Churchill Forge, Inc. v. Brown , 61 S.W.3d 368 ( 2002 )

Justice ENOCH

delivered the opinion of the Court,

in which Justice HECHT, Justice OWEN, Justice JEFFERSON, and Justice RODRIGUEZ join.

The question in this case is whether by statute or the common law, a commercial landlord is prohibited from contractually obligating its tenant to be responsible for damages caused by the tenant, the tenant’s occupant, or guest. In this case, JoAnn Brown co-signed a lease with her adult son, Carl Jeffrey (“Jeff’), for an apartment owned by Churchill Forge, Inc. Jeff allegedly caused a fire that extensively damaged the apartment complex. Churchill Forge sued JoAnn, asserting that the lease required her, as a cotenant, to pay for any damages resulting from Jeffs negligence. JoAnn defended, claiming that either the Texas Property Code or this Court’s fair notice doctrine prohibit Churchill Forge, as a commercial landlord, from contractually requiring her to pay for the alleged damage. The trial court granted summary judgment for JoAnn, and the court of appeals affirmed.¹ We reverse the court of appeals’ judgment and remand the case to the trial court for further proceedings.

Summary judgment is appropriate when there are no material fact issues and the movant is entitled to judgment as a matter of law.² Here, the lease JoAnn and Jeff signed provided:

REIMBURSEMENT. You must promptly reimburse us for loss, damage, or cost of repairs or service caused anywhere in the apartment community by your or any guest’s or occupant’s improper use or negligence. Unless the damage or stoppage is due to our negligence, we’re not liable for — and you must pay for — repairs, replacement costs and damage to the following if occurring during the Lease Contract term or renewal period: (1) damage to doors, windows, or screens; (2) damage from windows or doors left open; and (3) damages from wastewater stoppages caused by improper objects in lines exclusively serving your apartment. We may require payment at any time, including advance payment of repairs for which you’re liable. Any delay in our demanding sums you owe is not a waiver.

The question is whether enforcing this provision is prohibited by either Texas Property Code section 92.006(e) or the fair notice doctrine. We note in this appeal that we are not deciding whether Jeff was negligent, or whether he actually caused the fire. Those issues are not before us.

To begin, we observe that competent parties in Texas “shall have the utmost liberty of contracting.”³ JoAnn asserts that this principle has been altered by the Legislature and points to Chapter 92 of the Texas Property Code. We agree. Statutory limitations on the freedom of landlord and tenant to contract are contained in Subchapter A, section 92.006, entitled “Waiver or Expansion of Duties and Remedies.” JoAnn argues that Churchill Forge cannot enforce the lease provision against her because it cannot meet the conditions of subsection (e). As to this interpretation, we disagree.

Subchapter A, section 92.006(e) reads:

(e) A landlord and a tenant may agree for the tenant to repair or remedy, at the tenant’s expense, any condition covered by Subchapter B if all of the following conditions are met:

(1) at the beginning of the lease term the landlord owns only one rental dwelling;

(2) at the beginning of the lease term the dwelling is free from any condition which would materially affect the physical health or safety of an ordinary tenant;

(8) at the beginning of the lease term the landlord has no reason to believe that any condition described in Subdivision (2) of this subsection is likely to occur or recur during the tenant’s lease term or during a renewal or extension; and

(4) (A) the lease is in writing;

(B) the agreement for repairs by the tenant is either underlined or printed in boldface in the lease or in a separate 'written addendum;

(C) the agreement is specific and clear; and

(D) the agreement is made knowingly, voluntarily, and for consideration.⁴

Nothing in subsection (e) prohibits a landlord from contracting with its tenant for the tenant to be responsible for damages the tenant, the tenant’s occupant, or guest causes. Subsection (e) only says that a landlord, meeting that section’s requirements, may contract for the tenant to pay for certain repairs. Legislative permission to contract under certain circumstances does not necessarily imply that contracting under other circumstances is prohibited. Certainly, given this State’s strong commitment to the principle of contractual freedom, we should hesitate to infer a general prohibition from a statutory clause granting specific permission to contract. Fortunately, we have no need to guess what the Legislature meant. The Legislature explicitly identified, in a clause preceding subsection (e), the prohibition it intended to enforce. That prohibition is found in section 92.006(c): Thus a tenant’s contractual agreement to bear the cost of repair must meet the requirements of subsection (e) when it would otherwise be prohibited as an impermissible waiver of the landlord’s duties or the tenant’s remedies under Subchapter B.

