Morrell v. Hardin Creek, Inc.

IN THE SUPREME COURT OF NORTH CAROLINA

No. 318A17

Filed 7 December 2018

ANDREA MORRELL, G. PONY BOY MORRELL, and THE PASTA WENCH, INC.

v.
HARDIN CREEK, INC., JOHN SIDNEY GREENE, and HARDIN CREEK
TIMBERFRAME AND MILLWORK, INC.

Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of

the Court of Appeals, ___ N.C. App. ___, 803 S.E.2d 668 (2017), reversing an order of

summary judgment entered on 27 April 2016 by Judge William Coward in Superior

Court, Watauga County, and remanding for further proceedings. On 1 November

2017, the Supreme Court allowed defendants’ petition for discretionary review of

additional issues. Heard in the Supreme Court on 14 May 2018 in session in the Old

Burke County Courthouse in the City of Morganton pursuant to N.C.G.S. § 7A-10(a).

Capua Law Firm, P.A., by Paul A. Capua and Genevieve A. Mente, for plaintiff-
appellees.

Wall Babcock LLP, by Joseph T. Carruthers and Lee D. Denton, for defendant-
appellants.

MORGAN, Justice.

This contract interpretation case concerns the operation of the provisions of a

commercial real estate lease, specifically those terms regarding insurance and

liability, when a lessee seeks damages allegedly caused by the lessor’s negligence.
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Opinion of the Court

The specific question before this Court is whether the pertinent provisions of the lease

at issue serve as a complete bar to plaintiff lessees’ negligence-based claims against

some or all of the named defendants, one of which is the lessor. The language of the

lease arrangements indicates the clear intent of the parties to discharge each other

from all claims and liabilities for damages resulting from hazards covered by

insurance, and it is undisputed that the damages claimed by plaintiff lessees resulted

from a hazard that was subject to their insurance coverage. Having elected to enter

into the lease at issue here, plaintiff lessees are bound by the explicit terms of the

contract and therefore are barred from bringing their claims against other parties to

whom the lease applies. Accordingly, we reverse the portion of the decision of the

Court of Appeals holding that a critical paragraph in the lease is ambiguous and that,

as a result, interpretation of the contract was a matter for a jury to resolve. We

remand this matter for further proceedings as described below.

Factual and Procedural Background

Beginning in early 2011, defendant Hardin Creek, Inc. (Hardin Creek), a North

Carolina company, began leasing commercial premises in Boone to plaintiff The Pasta

Wench, Inc., a specialty pasta manufacturing and distribution business owned and

operated by plaintiffs Andrea Morrell and her husband, G. Pony Boy Morrell (G.

Morrell). The initial lease, dated 2 February 2011, covered the time period from

February 2011 through February 2014, and defined “Landlord” as “Hardin Creek,

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Opinion of the Court

Inc.” and “Tenant” as “Andrea Morrell and G. Morrell (D.B.A.) The Pasta Wench, Inc.”

Defendant John Sidney Greene (S. Greene) signed the lease as President of Hardin

Creek, and both Andrea and G. Morrell signed on behalf of themselves and The Pasta

Wench. No other parties or third-party beneficiaries were named in or signed the

lease.

The lease was a standard form lease prepared by Hardin Creek, and it

included, inter alia, several provisions regarding insurance and liability. Relevant to

the parties’ arguments in this case are portions of two paragraphs. Paragraph 5,

titled “Alterations,” discusses The Pasta Wench’s right, as “Tenant,” to alter or

remodel the premises to suit its needs and further states in pertinent part:

(b) Tenant’s Neglect. Subject to the provisions set forth in the
following sentence, Tenant shall pay for the cost of any
repairs or damage resulting from the negligence or the
wrongful acts of his employees, representatives or visitors.
However, and notwithstanding any other provision of this
lease to the contrary, Landlord and Tenant and all parties
claiming under them agree and discharge each other from
all claims and liabilities arising from or caused by any
hazard covered by insurance on the leased premises, or
covered by insurance in connection with the property
owned or activities conducted on the leased premises,
regardless of the cause of the damage or loss, provided that
such cause does not prevent payment of insurance proceeds
to Landlord under the provisions of the applicable policy.

Paragraph 8, titled “Insurance,” provides in its entirety:

Tenant shall maintain insurance in accordance with the
provisions of sub[-]paragraphs (a) and (b) of this

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Opinion of the Court

paragraph, and Tenant shall indemnify Landlord in
accordance with the provisions of sub-paragraph (c).

(a) Property Insurance: Tenant shall hold Landlord harmless
for loss or damage by fire with regard to all of Tenant’s
furniture, fixtures, and equipment about or within the
leased premises.

(b) Liability Insurance: Tenant shall provide and keep in force
for the protection of the general public and Landlord
liability insurance against claims for bodily injury or death
upon or near the leased premises and the sidewalks,
streets and service and parking areas adjacent thereto to
the extent of not less than $500,000.00 in respect to bodily
injur[i]es or death to any one person and the extent of not
less than $500,000.00 for bodily injuries or death to any
number of persons arising out of one accident or disaster,
and property damage with limits of not less than
$100,000.00. The Tenant shall furnish Landlord with
satisfactory evidence of such insurance within thirty (30)
days of execution of this lease.

Despite the reference in the first sentence of Paragraph 8 to “sub-paragraph (c),”

there is no subparagraph (c) in Paragraph 8.

In early 2012 an inspection by the North Carolina Department of Agriculture

and Consumer Services (NCDA&CS) revealed the need for modifications to the

interior layout of the premises to comply with pertinent state regulations governing

The Pasta Wench’s food production activities. Specifically, the inspection noted the

need for the addition of an enclosed ceiling for the “open” kitchen that was being used

by lessees Andrea and G. Morrell in their business. Lessees discussed the NCDA&CS

requirements with S. Greene and his son, John Ellis Greene (E. Greene). Both S. and

E. Greene are licensed general contractors, with the two of them having different

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Opinion of the Court

business connections to the leased premises. E. Greene owned the building

containing the premises that plaintiffs leased, as well as the real property on which

the building sits. In addition to owning lessor Hardin Creek, S. Greene also owned

and operated defendant Timberframe and Millwork, Inc. (Timberframe), a

construction company in the business of building and remodeling residential and

commercial buildings.

After learning of the applicable regulatory requirements, Hardin Creek agreed

to undertake the kitchen ceiling enclosure project in exchange for the Morrells’

promise to extend the term of the lease from February 2014 through December 2018.

An “Amending Agreement” attached to the 2011 lease also imposed a series of rent

increases, the first of which went into effect on 1 June 2012. However, the Amending

Agreement specifically provided that “[a]ll other terms and conditions from the

original lease . . . will stay in effect.” The parties do not dispute that the insurance

and liability-related provisions of the 2011 lease quoted and discussed herein

therefore remained in operation at all times relevant to this case.

The kitchen ceiling enclosure project was completed, but in their respective

pleadings and depositions in the present case, the parties dispute who performed and

supervised the renovation work. S. Greene denied that either he or Timberframe was

involved and claimed that the Morrells themselves had supervised the project as the

lessees. But, Adam Voss, an employee of Timberframe, testified that he performed

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Opinion of the Court

the work while employed and being paid by Timberframe and at the direction of S.

Greene. Voss also testified that all work on the ceiling project was conducted under

the supervision of S. Greene and Timberframe alone. G. Morrell likewise testified

that S. Greene had supervised and completed the project using Timberframe

personnel.

