Opinion
No. 39557
Decided April 20, 1966.
Negligence — Tenant injured because of defective carpeting in hallway of apartment building — Liability of agent having exclusive management and control of building.
Whoever undertakes to manage real property pursuant to a contract for a fixed period terminable by the owner only upon a bona fide sale of the property and, under such contract, accepts exclusive management and control of the premises and has power and authority to select and dispossess all tenants, rent at stipulated rents any part of the premises, execute and enforce all leases, hire, pay, control and discharge all employees with respect to the premises, and make all ordinary repairs, all without control by the owner, has sufficient possession and control of a hallway of such premises for the common use of all tenants, and the carpeting therein, to be liable to a tenant of the premises for injuries arising from a defect in such carpeting which ordinary repairs could have corrected.
APPEAL from the Court of Appeals for Cuyahoga County upon the allowance of a motion to certify the record.
Beatrice Jacobs, appellant herein, commenced this action in the Court of Common Pleas of Cuyahoga County against Mutual Mortgage and Investment Company, appellee herein, to recover for personal injuries which she sustained in the hallway of an apartment house in which she was a tenant when she caught her foot in a tear in the carpeting and fell to the floor.
The defendant was the manager of the premises for the owner under a written management contract. At the trial there was evidence that prior to the accident plaintiff had reported the tear in the carpeting several times to the custodian, who was hired by defendant. The jury returned a verdict for plaintiff in the amount of $15,000. The trial court ordered a remittitur of $4,500, which was accepted, and granted judgment in favor of plaintiff in the amount of $10,500.
"Property Management Agreement.
"The Mutual Mortgage and Investment Company, hereinafter called the `Company' and The Fairhill Company, hereinafter called the `Owner' mutually agree as follows:
"The Owner gives to the Company, as its Agent, and the Company accepts the exclusive management and control of the following described property:
"Known as the Fairhill Apartment Building and situated on land known as being part of sub lots Nos. 112, 113 and 114 in a Re-Subdivision of part of The Van Sweringen Company's Subdivision No. 20 and further known as No. 13660 Fairhill road in the City of Shaker Heights, Cuyahoga County, Ohio. "For the period of three (3) years beginning on the 1st day of August, 1947, and ending on the 31st day of July, 1950, and thereafter at the option of the Owner upon the following terms and conditions:
"1. The Company shall have the power and authority:
"(a) To advertise, display signs upon, select all tenants and rent all or any part of the said premises at the rates now registered with, and approved by the O.H.E. and subject to O.H.E. Regulations, or at such rates as may be permissible in law and agreed upon between the parties;
"(b) To make and execute leases; to collect the rents and income from the premises; to prosecute any and all legal proceedings for the recovery of possession of any part of the leased premises and/or for the recovery of rentals due therefor and to settle, compromise and adjust suits, claims, and disputes arising out of such matters;
"(c) To make or cause to be made all ordinary repairs and such emergency repairs necessary and incident to the negotiation of a lease, or the rental of any part of the premises as may, in the discretion of the company, be necessary and proper. Any permanent replacements and improvements, costing in excess of five hundred and no/100 dollars ($500) that may be required, in the judgment of the Company, are to be made with the approval of the Owner;
"(d) To hire, manage, control, pay and discharge all managers, janitors and other employees; to purchase all supplies and to pay all bills.
"2. It is mutually understood and agreed:
"(a) That all costs, charges, expenses and wages which may be incurred by the Company in executing any or all of the powers hereinbefore granted to it, shall be charged to the account of the Owner, — no profit to be added; that all persons employed by the Company in the management and operation of said building shall be considered as agents and employees of the Owner and not sub-agents of the Company;
"(b) That it shall not be incumbent upon the Company to perform any act or duty hereunder involving the expenditure of money unless the Company shall have in its possession a sufficient fund available therefor, and if at any time the funds so in the possession of the Company are not sufficient to pay the expenses from time to time incident to the performance of this agreement, the Owner agrees that upon the request of the Company, it will supply the sum necessary to pay such deficit. The Company may, however, in its discretion, make advances for such purpose;
"(c) That it shall not be incumbent on the Company to institute any legal proceedings unless requested so to do in writing by the Owner, and no provision of this agreement shall be construed as a guaranty by the Company of the performance of any act or duty assumed by it, but the Company's duties under this agreement shall be fully complied with upon its exercising reasonable diligence in their performance.
