Morlin Asset Management LP v. Murachanian

Filed 8/8/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
MORLIN ASSET MANAGEMENT LP et B259800
al.,
(Los Angeles County
Cross-complainants and Super. Ct. No. BC504083)
Appellants,
v.
EDWARD M. MURACHANIAN,
Cross-defendant and
Respondent.
APPEAL from judgments and an order of the Superior Court for the County of
Los Angeles. Gregory Keosian and Donna Fields Goldstein, Judges. Affirmed.
Horvitz & Levy, Mitchell C. Tilner, Stephen E. Norris; Kuluva, Armijo & Garcia
and Sherry L. Grguric for Cross-complainants and Appellants.
Williams Iagmin and Jon R. Williams for Cross-defendant and Respondent.
__________________________________________
SUMMARY
This is an appeal from the grant of summary judgment on two cross-complaints
for indemnity and apportionment of fault. Plaintiff Jose Luis Anguiano filed this lawsuit
after he was injured when he slipped on the stairs in the common area of a commercial
building. He was at the building to clean the carpets in the dental suite of a tenant in the
building. Plaintiff sued the owners of the building and its managers, Morlin Asset
Management LP and Morlin Management Corporation (the landlords), for negligence and
premises liability. The landlords each filed virtually identical cross-complaints against
Edward Murachanian (the tenant), a dentist who rents an office suite in the building. The
tenant had hired plaintiff’s employer to clean the carpets in his second-floor suite.
The tenant moved for summary judgment on the cross-complaints on the grounds
that plaintiff claimed his injury was caused by a defect in the common areas of the
building for which the landlords had the exclusive right of management and control, and
the tenant’s lease provided he was only liable to indemnify the landlords for injuries
incurred within his suite.
The landlords opposed the motion, arguing there were material disputed facts,
including whether plaintiff was at fault for spilling a bucket of soapy water in which he
slipped and fell; whether the tenant was at fault for failing to fulfill his duty under the
lease to notify the landlords that someone was coming to clean the carpet, thus depriving
them of an opportunity to take steps to spare plaintiff from carrying heavy buckets of
water up the stairway; and whether the stairway was defective. The landlords contended
the determination of their rights to indemnity and apportionment of fault rested on how
these disputed facts were resolved.
The trial court granted the tenant’s motion for summary judgment, finding the
lease obligated the tenant to indemnify the landlords only against claims for injuries
occurring within the tenant’s office suite, not in the common areas.
We affirm the judgments, as well as the court’s order awarding attorney fees to the
tenant.
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FACTS
Plaintiff was an employee of Arax Carpet Co. Cross-defendant tenant engaged
Arax to clean the carpets in his dental suite. Arax sent plaintiff and another man to do the
work on October 4, 2012.
As he walked up a flight of stairs, plaintiff slipped, falling forward and suffering
severe injuries. Plaintiff sued the landlords, claiming the stairs presented a dangerous
condition because the treads and risers did not conform to the building code or industry
standards in various respects.
During discovery, these facts came to light:
A medical report from Dr. Daniel Skenderian stated that, while carrying soapy
water up a flight of stairs, plaintiff “had apparently spilled some water and slipped and
fell face first, hitting his face and jaw.” Dr. Skenderian’s report stated that plaintiff
“volunteered that there was soap in the water that made the spills on the stairs more
slippery.” Dr. Skenderian later testified at his deposition that plaintiff corroborated the
information in the medical records. Dr. Skenderian’s recollection of what plaintiff told
him was that “he was carrying soapy water, water spilled, and he stepped in the spill and
slipped.” A medical report and deposition testimony from Dr. Michelle Ward stated
essentially the same thing: that plaintiff told her that he was carrying buckets of soapy
water upstairs; the “bucket caught on the stair, water spilled and on his next step he
slipped and fell forward.”
When plaintiff was asked in discovery to state facts upon which he based any
contention that his actions or omissions were not the sole cause of the incident, plaintiff
responded with the same allegations he made in the complaint about the dangerous
condition of the stairs, in violation of statute or industry standards, and said: “As he
climbed [the] stairs carrying heavy buckets of water, Plaintiff made contact with one or
all of these dangerous conditions causing him to fall with great force on the steps.”
