No
No. 97-649
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 216
FIVE U'S, INCORPORATED,
Plaintiff and Appellant,
v.
BURGER KING CORPORATION, BURGER
KING OPERATING LIMITED PARTNER-
SHIP, and QSC, II, INC.,
Defendants and Respondents.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (1 of 11)4/19/2007 11:38:41 AM
No
APPEAL FROM: District Court of the First Judicial
District,
In and for the County of Lewis and Clark,
Honorable Thomas C. Honzel, Judge Presiding.
COUNSEL OF RECORD:
For Appellant:
Andrew J. Utick, Utick & Grosfield, Helena, Montana
For Respondents:
J. Robert Planalp, Landoe, Brown, Planalp & Braaksma, Bozeman,
Montana
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (2 of 11)4/19/2007 11:38:41 AM
No
Gary L. Walton, Poore, Roth & Robinson, Butte, Montana
Stuart L. Kellner, Hughes, Kellner, Sullivan & Alke, Helena, Montana
Submitted on Briefs: July 16, 1998
Decided: September 3, 1998
Filed:
__________________________________________
Clerk
Chief Justice J. A. Turnage delivered the Opinion of the Court.
¶ This is an action for damages for the negligent destruction of a Burger King
restaurant by fire. Five U's, Incorporated, appeals from a summary judgment of the
First Judicial District Court, Lewis and Clark County, in favor of defendants Burger
King Corporation (BKC) and Burger King Operating Limited Partnership
(BKOLP). We affirm.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (3 of 11)4/19/2007 11:38:41 AM
No
¶ The issues are:
¶ 1. Whether the District Court erred in granting summary judgment with respect to
the claim for damages for the destruction of the restaurant building by fire; and
¶ 2. Whether the court erred in granting summary judgment with respect to the
claim for damages for loss of rentals while the restaurant was being rebuilt.
¶ Five U's is a Montana corporation which owns the real property and building used
as the Burger King restaurant in Helena, Montana. Five U's leased the property and
building to BKC, a Florida corporation. Their lease agreement required BKC to
maintain fire and casualty insurance on the property. Under the agreement, Five U's
was required to rebuild in the event of fire or other casualty.
¶ In February 1986, BKC assigned its interest in the lease to BKOLP. A franchisee,
QSC, subleased the property and owned the restaurant equipment. Under the
sublease, QSC assumed responsibility to insure the restaurant against fire and other
casualties.
¶ On June 26, 1992, a grease fire destroyed the Helena Burger King restaurant.
Following the fire, QSC and Five U's agreed to distribute the $408,500 in insurance
proceeds first to Five U's to allow it to rebuild, with the remaining balance to QSC to
allow it to acquire new restaurant equipment. The restaurant reopened on December
12, 1992.
¶ Although the cost of rebuilding the restaurant was covered by the fire insurance,
Five U's nevertheless filed this tort action in June 1994 to recover the cost of
removing and replacing the Burger King building and the rental income lost while
the restaurant was being rebuilt. The District Court granted summary judgment in
favor of BKC and BKOLP. The court also granted partial summary judgment in
favor of QSC, leaving as the only issue for trial whether Five U's was entitled to lost
rentals from QSC. When Five U's later agreed to dismiss QSC from the suit,
summary judgment became final. Five U's appeals.
Standard of Review
¶ Under Rule 56(c), M.R.Civ.P., summary judgment shall be rendered "if the
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (4 of 11)4/19/2007 11:38:41 AM
No
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 the moving party is entitled to a judgment as a matter of law." This Court
uses de novo review to determine whether a trial court correctly granted summary
judgment. Public Employees' Ass'n v. Dept. of Transp., 1998 MT 17, ¶8, 954 P.2d 21,
¶8.
Issue 1
¶ Did the District Court err in granting summary judgment with respect to the claim
for damages for the destruction of the restaurant building by fire?
¶ The lease agreement between Five U's and BKC required BKC, as the lessee, to
keep the building insured "for the benefit of Lessor and Lessee" against loss or
damage by fire. Under its sublease, QSC undertook this responsibility to provide fire
insurance. The District Court ruled that the insurance proceeds paid to Five U's
from the policy purchased by QSC were paid on behalf of all of the defendants, due
to the nature of their relationship. The court further ruled that having been fully
compensated by insurance, Five U's is not entitled, as a matter of law, to be
compensated a second time for the same loss. The court stated, "Montana courts
have consistently held that when a plaintiff has been fully compensated for his injury,
he is not entitled to an additional damage award under any legal theory." The court
cited as authority for this principle Boyken v. Steele (1993), 256 Mont. 419, 847 P.2d
282, and State ex rel., Deere & Co. v. District Court (1986), 224 Mont. 384, 730 P.2d
396.
