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Harry Vermes v. American District Telegraph Company and Others Supreme Court of Minnesota

Harry Vermes v. American District Telegraph Company and Others
Supreme Court of Minnesota
312 Minn. 33; 251 N.W.2d 101; 1977 Minn. LEXIS 1619
January 21, 1977
PRIOR HISTORY:
Action in the Hennepin County District Court wherein plaintiff sought to
recover for a loss resulting from a burglary of his store on premises which
had been rented from defendant Apache Corporation and in which defendant
American District Telegraph Company (ADT) had installed security equipment.
The Towle Company, which had taken over as building manager, was also named
as a defendant. The case was tried before Eugene Minenko, Judge, and a jury,
which found in a special verdict that plaintiff, Towle Company, Apache
Corporation, and ADT were all causally negligent; that their negligence
contributed 17 percent, 10 percent, 48 percent, and 25 percent respectively;
and that plaintiff's damages amounted to $ 23,000. The court increased the
award of damages to $ 47,185.03 and ordered judgment accordingly. Defendants
ADT and Apache Corporation each appealed from an order denying its
alternative motion for judgment notwithstanding the verdict or for a new
trial and from the judgment entered.

DISPOSITION: Reversed in part, affirmed in part, and remanded with
instructions.


CASE SUMMARY

PROCEDURAL POSTURE: Defendants, a security company and a landlord, each
challenged an order of the Hennepin County District Court (Minnesota)
denying alternative motions for judgment notwithstanding the verdict or for
a new trial in plaintiff tenant's action to recover for a loss resulting
from a burglary of his store.


OVERVIEW: The tenant leased space in the landlord's building for his jewelry
store. The tenant entered into a contract with the security company for
burglar alarm service. One morning, the tenant discovered that his store had
been burglarized. The police determined that entry had been made through the
ceiling of the vault area. The construction design allowed easy entry into
the vault from above. At trial, the jury allocated the negligence causing
the burglary to 48 percent to the landlord, 25 percent to the security
company, 17 percent to the tenant, and 10 percent to defendant property
manager. The landlord and the security company were held jointly and
severally liable for the total award. On appeal, the court held that the
landlord's duty, prior to the signing of the lease, would have been to point
out any facts about the premises, which would have tended to make the tenant
insecure. However, the court found that as a matter of law, upon the factual
record, no legal duty was owed to the tenant by the security company
regarding the burglary. Hence, the security company was under no duty to the
tenant other than to perform faithfully under the contract, which it did.

OUTCOME: The court reversed the judgment as to the security company,
affirmed the judgment as to the landlord, and remanded the matter with
instructions.

COUNSEL: Abdo & Abdo and E. John Abdo, for appellant American District
Telegraph Company.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan, J. Richard
Bland, and O. C. Adamson II, for appellant Apache Corporation.

Robins, Davis & Lyons, A. James Anderson, and Robert M. Wattson, for
respondent.

JUDGES: Rogosheske, Peterson, and Scott, JJ., and considered and decided by
the court en banc.

OPINIONBY: SCOTT

OPINION: These are separate appeals by two of the defendants in an action
brought by Harry Vermes, owner of a jewelry store in the Foshay Tower in
Minneapolis, to recover losses sustained when his store was burglarized.
Defendants were the American District Telegraph Company (ADT), which had
supplied Vermes with a burglary detection system; the Apache Corporation
(Apache), which had leased the space to Vermes; and The Towle Company
(Towle), which managed the Foshay Tower at the time of the burglary.

Trial was by jury in the district court. In a special verdict, the jury
allocated negligence percentages among the parties and set damages at $
23,000. Plaintiff's post-trial motion to increase damages to $ 47,185.03 was
granted. Defendants' [***4] motions for judgment notwithstanding the
verdict and a new trial were denied. These appeals are by ADT and Apache
from the judgment below and the order denying the various post-trial
motions.

In 1968 Harry Vermes leased space in the Foshay Tower's first floor for his
jewelry store. A few weeks later Vermes entered into a contract with ADT for
burglar alarm service. In 1970 Towle replaced Apache as building manager.

On Monday morning, August 23, 1971, Vermes discovered that his store had
been burglarized. The police investigation determined that entry had been
made through the ceiling of the vault area. A mechanical-equipment access
room was located over the [*36] plaintiff's store and the thin floor of
this room formed the ceiling of plaintiff's store. The construction design
allowed easy entry into the vault from above. The wholesale value of the
property taken was $ 47,185.03.

Testimony at trial centered around two issues: (1) Among Vermes, Apache, and
Towle, who was responsible for the ceiling problem which allowed the entry?
(2) Between Vermes and ADT, who was responsible for the lack of a detection
system which might have prevented the burglary? The jury allocated [***5]
the negligence causing the burglary as follows: Apache, 48 percent; ADT, 25
percent; Harry Vermes, 17 percent; Towle, 10 percent.