A landlord’s duties and the tenant’s remedies under Subchapter B, which covers conditions materially affecting the physical health or safety of the ordinary tenant, may not be waived except as provided in Subsections (d), (e), and (f) of this section.⁵

Property Code, Subchapter B landlord duties are found in section 92.052, which reads:

(a) A landlord shall make a diligent effort to repair or remedy a condition if:

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(3) the condition materially affects the physical health or safety of an ordinary tenant. [But,]

(b) Unless the condition was caused by normal wear and tear, the landlord does not have a duty ... to repair or remedy a condition caused by:

(1) the tenant;

(2) a lawful occupant in the tenant’s dwelling;

(3) a member of the tenant’s family; or

(4) a guest or invitee of the tenant.⁶

It appears then, that Subchapter B imposes no duty on Churchill Forge to bear the cost of repairing damage allegedly caused by Jeff. As well, a tenant’s remedies under Subchapter B are conditioned upon the landlord’s liability,⁷ and the landlord’s liability is conditioned upon the existence of a duty under Subchapter B.⁸ Subchapter B therefore provides no remedy for JoAnn if Jeff damaged Churchill Forge’s property. Because Churchill Forge has no duty to pay for repair of tenant-caused damages, and JoAnn has no remedy against Churchill Forge for such damages, sections 92.006(c) and (e) do not restrict the parties’ freedom to contract as they wish concerning the matter.

This reading is consistent with section 92.061 of Subchapter B, which provides:

The duties of a landlord and the remedies of a tenant under this subchapter are in lieu of existing common law [landlord duties and tenant remedies]. Otherwise, this subchapter does not affect any other right of a landlord or tenant under contract, statutory law, or common law that is consistent with the purposes of this subchapter.... ⁹

Again, because under Subchapter B landlords have no duty to repair or pay to repair tenant-caused damage, and tenants have no remedy for such damage, section 92.061 makes clear that the Legislature did not intend the Subchapter to otherwise affect the parties’ presumptive right to contract over who would be responsible for conditions caused by the tenant, the tenant’s occupant, or guest.

Even if we were to infer, as JoAnn suggests, a general prohibition from subsection (e)’s permissive language, it would not apply to bar this lease provision. Subsection (e)’s reach is explicitly limited to conditions “covered by Subchapter B.” As mentioned, Subchapter B establishes a landlord’s duty to repair certain conditions not caused by the tenant, the tenant’s lawful occupant, or guest. Because no duty is triggered when a tenant damages the rented dwelling, such damage would not be a condition “covered by Subchapter B” to which subsection (e)’s requirements would apply.

Looking at the remainder of section 92.006 supports our view. While subsection (e) permits, under certain circumstances, a small, one-unit landlord to contract with tenants over the cost of repairing conditions covered by Subchapter B, subsection (f) allows any commercial landlord to shift the cost of repairs to the tenant, with a sufficiently clear agreement, for three specific types of conditions.¹⁰ The subsection (f) conditions are notable not because they are cheap to repair, but because they are conditions that would typically result from tenant negligence: “(1) damage from wastewater stoppages caused by foreign or improper objects in lines that exclusively serve the tenant’s dwelling; (2) damage to doors, windows, or screens; and (3) damage from windows or doors left open.”¹¹ Subsection (f) conditions therefore resemble those tenant-caused conditions which a landlord has no duty to repair, or pay to repair, under Subchapter B.

But importantly, there is no requirement in subsection (f) for a landlord to prove that the tenant caused these damages before seeking reimbursement. Without showing that the damage was caused by the tenant, the landlord would otherwise have a duty to bear the cost of repair under Subchapter B. And under 92.006(c), that duty could not be waived. By adding subsection (f), the Legislature permitted landlords and tenants to bargain over who would bear the cost of repairing these specific conditions, typically tenant-caused, without requiring landlords to show that they were tenant-caused. In short, the Property Code not only permits the parties to contract over who will pay for repairs when the tenant causes damage, it specifically authorizes the parties to shift by contract costs of repairs for certain damages from the landlord to the tenant irrespective of whether the damage was caused by the tenant.