¶ Five U's contends that the District Court was in error because Boyken and Deere
involved joint tortfeasors and limited their holdings to liability as between joint
tortfeasors. The effect of insurance reimbursement under a contract obligation was
not an issue in either case. Five U's is correct that, in its statement quoted above, the
District Court extended the holdings of Boyken and Deere.
¶ In entering summary judgment, the District Court also cited Publix Theatres
Corporation v. Powell (Tex. 1934), 71 S.W.2d 237, as persuasive authority. In that
case, lessee Powell negligently caused a fire which destroyed lessor Publix Theatres
Corporation's building. After receiving payment from Powell's insurance company
for the market value of the building, Publix sued Powell for his negligence in
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (5 of 11)4/19/2007 11:38:41 AM
No
allowing the building to catch on fire. The court rejected Publix's contention that it
should be allowed to recover from Powell despite having received full compensation
from the insurance company. In its reasoning, the court stated:
When so destroyed, lessor's loss was the value of the destroyed property--that
was his interest in the insurance and when paid, of course, satisfied the loss, if
the loss equalled or was less than the amount of insurance. To permit the
lessor to keep the insurance money, in such a case, and then collect from the
tenant, would be a double recovery not sanctioned by law. If the fire resulted
from the tenant's negligence, the tenant is liable for the result of that
negligence, but, when he has provided for the resulting damages, either by
payment himself or by payment through an insuring company, he has satisfied
the claim of the damaged party.
Publix, 71 S.W.2d at 241. Like the building owner in Publix, Five U's has been fully
reimbursed for the cost of replacing the building destroyed in the fire.
¶ Although Five U's criticizes Publix as dated, the reasoning set forth therein remains
sound. The Restatement (Second) of Torts § 920A(1)(1977), states, "A payment made
by a tortfeasor or by a person acting for him to a person whom he has injured is
credited against his tort liability, as are payments made by another who is, or
believes he is, subject to the same tort liability." The first comment to this
Restatement section explains:
Payments by or for defendant. If a tort defendant makes a payment toward his
tort liability, it of course has the effect of reducing that liability. This is also
true of payments made under an insurance policy that is maintained by the
defendant, whether made under a liability provision or without regard to
liability, as under a medical-payments clause. This is true also of a payment
by another tortfeasor of an amount for which he is liable jointly with the
defendant or even by one who is not actually liable to the plaintiff if he is
seeking to extinguish or reduce the obligation.
Restatement (Second) of Torts § 920A(1), cmt. a (1977).
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (6 of 11)4/19/2007 11:38:41 AM
No
¶ Five U's asserts that comment a to § 920A does not apply to this case. Instead, it
argues that comment b, concerning the collateral source rule, controls. That
comment states:
Benefits from collateral sources. Payments made or benefits conferred by
other sources are known as collateral-source benefits. They do not have the
effect of reducing the recovery against the defendant. The injured party's net
loss may have been reduced correspondingly, and to the extent that the
defendant is required to pay the total amount there may be a double
compensation for a part of the plaintiff's injury. But it is the position of the
law that a benefit that is directed to the injured party should not be shifted so
as to become a windfall for the tortfeasor. If the plaintiff was himself
responsible for the benefit, as by maintaining his own insurance or by making
advantageous employment arrangements, the law allows him to keep it for
himself.
Restatement (Second) of Torts § 920A, cmt. b (1977).
¶ The collateral source rule states that benefits received by a plaintiff from a source
wholly independent of and collateral to the wrongdoer will not diminish the damages
otherwise recoverable from the wrongdoer. Tribby v. Northwestern Bank of Great
Falls (1985), 217 Mont. 196, 209, 704 P.2d 409, 417. Five U's asserts that when the
collateral source rule is correctly applied to the facts of this case, it should be allowed
a double recovery. It reasons that payment under the fire insurance policy was not
made toward anyone's tort liability, but toward contract liability. Five U's further
alleges that it was "responsible for" the fire insurance "by making an advantageous
lease arrangement whereby the franchisee . . . paid the fire insurance premium as
additional rent for the premises."
¶ In that allegation, Five U's is totally off the mark. Five U's was no more
"responsible for" fire insurance on the Burger King restaurant property under this
lease than it was for making rental payments to itself.
¶ Moreover, payment for the insurance policy was not wholly independent of and
collateral to BKC and BKOLP. QSC purchased fire insurance for the Burger King
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (7 of 11)4/19/2007 11:38:41 AM
No
restaurant pursuant to its assumption of BKC's duty to provide such insurance
under the lease with Five U's. Although Five U's consented to BKC's assignment of
the lease to BKOLP and the sublease to QSC, Five U's did not thereby release BKC
from its lease obligations, including the purchase of fire insurance. If fire insurance
was inadequate or lacking, Five U's would assuredly have wanted to hold both BKC
and its assignee BKOLP liable for breach of the lease provision requiring BKC to
keep the building insured.