The trial court allocated damages among the parties as follows: Total Award
83% of $ 47,185.03 = $ 39,163.58
Apache: 48/73 of award = 25,847.76
ADT: 25/73 of award = 13,315.62
Towle: 0 (less negligent than plaintiff)


Apache and ADT were held jointly and severally liable for the total award.

On appeal a number of legal issues are raised including contractual limits
on liability, proximate cause, intervening cause, compromise verdict, joint
and several liability, and allocation of damages. Each of the pertinent
issues will be discussed below with reference to all relevant evidence
offered at trial. They can be summarized as follows:

(1) Did ADT owe a legal duty to Vermes other than that arising out of its
contract for services?

(2) Is Vermes' claim against Apache barred by an exculpatory provision in
their lease?

(3) Was the burglary a legally sufficient intervening cause relieving Apache
of liability?

(4) Did the jury compromise the issues of liability and damages?

[*37] 1. ADT argues on appeal that [***6] it had no duty to Vermes
outside of the contract for services. Vermes answers that ADT's negligence
occurred before the contract, and that since ADT "assumed to act," it must
be held to the standard of a "reasonably prudent security service company."

This issue lies in that uncertain region between tort and contract. There is
no question in this case that ADT properly performed the specific terms of
its service contract with Vermes. It is true that once the contract was
signed ADT had "undertaken" to provide Vermes with certain services, and
failure to do so would give Vermes a remedy in contract. Vermes' assertion,
however, that "* * * [o]nce defendant undertook to provide these services, a
duty to exercise reasonable care in performing them arose, regardless of
what the contract subsequently entered into did or did not provide with
respect thereto" misstates the case entirely. ADT did not "undertake"
anything until the contract was signed. Prior negotiations of the parties
are merged into the written contract unless in the minds of both parties an
independent oral contract was intended. Donnay v. Boulware, 275 Minn. 37,
144 N.W. 2d 711 (1966); Telex Corp. v. Balch, 382 [***7] F. 2d 211 (8 Cir.
1967); Restatement, Contracts 2d, § 239. Prosser states:

"* * * The question appears to be * * * whether the defendant's performance,
as distinct from his promise or his preparation, has gone so far that it has
begun to affect the interests of the plaintiff beyond the expected benefits
of the contract itself, and is to be regarded, by analogy to the cases of
gratuitous undertaking, as a positive act assuming the obligation." Prosser,
Torts (4 ed.) § 92, p. 618. (Italics supplied.)

In this case the record shows that while limited negotiations took place
between Vermes and ADT, these negotiations were clearly in contemplation of
signing a contract for services and were not intended by either Vermes or
ADT as an affirmative undertaking giving rise to an obligation beyond the
contract. There [*38] is little doubt that if the contract had not been
signed, no obligation would exist on the part of either party. The
obligations arose when the contract was signed and are therefore bounded by
the terms of the contract. No evidence appears on the record that ADT acted
fraudulently, nor did it hold itself out to be more than a detection service
which would [***8] supply any available system requested by the customer.
No prior knowledge of the problem with Vermes' store can be attributed to
ADT. In fact, it is probable that ADT was never aware of the problem, since
it never attempted to "push" a better, more expensive detection system on
Vermes. This case involves a limited legal relationship between two parties
consisting of brief prior negotiations and a contract which limits the
liability of one to the other for failure to perform under the contract or
for other ordinary negligence. ADT did not assume the duty of completely
evaluating the security needs of the Vermes store. [**104] Such a duty
might have included an investigation of the general building security as
well as the physical structure of the store. These were obligations of
Vermes himself as proprietor of the store and as an experienced jeweler who
had contracted with ADT for many years.

In short, the contract between Vermes and ADT formed the basis of their
legal relationship and placed boundaries on their legal obligations to one
another. The record shows that ADT did not act in any manner implying an
assumption of obligations beyond the contract, either before the [***9]
contract was signed or during performance. Hence it was under no duty to
Vermes other than to perform faithfully under the contract, which it did.
Cases involving gratuitous undertakings are clearly distinguishable. There
were no gratuitous undertakings between ADT and Vermes, and ADT did not act
beyond preparation for and performance of the contract between the parties.