Taken together, subsections (c) and (e) dictate that a commercial landlord cannot ask a tenant to pay for repairs that the landlord has the duty to make. Excepted from that dictate is subsection (f), under which there are three specific kinds of repairs that the parties can, by contract, shift the duty to pay for from the landlord to the tenant. The agreement must be conspicuous, clear, and voluntary, but the responsibility shifting can occur, regardless of whether the damages were caused by the tenant. And not covered by that dictate are those agreements between the parties concerning damages for which the landlord has no duty to repair, i.e., tenant-caused damages. Nothing in the Property Code restricts the parties’ freedom to negotiate over who will pay for repair of damages negligently or intentionally caused by the tenant, the tenant’s occupant, or guest.

JoAnn alternatively argues that the circumstance here is a casualty loss that must be treated differently from other conditions the landlord has a duty to repair. But Subchapter B does not distinguish between casualty losses and other conditions in determining whether the landlord has a duty to repair. Yet, though Churchill Forge had no duty to repair the damage, JoAnn contends that public policy supports restricting landlords’ contract rights through applying section 92.006(e)’s requirements to all casualty-loss reimbursement provisions such as the lease provision here. The State’s public policy, however, is reflected in its statutes.¹² In Subchapter B, the Legislature expressly absolved landlords of any duty to repair occupant-caused conditions. Absent that duty, nothing in the statute expresses a policy against tenants being held responsible for damages they or their cotenants cause. Additionally, no common law principle suggests that JoAnn should not be liable for damages negligently caused by one possessing the premises with her consent.¹³ This is consistent with the Restatement, which “takes the position that the tenant should be hable for damage done to the premises by those who are on the property with his consent....” ¹⁴ The statute, common law, and Restatement are in harmony on this point: there is nothing extraordinary or unjust in requiring a tenant to reimburse the landlord for damages negligently caused by the tenant or one occupying the premises with the tenant’s consent. Public policy does not restrict a landlord and tenant from agreeing that the tenant will be responsible for damages the tenant or cotenant causes.

Finally, JoAnn asserts that this Court’s fair notice doctrine supports the appellate court’s judgment. Under the fair notice doctrine, “certain contractual provisions relieving a party in advance for its own negligence must be unambiguous and conspicuous.” ¹⁵ The doctrine’s definition makes clear that it only applies when a party seeks release or indemnity from the consequence of its own negligence.¹⁶ The provision in this case does not attempt to shift responsibility to the tenant for any negligence by the landlord. The fair notice doctrine does not apply.

Because any restriction of landlord-tenant contract rights under section 92.006(e) is activated only by section 92.006(c)’s prohibition against the tenant waiving a landlord’s duty to repair imposed by Subchap-ter B, and because the fair notice doctrine does not apply, we conclude that JoAnn Brown is not entitled to judgment against Churchill Forge as a matter of law. Accordingly, we reverse the court of appeals’ judgment against Churchill Forge and remand the case to the trial court for further proceedings.

1 . 60 S.W.3d 118.

2 . Tex.R. Civ. P. 166a(c).

3 . Wood Motor Co., Inc. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 185 (1951) (quoting Printing & Numerical Registering Co. v. Sampson, 19 L.R.-Eq. 462, 465 (1875)).

4 . Tex. Prop.Code § 92.006(e) (emphasis added).

5 . Tex. Prop.Code § 92.006(c) (footnote omitted).

6 . Tex. Prop.Code § 92.052 (emphasis added).

7 . See Tex. Prop.Code § 92.056(e) ("a tenant to whom a landlord is liable ... may ..."); Tex. Prop.Code § 92.0561(a) ("[i]f the landlord is liable to the tenant ...”).

8 . Tex. Prop.Code § 92.056(a).

9 . Tex. Prop.Code § 92.061.

10 . Tex. Prop.Code § 92.006(f).

11 . Id.

12 . See Lawrence v. CDB Servs., 44 S.W.3d 544, 555 (Tex.2001).

13 . See, e.g., Publix Theatres Corp. v. Powell, 123 Tex. 304, 71 S.W.2d 237, 241 (1934) (noting that lessee who surrendered possession of premises to third party had same rights and liabilities as third party whose negligence caused fire).

14 . Restatement (Second) of Property § 12.2 reporter’s note 7 (1977).

15 . Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 386 (Tex.1997).

16 . See id. at 386-87.