Ivan Bell, the building engineer for the property, was deposed and testified that he
told the tenant he wanted to be notified “whenever Arax comes out” so that he could
“make sure the hoses were run properly.” (This was because of a previous occasion
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when he “caught them [(Arax)] with the hose going up the stairs,” and he told the tenant
that “it was a problem the way they were putting the hose” on that occasion.) Mr. Bell
testified that he “saw them [(Arax)] do it wrong,” and he told the tenant that “ ‘[y]ou have
to let me know every time they come.’ ”
In April and May 2014, the landlords filed cross-complaints against the tenant for
equitable indemnity (alleging any injuries to plaintiff were caused by the tenant);
apportionment of fault; declaratory relief; and express indemnity under the terms of the
lease. The landlords alleged the lease required the tenant to defend and indemnify them,
and to purchase liability insurance naming them as additional insureds.
In June 2014, the tenant moved for summary judgment. He contended the lease
agreement did not provide express indemnity for plaintiff’s alleged injuries because the
accident did not occur within his leased premises, but instead within the common areas;
he did not cause or contribute to plaintiff’s alleged injuries, so there was no basis for
implied or equitable indemnity; and at all times he procured the necessary liability
insurance naming the landlords as additional insureds.
The tenant’s evidence included, among other evidence, a copy of the lease,
containing this indemnification clause:
“8.7 Indemnity. Except for Lessor’s gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its
agents, Lessor’s master or ground lessor, partners and Lenders, from and against any
and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys’ and
consultants’ fees expenses and/or liabilities arising out of, involving or in connection
with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding
is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor
and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid
any such claim in order to be defended or indemnified.” (Italics and boldface added.)
The tenant was deposed six days after he filed his motion for summary judgment.
He testified that several years before plaintiff’s accident, Mr. Bell “asked us to inform
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them when we were going to have any work done such as a carpet cleaning or air
conditioning service when we were having somebody come over onto the premises.”
“We’d notify Ivan Bell. So if he had any concerns or needed to be there when any of this
work was being done by any of the contractors he had ample time and notice to be there.”
The tenant did not know whether his office staff notified Mr. Bell about the carpet
cleaning that took place on the date of plaintiff’s accident.
The landlords opposed the motion for summary judgment, contending the
evidence established “that plaintiff created the condition which caused his fall”; that
plaintiff was acting as an agent for the tenant; and that the tenant was responsible for
plaintiff’s actions. The landlords contended there were triable issues, including the extent
of the agency and whether the tenant was negligent for creating the condition that caused
or contributed to plaintiff’s fall and injuries.
The trial court granted the tenant’s motion for summary judgment on the
landlords’ claim for express indemnity, finding the lease obligated the tenant to
indemnify the landlords only against claims “involving the Premises, which has a limited
definition and does not include ‘stairwells.’ ” Because it was undisputed that plaintiff
was injured on the stairwells, within the common areas (defined as “all areas and
facilities outside the Premises,” including stairwells, the control of which is expressly
reserved to the landlords), the trial court concluded the tenant had no indemnification
obligation.
The court also granted summary judgment on the landlords’ claims for equitable
indemnity and apportionment of fault, reasoning it was undisputed that the tenant did not
exercise any control over the common areas. The court rejected the landlords’ agency
theory, finding no law or facts to support the existence of an agency relationship between
the tenant and plaintiff.
Judgments were entered in the tenant’s favor on the cross-complaints, and the trial
court awarded the tenant $12,000 in attorney fees. The landlords filed timely appeals
from the judgments and the attorney fee order.
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Along with their opening brief, the landlords requested, and we now grant, judicial
notice of documents showing plaintiff settled with the landlords and his complaint was
dismissed with prejudice on June 2, 2015.
DISCUSSION
As we explain below, we conclude as a matter of law that the indemnification
clause in the lease does not extend to claims or liabilities arising out of this accident in
the common areas over which the tenant had no control. Summary judgment was
therefore proper in this case.
1. The Standard of Review
We review an order granting summary judgment de novo, “considering all the
evidence set forth in the moving and opposition papers except that to which objections
have been made and sustained.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317,
334.)
A cross-defendant moving for summary judgment must show “that one or more
elements of the cause of action . . . cannot be established, or that there is a complete
defense to that cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) “In performing
our de novo review, we must view the evidence in a light favorable to [the landlords] as
the losing party [citation], liberally construing [their] evidentiary submission while
strictly scrutinizing [the tenant’s] own showing, and resolving any evidentiary doubts or
ambiguities in [the landlords’] favor.” (Saelzler v. Advanced Group 400 (2001) 25
Cal.4th 763, 768.) Summary judgment is appropriate where “all the papers submitted
show that there is no triable issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).)
