appellants, v SECURITY CONTROL ACQUISITION CORPORATION
d/b/a SONITROL SECURITY INC. and/or SECURITY CONTROLS, INC.,
Defendant-Appellee.
COURT OF APPEALS OF MICHIGAN
November 7, 1997, Decided
NOTICE: [*1] IN ACCORDANCE WITH THE MICHIGAN COURT OF APPEALS RULES,
UNPUBLISHED OPINIONS ARE NOT PRECEDENTIALLY BINDING UNDER THE RULES OF STARE
DECISIS.

PRIOR HISTORY: Macomb Circuit Court. LC No. 95-003396.

DISPOSITION: Affirmed.
CASE SUMMARY
PROCEDURAL POSTURE: Plaintiff property owners challenged a judgment of the
Macomb Circuit Court (Michigan) awarding them damages in their action
against defendant security company based on robberies of the property
owners' store. The trial court granted the security company's motion to
limit damages.

OVERVIEW: The property owners owned a store that was secured by the security
company. The store was robbed twice when the alarm did not operate, and the
property owners brought an action against the security company. The security
company filed a motion to limit its liability, and the trial court granted
the motion. The trial court entered a judgment in favor of the property
owners and the property owners sought review. The court affirmed, holding
that the security company was not an insurer; therefore, its loss was to be
limited based on the amount of money paid to it by the property owners.
Also, the limitation on liquidated damages was not against public policy
because it was reasonable in relation to the contract at issue. Finally,
while the security company could not limit its liability for gross
negligence, the property owners failed to allege gross negligence against
the security company.

OUTCOME: The court affirmed the judgment in favor of the property owners in
their action against the security company.

JUDGES: Before: Murphy, P.J., and Kelly and Gribbs, JJ. William B. Murphy,
concurring in result only. Michael J. Kelly, dissenting.

OPINION:

PER CURIAM

Plaintiffs appeal as of right from entry of judgment in their favor for $
1,000 after defendant's motion to limit damages to that amount was granted.
We affirm.

Plaintiffs filed suit against defendant after being robbed two times during
which their security system failed to operate The first incident occurred in
July 1992, when four people robbed the store, shot plaintiff Zouhair Alayan
and assaulted plaintiff Marwan Alayan. Marwan Alayan allegedly triggered the
burglar alarm during the incident, but it did not work. Plaintiffs alleged
that defendant inspected the alarm after the robbery and made necessary
repairs. Two years later, in August 1994, a second robbery took place and
plaintiffs alleged that the alarm failed again. No personal injuries
resulted the second time.

Plaintiffs first argue that the damage limitation clause found in [*2] the
contract between the parties should not have applied in this case. The
clause provided that defendant was not an insurer, that damages caused by a
failed alarm would be difficult to ascertain, and that defendant's liability
was for personal injury or property loss was limited "to a sum equal to the
total of one-half year's monitoring payments, or five hundred dollars,
whichever is the lesser." Plaintiffs claim that this Court should adopt the
proposition that a party may not limit damages in the event that personal
injuries occur. We disagree because of the unique circumstances of the
contract at issue.

In St Paul Fire and Marine Ins Co v Guardian Alarm, 115 Mich App 278; 320
NW2d 244 (1982), this Court upheld a damage limitation clause in a burglar
alarm monitoring contract. We did so because we recognized that alarm
companies are not insurers and that ascertaining damages caused by a failed
alarm as opposed to other causes of loss, such as the crime itself, is
difficult. Id. at 282-283. It is impossible to prove that the damages would
not have occurred had the alarm functioned properly. Moreover, we held that
a liquidated damages [*3] clause in a burglar alarm contract is not
contrary to public policy. Id. at 283. A party may contract against
liability for damage caused by its ordinary negligence. Id.

The clause that was upheld in St Paul Ins, supra was substantially similar
to the one in this case. It limited damages to $ 250 or six months of
monitoring costs and applied to personal injury and property losses. Id. at
280. In upholding the damage limitation clause, this Court did not
specifically address whether it would be upheld in the event that the claim
was one for personal injuries as opposed to one for property loss only. It
was unnecessary to address that specific aspect of the clause because there
were no personal injuries in that case. However, we now hold that damage
limitation clauses in burglar alarm contracts validly operate to limit
damages where the claim is one for personal injuries. The same rationale as
set out in St Paul Ins, supra, applies whether the damage is personal injury
or property loss. Burglar alarm companies are not insurers against personal
injury. Other jurisdictions have upheld this proposition for the same [*4]
reasons. See for example Schrier v Beltway Alarm Co, 73 MD App 281; 533 A2d
1316 (Md App, 1987); Elksen v Network Multi-Family Security Corp, 838 P2d
1007 (Okla, 1992). Moreover, our holding is in accord with previous holdings
in this state. In Universal Gym v Vic Tanny, Inc, 207 Mich App 364, 366; 526
NW2d 5 (1994), and Skotak v Vic Tanny, Inc, 203 Mich App 616, 617-618; 513
NW2d 428 (1994), this Court held that a party can contract away liability
for personal injury damages caused by ordinary negligence.

