Attorneys for Appellant
James R. Fisher
Debra H. Miller
Fred R. Biesecker
Indianapolis, IN
Attorneys for Amicus Curiae
William F. Conour
Ronald S. Todd
Indianapolis, IN
Attorneys for Indiana Trial Lawyers Association
Attorney for Appellee
Andrew P. Wirick
Indianapolis, IN
IN THE
INDIANA SUPREME COURT
MONTY R. YOUNG, Personal Representative of the Estate of Michael K. Young,
Deceased,
Appellant (Plaintiff below),
v.
TRI-ETCH, INC. d/b/a Sonitrol Security Systems of Muncie, Inc.,
Appellee (Defendant below).
)
)
)
)
) Supreme Court No.
) 18S02-0211-CV-616
)
)
)
)
APPEAL FROM THE DELAWARE CIRCUIT COURT
The Honorable Steven R. Caldemeyer, Judge
Cause No. 18C01-9908-CT-12
ON PETITION TO TRANSFER
June 26, 2003
SULLIVAN, Justice.
A liquor store employee was abducted and brutally beaten to death by
a late-night robber. The employee’s estate sued the store’s alarm service
for damages. The store’s contract with the alarm service limited the time
in which the store could sue the alarm company. We hold this time limit
does not apply to the estate because the employee was not a party to the
contract.
Background
On July 6, 1992, Tri-Etch, Inc., entered into a written contract with
MLS, Inc. (the owner of Muncie Liquors), to monitor the security alarm
system that Tri-Etch sold to and installed at the Muncie Liquors’ store on
Tillotson Avenue in Muncie. Tri-Etch’s obligation under the contract was
expressly limited to monitoring the alarm system while it was activated.
The contract also contained a clause requiring that any lawsuit against Tri-
Etch be filed within one year of the event giving rise to the lawsuit. [1]
In addition, there was evidence that Tri-Etch provided an additional
service to Muncie Liquors not described in the contract. If the store’s
alarm has not been set within a certain amount of time after the usual
closing time for the store, Tri-Etch would call the store. If no employee
answered, Tri-Etch would notify the store’s general manager and then call
the police. The store’s usual closing time was midnight. In the event the
alarm was not set by this closing time, Tri-Etch customarily notified the
Tillotson store or, if no answer, the general manager, by 12:30 a.m.
On August 12, 1997, Michael Young, an employee at the Tillotson
store, worked the closing shift. At some time after 11:50 p.m. and before
Young could activate the store alarm, Michael Moore robbed the store at
gunpoint, kidnapped Young, drove him to a nearby park, beat him severely,
and left him tied to a tree in the park. The alarm was never set. Tri-
Etch did not call the store or the general manager to notify Muncie Liquors
that the alarm had not been set until approximately 3:15 a.m. Young was
found alive at approximately 6:00 a.m. on August 13, 1997, but he died
later that day as a result of his injuries. The estate presented some
evidence that had Young been found earlier, he might have survived.
The estate filed a wrongful death action on August 6, 1999, claiming
Tri-Etch had assumed a duty to notify Muncie Liquors by 12:30 a.m. if the
alarm was not activated. Tri-Etch filed a motion for summary judgment,
asserting that Young’s wrongful death action was barred by the one-year
limitations period contained in the contract between Muncie Liquors and Tri-
Etch mentioned supra and set forth in footnote 1. The trial court found
that Young’s claim was governed by the terms of the contract and that more
than one year had passed between Young’s murder and the filing of the
complaint. It granted summary judgment for Tri-Etch based upon the service
contract’s one-year limitation on actions.[2]
The Court of Appeals affirmed, finding that the one-year liability
limitation applied to the estate’s claim and if the limits did not apply
“greater rights [would be granted to Young] under the contract than the
parties themselves had under that contract.” Young v. Tri-Etch, Inc., 767
N.E.2d 1029, 1034 (Ind. Ct. App. 2002). We granted the estate’s petition
to transfer. 783 N.E.2d 702 (Ind. 2002) (table).
Discussion
The plaintiff estate contends that defendant Tri-Etch was guilty of
negligence, a tort. Tri-Etch argues that any responsibility it has to the
estate is solely derivative of and governed by the terms of the contract
between it and Muncie Liquors and that those terms include a requirement
that any lawsuit brought against it be filed within one year.
