Balcor Equity Properties XVIII v. Caligo Ltd.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BALCOR EQUITY PROPERTIES XVIII, a 
Real Estate Limited Partnership, as
successor in interest to Hidden
Lakes Partners, as successor in
interest to the Lakes Partners
Limited Partnership,
Plaintiff-Appellee,  No. 01-1913
v.
CALIGO LIMITED, now known as
Philip Automotive, Limited,
Defendant-Appellant.

BALCOR EQUITY PROPERTIES XVIII, a 
Real Estate Limited Partnership, as
successor in interest to Hidden
Lakes Partners, as successor in
interest to the Lakes Partners
Limited Partnership,
Plaintiff-Appellant,  No. 01-1960
v.
CALIGO LIMITED, now known as
Philip Automotive, Limited,
Defendant-Appellee.

Appeals from the United States District Court
for the District of South Carolina, at Greenville.
Henry M. Herlong, Jr., District Judge.
(CA-97-1494-6-20)
Argued: June 6, 2002
Decided: August 13, 2002
2 BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED
Before WIDENER and WILKINS, Circuit Judges, and
Frederick P. STAMP, Jr., United States District Judge of the
Northern District of West Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: W. Howard Boyd, Jr., GALLIVAN, WHITE & BOYD,
P.A., Greenville, South Carolina, for Appellant. James William
Logan, Jr., LOGAN, JOLLY & SMITH, L.L.P., Anderson, South
Carolina, for Appellee. ON BRIEF: Luanne Lambert Runge, GAL-
LIVAN, WHITE & BOYD, P.A., Greenville, South Carolina, for
Appellant. Michael T. Smith, LOGAN, JOLLY & SMITH, L.L.P.,
Anderson, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Caligo Limited (Caligo) appeals a judgment in favor of Balcor
Equity Properties XVIII (Balcor) in a lawsuit arising out of a July 4,
1994 fire. Finding no error, we affirm.
I.
In early June 1994, Caligo began an industrial cleaning project in
Greer, South Carolina. Caligo staffed the project in part with employ-
ees from outside the Greer area and housed these employees in apart-
BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED 3
ments leased from Balcor. Caligo rented and signed leases for several
apartment units, including Units 161 and 166.
The form leases signed by Caligo stated in pertinent part:
10. DAMAGE AND LOSS. You shall at all times exercise
due care in the use of the Premises[.] . . . You agree to carry
insurance covering all Your property located in the Premises
and to indemnify Us from any damage or loss We may sus-
tain because of any fire or the extinguishing of such fire
originating in the Premises which damages Our Property[.]
J.A. 2010. The terms "fire" and "originating" were not defined in the
leases.
During the evening of July 4, some Caligo employees residing in
Units 161 and 166 were discharging fireworks onto the ground from
their balconies. The employees subsequently began shooting bottle
rockets and Roman candles at each other. Shortly afterward, the
wooden deck of Unit 164—which was not leased by Caligo but which
was situated between Units 161 and 166—caught on fire, and the
resulting blaze caused more than $1,000,000 in damage to the com-
plex.
Balcor had purchased fire insurance coverage for the apartment
complex from four different carriers. After the fire, the carriers jointly
paid Balcor $991,796.41, which represented Balcor’s claimed dam-
ages less its $100,000 deductible. Balcor then instituted this action,
claiming that Caligo was liable for the conduct of its employees in
discharging the fireworks and seeking to recover damages in the full
amount of the loss caused by the fire. Balcor alleged, inter alia,
claims of breach of paragraph 10 of the contract, negligent supervi-
sion, and negligent retention. Caligo generally denied Balcor’s claims
and also asserted, as is relevant here, that the action was barred by
South Carolina Code § 38-75-60, which precludes suits by insurers
against tenants for damage to leased real or personal property unless
the damage is caused intentionally or recklessly. See S.C. Code Ann.
§ 38-75-60 (Law. Co-op. 2002).
4 BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED
Caligo moved to join Balcor’s insurance carriers as involuntary
plaintiffs. See Fed. R. Civ. P. 19(a). After the carriers stipulated that
they would be bound by the judgment, the district court denied the
joinder motion. The district court also struck Caligo’s § 38-75-60
defense, ruling that the statute did not apply to Balcor’s suit.
The parties cross-moved for summary judgment. Following a hear-
ing, the court granted judgment in favor of Balcor on its claim based
upon Paragraph 10 of the lease and denied Caligo’s motion regarding
that claim. The court reasoned that Caligo had a contractual duty to
indemnify Balcor for the fire damage because, as a matter of law, the
fire originated on the premises leased by Caligo. The district court
also granted summary judgment to Caligo on Balcor’s claims of neg-
ligent supervision and negligent retention.