The kitchen ceiling enclosure project was later discovered to have violated both

general building codes and mechanical codes for fire sprinkler systems. The flawed

nature of the work to enclose the ceiling of the kitchen was discovered after the

mountain municipality of Boone experienced extremely low temperatures in January

2014, causing the fire sprinkler pipes on the leased premises to burst, to flood the

Morrells’ leased business space, and to destroy the lessees’ inventory, ingredients,

and specialty equipment. As the lessees, the Morrells claimed that these losses

prevented The Pasta Wench from filling pending orders and that they halted new

sales. Although the lessees had obtained insurance on the premises that covered the

hazard of flooding, nevertheless the benefit limits of the policy that they purchased

were insufficient to cover their alleged losses such that The Pasta Wench went out of

business.

On 3 December 2014, plaintiff lessees filed an action in Superior Court,

Watauga County, alleging negligence and breach of the duty of workmanlike

performance against Hardin Creek, S. Greene, and Timberframe; constructive

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Opinion of the Court

eviction and breach of contract against Hardin Creek; and unfair trade practices

against S. Greene and Hardin Creek. In their complaint, plaintiffs asserted that,

after the flooding, they discovered acts and omissions attributable to Hardin Creek,

Timberframe, and S. Greene which plaintiffs claim caused, or contributed to, the

frozen pipes in the sprinkler system. These allegedly negligent acts and omissions

included leaving a vent open near the roof so as to allow the entry of cold air, and

establishing a thermal barrier between the newly enclosed kitchen and the open area

above it, so as to render the thermostat ineffective for regulating the temperature

above the kitchen ceiling where the fire sprinkler system pipes were located.

On 2 March 2015, defendants Hardin Creek, S. Greene, and Timberframe (the

original defendants) filed an answer. Along with general denials and admissions, the

answer averred that “plaintiffs and defendant Hardin Creek” were the only parties

to the lease and that “the other two defendants [S. Greene and Timberframe] did not

provide any services to plaintiffs in their (i.e., defendants’) names.” The original

defendants also raised four affirmative defenses: plaintiffs’ contributory negligence,

assumption of risk, failure to mitigate damages, and the economic loss doctrine.

Hardin Creek also reserved its “right to assert other affirmative defenses that become

known through discovery.” The original defendants also moved to dismiss plaintiffs’

negligence, breach of warranty, and unfair and deceptive trade practices claims

pursuant to N.C.G.S. § 1A-1, Rule 12(b)(6). On 8 March 2016, Hardin Creek amended

the answer and added two counterclaims, one alleging that plaintiffs had breached

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Opinion of the Court

their duty to maintain the premises and the other contending that plaintiffs had

violated the terms of the lease. Hardin Creek sought monetary damages for these

counterclaims.

On 14 April 2016, the original defendants moved for summary judgment

contending, inter alia, that plaintiffs’ claims against S. Greene and Timberframe

must be dismissed because they were not parties to the lease and any work that was

performed by Timberframe was on Hardin Creek’s behalf. In addition, the original

defendants asserted that the lease discharged Hardin Creek “from all claims and

liabilities arising from or caused by any hazard covered by insurance . . . regardless

of the cause of the damage or loss” pursuant to Paragraph 5(b) of the lease. On the

next day, plaintiffs moved to amend their complaint to add E. Greene as a party

defendant, alleging negligence and breach of the implied warranty of workmanlike

performance. On the same date, plaintiffs filed a motion to continue and to extend

the previously determined scheduling deadlines. On 22 April 2016, plaintiffs filed a

third-party complaint against E. Greene, bringing all claims alleged in their

complaint against him.

On 25 April 2016, the Honorable William Coward heard arguments on all

parties’ motions. On 27 April 2016, the trial court granted summary judgment in

favor of defendants and dismissed the complaint with prejudice. The trial court found

that: (1) plaintiffs “presented no plausible reasons why further discovery would shed

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any light on [P]aragraph 5(b) in the Lease,” and (2) “[P]aragraph 5(b) in the lease is

not ambiguous and is a complete defense to the claims raised in the Complaint.” The

trial court sua sponte granted summary judgment in favor of plaintiffs on Hardin

Creek’s counterclaims. Finally, the trial court dismissed with prejudice plaintiffs’

third-party complaint against E. Greene and dismissed as moot plaintiffs’ motion to

amend complaint and motion to continue. Plaintiffs filed their notice of appeal to the

Court of Appeals on 20 May 2016.

At the Court of Appeals, plaintiffs argued that the trial court erred in granting

summary judgment in favor of defendants. Specifically, plaintiffs contended that the

language of Paragraph 5(b) of the lease—that the parties “discharge[d] each other

from all claims and liabilities arising from or caused by any hazard covered by

insurance . . . regardless of the cause of the damage or loss, provided that such cause

does not prevent payment of insurance proceeds to Landlord under the provisions of

the applicable policy”—was ambiguous in that it did not clearly reflect the intent of

the parties to bar negligence claims against each other. A majority of the Court of

Appeals panel agreed with plaintiffs, concluding that the trial court’s summary

judgment ruling was erroneous. Morrell v. Hardin Creek, Inc., ___ N.C. App. ___, 803

S.E.2d 668, 675 (2017). In reaching that result, the majority opined that the

references in Paragraph 5(b) to “any hazard covered by insurance” and “payment of

insurance proceeds” require that this provision be read in conjunction with

Paragraph 8 of the lease, which

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purports to define the type and amount of insurance
[d]efendants required [p]laintiffs to carry. Paragraph 8
also includes the terms under which [p]laintiffs would
indemnify [d]efendants for damages covered by insurance.
However, Paragraph 8 is incomplete. The opening
sentence of Paragraph 8 states “Tenant shall maintain
insurance in accordance with the provisions of
subparagraphs (a) and (b) of this paragraph, and Tenant
shall indemnify Landlord in accordance with the provisions
of sub-paragraph (c).” The text of subparagraphs (a) and
(b) follow this sentence. Subparagraph 8(a), titled
“Property Insurance,” contains indemnification language
and states [p]laintiffs hold Hardin Creek harmless for
damages or losses caused by fire to [p]laintiffs’ furniture,
fixtures, and equipment. Subparagraph 8(b), titled
“Liability Insurance,” defines the types and amounts of
liability insurance [d]efendants required [p]laintiffs to
carry. There is not a Subparagraph 8(c).

Both [P]aragraph 5(b) and Paragraph 8 refer to
limits on Hardin Creek’s liability under the lease. The
incomplete construction of Paragraph 8 creates an
ambiguity as to the type and amount of insurance Hardin
Creek required of [p]laintiffs. The incomplete construction
of Paragraph 8 also creates an ambiguity relating to the
scope of [P]aragraph 5(b). The language the trial court
relied on in [P]aragraph 5(b) refers to any “hazard covered
by insurance on the leased premises.” However, when
[P]aragraph 5(b) is read in connection with Paragraph 8,
the exact meaning of the term “covered by insurance” is
ambiguous. It is unclear whether that term refers to
hazards covered only by insurance coverage as required by
the lease, or whether that term is modified by the language
in the missing subparagraph on indemnification.