Plaintiffs also argue that even if damage limitation clauses can be upheld
in personal injury cases, the clause in this case was an invalid penalty and
should not be upheld. This Court considered the damage limitation provision
in St Paul Ins, supra, to be a liquidated damage provision. Traditionally
"the distinction between a valid liquidated damages clause and an illegal
penalty depends on the relationship between the amount stipulated to" in the
clause and the subject matter of the action. Papo v Aglo Restaurants, 149
Mich App 285, 294; [*5] 386 NW2d 177 (1986). See also Curran v Williams,
352 Mich 278, 282; 89 NW2d 602 (1958); Roland v Kenzle, 11 Mich App 604,
611-612; 162 NW2d 97 (1968).

Plaintiffs' argument ignores that the amount of liquidated damages is
usually related to the contract at issue. See Papo, supra at 295, where this
Court ruled that the liquidated amount should not be out of proportion to
the contract at issue. See also Solomon v Dep't of State Highways, 131 Mich
App 479, 484-485; 345 NW2d 717 (1984), where this Court held that the
liquidated damage sum was not a penalty because it was "not unreasonable,
considering the original contract amount." Cf Curran, supra; Roland, supra.
So, although damages should reflect potential injury, the damages should be
related to the contract.

In St Paul Ins, supra, this Court ruled that the primary consideration was
whether the contract clause limiting liability was reasonable based on the
facts of the case:
Reasonableness is the primary consideration. The contract clause limiting
defendant's [*6] liability to the aggregate of six monthly payments or $
250 is manifestly reasonable under the circumstances of this case. Defendant
is not in the insurance business. Rather it provides an alarm service for a
specific sum. That sum is not a premium for theft insurance. The contract in
question made that clear. [ Id. at 284.]


In this case, the agreed upon damage amount is reasonable in relation to the
contract at issue and the circumstances of the case. Defendant merely
provided a service for a fee and that fee was not a premium for personal
liability insurance. Defendant only received $ 68 per month from plaintiffs
and the parties agreed that defendant, rather than accepting unknown
liability for future damages, should agree to pay a damage related to the
charges for its services. Moreover, as was previously noted, it is
impossible to determine what damages would have occurred even if the alarm
had operated properly. The trial court properly applied the liquidated
damage clause in this case.

Finally, plaintiffs argue that they pleaded gross negligence and therefore,
the damage limitation clause should not have applied. While the general rule
in Michigan is [*7] that a party cannot contract away liability for gross
negligence, Universal Gym, supra; Shelby Mutual Ins Co v City of Grand
Rapids, 6 Mich app 95, 98; 148 NW2d 260 (1967), plaintiffs failed to plead a
cause of action for gross negligence in this case. Plaintiffs did not plead
that defendant's conduct was reckless or that it demonstrated a substantial
lack of concern about whether injury would occur. Rather, plaintiffs pleaded
a simple negligence claim. Therefore, there was no need for the trial court
to whether the limitation clause applies where there is gross negligence.

MCR 2.111 (B)(1) provides that a plaintiff must inform the adverse party of
the nature of the claims against it. The pleading must be clear, concise,
and direct. MCR 2.111(A)(1). Plaintiffs' pleading did not alert defendant as
to what claims of gross negligence there may have been. Although plaintiffs
included the term "grossly negligently" in their complaint, this did not
qualify as pleading gross negligence. Where plaintiffs failed to plead gross
negligence, never moved to amend to plead gross negligence, and failed to
offer any evidence that would support a finding of gross negligence, [*8]
they should not be allowed to do so now.

Affirmed. Defendant being the prevailing party, it may tax costs pursuant to
MCR 7.219.

/s/ Roman S. Gribbs

CONCURBY: William B. Murphy

CONCUR: Concurring in result only.

/s/ William B. Murphy

DISSENTBY: Michael J. Kelly

DISSENT:

MICHAEL J. KELLY (dissenting).

I believe that plaintiffs adequately pleaded a claim of gross negligence
and, thus, the trial court's grant of defendant's motion to limit damages as
to plaintiffs' ordinary negligence claim should not be read to extend to
summary dismissal of plaintiffs' gross negligence claim. Accordingly, I
respectfully dissent, and would remand this matter for trial on plaintiffs'
claim of gross negligence. At the very least, since the issue of the
adequacy of pleadings is raised and addressed for the very first time on
appeal, the majority should remand this matter to allow plaintiffs the
opportunity to amend their pleadings pursuant to MCR 2.118.