Caligo appealed to this court, contending that the district court
erred in granting summary judgment to Balcor regarding Paragraph
10, in denying its motion to join Balcor’s insurance carriers as invol-
untary plaintiffs, and in striking its statutory defense. Balcor cross-
appealed, maintaining that the district court erred in granting sum-
mary judgment against it on its negligent supervision and negligent
retention claims.
We reversed the grant of summary judgment on the paragraph 10
claim ("the origination claim"), holding that the language of the para-
graph was at least ambiguous and therefore that the district court
erred in ruling as a matter of law that the fire originated on the prem-
ises leased by Caligo. See Balcor Equity Properties XVIII v. Caligo
Ltd., 238 F.3d 410, 2000 WL 1853087, at *2-*3 (4th Cir. 2000) (per
curiam) (unpublished table decision) (Balcor I). We also concluded
that the district court correctly ruled that South Carolina Code § 38-
75-60 did not bar the origination claim because it bars insurers’, not
landlords’, claims. See id. at *3. We further determined that the stat-
ute would not have barred Balcor’s claim even had Balcor’s insurance
carriers been joined as involuntary plaintiffs. See id. at *3 n.3. On that
ground, we held that any error in denying Caligo’s motion to join Bal-
cor’s insurance carriers was harmless. See id. We also affirmed the
order granting summary judgment against Balcor on its negligent
supervision and retention claims. See id. at *3-*4.
BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED 5
On remand to the district court, on the day before trial, Caligo
admitted for the first time that it had failed to exercise due care in its
use of the premises and that its breach had proximately caused Bal-
cor’s fire damage. On the basis of this admission, Balcor moved for
judgment as a matter of law on its breach of contract claim on the
ground that the facts admitted established that Balcor’s fire damage
was the proximate result of Caligo’s breach of its contractual duty to
use the premises with due care ("the due care claim"). The district
court reserved judgment on the motion, and the case was tried on stip-
ulated facts, the only jury issue being where the fire originated. The
district court denied motions by Caligo for judgment as a matter of
law on that issue, and the jury found that the fire originated on the
premises leased by Caligo.
Following the jury verdict, the district court addressed the due care
claim. Caligo argued that Balcor had not pled any cause of action
based solely on the "due care" language, to which Balcor responded
that it had pled a cause of action based on Paragraph 10, which con-
tained the language. In any event, the district court concluded that to
the extent that Balcor’s pleadings had not sufficiently alleged the due
care claim, an amendment to the pleadings would be allowed, and the
district court subsequently granted judgment as a matter of law to
Balcor on this claim. On this basis, and on the basis of the jury verdict
on the origination claim, judgment was entered in Balcor’s favor for
$1,050,000, which represented the entire amount of Balcor’s fire
damage.
Caligo moved to amend the judgment, arguing, as is relevant here,
that it should be responsible only for the $100,000 in fire damage for
which Balcor was not compensated by insurance benefits. Caligo con-
tended that Balcor’s insurance carriers should have been joined as
involuntary plaintiffs, and if they had been, South Carolina Code
§ 38-75-60 would have barred recovery of the amounts paid by the
insurers to Balcor. The district court denied the motion, noting that
we had rejected that argument in Balcor I.
II.
Caligo first argues that the district court erred in granting judgment
as a matter of law to Balcor on the due care claim. We disagree.1
1
Because we reject Caligo’s challenge to the judgment as a matter of
law on the due care claim, we do not address the parties’ arguments
regarding the other liability theories.
6 BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED
We review an order granting judgment as a matter of law de novo.
See Anderson v. Russell, 247 F.3d 125, 129 (4th Cir.), cert. denied,
122 S. Ct. 342 (2001). Because the district court sat in diversity, we
must apply South Carolina law and predict how the South Carolina
Supreme Court would decide the issue. See Doe v. Doe, 973 F.2d 237,
240 (4th Cir. 1992). Here, two principles of South Carolina law are
relevant. First, when a contract term is unambiguous, the term must
be given its plain meaning. See Warner v. Weader, 311 S.E.2d 78, 79
(S.C. 1983). Second, absent an agreement to the contrary, a party is
liable for any damages following as a natural and proximate result of
its breach of contract. See Fuller v. E. Fire & Cas. Ins. Co., 124
S.E.2d 602, 610 (S.C. 1962); Ancrum v. Camden Water, Light & Ice
Co., 64 S.E. 151, 156 (S.C. 1909).