Id. at ___, 803 S.E.2d at 674. The majority went on to observe that, even if the lease

was unambiguous as to indemnification, the majority still would have concluded that

Paragraph 5(b) did not serve as a bar against claims arising out of negligence because

a “contract will never be so interpreted [to exempt liability for negligence] in the

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absence of clear and explicit words that such was the intent of the parties.’ Id. at ___,

803 S.E.2d at 674 (alteration in original) (quoting Winkler v. Appalachian Amusement

Co., 238 N.C. 589, 596, 79 S.E.2d 185, 190 (1953)). Based upon its own cases applying

this reasoning, the Court of Appeals reversed the trial court’s entry of summary

judgment in favor of all defendants and remanded the matter for further proceedings.

Id. at ___, 803 S.E.2d at 674-76. The court further determined that it could not

“review or resolve the issue of the various [d]efendants’ degree of involvement in

modifying the sprinkler system from our record on appeal” and added that “[t]his is

an issue for the trial court which the trial court may be able to resolve upon motion

for directed verdict.” Id. at ___, 803 S.E.2d at 675-76. On remand, the trial court was

also directed to “resolve and reconsider [p]laintiffs’ motion to add E. Greene as [ ] a

defendant to this action” because the trial court’s denial of that motion in the first

instance was a consequence of its order granting summary judgment in defendants’

favor. Id. at ___, 803 S.E.2d at 676.

The dissenting judge would have held that the trial court’s grant of summary

judgment in favor of defendants was proper, based on his conclusion that Paragraph

5(b) “is unambiguous and operates as a complete defense to [all] claims raised by

[p]laintiffs.” Id. at ___, 803 S.E.2d at 676 (Berger, J., dissenting). Quoting Gibbs v.

Carolina Power & Light Co., 265 N.C. 459, 467, 144 S.E.2d 393, 400 (1965), for the

proposition that “when the language of the contract and the intent of the parties are

clearly exculpatory, the contract will be upheld,” the dissenting judge found that the

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language in Paragraph 5(b)—“notwithstanding any other provision of this lease to

the contrary, Landlord and Tenant . . . agree and discharge each other from all claims

and liabilities arising from or caused by any hazard covered by insurance . . . ,

regardless of the cause of the damage or loss”—showed that “the parties clearly and

explicitly waived all claims, including claims for negligence.” Id. at ___, 803 S.E.2d

at 676-78. In addition, rather than finding ambiguity in the terms of Paragraph 8

regarding the parties’ intent to waive negligence claims against each other, the

dissenting judge determined that “[i]ncluding an insurance requirement is evidence

of the parties’ intent to relieve the other from any liability or damages, including

damages related to negligence.” Id. at ___, 803 S.E.2d at 679.

On 20 September 2017, defendants filed a notice of appeal based upon the

dissent in the Court of Appeals. They also filed a petition for discretionary review of

additional issues, which this Court allowed on 1 November 2017. Morrell v. Hardin

Creek, Inc., ___ N.C. ___, 805 S.E.2d 695 (2017).

Standard of Review

Summary judgment is proper “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that any party is entitled to a

judgment as a matter of law.” N.C.G.S. § 1A-1, Rule 56(c) (2017). A ruling on a

motion for summary judgment must consider the evidence in the light most favorable

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to the non-movant, drawing all inferences in the non-movant’s favor. Dobson v.

Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000) (citations omitted). The standard

of review of an appeal from summary judgment is de novo. In re Will of Jones, 362

N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citation omitted). Likewise, whether the

language of a contract is ambiguous is a question of law to be reviewed de novo. See

Bicket v. McLean Secs., Inc., 124 N.C. App. 548, 553, 478 S.E.2d 518, 521 (1996)

(citations omitted).

Analysis

A. Claims Against Hardin Creek

“Interpreting a contract requires the court to examine the language of the

contract itself for indications of the parties’ intent at the moment of execution.” State

v. Philip Morris USA Inc., 359 N.C. 763, 773, 618 S.E.2d 219, 225 (2005) (citing Lane

v. Scarborough, 284 N.C. 407, 409-10, 200 S.E.2d 622, 624 (1973)). “The heart of a

contract is the intention of the parties, which is to be ascertained from the expressions

used, the subject matter, the end in view, the purpose sought, and the situation of the

parties at the time.” Gould Morris Elec. Co. v. Atl. Fire Ins. Co., 229 N.C. 518, 520,

50 S.E.2d 295, 297 (1948) (citation omitted). Although parties may generally contract

“to bind themselves as they see fit,” “contracts exempting persons from liability for

negligence are not favored by the law, and are strictly construed against those relying

thereon.” Hall v. Sinclair Ref. Co., 242 N.C. 707, 709, 89 S.E.2d 396, 397-98 (1955).

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For this reason, exculpatory clauses will not be “construed as to exempt the

indemnitee from liability for his own negligence or the negligence of his employees in

the absence of explicit language clearly indicating that such was the intent of the

parties.” Hill v. Carolina Freight Carriers Corp., 235 N.C. 705, 710, 71 S.E.2d 133,

137 (1952). Thus, even when the issue before a court is whether an agreement

exempts a party thereto from liability for its own negligence, the central question

remains the same as in any contract interpretation case: what did the parties intend?

“[W]hen the language of the contract and the intent of the parties are clearly

exculpatory, the contract will be upheld.” Gibbs, 265 N.C. at 467, 144 S.E.2d at 400.

As previously noted, the cases relied upon by the majority below are decisions

of the Court of Appeals—William F. Freeman, Inc. v. Alderman Photo Co., 89 N.C.

App. 73, 365 S.E.2d 183 (1988), and Lexington Insurance Co. v. Tires Into Recycled

Energy & Supplies, Inc., 136 N.C. App. 223, 522 S.E.2d 798 (1999), disc. rev. denied,

351 N.C. 642, 543 S.E.2d 872 (2000)—that in turn were based upon this Court’s

decision in Winkler. We stated in Winkler that “[c]ontracts for exemption from

liability for negligence are not favored by the law, and are strictly construed against

the party asserting it. The contract will never be so interpreted in the absence of clear

and explicit words that such was the intent of the parties.” Winkler, 238 N.C. at 596,

79 S.E.2d at 190 (emphasis added) (citation omitted). A close examination of the facts

in Winkler is useful in understanding why the Court of Appeals erred in finding that

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the lease in the instant case was ambiguous regarding the parties’ intent to exempt

each other for liability for negligence.

Winkler arose from an action brought by the plaintiff-landlord against his

tenant for damages incurred when a theater building burned, allegedly as the result

of the defendant-tenant’s negligent operation of a popcorn machine. Id. at 589, 79

S.E.2d at 186. In the trial court, the defendant-tenant asserted, inter alia, “that the

language of paragraphs 3 and 9 of the lease relieved the defendant from liability for

damages by fire, no matter if caused by its own negligence” and the plaintiff-landlord

was nonsuited. Id. at 594, 79 S.E.2d at 189. On appeal, just as in the instant case,

this Court considered whether two lease provisions were ambiguous regarding the

parties’ intent as to the allocation of risk from the tenant’s negligence:

The first question involved is: Whether the words in
the lease in paragraph 9 “the lessees agree that they will,
at the expiration of this lease, deliver up and return
possession of the premises to the lessors in as good order,
repair and condition as at present, ordinary wear and tear
excepted, and damage by fire . . . excepted,” and the words
in paragraph 3 “the lessees . . . shall, at their own cost and
expense, make any and all repairs that may be necessary
inside the portion of the building hereby demised,
excepting in case of destruction or damage by fire,” exempt
the defendant from liability for damage by fire caused by
its actionable negligence, if there was such actionable
negligence on its part.