As we have mentioned above, logic would dictate that had Vermes decided to
contract with another burglar alarm agency, ADT would not have been under
any duty to Vermes whatsoever. Since there are no factual questions similar
to those raised [*39] in The Morgan Co. v. Minnesota Min. & Mfg. Co. 310
Minn. 305, 246 N.W. 2d 443 (1976), n1 there is no reason to go further than
the contract itself and the performance or nonperformance of obligations
imposed by it. We need not reach the application of the "negligence" clause
of the contract. Rather, we hold that the court should not have submitted
the interrogatory on this issue to the jury. n2 We conclude that as a matter
of law, based upon this factual record, no legal duty was owed to Vermes by
ADT regarding this burglary. It seems only reasonable to conclude [***10]
that a burglar alarm company is not an insurer that a burglary will not
happen. This crime was somewhat ingeniously executed, and it is foreseeable
that almost any detection device or security system, no matter how modern or
scientific, might be circumvented. Such detection systems do not guarantee
the absence of crime or that all criminal attempts will fail. ADT is
therefore dismissed from this action.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -


n1 That appeal, among other things, questioned the installation of the
burglar alarm system itself.


n2 "SPECIAL VERDICT

* * *

"QUESTION 5: Was defendant American District Telegraph Company negligent in
failing to sufficiently advise plaintiff, Harry Vermes, as to the various
systems of burglary detection available to him?"


- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

2. The liability of a landlord to a tenant is necessarily based upon
different considerations than that owed a tenant by a third party with whom
the tenant merely contracts for certain specific services. The lease between
Vermes and Apache contained the following clause: [***11]

"Lessee also agrees to be responsible for and to relieve Lessor from all
liability by reason of any damages or injuries to any person or thing which
may arise from or be due to the use, misuse or abuse of all or any of the
elevators, hatches, openings, stairways, hallways of any kind whatsoever
which may exist or hereafter be erected or constructed on the said premises,
or from any kind of injury which may arise from any other cause whatsoever
[*40] on the said premises or the building of which the demised premises
are a part, whether such damage, injury, use, misuse or abuse be caused by
or result from the negligence of Lessor, its servants or agents or any other
person or persons whatsoever."

On appeal Apache contends that this clause is valid and applies with full
force to plaintiff. Vermes responds by arguing that (1) the negligence
alleged (i.e., leasing Vermes space not suitable for a jewelry store)
occurred prior to the lease, and (2) the exculpatory clause may be void as
against public policy, citing the following language from Rossman v. 740
River Drive, 308 Minn. 134, 136, 241 N.W. 2d 91, 92 (1976):

"* * * [**105] The enforceability of a lease clause which [***12]
exculpates a landlord from liability for negligence is a question of
balance. The public policy favoring freedom of contract is weighed against
the policy favoring the landlord's observance of the particular duty he is
alleged to have breached. Thus, the balance depends on the nature of the
particular duty breached. If the landlord's duty is basic and his observance
of it is of extreme importance * * *, then the policy favoring his
observance of that duty may well be stronger than the policy favoring
freedom of contract. * * * [I]f the duty the landlord breaches is less basic
and his observance of it is not of such grave importance * * *, then freedom
of contract may well be the dominant policy."

The question then becomes whether the alleged duty of the landlord in this
case is "basic."

The duty of Apache, if it can be defined as such, was to sufficiently inform
Vermes concerning the store which was being considered for rental to the
extent that Vermes had enough information from which he would be able to
properly assess the store's suitability for his jewelry business. In the
commercial context this would seem to be a "basic" duty. A commercial tenant
will often have [***13] specific needs peculiar to his business which will
require the premises to be leased to have certain attributes. [*41] Space
suitable for a restaurant, for example, might be completely unsuitable for a
bank. A part of a building where the air conditioning is ineffective might
suit a tenant in need of storage space, but could be useless for a doctor or
a business office. In cases where suitability factors might not be obvious
upon casual inspection, as with ineffective air conditioning if the premises
were inspected in winter, it would be a basic duty of the landlord to inform
the prospective tenant of any qualities of the premises which might
reasonably be undesirable from the tenant's point of view.

A jewery store, in addition to the usual requirements for a retail store,
requires physical security. The landlord's duty, prior to the signing of the
lease, would be to point out any facts about the premises which would tend
to make them insecure; for example, a side door accessible from the street
or a thin partition separating them from a storage room. In this case it
was, in the language of Rossman v. 740 River Drive, supra, the "particular
duty" of Apache to point out [***14] to Vermes any facts about the proposed
premises which might reasonably make them unsuitable for his use. As noted
by Vermes in his brief, this duty was basic to the relationship between
Apache and Vermes. It is fair to say that if Vermes had been informed of his
insecure ceiling, he might have insisted that changes be made as conditions
to the lease. He did so as to lighting.

Thus, under the Rossman decision, the broad exculpatory clause in the lease
here should not operate to bar Vermes' negligence claim against Apache. It
is not necessary to reach plaintiff's other arguments on precontractual
negligence, contractual ambiguity, misrepresentation, and strict
construction.