2. The Lease Provisions
We quoted above the indemnity clause in the parties’ lease, requiring the tenant to
indemnify and defend the landlords and their agents (except for their gross negligence or
willful misconduct) against all claims and liabilities “arising out of, involving or in
connection with, the use and/or occupancy of the Premises by [tenant].”
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Both parties variously invoke several other provisions of the lease, and both point
out that the lease must be construed as a whole. (Civ. Code, § 1641 [“The whole of a
contract is to be taken together, so as to give effect to every part, if reasonably
practicable, each clause helping to interpret the other.”].)
The tenant points to the definitions of lease terms, including the leased premises,
which are limited to suite No. 204; the common areas, which are outside the suite and
include the stairwells; and provisions giving the landlords exclusive control and
management of the common areas and the responsibility for keeping the common areas in
good condition and repair. The landlords point to a provision exempting them from all
liability for injury or damage to the person or property of the tenant or the tenant’s
employees, contractors or others “in or about the Premises,” from any cause, whether the
injury results from conditions arising “upon the Premises . . . or from other sources or
places,” and a provision requiring the tenant to maintain specifically described liability
insurance. The landlords also point to the rules and regulations appended to the lease and
initialed by the parties. These include a rule stating that the tenant “shall not employ any
service or contractor for services or work to be performed in the Building except as
approved by [landlords].”
3. The Indemnity Clause Bars the Cross-complaints.
The tenant agreed to indemnify the landlords for claims “arising out of, involving
or in connection with” his use or occupancy of the dental suite. The landlords contend
the term “arising out of” should be liberally construed in favor of the promisee (here, the
landlords). For this proposition, the landlords cite Vitton Construction Co., Inc. v. Pacific
Ins. Co. (2003) 110 Cal.App.4th 762, 766 (and many other insurance cases), where the
court observed that “ ‘California courts have consistently given a broad interpretation to
the terms “arising out of” or “arising from” in various kinds of insurance provisions.’ ”
Here, the landlords say, “[w]ere it not for [the tenant’s] use of the leased premises to
operate his dental office, including his hiring of Arax to clean the carpet within the leased
premises, [plaintiff] would not have been ascending the stairwell and would not have
been injured.”
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But this is not an insurance case. And as the Supreme Court instructs, “[t]hough
indemnity agreements resemble liability insurance policies, rules for interpreting the two
classes of contracts do differ significantly.” (Crawford v. Weather Shield Mfg., Inc.
(2008) 44 Cal.4th 541, 552 (Crawford) [a “public policy concern influences to some
degree the manner in which noninsurance indemnity agreements are construed”].) “For
example, it has been said that if one seeks, in a noninsurance agreement, to be
indemnified . . . regardless of the indemnitor’s fault . . . language on the point must be
particularly clear and explicit, and will be construed strictly against the indemnitee.”
(Ibid.) In accordance with this principle, the indemnification clause cannot be read as the
landlords suggest.
Of course, “[i]n a remote sense,” the accident would not have occurred if the
tenant had not hired Arax to clean the carpets in his dental suite, and in that sense, the
accident could be said to arise from the tenant’s use of the suite. (See Hollander v.
Wilson Estate Co. (1932) 214 Cal. 582, 584, 585 [construing the tenant’s agreement to
indemnify for claims “ ‘arising . . . in or about or connected with’ ” the demised
premises; “[i]n a remote sense, of course, the elevator [which dropped to the basement
injuring the tenant] is a means of ‘connection’ between the street and the demised
premises”; but elevator was “owned, controlled, operated and maintained exclusively by
the defendant” and “can hardly be supposed to have been a subject within the scope of
the lease”]; see also City of Oakland v. Oakland etc. Sch. Dist. (1956) 141 Cal.App.2d
733, 735, 737 (City of Oakland) [construing the lessee’s agreement to indemnify the
lessor for claims “ ‘arising out of the use and occupation of the premises by the lessee ’ ”;
the indemnity clause did not apply to an injury incurred when a third party stepped in a
hole in a walkway used for ingress and egress to and from the leased premises].)