Id. at 596, 79 S.E.2d at 190-91 (ellipses in original) (emphasis added). This Court

noted the “implied obligation on the part of the lessee to use reasonable diligence to

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treat the premises demised in such manner that no injury be done to the property,

but that the estate may revert to the lessor undeteriorated by the willful or negligent

act of the lessee,” Id. at 594-95, 79 S.E.2d at 189, and then observed:

Similar words [to those in the theatre lease] have been used
in leases for many years to relieve the lessee from any
liability caused by accidental fires, or fires caused by the
wrongful act of another. Did these words mean that the
lessee was to be exculpated from a fire which was the result
of its own negligence? Such a concession would scarcely be
looked for in a contract between business men. If the
parties intended such a contract, we would expect them to
so state in exact terms. It would be natural for the lessee,
who had contracted to keep up repairs, to desire to escape
liability for purely accidental fires and for the lessor to be
willing to grant that relief, but it would not be natural that
the lessor would be willing to release the lessee from
damage caused by its own active negligence. In our
opinion, the words in paragraphs 9 and 3 of the lease do
not exempt the defendant from liability for fire damage, if
caused by its actionable negligence.

Id. at 596, 79 S.E.2d at 191. This Court therefore determined that the requirements

in paragraphs 3 and 9 that the theatre be returned to the landlord in “good order”

and “undeteriorated” other than by ordinary wear and tear, and that the tenant bear

the costs of all such needed repairs other than those caused by fire, did not reveal a

clear intent to go beyond the typical or “natural” contractual bargain and waive a

party’s liability for damages caused by that party’s own negligence. Id. at 598, 79

S.E.2d at 192.

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The Court went on in Winkler to reject the defendant-tenant’s contention that

another paragraph of the lease providing “that the lessor shall keep the building

insured to the extent of its full insurable value[ ] exculpate[d] the defendant from

liability for fire damage caused proximately by its negligence.” Id. at 597, 79 S.E.2d

at 191. While acknowledging that “[u]pon paying a loss by fire, the insurer is entitled

to subrogation to the rights of insured against the third person tort-feasor causing

the loss, to the extent of the amount paid,” the Court opined that the fact “that the

insurer is entitled to recoup its loss out of what the defendant owes the plaintiff for

having negligently destroyed the insured building is of no legal concern to the

defendant.” Id. at 597-98, 79 S.E.2d at 191-92. Accordingly, the Court concluded that

“the language in the [theatre] lease does not expressly or impliedly exempt the

defendant from liability for any damage by fire to the demised premises caused

proximately by its negligence.” Id. at 598, 79 S.E.2d at 192.

The language in Paragraph 5(b) in the case at bar cited as exculpatory by

defendants and in the Court of Appeals dissent is readily distinguishable from the

provisions in Winkler that were deemed to lack a clear demonstration of the parties’

intent to indemnify each other for negligence. Rather than merely referring to the

tenant’s duty to return the premises in “good order” and to “make any and all repairs,”

the lease here explicitly exempted the parties “from all claims and liabilities arising

from or caused by any hazard covered by insurance on the leased premises . . .

regardless of the cause of the damage or loss.” (Emphasis added). Indeed, plaintiffs

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acknowledge that “this language is broad and expansive enough to encompass a wide

range of claims against Hardin Creek,” while asserting that “it is that very breadth

that makes the clause unable to satisfy the exacting standard under North Carolina

law for relieving Hardin Creek from liability for its own negligence.” Plaintiffs’

chameleonic construction of this contractual language is unworkable. Given the

“broad and expansive” nature of the phrase “all claims and liabilities . . . regardless

of the cause of the damage or loss,” it is a challenging exercise to conjure up language

in an exculpatory clause that would meet plaintiffs’ implied standard for unambiguity

regarding waiver of negligence-based claims other than to require such a waiver to

explicitly mention the term “negligence.” Neither Winkler nor any other precedent

from this Court, however, requires that a contract expressly include the term

“negligence” in order for an exculpatory clause to be enforced in the context of

negligence claims. Instead, such provisions must simply contain “clear and explicit

words that such was the intent of the parties.” Winkler, 238 N.C. at 596, 79 S.E.2d

at 190 (citation omitted). Here the phrase “from all claims and liabilities arising from

or caused by any hazard covered by insurance on the leased premises . . . regardless

of the cause of the damage or loss” is explicitly and effectively exculpatory as to “all

claims,” including those grounded in tort and caused by Hardin Creek’s alleged

negligence, which result from a “hazard covered by insurance . . . regardless of the

cause of the damage or loss.” (Emphasis added).

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Plaintiffs argue that the language in Paragraph 5(b) cannot be read to obligate

them to indemnify Hardin Creek from liability for claims for business losses—not

covered by insurance—arising from Hardin Creek’s negligence or other misconduct.

Plaintiffs misapprehend the lease provision. A plain reading of Paragraph 5(b)

reveals that the only limit on the scope of the exculpatory clause is not the type of

losses suffered, but the type of hazard that caused those losses. If the hazard that

caused plaintiffs’ alleged damages was covered by insurance—and it is undisputed

that the hazard of flooding that caused plaintiffs’ alleged damages was covered by

insurance—then plaintiffs are barred from bringing an action against Hardin Creek

for “all claims and liabilities” caused thereby, including “business losses.”

The dissent views the language at issue in Paragraph 5(b) of the lease in such

a manner so as to gratuitously equate plaintiffs’ interpretation of said language with

defendants’ construction of this provision. In examining this disputed language and

evaluating the parties’ respective positions concerning it, the dissent concludes that

“each provides a plausible interpretation of the plain language.” Based on the faulty

premise that plaintiffs’ version of the legal effect of the contested language in

Paragraph 5(b) substantively establishes an ambiguity in the provision’s

terminology, the dissent thereupon conveniently applies well-established rules of

contract interpretation pertaining to ambiguities and resorts to consultation of other

provisions of the lease in an effort to cultivate an ambiguity which was not planted

in the contract. This approach is further exacerbated by the dissent’s resolve to both

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Opinion of the Court

stretch and invert this Court’s reasoning in Winkler in an attempt to rationalize the

applicability of such reasoning to the parties in the instant case, even though they

occupy diametrically opposite positions from the parties in Winkler. Due to an initial

erroneous supposition that plaintiffs’ depiction of Paragraph 5(b)’s language at issue

as ambiguous is meritorious, coupled with a misplaced reliance on the applicability

of N.C.G.S. § 22B-1’s public policy declarations which do not apply to a building

outside of a contract “relative to the design, planning, construction, alteration, repair

or maintenance,” the dissent’s resulting analyses are misoriented and the ultimate

conclusions are unwarranted.

We likewise reject plaintiffs’ contention that the above-quoted portion of

Paragraph 5(b) is a waiver of subrogation clause that must be interpreted in context

with the other provisions of the lease respecting insurance and not be enforced beyond

the scope of the specific context in which it appears. In plaintiffs’ view, this Court

must look to the terms of Paragraph 8, which covers insurance requirements under

the lease, to understand the parties’ intent in Paragraph 5(b). Paragraph 8 required

plaintiffs to maintain property insurance to “hold Landlord harmless for loss or

damage by fire” and to maintain liability insurance to protect “the general public and

Landlord . . . against claims for bodily injury or death.” Plaintiffs suggest that those

requirements delimit the reference to “any hazard covered by insurance on the leased

premises” in Paragraph 5(b), and as a result, Paragraph 8 would not require plaintiffs

to maintain property insurance for flood damage or for property damage greater than

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Opinion of the Court

$100,000.00, and the exculpatory language in Paragraph 5(b) cannot apply to claims

arising from those hazards. In effect, plaintiffs ask this Court to read into Paragraph

5(b) the equivalent of the following bracketed language:

Landlord and Tenant and all parties claiming under them
agree and discharge each other from all claims and
liabilities [other than negligence and intentional torts]
arising from or caused by any hazard covered by insurance
[as specifically required under the terms of Paragraph 8 of
this lease] on the leased premises, or covered by insurance
[as specifically required under the terms of Paragraph 8 of
this lease] in connection with the property owned or
activities conducted on the leased premises, regardless of
the cause of the damage or loss [excepting intentional or
negligent acts of the Landlord], provided that such cause
does not prevent payment of insurance proceeds to
Landlord under the provisions of the applicable policy[; and
with the proviso that the minimum policy limits of the
insurance required in Paragraph 8 shall serve as the limits
on the liability for claims brought pertinent to this
provision].