The trial court and Court of Appeals both took the view that any
rights the estate had “were derivative of the business relationship between
Muncie Liquors and Tri-Etch” and that the one-year limitation period
applied. 767 N.E.2d at 1034.
The reasoning of both courts was based on their respective readings
of a Court of Appeals case, Orkin Exterminating Co., Inc. v. Walters, 466
N.E.2d 55 (Ind. Ct. App. 1984), trans. denied, disapproved on other
grounds, Mitchell v. Mitchell, 695 N.E.2d 920, 922 (Ind. 1998).
In Orkin, the plaintiff asked Orkin Exterminating Co. to inspect her
home for insect infestation. After insects were discovered, plaintiff
signed a “Subterranean Termite Agreement” which provided for an initial
treatment and Orkin’s “Continuous Protection Guarantee” for an annual fee.
Upon treatment, plaintiff received the “Lifetime Re-treatment Guarantee”
which guaranteed additional treatments at no cost if termites reappeared
during the guarantee period. This agreement expressly limited Orkin’s
liability to re-treatment only and expressly waived any liability for
termite damage to the structure or the contents. Plaintiff discovered
continued termite damage and sued Orkin for negligent breach of contract.
The trial court entered judgment for the plaintiff, finding that Orkin’s
breach of duty constituted “tortious malfeasance,” and allowed the
plaintiff to recover damages in tort. Orkin, 466 N.E.2d at 58. The Court
of Appeals reversed the trial court, noting that a “suit based in tort does
not change the fact that Orkin’s duty to [the plaintiff] is based on the
contract.” Id. In addition, “bringing a suit in tort does not allow [the
plaintiff] to avoid the limitation of liability clause in the contract.”
Id.
Contrary to the Court of Appeals and trial court’s findings, Orkin
does not control in this case. Orkin involved a tort lawsuit between the
two parties to a contract, under which both parties agreed to the liability
limitation provision. The present case, however, involves a tort lawsuit
between one of the original parties to a contract that contains a liability
limitation provision and a nonparty who never agreed to the terms of the
contract.
Guidance is more readily available from other jurisdictions than from
Indiana precedent. Both Scott & Fetzer Co. v. Montgomery Ward & Co., 493
N.E.2d 1022 (Ill. 1986), and Lovell v. Sonitrol of Chattanooga, Inc., 674
S.W.2d 728 (Tenn. Ct. App. 1983), addressed the feasibility of tort claims
against installers of security systems.
In Scott & Fetzer Co., a fire started in the portion of a large
warehouse that was rented by Montgomery Ward & Co., Inc. (Ward). Ward had
an agreement with Burns Electronic Security Services, Inc. (Burns), for the
installation and maintenance of fire-warning systems in Ward’s rental
space. This contract contained an exculpatory provision that limited
Burns’s liability “in actions brought by Ward[] or some party who had
property stored in Ward[’s] portion of the warehouse.” Scott & Fetzer Co.,
493 N.E.2d at 1030. The detection equipment allegedly malfunctioned and
the fire spread throughout the warehouse, causing extensive damage to
Ward’s property as well as property belonging to adjacent tenants. The
adjacent tenants filed suits seeking recovery based on Burns’s alleged
negligence. The court found that dismissal was not proper on the grounds
that the contract between Burns and Ward contained an exculpatory clause.
Rather, the court found that “the clear and explicit language of the
contract [did] not require that it be construed as barring or limiting the
rights of the adjacent tenants, nor [was] such intention expressed in
unequivocal terms.” Id. at 1027. Thus, the exculpatory clause found in
the contract “[did] not affect Burns’[s] duty to the adjacent tenants.”
Id.
Likewise, in Lovell¸ the Lovells owned property that was leased by
Dust-Tex Rental Services, Inc. Dust-Tex had a contract with Sonitrol of
Chattanooga for the installation of smoke detection equipment, within which
was a provision that limited damages “due to a failure of services” to
$250. Lovell, 674 S.W.2d at 729. A fire occurred on the rental property.