In its entirety, paragraph 10 of the lease provides as follows:
10. DAMAGE AND LOSS. You shall at all times exercise
due care in the use of the Premises[.] You are taking occu-
pancy of the Premises and accepting the Premises "as is"
and "where is[.]" You agree that We shall not be liable to
You, your family, your guests or any other person for any
loss[,] injury or damage to person or property arising out of
the failure of any appliance, fixture, the roof[,] any plumb-
ing, heating, air conditioning, electric, gas, water or sewer-
age systems in or about the Premises, or caused by any
casualty or catastrophe including without limitation storm,
flood[,] fire, criminal acts, moths, termites, or vermin, or
caused by latent defects, or from any other cause whatso-
ever, whether or not due to negligent acts or omissions by
You, your family and guests or by any third parties, includ-
ing without limitation other occupants of this Apartment
Community, and You assume all risk of and agree to indem-
nify Us from any such loss, injury or damage[.] Further, the
use of the parking spaces, storerooms, laundry facilities,
swimming pool, recreational facilities, community build-
ings, and all other common areas in this Apartment Commu-
nity shall be at Your own risk and We shall not be liable to
You, your family, your guests or any other person for any
loss, injury or damage to person or property arising out of
use of the foregoing, from any cause whatsoever, and You
BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED 7
assume all risk of and agree to indemnify Us from any such
loss, injury or damage[.] You agree to carry insurance cov-
ering all Your property located in the Premises and to
indemnify Us from any damage or loss We may sustain
because of any fire or the extinguishing of such fire origi-
nating in the Premises which damages Our Property.
J.A. 2010 (emphasis added).
Caligo does not dispute that Paragraph 10 contractually obligated
it to exercise due care in using the leased premises, that Caligo
breached that duty, and that the damages for which it has been held
liable were the natural and proximate result of its breach. Caligo also
does not assert that the district court abused its discretion in allowing
amendment of the complaint to include the due care claim. Caligo’s
only contention supporting its challenge to the judgment as a matter
of law is that the due care language in Paragraph 10 "must be read
in conjunction with the indemnification provision at the end of para-
graph 10 to mean that Caligo is only required to indemnify Balcor for
fire damage which originates in the leased premises and is caused by
Caligo’s failure to exercise due care." Br. of Appellant/Cross-
Appellee at 28.
We conclude, however, that the duty to exercise due care in using
the premises is plainly an independent duty, unrelated in any signifi-
cant way to Caligo’s duty to indemnify Balcor for damage from fires
originating in Caligo’s leased premises. Paragraph 10 unambiguously
sets forth a series of provisions concerning damage and loss. There
is no indication in the language that these seemingly independent pro-
visions in fact do not stand alone. And, indeed, they are separated in
the lease by several undeniably independent provisions.
Caligo argues that if the first and last provisions are read to create
separate duties, the last sentence will be reduced to surplusage. See
Gibbes Mach. Co. v. Johnson, 61 S.E. 1027, 1028 (S.C. 1908) (adopt-
ing a contract construction that would avoid reducing certain lan-
guage to surplusage). Caligo is mistaken. Without the last sentence,
Caligo would not be required to indemnify Balcor for damage from
a fire originating on the leased premises unless Balcor could prove
that Caligo’s lack of due care caused the fire. The presence of the pro-
8 BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED
vision obligates Caligo to indemnify Balcor for damage from any fire
originating on Caligo’s leased premises, regardless of fault.
Caligo further contends that obligating it to indemnify Balcor for
some fires not shown to have been proximately caused by Caligo’s
lack of due care would be an absurd result. See Farr v. Duke Power
Co., 218 S.E.2d 431, 434 (S.C. 1975) (stating that constructions of
contractual terms creating absurd results are disfavored). However,
we fail to see the absurdity in the parties’ allocation of the risk of loss.
Cf. Campbell v. Beacon Mfg. Co., 438 S.E.2d 271, 272 (S.C. Ct. App.
1993) (holding that when security company agreed to hold customer
harmless for any damages "arising out of" the acts of security compa-
ny’s employees, security company was liable for employee’s actions
in starting fire even if actions causing fire were outside scope of
employee’s employment (internal quotation marks omitted)). Caligo
was arguably best positioned to prevent a fire from originating on its
leased premises, and Caligo would certainly have been able to pur-
chase insurance to cover its indemnification duties.