¶ We conclude that the payment to Five U's under insurance purchased by alleged
cotortfeasor QSC should be credited against the tort liability of BKC and BKOLP.
We therefore hold that the District Court did not err in granting summary judgment
for BKC and BKOLP on the claim for damages for destruction of the Burger King
restaurant by fire.
Issue 2
¶ Did the court err in granting summary judgment with respect to the claim for
damages for loss of rentals while the restaurant was being rebuilt?
¶ The lease contract between Five U's and BKC provided:
If during the term of this lease the building, improvements in or appurtenant
to the demised premises shall be destroyed or damaged by fire, storm,
lightning, earthquake or other casualty, rental shall abate in such proportion as
use of the premises by Lessee has been destroyed, and Lessor shall restore
premises to substantially the same condition as before damage as speedily as
practical; whereupon, full rental shall commence.
Paragraph 12, Agreement to Build and Lease.
¶ Five U's argues that the measure of damages in this tort action is not limited by the
terms of the lease contract. It cites Miller v. Fallon County (1986), 222 Mont. 214, 721
P.2d 342, for the proposition that a party cannot contractually exculpate itself from
liability for willful or negligent violation of legal duties.
¶ In Miller, the plaintiff had waived, in writing, all claims for liability of the company
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (8 of 11)4/19/2007 11:38:41 AM
No
in whose vehicle she was subsequently injured while a passenger. This Court
determined that the waiver agreement violated the policy of the law and therefore
could not be relied upon. In other words, the contract was declared invalid as an
illegal contract. In the present case, as the District Court noted, the contract does not
seek to exculpate BKC from all liability for negligence; it simply includes a rent
abatement clause for periods during which the building is rendered unusable. There
is no provision which violates the policy of the law.
¶ When the language of a legal contract is clear and unambiguous on its face, it is the
duty of the courts to enforce the contract as the parties intended. First Sec. Bank v.
Vander Pas (1991), 250 Mont. 148, 153, 818 P.2d 384, 387. Here, Paragraph 12 of the
lease makes no distinction as to the cause of a fire, and therefore requires rent to
abate regardless of whether the fire was caused by events unrelated to BKC or by
BKC's negligence. Five U's may not circumvent the intent of the contract by suing
BKC and BKOLP in negligence to recover rent for the period for which the lease
clearly provided that rent was to abate.
¶ We conclude that the lease should be enforced as written, abating rental payments
when use of the premises has been destroyed. We hold that the District Court did not
err in granting summary judgment to BKC and BKOLP with respect to the claim for
damages for loss of rent payments while the restaurant was being rebuilt.
¶ We affirm the decision of the District Court.
/S/ J. A. TURNAGE
We concur:
/S/ JAMES C. NELSON
/S/ JIM REGNIER
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (9 of 11)4/19/2007 11:38:41 AM
No
/S/ KARLA M. GRAY
Justice W. William Leaphart did not participate.
Justice William E. Hunt, Sr. specially concurs and dissents.
¶ I concur in the Court’s opinion on issue one. I dissent from that opinion on issue
two. The Court has mixed apples and oranges in analyzing this issue. Appellant’s
complaint asserts negligence on the part of Respondents for the destruction of its
property and seeks to recover the lost rental, or use value, of the property for which
it was denied during the period of re-construction. An action to recover loss of use is
a tort and is governed by tort law. In focusing on the rent abatement clause of the
parties’ contract, and concluding that it precluded Appellant’s recovery of loss of
use, the majority erroneously used contract law to decide Appellant’s tort claim. The
rent abatement clause of the contract is irrelevant in deciding Appellant’s
entitlement to loss of use. Had Appellant sought damages under a breach of contract
theory, then the rent abatement clause would be relevant.
¶ Section 27-1-317, MCA, prescribes the damages recoverable in a tort action. That
statute provides:
For the breach of an obligation not arising from contract, the measure of
damages, except where otherwise expressly provided by this code, is the
amount which will compensate for all the detriment proximately caused
thereby, whether it could have been anticipated or not.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (10 of 11)4/19/2007 11:38:41 AM
No
Because Appellant brought this action in tort, I would reverse the decision of the District
Court on issue two and remand for further findings concerning the reasonable use value of
the property during the period of re-construction to which Appellant would be entitled
pursuant to § 27-1-317, MCA. I dissent from our failure to do so.
/S/ WILLIAM E. HUNT, SR.
Justice Terry N. Trieweiler:
I join in the concurring and dissenting opinion of Justice Hunt.
/S/ TERRY N. TRIEWEILER
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-649_(9-3-98)_Opinion.htm (11 of 11)4/19/2007 11:38:41 AM