3. Apache contends on appeal that the unusual circumstances of the burglary
make it a legally sufficient intervening cause relieving Apache of liability
for Vermes' losses. To succeed with this line of argument, Apache must show
that the burglary was not "reasonably foreseeable" under the circumstances.
Prosser [*42] analyzes the general problem and the specific case of
criminal acts as follows:

"If the intervening cause is one which in ordinary human experience is
reasonably to be anticipated, or [***15] one which the defendant has reason
to anticipate under the particular circumstances, he may be negligent, among
other reasons, because he has failed to guard against it; or he may be
negligent only for that reason.

* * *

"The same is true as to those intervening intentional or criminal acts which
the defendant might reasonably anticipate, and against which he would be
required to take precautions. It must be remembered [**106] that the mere
fact that misconduct on the part of another might be foreseen is not of
itself sufficient to place the responsibility upon the defendant. * * * But
once it is determined that the defendant's duty requires him to anticipate
the intervening misconduct, and guard against it, it follows that it cannot
supersede his liability." Prosser, Torts (4 ed.) § 44, p. 272, 275.

As for the relative functions of court and jury, Prosser states:

"In any case where there might be reasonable difference of opinion as to the
foreseeability of a particular risk, the reasonableness of the defendant's
conduct with respect to it, or the normal character of an intervening cause,
the question is for the jury * * *." Prosser, Torts (4 ed.) § 45, p. 290.
[***16]

Prosser's analysis has been followed by this court. See, Hilligoss v. Cross
Companies, 304 Minn. 546, 228 N.W. 2d 585 (1975).

One important factor in deciding foreseeability in a particular case has
been whether similar crimes have occurred prior to the one at issue. See,
Hilligoss v. Cross Companies, supra; Bass v. City of New York, 61 Misc. 2d
465, 305 N.Y.S. 2d 801 (1969), reversed on other grounds, 38 App. Div. 2d
407, 330 N.Y.S. 2d 569 (1972); Kline v. 1500 Massachusetts Avenue Apartment
Corp. 141 App. D.C. 370, 439 F.2d 477 (1970). See, generally, Annotation, 43
A.L.R. 3d 331, 335, 348. In the instant case there [*43] was no evidence
of record that crimes of a similar nature had occurred in the Foshay Tower.
Testimony offered that such crimes had not occurred was objected to as being
irrelevant, and the trial court sustained the objection. This ruling, based
upon all the evidence produced, was error, but harmless. Previous crimes
against tenants' property are relevant to the question of foreseeability. As
has been mentioned above, this crime occurred in an unusual manner, and was
carried out with great cleverness and skill, considering the inaccessibility
[***17] of the room over Vermes' store. On the other hand, it took less
than 2 minutes to reach the area over Vermes' vault once the access door was
breached. Other factors were overall building security, an allegedly locked
security door between the main floor and the access room, and the free use
of pass keys by building employees.

On the whole it is difficult to say that there could not be a reasonable
difference of opinion on the foreseeability of the burglary. The jury found
that the criminal act in this case was foreseeable by Apache, considering
all the circumstances. This finding is not clearly contrary to the evidence,
and thus should not be disturbed on appeal.

4. Although the only evidence of damages at trial showed that Vermes' total
out-of-pocket loss (i.e., wholesale value of goods stolen) was $ 47,185.03,
the jury, after allocating negligence among all of the parties, awarded
Vermes $ 23,000. On post-trial motion by Vermes, the trial judge raised the
damages to $ 47,185.03. ADT asserts on appeal that the jury verdict was a
compromise between liability and damages, while Vermes counters that the
jury merely confused retail value with wholesale costs. ADT points out
[***18] that $ 23,000 is approximately 48 percent of $ 47,185.03, that
being the percentage of negligence attributed to Apache. It suggests that
this might be explained by the jury desiring to give Vermes only the damages
attributable to the "most negligent" defendant.

>From the evidence in the record it is difficult to say more than the trial
judge said in revising the award. He stated that it was [*44] "unsupported
by and contrary to the evidence." Since the jury apparently took some care
to arrive at the exact negligence percentages, it does not appear that it
was attempting to give Vermes only damages attributable to the "most
negligent" defendant. This could have been done by finding that ADT and
Towle had committed no negligence, and holding Vermes just less than 50
percent negligent. Such was clearly not the jury's intent. In view of a lack
of any evidence to the contrary, it must be assumed that the jury simply
misunderstood the proof of damages at trial, and [**107] thus gave an
insufficient award which was properly revised by the trial court.

Since this court's opinion coupled with the jury verdict results in the
retention of only one defendant, discussion of further [***19] issues
raised becomes unnecessary. This places Apache in the position many
defendants who are jointly liable find themselves in when the liability of
codefendants is eliminated by a finding of a lesser percentage of
comparative negligence than that of the plaintiff. We therefore order
judgment to be entered for $ 39,163.58 (83 percent of the damages of $
47,185.03) in favor of Vermes against defendant Apache.

Reversed in part, affirmed in part, and remanded with instructions.

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