It was alleged that the fire was incurred because the warning system failed
to timely detect and warn of the presence of the fire. The appellate court
found that in light of testimony regarding the intent of the contract
coverage, summary judgment was not proper. Id. at 732. In reaching this
determination, the court noted that “even if the exculpatory clause was
intended to include the smoke alarm service, it would not be binding as to
Mr. and Mrs. Lovell, who were not parties to the agreement.” Id.
The written contract between Muncie Liquors and Tri-Etch, as outlined
above, is expressly limited to the monitoring of the premises during the
hours when the store is closed and the alarm is activated. Since Young was
not a party to the contract, and thus never consented to the terms of the
contract, the contract simply does not impose any obligations or
limitations on him.[3]
Given that the plaintiff did not agree to the contract, the express
terms of the contract do not serve to limit the estate’s recovery
opportunities. Rather, the contract’s provisions do not apply to the
estate under these facts. Consequently, summary judgment for Tri-Etch
based on the contract’s requirement that all actions on it be brought
within one year of occurrence was not appropriate.
Conclusion
Having previously granted transfer pursuant to Indiana Appellate Rule
58(A), we now reverse the judgment of the trial court. We remand this
matter to the trial court for further proceedings consistent with this
opinion.
SHEPARD, C.J., and DICKSON, BOEHM, and RUCKER, JJ., concur.
-----------------------
[1] Paragraph 13, page 2 of the contract reads:
All claims, actions or proceedings, legal or equitable, against DEALER
[Tri-Etch] must be commenced in court within one (1) year after the
cause of action has occurred or the act, omission or event occurred
from which the claim, action or proceeding arises, whichever is
earlier, without judicial extension of time, or said claim, action or
proceeding is barred, time being of the essence of this paragraph.
(App. at 55.)
[2] There was disagreement at oral argument over whether the trial court
granted summary judgment to Tri-Etch on more than one ground. Tri-Etch
sought summary judgment on several bases: (1) that the contract required
any claims to be filed within one year; (2) that the contract limited any
damages to the lesser of one-half year’s monitoring payments or $500; (3)
that Young was not a third party beneficiary; and (4) that Tri-Etch owed no
duty of care to Young as a matter of tort law. As will be discussed below,
the trial court found that any claim that Young might have against Tri-Etch
sounded in contract and not tort on the authority of Orkin Exterminating
Co., Inc. v. Walters, 466 N.E.2d 55 (Ind. Ct. App. 1984), trans. denied,
disapproved on other grounds, Mitchell v. Mitchell, 695 N.E.2d 920, 922
(Ind. 1998), and that the one-year limitation provision in the contract
precluded Young’s recovery. (Conclusions of Law ¶11, 13, App. at 15, 16.)
As such, it was unnecessary for the trial court to, and the trial court
explicitly did not, rule on the damage limitations and third party
beneficiary arguments. (Conclusions of Law ¶11, App. at 15.)
More importantly, because the trial court was of the view that Young
had no tort claim against Tri-Etch, the trial court did not rule on whether
Tri-Etch had a duty to Young as a matter of tort law. Because the courts
below have not addressed the question of Tri-Etch’s duty, if any, to Young
as a matter of tort law, that issue is not before us.
[3] On rehearing, the Court of Appeals held that because “Tri-Etch would
have had no relationship with Young at all were it not for the service
contract . . . the liability limitations in the contract are controlling
over Young’s claim against Tri-Etch.” Young v. Tri-Etch, 773 N.E.2d 298,
299 (Ind. Ct. App. 2002). However, this position contradicts well-
established areas of law. For example, under workers’ compensation law,
the employment contract ultimately restricts the legal rights and
obligations between the employer and the employee. However, it is quite
common for an employer to then enter into a separate contract with a third
person, whether for goods or services, which may contain its own set of
liability limitations. The Worker’s Compensation Act, however, does not
limit employee actions against third persons, even though the employee
would likely have no relationship with that third party if not for the
contract the third party had with the employer. See I.C. 22-3-2-6; see
also Ross v. Schubert, 388 N.E.2d 623, 627 (Ind. Ct. App. 1979) (no
indication that the Legislature ever intended to reach beyond the
employment relationship so as to benefit a third party by limiting recovery
as to that party).