Ransburg v. Richards , 2002 Ind. App. LEXIS 958 ( 2002 )

NAJAM, Judge,

dissenting.

.I respectfully dissent. The majority opinion nullifies a valid private agreement, rewrites the lease, and reallocates the exchange of costs and benefits between the parties. The majority declares that the exculpatory clause in question is void and unenforceable because it "contravenes long established common law rules of tort liability" and "offends the public policy of the state." In making this new rule the majority assumes what it seeks to prove, namely, that the law of negligence and the law of contract occupy mutually exclusive spheres and cannot be reconciled on these facts, notwithstanding a body of Indiana law to the contrary. The majority ignores the plain meaning of the exculpatory clause and violates the well-settled common law right of the parties to make such a provision and to have it enforced according to its terms. In so doing, the majority has unilaterally altered the economic equation in countless residential leases across the state.

Indiana courts recognize the principle that parties are free to enter into contracts and, indeed, presume that contracts represent the freely bargained agreement of the parties. Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1129 (Ind.1995). Where the language of an instrument is unambiguous, the intent of the parties is determined from its "four corners." Orme v. Estate of Kruwell, 453 N.E.2d 355, 356 (Ind.Ct.App.1983); see Zawistoski v. Gene B. Glick Co., Inc, 727 N.E.2d 790, 792 (Ind.Ct.App.2000) (interpreting residential lease). The construction or legal effect of a contract is a question of law to be determined by the court. Id.

It is well established in Indiana that parties are permitted to agree in advance that one is under no obligation of care for the benefit of the other, and shall not be liable for the consequences of conduct that would otherwise be negligent. Powell v. American Health Fitness Ctr. of Fort Wayne, Inc., 694 N.E.2d 757, 760 (Ind.Ct.App.1998). Further, it is well settled in Indiana that contracts containing exceulpa-tory agreements are not against public policy. Marsh v. Dixon, 707 N.E.2d 998, 1000 (Ind.Ct.App.1999); see Weaver v. American Oil Co., 257 Ind. 458, 276 N.E.2d 144, 148 (Ind.1971). Parties to a lease may agree to exculpate one of them from his own negligence. See Loper v. Standard Oil Co., 138 Ind.App. 84, 211 N.E.2d 797, 800 (1965) (upholding commercial lease provision that indemnified landlord against its own negligence); see also Vertucci v. NHP Mgmt. Co., 701 N.E.2d 604, 606-07 (Ind.Ct.App.1998) (concerning residential lease exculpatory clause).⁵

Here, both parties agree that they entered into a residential lease contract that contains, in part, the following exculpatory language:

[Wlalkways, stairways, parking lots, lawns and all other areas and equipment to be used in common by all occupants of the apartment building and grounds, are provided and maintained gratuitously by [Ransburg], and ... [Ransburg] shall, in no event, be or become lable thereby for any loss, or damage, to person or property .:. even though such loss or damage shall be caused by the negligence of [Ransburg], or its agents, servants or employees.

Appellant's App. at 78 (emphases added). The facts in this case correspond exactly with the cireumstances contemplated by the exculpatory clause. Richards contends that Ransburg was negligent in clearing the parking lot of snow and ice. But the lease clearly prévides that Richards will use the common area at her own risk and that Ransburg shall not be or become Ha-ble for her own negligent acts, including maintenance of the parking lot where Richards slipped and fell.

The majority acknowledges this state's "strong presumption of enforceability of contracts that represent the freely bargained agreement of the parties," and that "exculpatory clauses are generally enforced and are not void on public policy grounds...." But the majority then discards these principles and declares instead that the question of whether a residential lease, which insulates the landlord from his own negligence, is unconscionable and therefore void as against public policy "has never been specifically addressed in Indiana." By phrasing the question in this manner, the majority attempts to distinguish residential leases from other types of leases or contracts in which exeulpatory provisions have been upheld.

There is no such distinction. It has long been the law in Indiana that a lease is to be construed in the same manner as any other contract. Zawistoski, 727 N.E.2d at 792. This principle applies to commercial leases. See Loper v. Standard Oil Co., 138 Ind.App. 84, 211 N.E.2d 797, 800 (1965). And Judge Darden, writing for our court, recently reaffirmed that this principle also applies to residential leases. See Smyrniotis v. Marshall, 744 N.E.2d 532, 534 (Ind.Ct.App.2001) (citing Stout v. Kokomo Manor Apartments, 677 N.E.2d 1060, 1064 (Ind.Ct.App.1997)).