The parties here could have entered into such an agreement that included the

imagined terms bracketed above, which plaintiffs intimate should be inferred in

construing Paragraph 5(b), but the parties did not do so. This Court cannot creatively

interpret the parties’ actual lease agreement in the manner urged by plaintiffs, and

must instead enforce the parties’ intent as evidenced by the clear and explicit

language of the lease. See Dawes v. Nash County, 357 N.C. 442, 449, 584 S.E.2d 760,

764 (2003) (stating that “courts must enforce the contract as written; they may not,

under the guise of construing an ambiguous term, rewrite the contract or impose

liabilities on the parties not bargained for and found therein” (quoting Woods v.

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 MORRELL V. HARDIN CREEK, INC.

Opinion of the Court

Nationwide Mut. Ins. Co., 295 N.C. 500, 506, 246 S.E.2d 773, 777 (1978))). The lease

executed by plaintiffs and Hardin Creek unequivocally demonstrates the parties’

intent to hold each other harmless regarding all liability for damage and loss arising

from hazards covered by the insurance obtained for the premises. The parties do not

dispute that the flooding of plaintiffs’ leased premises was a hazard covered by

insurance on the premises. Plaintiffs’ complaint does not allege that the acts or

omissions of any defendant prevented payment of insurance proceeds that became

due as the result of covered hazards, although the complaint alleges that plaintiffs’

damages exceeded their insurance policy limits. The trial court was correct in finding

that Paragraph 5(b) is unambiguous and functions as a complete defense to plaintiffs’

claims lodged against Hardin Creek, the only defendant that was undisputedly a

party to the contract. Accordingly, we reverse the decision of the Court of Appeals

with regard to all of plaintiffs’ claims with regard to Hardin Creek and find that the

trial court properly granted summary judgment in favor of Hardin Creek.

B. Claims Against S. Greene, Timberframe, and E. Greene

The trial court granted summary judgment in favor of defendants S. Greene

and Timberframe and also dismissed plaintiffs’ third-party complaint against E.

Greene with prejudice. The dissent below did not address these issues, but the Court

of Appeals majority determined that the case should be remanded to the trial court

to reconsider both matters. We agree with the lower appellate court’s approach

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Opinion of the Court

regarding these claims, in light of the insufficiency of the record to allow this Court

to fully assess the correctness of the trial court’s allowance of the dispositive motions

of defendants S. Greene, Timberframe, and E. Greene.

Although we reverse the Court of Appeals in its erroneous analysis of the lease,

we agree that the record is not sufficiently developed for our consideration of the

involvement of Timberframe and the individual defendants regarding modifications

to the premises. Therefore, we remand these matters to the trial court for

reconsideration of the remaining claims.

C. Hardin Creek’s Counterclaims

As previously noted, Hardin Creek’s counterclaims for negligence and breach

of contract were dismissed sua sponte by the trial court pursuant to N.C.G.S. § 1A-1,

Rule 56(c). At the time that the trial court dismissed these counterclaims, no

discovery had been conducted with respect to them, and they were not argued by the

parties at the hearing on defendants’ summary judgment motion. Under these

circumstances, Hardin Creek contends that the basis for the trial court’s dismissal of

said counterclaims could only have been that the exculpatory clause, applying equally

to Hardin Creek and to plaintiffs, concomitantly provided a complete defense to

plaintiffs’ claims and Hardin Creek’s counterclaims. We agree that this is the only

reasonable interpretation of the trial court’s order, and therefore proceed on this

premise.

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Opinion of the Court

In the Court of Appeals, Hardin Creek’s brief addressed the dismissal of its

counterclaims as follows:

Without diminishing the strength of [d]efendants’
argument that the Exculpatory Clause is valid and
enforceable and bars [p]laintiffs’ claims, [d]efendants, in
the alternative, ask the [Court of Appeals] to apply the
Exculpatory Clause equally to both parties; and if the
summary judgment in favor of [d]efendants is reversed, the
[c]ourt should reverse the dismissal of the counterclaims.

Plaintiffs characterized this language as only summarily addressing the dismissal of

the counterclaims, and the Court of Appeals agreed, opining:

[d]efendants fail to argue this issue and do not present this
[c]ourt with a reason to disturb the trial court’s order
granting summary judgment in favor of [p]laintiffs as to
[d]efendants’ counterclaims. Defendants have abandoned
this issue on appeal, and we consequently affirm the trial
court’s ruling as to [d]efendants’ counterclaims.

Id. at ___, 803 S.E.2d at 676. We believe the Court of Appeals erred in determining

that Hardin Creek abandoned this issue on appeal.

Whether the trial court erred in its resolution of Hardin Creek’s counterclaims

against plaintiffs depended on the same essential issue as did consideration of the

trial court’s resolution of plaintiffs’ claims against Hardin Creek, namely, a

determination of the meaning and effect of the exculpatory clause. Accordingly, the

same facts, arguments, and authorities were pertinent to this element of the case. A

repetition of these facts, arguments, and authorities would have served no useful

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Opinion of the Court

purpose. Under the specific circumstances presented here, we therefore conclude that

Hardin Creek did not abandon its counterclaims issue on appeal and instead

sufficiently presented the matter for review.

In light of our determination that the exculpatory clause bars plaintiffs’ claims

against Hardin Creek, this provision also bars Hardin Creek’s counterclaims against

plaintiffs. Therefore, although we disavow the reasoning and holding of the Court of

Appeals with regard to preservation of the counterclaims issue on appeal, the

ultimate result as to the resolution of Hardin Creek’s counterclaims remains the

same. The trial court’s grant of summary judgment in favor of plaintiffs on defendant

Hardin Creek’s counterclaims is upheld.

Conclusion

We affirm in part, affirm in part as modified, and reverse in part the decision

of the Court of Appeals, and we remand this matter to that court for further remand

to the trial court. While the summary judgment order is left undisturbed with regard

to the claims of plaintiffs against Hardin Creek and Hardin Creek’s counterclaims

against plaintiffs, on remand the trial court should consider plaintiffs’ claims against

the other original defendants, plaintiffs’ motion to add E. Greene as a defendant, and

any discovery motions implicated thereby.

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Opinion of the Court

AFFIRMED IN PART; MODIFIED AND AFFIRMED IN PART; REVERSED

IN PART; AND REMANDED.

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 Justice BEASLEY, concurring in part and dissenting in part

The majority today holds that an exculpatory clause in a commercial lease

absolves the landlord from liability for his improper construction or oversight of

construction of improvements pursuant to a lease modification agreement. In doing

so, the majority construes the written contract in favor of the drafter, construes an

exculpatory clause in favor of the party benefiting thereunder, and approves of the

grant of summary judgment in a case in which multiple genuine issues of material

fact have yet to be determined. For these reasons, I must respectfully dissent in part

from the majority’s opinion.