"3. The Owner agrees to carry public liability insurance on said premises which shall contain a clause protecting the Company, and further to indemnify and save harmless the Company from any and all liability for loss or damages for injuries suffered or claimed, either to person or property, by anyone, whether a tenant, employee or other person, arising in any way out of the condition or use of the premises, or of the public or private property adjacent thereto, or arising from the acts or omissions of any person in or about the same, and for any expenses incurred by the Company arising out of any claim or action for such loss or damage;
"4. The Company shall furnish the services of its organization in the renting, management and operation of said premises, and as its compensation for such services shall be entitled to receive and to deduct from any sums collected by it a commission of two percentum (2%) of the gross amount of rentals accruing from and collected for said premises;
"5. The Company shall, on or about the 10th day of each month, render to the Owner a monthly statement of receipts, disbursements and commissions charged for the preceding calendar month and shall remit to the Owner the net balance standing to his credit, as shown by such statement. In the event that such statement should show a deficit, the Owner will repay the same by remitting the amount thereof to the Company immediately upon the receipt of such statement. The Company reserves the right to charge interest at the rate of six percentum (6%) per annum on the amount of such deficit;
"6. In the event of a bona fide sale of, and the recording of a deed of transfer of title to the premises, this agreement may be terminated by the Owner. This agreement may be terminated at the discretion of the Company, providing all accounts between an indebtedness from and to the Company, and to and from the Owner, shall have been settled and paid, and provided that all work in progress, and leases in course of negotiation shall have been completed, by the Company giving the Owner ninety (90) days' notice in writing of its intention to so terminate this agreement;
"7. Until this agreement shall have been terminated in accordance with the foregoing provisions, it shall be binding upon the heirs, administrators, executors, successors and assigns of the Owner and of the Company."
Upon appeal, the Court of Appeals for Cuyahoga County reversed the judgment, holding that under the property management contract, defendant, as a matter of law, was not in complete and exclusive control of the premises and, therefore, was not liable to the plaintiff. That court did not pass upon defendant's other assignments of error in view of its finding.
Messrs. Dudnick, Komito, Nurenberg, Plevin, Dempsey Jacobson and Mr. Robert M. Dudnick, for appellant.
Messrs. Arter, Hadden, Wycoff Van Duzer and Mr. Robert Weh, for appellee.
In this appeal, there is no dispute that plaintiff was injured, or that the proximate cause of her injuries was the negligence of the person in possession and control of the premises in failing to maintain the carpeting in the hallway in a reasonably safe condition so that such person is responsible at law to the plaintiff for her injuries. The single question, therefore, is: Was the defendant in sufficient control of the premises so as to fix liability upon it?
The answer is to be found solely within the terms of the contract between defendant and the owner. The conclusion of the Court of Appeals that that contract did not invest the defendant with exclusive control is not without merit. However, we reach the opposite result. We are persuaded that the contract has every indicia of a lease and that the defendant is in the posture of a lessee with respect to the events giving rise to this action.
It accepted "exclusive management and control of" the premises for a period determinable by the owner only "in the event of a bona fide sale of, and the recording of a deed of transfer of title to the premises." The most compelling feature of the contract leading to our conclusion is that, in addition to the usual authority of a leasing agent, defendant accepted power and authority " to make and execute leases" at stipulated rentals with tenants selected by it and "to prosecute any and all legal proceedings for the recovery of possession of any part of the leased premises and/or for the recovery of rentals due therefor and to settle, compromise and adjust suits, claims and disputes arising out of such matters." (Emphasis supplied.)
Defendant also had authority "to hire, manage, control, pay and discharge all managers, janitors and other employees." There is no indication that the owner retained any right of control or direction over any of these important activities. Defendant had, as Judge Taft (now Chief Justice) said in Cooper v. Roose, 151 Ohio St. 316, at page 323, "* * * the power and right to use the premises and to admit people to the premises and exclude them from the premises. Such rights are attributes of ownership. They are the very attributes of ownership which form the basis of the duty to use ordinary care as to the condition of the premises. * * *" See, also, Davies, a Minor, v. Kelley, 112 Ohio St. 122.
Furthermore, it is not urged that the defective carpeting involved an emergency repair "necessary and incident to the negotiation of a lease, or the rental of any part of the premises," or a permanent replacement or improvement. The defect here called for an ordinary repair and defendant had full power and authority to make "all ordinary repairs" without any financial restriction. Under paragraph 2 (b), if sufficient funds were not on hand to the credit of the owner, the owner was required promptly to pay the deficit on request of defendant.
Finally, defendant has advanced no substantial reason to support its contention that it had no duty to repair the carpeting. The word, "duty," is employed in the language of the contract only in paragraph 2 (c) with reference to the degree of compliance required of defendant. But duty is implicit in every feature of the arrangement, which is "instinct with obligation." Absent duty, neither party could derive any benefit therefrom. The owner's investment would not be conserved and the defendant would receive no compensation.