Further, the issue of whether residential apartment leases are adhesion contracts and unconscionable and, therefore, void as against public policy has already been decided by this court. In Nylen v. Park Doral Apartments, 535 N.E.2d 178, 184 (Ind.Ct.App.1989), trans. denied, we acknowledged our supreme court's opinion in Weaver, that a contract may be declared unenforeeable due to unconscionability when there is a great disparity in bargaining power which leads the party with the lesser power to sign a contract unwillingly and unaware of its terms. But the contract must be one that no sensible person not under delusion, duress or in distress would make, and one that no honest and. fair person would accept. Id. In Nylen we held that a standardized residential lease agreement signed by three college students was not unconscionable. - We stressed that contracts are not unenforceable simply because one party enjoys an advantage over the other. Id. at 185. The fact that the lease in Nylen contained terms favorable to the landlord did not render that lease unconscionable. Id.

Here, neither does the fact that the exculpatory clause benefits Ransburg more than Richards render that provision unenforceable. The majority points to no evidence that Richards signed the lease under compulsion or duress. The majority also fails to demonstrate why residential lessees, such as Richards, are so disadvantaged that they deserve special "immunity" from exculpatory clauses-a protection this court has never bestowed upon a particular class of lessees.⁶

Richards entered this lease agreement after having been trained as a paralegal. She renewed her year-to-year lease in May 1995, and she fell in January 1997. Richards had an opportunity to terminate or renegotiate the lease terms, but she renewed the lease, even after Ransburg had informed her that the monthly rent would be increased by more than $100 per month. These facts neither suggest a great disparity of bargaining power nor that Richards was unwilling and unaware of its terms when she signed the contract on at least two occasions. Nylen, 585 N.E.2d at 184.

The majority attempts to distinguish this case from Vertucei. There, we considered the effect of an exeulpatory clause in a residential lease where the tenant had been the victim of a sexual assault. Vertucci, 701 N.E.2d at 606-07. By first considering whether the exculpatory clause controlled the outcome, we acknowledged that such provisions are not against public policy. Otherwise, we would have had no reason to determine whether the exeulpa-tory clause applied to shield the landlord from liability. The majority attempts but fails to reconcile its opinion with Vertueci.

While I would hold that the exculpatory clause here does not violate public policy, that conclusion does not end the ultimate enquiry. - Notwithstanding the parties' clear intention to insulate Ransburg from its own negligence, the language of the exculpatory provision must be legally sufficient to accomplish that goal. This court has held that an exeulpatory clause will not act to absolve the drafting party from liability unless it "specifically and explicitly refers] to the negligence of the party seeking release from liability." Marsh, 707 N.E.2d at 1000 (citation omitted). This rule is based on the principle that an agreement to release a party from its own negligence must clearly and unequivocally manifest a knowing and willing commitment by one party to pay for damages occasioned by the negligence of the other party. Id. An exculpatory clause that does not refer to the negligence of a releasee is void to the extent it purports to release the party from liability caused by its own negligence. See Marsh, 707 N.E.2d at 1000.

Here, the exculpatory clause unambiguously states that Ransburg will not be liable for those losses or damages "caused by the negligence of [Ransburg], or its agents, servants or employees." This language demonstrates the parties knowing and willing commitment to release Rans-burg from liability for damages resulting from her own negligence. See Clanton v. United Skates of America, 686 N.E.2d 896, 901 (Ind.Ct.App.1997) (upholding exculpatory clause where plaintiff agreed to release defendant from lability for any injury which arose from his "use of or presence upon the [flacilities ... whether or not caused by the negligence or other fault of [defendant]"). The majority opinion nullifies the clause, ignores the agreement of the parties, and, by declaring the clause void as against public policy, re-writes Indiana law.

Freedom of contract is a common law right. Our legislature has declared that the common law governs this state when it is not inconsistent with our constitutions and statutes. See Ind.Code § 1-1-2-1. As our supreme court stated in Johnson v. Scandia Assoc., Inc., 717 N.E.2d 24, 29 (Ind.1999), contracts are private, voluntary allocations by which two or more parties distribute specific entitlements and obligations. When a landlord enters a residential lease, she voluntarily confers certain rights upon the tenant in consideration of the tenant's promise to pay rent, not waste the property, use it for illegal purposes, or "holdover" beyond the term. Id. The landlord agrees to this legal relationship after balancing the costs and benefits, and the same is true for the tenant. Id.