Plaintiffs’ claims against defendants included: (1) negligence against John

Sidney Greene (S. Greene), Hardin Creek, Inc. (Hardin Creek), and Hardin Creek

Timberframe and Millwork, Inc. (Timberframe); (2) breach of the implied warranty

of workmanlike performance against the same defendants; (3) constructive eviction

against Hardin Creek; (4) breach of the lease agreement’s covenant of quiet

enjoyment against Hardin Creek; and (5) unfair and deceptive trade practices against

S. Greene and Hardin Creek.

In their motion for summary judgment, defendants alleged that Hardin Creek

“was the entity responsible for getting the modifications done” and, therefore, no

claim of negligence against S. Greene or Timberframe could lie. Defendants further

alleged that there was no privity of contract between plaintiffs and S. Greene, or

between plaintiffs and Timberframe and, therefore, no claims for breach of the
 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

implied warranty of workmanlike performance could lie against these defendants.

Defendants alleged that Hardin Creek “was ready, willing, and able to restore the

premises” after the flooding event, but plaintiffs quit the lease before repairs could be

made. Therefore, defendant Hardin Creek could not be liable for constructive eviction

or breach of the covenant of quiet enjoyment. Finally, defendants argued that

paragraph 5(b) of the lease discharged any liability of Hardin Creek to plaintiffs as

to all five of the claims brought against it.

The trial court found that paragraph 5(b) was “a complete defense to the claims

raised in the Complaint” and that there were no genuine issues of material fact with

respect to any of the claims raised in plaintiffs’ complaint or the counterclaims raised

in defendants’ amended answer. The Court further found that plaintiffs’ third-party

complaint raised the same claims as the original complaint and was “substantively

and substantially identical to the proposed Amended Complaint.” Based upon those

findings, the trial court summarily dismissed all claims against all parties.1

1 Although the Court of Appeals did not reach this issue, I am compelled to briefly
note the troubling litigation tactics employed by defendants in this case, which plaintiffs did
raise on appeal to the Court of Appeals.
Defendants did not fully respond to discovery until being compelled by court order to
do so on 26 February 2016, more than one year after discovery requests were first filed. Over
the next six weeks, plaintiffs learned that legal title to the leased premises was actually
vested in S. Greene’s son and that a previously undisclosed agency relationship existed, and
their counsel was flooded with an amended answer containing counterclaims, 1,200 pages of
new discovery, six scheduled depositions (two of which were expert witnesses that defendants
cancelled just days prior), a mediation conference, a motion to strike, and a motion for
summary judgment, which defendants noticed for 10:00 a.m. on 25 April 2016 with a request
that it not actually be heard until after 4:00 p.m., or the next day, or later in the week,
because the parties’ previously scheduled mediation was also being held at 10:00 a.m. that

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Beasley, J., concurring in part and dissenting in part

Analysis

I. Standard of Review

When the trial court allows or denies a motion for summary judgment, we

review that ruling de novo. In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572,

576 (2008) (citing Forbis v. Neal, 361 N.C. 519, 523-24, 649 S.E.2d 382, 385 (2007)).

Summary judgment is appropriate “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that any party is entitled to a

judgment as a matter of law.” N.C.G.S. § 1A-1, Rule 56(c) (2017).

same day. Plaintiffs moved to continue the hearing and were being heard on that motion
when the trial court abruptly ordered summary judgment, in part sua sponte, for all
defendants. Plaintiffs have, by all accounts, prosecuted their claims diligently and in good
faith, while defendants have benefited from dilatory and prejudicial tactics.
Rule 6(b) of the North Carolina Rules of Civil Procedure provides that the trial court
may, in its discretion and upon a showing of cause, enlarge the time within which any act is
required to be done. N.C.G.S. § 1A-1, Rule 6(b) (2017). In deciding whether, in its discretion,
to grant a motion for continuance, the chief consideration is whether the grant or denial will
be in furtherance of substantial justice. Shankle v. Shankle, 289 N.C. 473, 483, 223 S.E.2d
380, 386 (1976). Additionally, we have stated that “it is error for a court to hear and rule on
a motion for summary judgment when discovery procedures, which might lead to the
production of evidence relevant to the motion, are still pending and the party seeking
discovery has not been dilatory in doing so.” Conover v. Newton, 297 N.C. 506, 512, 256
S.E.2d 216, 220 (1979). It is clear from the record before us that multiple issues of fact
remained to be determined, that plaintiffs had diligently pursued discovery for the preceding
nine months, and that plaintiffs reasonably expected to be given an opportunity to flesh out
those remaining issues of fact by completing discovery. This Court would certainly have
benefited from a more fully developed record. Under these circumstances, I would hold that
the trial court abused its discretion in denying plaintiffs’ motion to continue.

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Beasley, J., concurring in part and dissenting in part

“[T]he real purpose of summary judgment is to . . . pierce the pleadings and

determine whether there is a genuine issue of material fact,” Singleton v. Stewart,

280 N.C. 460, 464, 186 S.E.2d 400, 403 (1972), in order to “eliminate formal trials

where only questions of law are involved.” Kessing v. Nat’l Mortg. Corp., 278 N.C.

523, 534, 180 S.E.2d 823, 830 (1971). “The party moving for summary judgment has

the burden of clearly establishing the lack of any triable issue of fact.” Singleton, 280

N.C. at 464, 186 S.E.2d at 403 (citation omitted). “An issue is ‘genuine’ if it can be

proven by substantial evidence and a fact is ‘material’ if it would constitute or

establish any material element of a claim or defense.” Lowe v. Bradford, 305 N.C.

366, 369, 289 S.E.2d 363, 366 (1982) (citing Bone International, Inc. v. Brooks, 304

N.C. 371, 375, 283 S.E.2d 518, 520 (1981)). .

II. Scope of Exculpatory Clause

Because the trial court allowed summary judgment solely based on paragraph

5(b) of the lease agreement, this is principally a matter of contract interpretation.

“The heart of a contract,” i.e., the genuine issue, “is the intention of the parties, which

is to be ascertained from the expressions used, the subject matter, the end in view,

the purpose sought, and the situation of the parties at the time.” Gould Morris Elec.

Co. v. Atl. Fire Ins. Co., 229 N.C. 518, 520, 50 S.E.2d 295, 297 (1948). When the intent

of the parties is clearly expressed in a written contract that contains no ambiguities

requiring resort to extrinsic evidence or consideration of disputed facts, the contract

may be interpreted as a matter of law. Lane v. Scarborough, 284 N.C. 407, 410, 200

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 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

S.E.2d 622, 624 (1973). However, when an ambiguity exists, the intention of the

parties is a genuine issue of material fact to be determined by the jury, and summary

judgment is inappropriate. Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs.,

LLC, 365 N.C. 520, 525, 723 S.E.2d 744, 748 (2012) (finding summary judgment

improper when parties disputed the meaning of a provision in their contract and

construction of the document was required to ascertain their intent).