To say the accident would not have occurred if the tenant had not hired Arax to
clean the carpets does not mean the standard indemnity clause applies here. At oral
argument, counsel for the landlords conceded that the landlords could not seek indemnity
if a defect in the stairs for which they were responsible caused the accident. They point
out that cases such as Hollander and City of Oakland involve circumstances where the
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accident is indisputably caused by the lessor’s negligent maintenance of the common area
over which the lessor had exclusive control. This case is different, they say, because the
tenant “offered no evidence that [the landlords] negligently maintained the stairwell or
that a defect in the stairwell caused the accident.” Further, they say, they offered
evidence the accident was caused by plaintiff’s negligence, Arax’s negligent supervision
of plaintiff, or the tenant’s negligence in failing to notify the landlords of the carpet
cleaning. These arguments are unavailing.
We are not persuaded the distinctions the landlords proffer have any relevance to
the scope of the indemnification clause, an issue of contract interpretation that is
unaffected by the ultimate cause of the accident.1 The factual questions the landlords
raise about plaintiff’s negligence and Arax’s negligent supervision relate only to the
dispute between plaintiff and the landlords, which the parties have settled – not to the
scope of the tenant’s contractual indemnification obligation. Nor do the factual issues
about the tenant’s failure to notify Mr. Bell about the carpet cleaning have any relevance
to the scope of the tenant’s obligation to indemnify the landlords under the lease. At
most, the failure to notify could arguably constitute breach of a rule in the lease (a finding
we do not make), but no breach of contract claim is before us.
1 At oral argument, counsel for the landlords cited National Fire Ins. Co. v. Federal
Ins. Co. (N.D.Cal. 2012) 843 F.Supp.2d 1011 for the proposition that a lessee had a duty
to indemnify a lessor for an accident that did not occur in the leased premises. In that
case, a small child was killed when she fell off a hotel balcony, after wandering away
from a party catered by an on-site restaurant in a hotel ballroom being used by the
restaurant under the terms of its lease with the hotel. The restaurant’s insurer sought
reimbursement of its defense and settlement costs from the hotel’s insurer. Cross-
motions for summary judgment by both insurers were denied. (Id. at pp. 1012-1013.)
The case turned on the court’s interpretation of insurance policies, including questions
whether the restaurant’s insurer was obliged to defend and indemnify the hotel as an
additional insured, whether the hotel had to first exhaust its self-insured retention, and
whether the hotel’s insurer provided only excess coverage with no obligation pending
exhaustion of the restaurant’s coverage limits. The short answer to the landlords’
reliance on that case is simple: the principles governing insurance coverage are not the
same principles governing noninsurance indemnity agreements. (See Crawford, supra,44 Cal.4th at p. 552.)
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Finally, to the extent the landlords are suggesting they have a right to equitable
indemnification, they are mistaken. The Supreme Court has held otherwise: “[W]hen
parties by express contractual provision establish a duty in one party to indemnify
another, ‘the extent of that duty must be determined from the contract and not from the
independent doctrine of equitable indemnity.’ ” (E. L. White, Inc. v. Huntington Beach
(1978) 21 Cal.3d 497, 508, italics omitted; see also 5 Witkin (10th ed. 2005) Summary of
Cal. Law, Torts, § 123, p. 225 [“An express indemnity clause, rather than the equitable
principles behind comparative indemnity, governs the scope of any duty to indemnify.”].)
We hold that under the indemnity clause in this case, the injury to a third party that
occurred outside the dental suite, in a common area over which the landlords have
exclusive control, did not arise out of the tenant’s use of the dental suite. It does not
matter that the accident would not have happened but for the tenant hiring the third party
to clean the carpets in the dental suite, and that the third party may have been at fault.
The connection between the tenant’s use of his suite and the accident in the stairwell over
which the tenant had no control is too remote to have been within the contemplation of
the parties when they entered into the lease. This construction of the indemnity clause is
fully consistent with the law governing the interpretation of indemnification provisions
(Crawford, supra, 44 Cal.4th at p. 552), and with the Hollander and City of Oakland
cases construing similar language, albeit in distinguishable circumstances. The trial court
properly granted summary judgment.
The only basis the landlords assert for reversal of the attorney fee order is that the
summary judgments were erroneous. Because we have concluded otherwise, we likewise
affirm the attorney fee order.
DISPOSITION
The judgments and the order awarding attorney fees are affirmed. Respondent
shall recover his costs on appeal.
GRIMES, J.
WE CONCUR:
RUBIN, Acting P. J. FLIER, J.
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