Caligo similarly argues that if the first and last sentences of Para-
graph 10 are read to create independent duties, the parties’ agreement
that Caligo would indemnify Balcor for all damage resulting from
fires originating on the leased premises is unconscionable and there-
fore unenforceable. We seriously doubt that such an agreement is
unconscionable under South Carolina law. Cf. Fanning v. Fritz’s
Pontiac-Cadillac-Buick, Inc., 472 S.E.2d 242, 245 (S.C. 1996)
("Unconscionability has been recognized as the absence of meaning-
ful choice on the part of one party due to one-sided contract provi-
sions, together with terms which are so oppressive that no reasonable
person would make them and no fair and honest person would accept
them."). However, even if the indemnity provision were unenforce-
able, that would in no way negate Caligo’s duty to exercise due care
in using the leased premises. The lease specifically provides that it
shall if possible be construed consistently with all laws and
public policies, and if any court of competent jurisdiction
determines that it is impossible to so construe any provision
of this Lease and consequently holds that provision to be
invalid, then such holding shall in no way whatsoever affect
the validity of any other provisions of this Lease[.]
BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED 9
J.A. 2010.
Caligo finally points to the last sentence of Paragraph 10 and sev-
eral other provisions of the lease and argues that the fact that remedies
were explicitly provided for some contractual breaches indicates that
the parties intended that there would be no contractual remedy for
damage caused by Caligo’s simple lack of due care.2 Caligo similarly
argues that the explicit inclusion in the contract of a remedy for Bal-
cor for fire damage caused by a fire originating on the leased property
indicates that the parties intended that there would be no remedy for
any fire damage caused by a fire not originating on the leased prop-
erty. The lease explicitly negates these inferences, however, and states
that "[t]he remedies provided in this Lease shall be cumulative and
shall not in any way abridge, modify or preclude any other rights or
remedies to which We are entitled at law or in equity." Id.For all of these reasons, we conclude that the lease placed an
unqualified duty on Caligo to exercise due care in its use of the leased
premises and in no way limited the legal remedies available to Balcor
for Caligo’s breach of that duty.
III.
Caligo also argues that the district court erred in denying its
motions to join Balcor’s insurers as involuntary plaintiffs. Caligo con-
tends that because Balcor’s insurers have paid Balcor $991,796.41 as
a result of the fire, these insurers owned a portion of Balcor’s claim.
Caligo continues that had the insurers been joined as involuntary
plaintiffs, they would have been prohibited under South Carolina
Code § 38-75-60 from asserting their claims, and therefore Balcor’s
damages would have been reduced by $991,796.41. As the district
court correctly ruled, we rejected this precise argument in Balcor I
when we held that any error in not joining Balcor’s insurers did not
prejudice Caligo because the "statute at most would have prevented
the insurance carriers from stating a claim against Caligo, but would
have had no effect on Balcor’s cause of action." Balcor I, 2000 WL
2At oral argument, Caligo argued that the lease would entitle Balcor
to evict Caligo for a breach of its duty to exercise due care but cited no
language in the lease supporting that assertion.
10 BALCOR EQUITY PROPERTIES XVIII v. CALIGO LIMITED
1853087, at *3 n.3. That ruling is the law of the case. See United
States v. Aramony, 166 F.3d 655, 661 (4th Cir. 1999).
In any event, Caligo’s argument that Balcor’s damages would have
been reduced if its insurers had been joined as involuntary plaintiffs
is simply incorrect. In partial subrogation cases, the insured’s right of
action against the wrongdoer is "single and indivisible, even though
the insurer is subrogated to the rights of the insured to the extent of
the loss paid." Spearman v. J & S Farms, Inc., 755 F. Supp. 137, 141
(D.S.C. 1990); see Pringle v. Atl. Coast Line R.R., 47 S.E.2d 722, 724
(S.C. 1948). Additionally, South Carolina follows the "collateral
source rule," under which compensation from insurance proceeds will
not reduce the amount of damages for which the wrongdoer is liable.
See Citizens & S. Nat’l Bank of S.C. v. Gregory, 463 S.E.2d 317, 318
(S.C. 1995); Otis Elevator, Inc. v. Hardin Constr. Co. Group, 450
S.E.2d 41, 45-46 (S.C. 1994) (applying rule in contractual indemnity
setting). Accordingly, as we determined in Balcor I, any error in not
joining Balcor’s insurers as involuntary plaintiffs did not increase the
amount of damages for which Caligo could be liable.
IV.
In sum, because we conclude that the district court correctly
granted judgment as a matter of law to Balcor on its due care claim
and because Caligo was not prejudiced by the denial of its joinder
motion, the judgment of the district court is affirmed.
AFFIRMED