“An ambiguity exists in a contract when either the meaning of words or the

effect of provisions is uncertain or capable of several reasonable interpretations.” Id.

at 525, 723 S.E.2d at 748 (quoting Schenkel & Shultz, Inc. v. Hermon F. Fox & Assocs.,

362 N.C. 269, 273, 658 S.E.2d 918, 921 (2008)); see also St. Paul Fire & Marine Ins.

Co. v. Freeman-White Assocs., 322 N.C. 77, 366 S.E.2d 480 (1988) (finding dismissal

improper when parties’ disagreement about extent of insurance waiver provisions

and assignment of risk of loss indicated ambiguity). The majority declares that the

lease uses “clear and explicit language” which “unequivocally demonstrates the

parties’ intent to hold each other harmless regarding all liability for damage and loss

arising from hazards covered by the insurance obtained for the premises.”

But the parties contest the applicability and scope of the subparagraph at

issue, and each provides a plausible interpretation of the plain language thereof. The

entire provision disputed by the parties reads as follows:

(b) Tenant’s Neglect. Subject to the provisions set forth
in the following sentence, Tenant shall pay for the

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 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

cost of any repairs or damage resulting from the
negligence or the wrongful acts of his employees,
representatives or visitors. However, and notwith-
standing any other provision of this lease to the
contrary, Landlord and Tenant and all parties
claiming under them agree and discharge each other
from all claims and liabilities arising from or caused
by any hazard covered by insurance on the leased
premises, or covered by insurance in connection with
the property owned or activities conducted on the
leased premises, regardless of the cause of the
damage or loss, provided that such cause does not
prevent payment of insurance proceeds to landlord
under the provisions of the applicable policy.

Defendants argue that, under this provision of the lease, if the hazard is covered by

insurance, then all claims and liabilities arising out of that hazard are discharged,

regardless of the amount of insurance and regardless of the nature of the claim.

Plaintiffs contend that the same language releases each party from liability for “any

claim” that is (1) caused by hazard and (2) covered by insurance. The majority

opinion adopts defendants’ interpretation by zeroing in on the words “all claims . . .

arising from . . . any hazard covered by insurance.” In doing so, the majority asserts

that the plain reading is that “covered by insurance” modifies “hazard,” not “claims,”

and therefore, if the hazard that caused the damage was covered by insurance,

plaintiffs are barred from bringing any claim against defendant landlord related to

that hazard. While this is certainly a reasonable interpretation of that language, so

too is the interpretation offered by plaintiffs. Because both interpretations of the

exculpatory clause are reasonable, a genuine issue of material fact remains, and the

task of ascertaining the true intent of the parties at the time of contract formation is

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Beasley, J., concurring in part and dissenting in part

one for the jury, not the Court.

Despite asserting that the language is “clear and explicit,” the majority goes

on to construe that language, and does so in contravention of well-established rules

of interpretation by resolving the ambiguity in favor of the drafter, Root v. Allstate

Ins. Co., 272 N.C. 580, 585, 158 S.E.2d 829, 834 (1968) (noting the rule that any

“ambiguity in a written contract is to be construed against the party who prepared

the instrument” (citing Wilkie v. New York Mut. Life Ins. Co., 146 N.C. 513, 521, 60

S.E. 427, 430 (1908)); expressly declining to consider the contract provision in the

context of the whole agreement, Jones v. Casstevens, 222 N.C. 411, 413-14, 23 S.E.2d

303, 305 (1942) (stating the rule that “[s]ince the object of construction is to ascertain

the intent of the parties, the contract must be considered as an entirety” (quotation

and citation omitted)); and, rather than strictly construing the exculpatory clause,

giving it the broadest possible interpretation, Hall v. Sinclair Ref. Co., 242 N.C. 707,

709, 89 S.E.2d 396, 397-98 (1955) (noting that “contracts exempting persons from

liability for negligence are not favored by the law, and are strictly construed against

those relying thereon”); Hill v. Carolina Freight Carriers Corp., 235 N.C. 705, 710, 71

S.E.2d 133, 137 (1952) (stating that strict construction requires “explicit language

clearly indicating that such was the intent of the parties”). The majority also fails to

adhere to the principle that, in this procedural posture, we are required to view the

evidence in the light most favorable to the nonmovant, the plaintiff lessees. These

rules combine to mean that, in this case, any time we are asked to choose between

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 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

the meaning assigned by or most favorable to defendant landlord (the drafter and

party seeking benefit of the exculpatory clause) and the meaning assigned by or most

favorable to plaintiff lessees, the latter must prevail for purposes of determining

whether summary judgment was appropriate. Not only that, but to give the language

the meaning urged by defendants, we must find that it clearly and expressly states

the parties intention to exculpate defendant from liability for his own negligence, and

is clearly not susceptible to the meaning offered by plaintiffs.

The majority distinguishes the contract provision at issue here from the

provision considered by this Court in Winkler v. Appalachian Amusement Co., 238

N.C. 589, 79 S.E.2d 185 (1953). The majority finds the distinction between the

exculpatory language at issue in Winkler and this lease’s exculpatory language so

significant as to warrant a completely contrary holding. But the underlying

reasoning of the holding in Winkler is entirely applicable to the case at bar. There

we noted that:

It would be natural for the lessee, who had contracted to
keep up repairs, to desire to escape liability for purely
accidental fires and for the lessor to be willing to grant that
relief, but it would not be natural that the lessor would be
willing to release the lessee from damage caused by its own
active negligence.

Id. at 596, 79 S.E.2d at 190-91. The same reasoning is applicable here where the

liabilities are reversed. It would be natural for the lessor, who had contracted to

make a repair, to desire to escape liability for purely accidental hazards and for the

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 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

lessee to be willing to grant that relief, but it would not be natural that the lessee

would be willing to release the lessor from damage caused by the lessor’s own active

negligence. In Winkler we concluded that the language at issue did not evince a clear

intent to go beyond the “natural” contractual bargain by waiving one party’s liability

to the other for its own active negligence. Id. at 596, 79 S.E.2d at 191. Evidence of

that clear intent is necessary because, as the majority correctly notes, we must

strictly construe contracts that purport to exempt a party from its own negligence.

Hall, 242 N.C. at 709, 89 S.E.2d at 397-98.

I agree with plaintiffs that the broad and expansive language of paragraph 5(b)

cannot be read by this Court to explicitly express an intention that the lessor be

exculpated from its own active negligence. This argument is not “chameleonic.” It is

a correct interpretation of this Court’s holdings spanning more than sixty years. See,

e.g., Schenkel & Shultz, 362 N.C. at 274-75, 658 S.E.2d at 922 (distinguishing

indemnity clauses which may be broadly construed “to cover all losses, damages, and

liabilities which reasonably appear to have been within the contemplation of the

parties” from exculpatory clauses which “are not favored by the law” and must be

“strictly construed against the party asserting it” (first quoting Dixie Container Corp.

v. Dale, 273 N.C. 624, 627, 160 S.E.2d 708, 711 (1968), then quoting Hill, 235 N.C. at

710, 71 S.E.2d at 137)); Gibbs v. Carolina Power & Light Co., 265 N.C. 459, 467, 144

S.E.2d 393, 400 (1965) (noting that in “contracts whereby one seeks to wholly exempt

himself from liability for the consequences of his negligent acts,” both the language

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 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

of the contract and intent of the parties must be “clearly exculpatory” and will be

strictly construed (citing Winkler, 238 N.C. 589, 79 S.E.2d 185)); Dixie Fire & Cas.