There are, of course, other aspects of the relationship, responsibility for which is shared by the owner and the defendant. But those responsibilities do not pertain to nor could they have affected the occurrence with which this action is concerned. And they are over-balanced by those features by which defendant possessed full power and authority as to this defect to the exclusion of the owner, that is, to admit or reject plaintiff or any other person from the hallway in which the defect occurred and completely to provide for the maintenance of that hallway in the safe condition in which it was presumably received from the owner, including the correction of that defect.
The rule that a writing will be construed most strongly against the party responsible for its language may well apply here, where both the defendant and the owner have provided each other with an arguable defense to an action against either by a third party. Justice will not be served by permitting either party to the contract to derive a procedural advantage from their contractual relationship containing elements fortuitous to both over one aggrieved by a matter concerning his tenancy or by the condition of the premises, particularly since the owner bears the final financial responsibility under an indemnity clause (paragraph 3).
The judgment of the Court of Appeals is, therefore, reversed and the cause is remanded to that court for consideration of other alleged errors not previously considered. In so doing, we disturb nothing in the law of agency or of landlord and tenant.
Judgment reversed.
TAFT, C.J., ZIMMERMAN, MATTHIAS and HERBERT, JJ., concur.
O'NEILL and BROWN, JJ., dissent.
The management agreement between the owner and the defendant management company is the only evidence establishing the relationship between defendant and the property involved. The agreement clearly establishes that defendant was simply an agent of the owner and authorized to act for the owner in certain limited areas specifically detailed in the agreement. It clearly negates the contention that the defendant was in exclusive possession and control of the premises, and, hence, the management company is not liable in tort to the tenant.
Additionally, the agreement does not obligate the defendant to make any repairs whatsoever. The property management agreement merely gives defendant the "power and authority" to make certain "ordinary" repairs, and a failure to exercise a power, not a duty, does not amount to a breach of contract.
In Ripple v. Mahoning National Bank (1944), 143 Ohio St. 614, the syllabus reads as follows:
"The reservation in a lease of a suite of rooms for use as a private office, whereby control thereof is retained only `for the purpose of repairing the same and doing of daily janitor work,' does not render the lessor liable for injuries sustained by an employee of the lessee caused by falling plaster, in the absence of authority of the lessor to exercise control over such premises to the exclusion of any control by the lessee. ( Burdick v. Cheadle, 26 Ohio St. 393; Marqua v. Martin, 109 Ohio St. 56; and Berkowitz v. Winston, 128 Ohio St. 611, approved and followed.)" (Emphasis added.)
Gardner, Admx., v. 1111 Corporation (1955), 286 App. Div. 110, affirmed, 1 N.Y. 2d 758, 135 N.E.2d 55, involved a suit against a managing agent of an apartment house, for the death of an elevator operator. The lower court allowed the jury to decide whether the managing agent was in a relationship to the premises which might make it liable to the plaintiff and the jury found for the plaintiff. The Appellate Division, in reversing the trial court's judgment for the plaintiff, held that the existence of such relationship must be resolved purely as a matter of law saying, at page 112:
"The written agreement between the owner and appellant empowered the latter to rent and lease; to collect rents and deposit them in an agency account subject to the owner's right to demand at any time a statement of the accounts; to institute and prosecute actions; to make necessary repairs and alterations with the limitation that any alteration of a capital nature in excess of $2,500 would require the owner's approval; to supervise, hire and discharge employees, it being expressly provided, however, `that all such employees are in the employ of the owner of the property and not of the managing agent.' Other powers were given to the agent which need not be detailed. It should be noted, however, that while the agreement authorized defendant to make repairs there was no specific undertaking by defendant to do so and it assumed no responsibility in that respect.
"It seems obvious that this agreement did not give such complete control to the appellant so as to exclude the owner entirely. The fact that the owner reserved to itself control over the funds collected by the agent and also the right to pass upon all alterations in excess of $2,500 indicates that the agent was not put in the owner's place in the operation of the premises. The owner having reserved to itself a certain amount of control it cannot be said that the managing agent's control was absolute and complete."
With regard to full control being required in order for liability to occur, 2 Restatement of Torts 2d, Section 387, comment a. contains the following:
"* * * the contractor must have taken over the entire charge of the land or building. It is not enough to create liability under the rule stated in this section that he has undertaken to make specific repairs, or even to inspect the land or building and from time to time make such repairs as he should discover to be necessary." (Emphasis added.)
O'NEILL, J., concurs in the foregoing dissenting opinion.