The parties to a lease have the right to define their mutual rights and obligations. Jennings Realty Corp. v. First Nat'l Bank of North Vernon, 485 N.E.2d 149, 152 (Ind.Ct.App.1985). It is not within our province to make a new contract for the parties or to ignore or eliminate any provisions in the instrument. Id. The majority opinion violates the rights associated with freely bargained for contracts and the rights incident to real property ownership. Rans-burg's right, as a property owner, to control the use of her private property is an essential feature of our economic system. The rights associated with ownership of property include the right to possess, enjoy, sell, destroy, or otherwise control the use of the property. See Henry N. Burler, Economic Analysis ror Lawyers, p. 357 (1998). In free market economies, the rights of ownership are typically enforced, not thwarted, by the government. Id. °

Finally, the majority usurps the role of the legislature when it invokes "public poli-ey" to justify its opinion. The flaw in the majority's reliance on "public policy" is underscored by recent legislation. The 2002 session of the Indiana General Assembly enacted a bill that regulates residential leases, House Bill 1018, which becomes effective July 1, 2002. The new legislation was enacted some twenty-six years after landlord-tenant legislation was first introduced in the General Assembly and is the best evidence of the public policy of our state on this issue. It is significant that the Senate Committee on Judiciary deleted from House Bill 1013 as introduced a provision that would have created a tenant's cause of action against a landlord for "any damages for personal injuries," and would have made any attempt to waive such an action, by contract or otherwise, void. If enacted, the provision would have modified the common law and, in its operation and effect, would have prohibited exculpatory clauses in residential leases. Now, the majority opinion has invoked "public policy" to accomplish by judicial decree precisely what the General Assembly has declined to do.⁷

Our supreme court supports the traditional precaution against the reckless use of public policy as a means of invalidating contracts and has emphasized that the power of the courts to declare a contract void for being in contravention of sound public policy is a very delicate and undefined power. Hogston v. Bell, 185 Ind. 536, 112 N.E. 883, 885 (1916); Straub v. B.M.T. by Todd, 645 N.E.2d 597, 599 n. 3 (Ind.1994). Our courts should not invoke "public policy" to nullify an otherwise valid private agreement, exeept as a last resort, and then only where the legal justification is clear, compelling and unavoidable. We tinker with private contracts at great peril. In so doing we jeopardize the freedom our citizens enjoy to make agreements by which they voluntarily allocate their respective rights, risks and responsibilities.

The exculpatory clause here lawfully shields Ransburg from lability against Richards' negligence claim. We should reverse the trial court's denial of summary judgment and order that summary judgment be entered in favor of Ransburg. For these reasons, I respectfully dissent.

5 . In Franklin Fire Ins. Co. v. Noll, 115 Ind.App. 289, 58 N.E.2d 947, 951 (1945), this court recognized the propriety of exculpatory clauses in leases as follows:

Stipulations between a landlord and tenant, determining which shall bear a loss arising from nonrepair or misrepair of the tenement, and which shall be immune, are not matters of public concern. Moreover, the two stand upon equal terms; neither the one nor the other is under any form of compulsion to make the stipulations; either may equally well accept or refuse entry into the relationship of landlord and tenant. We think it clear that public policy does not condemn the immunity clause voluntarily agreed upon by these parties.

(Citation omitted).

6 . This court has upheld exculpatory clauses in contracts where the "public policy" concerns were far more compelling than those presented by the lease here. In LaFrenz v. Lake Co. Fair Bd., 172 Ind.App. 389, 360 N.E.2d 605, 608 (1977), we addressed whether a patron killed at a demolition derby, who had signed an exculpatory agreement in order to receive a "pit pass" so that she could assist her husband as a mechanic, had bargained away her right to sue the Fair Board. In upholding the exculpatory clause, we concluded that there was no unequal bargaining power between the parties and that the victim was under no compulsion, economic or otherwise, to be in the restricted pit area. Id.

Likewise, in Marshall v. Blue Springs Corp., 641 N.E.2d 92, 96 (Ind.Ct.App.1994), we refused to declare unconscionable a "liability release" signed by a scuba diving student prior to taking lessons who was subsequently injured. In so holding, we noted that Marshall chose to take the scuba lessons for his own enjoyment and was under no compulsion by any outside source to undertake the lessons. Id.

7 . The majority contends that this point is a '"mischaracterization'' of the statute. The majority also asserts that its opinion is "consistent with the statute as enacted," in that the statute imposes a duty on a landlord to "make all reasonable efforts to keep common areas of a rental premises in a clean and proper condition," which cannot be waived. Id.; Public Law No. 92-2002. The majority insists that this language "specifically precludes" landlords from disclaiming their own negligence. But the majority errs when it equates "all reasonable efforts" with "all non-negligent efforts." And the majority ignores the fact that our legislature considered and rejected a provision that would have given tenants a right to recover for "personal injuries" a statutory remedy that undoubtedly contemplated a negligence cause of action. It is just as important to recognize what a statute does not say as it is to recognize what it does say. City of Evansville v. Zirkelbach, 662 N.E.2d 651, 654 (Ind.Ct.App.1996), trans. denied. The legislative history is clear. Had the legislature wanted to prohibit landlords from disclaiming their own negligence, it would have included such a provision in the statute. -It did not.