Co. v. Esso Standard Oil Co., 265 N.C. 121, 126, 143 S.E.2d 279, 283 (1965) (strictly

construing lease provision requiring lessor to make all repairs and declining to

exempt lessee from its own negligence thereunder); Hill, 235 N.C. at 710, 71 S.E.2d

at 137 (noting the “universal rule” that a clause exempting a person from liability for

his own negligence is “strictly construed against the party asserting it”); cf. Hall, 242

N.C. at 709-11, 89 S.E.2d at 397-98 (strictly construing a contract provision which

discharged a defendant “from any and all claims, demands and liability for any loss,

damage, or injury, . . . by reason of any other casualty, whether due to the negligence

of [the defendant] or otherwise” and finding the language sufficiently clear and

explicit (first alteration in original)). If a party intends to be released from liability

for its own active or passive negligence, it must so state in explicit terms. Hardin

Creek did not. I can find no reason why the language at issue here differs so

materially from that at issue in Winkler as to require a contrary holding.

The majority also rejects outright plaintiffs’ reasonable contention that the

exculpatory clause must be interpreted in the context of the whole agreement,

particularly with respect to the other provisions of the lease requiring coverage by

insurance. The Court of Appeals correctly looked to the entire contract, noting that

the phrases in paragraph 5(b)—“any hazard covered by insurance” and “payment of

insurance proceeds”—required reference to another paragraph of the lease setting

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 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

out the parties’ intentions as to the required insurance coverages and the assignment

of risk between them. Morrell v. Hardin Creek, Inc., ___ N.C. App. ___, ___, 803

S.E.2d 668, 674 (2017). The majority today claims that it cannot look to other

provisions of the lease without adding language to the disputed paragraph explicitly

referencing the other provision. I can find no support in the law for this reasoning.

In fact, the majority’s rationale appears contrary to the fundamental law of contracts.

See, e.g., Restatement (Second) of Contracts § 202(2) (Am. Law Inst. 1979) (“A writing

is interpreted as a whole . . . .”); 17A C.J.S. Contracts § 399, at 287 (collecting cases

and stating the rule that “[a] contract must be interpreted or considered as a whole,

or in its entirety”); R. Lord, 11 Williston on Contracts § 32:1, at 603 (4th ed. 2012)

(“Primary rules of interpretation are always used by the courts to determine the

meaning of particular words or clauses found in a contract, and the contract as a

whole, regardless of whether the parties’ writing is clear or ambiguous.”). It is not

necessary that paragraph 5(b) expressly reference paragraph 8. We need not be

directed by the drafter to look at another paragraph. Our rules of construction

require that we do so to ascertain the meaning which, as nearly as possible,

approximates the parties’ intentions at the time of contract formation. Atl. & N.C. R.

Co. v. Atl. & N.C. Co., 147 N.C. 368, 61 S.E 185, 189-90 (1908) (discussing the need

to review contract language in light of the whole agreement). The majority

acknowledges that its reading of the disputed paragraph requires reference to “the

insurance obtained for the premises” and then refuses to consider the text of the lease

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Beasley, J., concurring in part and dissenting in part

setting out what that insurance might be. We are required to construe the language

of paragraph 5(b) not as a singular clause, but as a clause contained within a larger

paragraph which is part of the whole contract which in its totality expresses the

intention of the parties. Determining the intention of the parties requires reference

to the entire contract. Again, the task of ascertaining the parties’ intention at the

time of contract formation is one for the jury, not this Court.

Additionally, I agree with plaintiffs that, by statute, this promise to alter the

building cannot include a waiver of liability for negligence2 because such agreements

are explicitly against public policy:

Any promise or agreement . . . relative to the . . .
alteration, repair or maintenance of a building . . .
purporting to indemnify or hold harmless the promisee, the
promisee’s independent contractors, agents, employees, or
indemnities against liability for damages arising out of . . .
damage to property proximately caused by or resulting
from the negligence . . . of the promisee, its independent
contractors, agents, employees, or indemnitees, is against
public policy and is void and unenforceable.

N.C.G.S. § 22B-1 (2017).3 Therefore, even if we assume, arguendo, that the parties

2 In addition to the statutory mandate that one who contracts to improve a building
may not seek to exculpate himself for negligence relative thereto, the landlord who
undertakes to make repairs is also under a duty, implied by law, to do so with care. Bolkhir
ex rel Bolkhir v. N.C. State Univ., 321 N.C. 706, 709, 365 S.E.2d 898, 900 (1988). Additionally,
enforcement of exculpatory clauses between parties whose legal relationship gives rise to
special duties is against public policy. See Hall, 242 N.C. at 710, 89 S.E.2d at 398 (recognizing
that public policy prohibits a public utility from contracting to discharge its own negligence
and that “[t]he limitation is likewise uniformly applied to certain relationships such as that
of master and servant” (quoting Miller’s Mut. Fire & Ins. Ass’n of Alton, Ill. v. Parker, 234
N.C. 20, 22, 65 S.E.2d 341, 342 (1951))).
3 The majority contends that the statute is inapplicable because the contract between

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Beasley, J., concurring in part and dissenting in part

originally intended to discharge the lessor from liability for his own negligence, to the

extent that the agreement for the alteration of the building incorporated paragraph

5(b), the exculpatory clause cannot apply to the lessor’s promise to alter the building.

Our General Assembly has expressly declared such a promise to be void as against

public policy, and this Court therefore has no jurisdiction to enforce it. See Associated

Mech. Contractors, Inc. v. HDR Eng’g Inc. of the Carolinas, 178 F.3d 1282, 1999 WL

253539, at *5 (per curiam) (unpublished) (4th Cir. 1999) (noting that the statute

allows the promisor to indemnify the promissee for damages caused solely by the

promisor’s negligence, but that defendant’s indemnification provision could not be

otherwise enforced); accord Jackson v. Associated Scaffolders & Equip. Co., 152 N.C.

App. 687, 690-91, 568 S.E.2d 666, 668 (2002) (applying the statute to hold indemnity

clause in construction contract void as against public policy and therefore

unenforceable).

Conclusion

I would hold that determination of the full scope of paragraph 5(b) relative to

the alteration of the leased premises is a genuine issue of material fact that ought to

be submitted to a jury and that the trial court must determine whether, to the extent

the parties is not “relative to the design, planning, construction, alteration, repair or
maintenance” of a building. This assertion fails, however, to recognize that the damage
involved was, at least arguably, caused by the negligent “alteration” of the building by S.
Greene who very well may have been acting at the time in his capacity as a licensed general
contractor, rather than in his capacity as agent for the landlord. Again, these are genuine
issues of material fact more appropriately resolved by a jury.

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 MORRELL V. HARDIN CREEK, INC.

Beasley, J., concurring in part and dissenting in part

the exculpatory clause purports to shield defendants from liability for their own

negligence in altering the building, it is void as against public policy. I would also

hold that paragraph 5(b) is ambiguous as demonstrated by the parties’ differing,

reasonable interpretations of its meaning; and that resolution of the ambiguity

requires determination of issues of fact properly within the province of the jury.

Consequently, I would affirm the decision of the Court of Appeals below which held

that the trial court erred in allowing the motion for summary judgment in favor of

defendant Hardin Creek and remand to that court with instructions to further

remand for determination of these issues by the trial court.

I concur in that part of the majority’s opinion which affirms the Court of

Appeals’ decision to remand this matter to the trial court for reconsideration of the

liability of the remaining parties; however, I dissent as to that part of the opinion

which concludes that the lease provision at issue is a complete bar to plaintiffs’ claims

against Hardin Creek, and for the same reasons, I also dissent as to that part of the

majority’s opinion which disavows the Court of Appeals’ decision with regard to

preservation of defendants’ counterclaims.

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