A complaint must provide reasonable notice to opposing parties regarding the
claims that are being brought against it. MCR 2.111; Dacon v Transue, 441
Mich 315, 329; 490 NW2d 369 (1992). This rule strikes a balance between
extreme formalism [*9] and extreme ambiguity, and their concomitant evils.
Id. With this principle in mind, we are not strictly bound to the label
affixed to a claim, but may look beyond the label to determine the exact
nature of the allegation made. Li v Feldt (On Second Remand), 187 Mich App
475, 478; 468 NW2d 268 (1991), rev'd on other grounds 439 Mich 457; 487 NW2d
127 (1992); see also Randall v Harrold, 121 Mich App 212; 328 NW2d 622
(1982).

In their complaint, plaintiffs alleged that they entered into a contract
with defendant in which defendant agreed to provide them with an
operational, properly installed alarm/security system for their jewelry
business. Plaintiffs alleged that they executed the contract primarily
because defendant assured them that it had the proper "knowledge, skill and
judgment" necessary to provide plaintiffs with the appropriate equipment. On
July 27, 1992, plaintiffs were robbed at gunpoint of all of their stock at
the jewelry store, resulting in a financial loss of approximately $ 150,000.
Additionally, plaintiffs were assaulted and battered by the robbers, who
shot plaintiff Marwan [*10] Alyan. Plaintiffs alleged that during the
robbery they depressed the emergency button, but the alarm system did not
activate. Defendant inspected the alarm system, and represented to
plaintiffs that it made necessary repairs to the system. On August 26 or 27,
1994, plaintiffs were again robbed of jewelry valued at $ 80,000. Once more,
the alarm system did not work, because, as plaintiffs alleged, defendant had
not properly installed or maintained it.

Plaintiffs incorporated the foregoing facts into Count II of their
complaint, which they labeled "Negligence/Implied Warranty in Tort." In
paragraph 27, plaintiffs stated, "That because of the aforementioned defects
and problems with said security system, the Defendant . . . did negligently
and/or grossly negligently breach said duties to Plaintiffs." I believe
that, under the circumstances and facts of this case, we can look past the
label that plaintiffs attached to their third count, and find that
plaintiffs reasonably apprised defendant of the fact that they were claiming
gross negligence. First, the factual allegations in this case at least raise
the specter of gross negligence, in that plaintiffs claimed that defendant
failed on [*11] two separate occasions to provide them with a working alarm
system, resulting in personal injury and property losses to plaintiffs. It
is readily apparent "as to what claims of gross negligence there may have
been," because defendant, already having notice that its alarm system had
failed to work at a time of crisis, appears to have compounded its failure
by carelessly or willfully failing to ensure that the alarm system would
work properly in the event of further emergency. See Jennings v Southwood,
446 Mich 125, 136, 145; 521 NW2d 230 (1994) (gross negligence includes
"conduct so reckless as to demonstrate substantial lack of concern for
whether injury results"). Second, to the extent that it was at least
questionable whether plaintiffs had succeeded in adequately raising a claim
of gross negligence so as to adequately inform defendant of the nature of
the claim against it, the arguments in plaintiffs' brief in response to
defendant's motion for summary disposition as to damages largely concern
their gross negligence claim and expand on the allegations in their
complaint. Defendant did not challenge plaintiffs' characterization of their
claim against [*12] it in any response brief or motion, nor did it raise
any objection in the trial court to plaintiffs' asserted gross negligence
claim. Elsewhere, in similar circumstances, "issues not raised in a pleading
may be tried by implied consent and then treated as if they had been raised
in the pleadings." Grebner v Clinton Twp, 216 Mich App 736, 744; 550 NW2d
265 (1996). Here, I would similarly find implied consent where defendant
completely failed to object to, or otherwise address, plaintiffs'
characterization of their claim as one for gross negligence.

Because I conclude that plaintiffs adequately pleaded a claim for gross
negligence against defendant, I find the trial court's summary dismissal of
this part of the claim to be erroneous. The damages limitation clause in the
parties' contract has bearing only as to a claim for ordinary negligence. As
stated in Universal Gym Equipment, Inc v Vic Tanny Int'l, Inc, 207 Mich App
364, 367; 526 NW2d 5 (1994), it is against public policy to allow a party to
insulate itself from liability for damages due to its own gross negligence.
See also Shelby Mutual Ins Co v Grand Rapids, 6 Mich App 95, 98; [*13] 148
NW2d 260 (1967).

I would reverse.

/s/ Michael J. Kelly