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Swisscraft Novelty Co. v. Alad Realty Corp.

Decided: February 23, 1971.


Lewis, Matthews and Mintz. The opinion of the court was delivered by Lewis, P.J.A.D.


Plaintiff Swisscraft Novelty Co., Inc. (tenant) appeals from a summary judgment entered by the Law Division in favor of defendants Alad Realty Corp. and Commodore Realty Corp. (landlord).

In essence, this is a controversy between insurance companies, for the respective parties, as to which carrier is liable for losses sustained by the tenant resulting from water damage to its merchandise. As indicated in the 1962 assignment of lease to tenant, the roof of the demised premises had to be raised to accommodate the tenant's embroidery machinery. The landlord undertook to perform the work but allegedly failed to do it in a satisfactory manner in that some of the leaders required to carry water off the roof were not properly reconnected, and, as a result thereof, water accumulated on the roof and broke through the flashings, flooding the leaseholder's premises on September 16 and October 19, 1966. On the first occasion, the water damage to tenant's property was approximately $3,000. The landlord was immediately notified of the loss, and tenant was assured that the defective condition would be remedied. This was not done by October 19, 1966 when after another rainstorm, water again leaked through the roof and walls, causing an estimated $29,000 in damages to tenant's merchandise. Thereafter, the leak was repaired.

Plaintiff's suit was initiated by a complaint filed on December 19, 1967, which was amended March 18, 1968 to add Commodore Realty Corp. as a defendant. The action was predicated upon the alleged breach of warranty and negligence of the landlord. An answer was filed by defendants on June 4, 1968, denying such allegations and asserting a variety of separate defenses, including contractual exculpation from any responsibility for loss or damage to plaintiff's property occurring in or about the demised premises. In response to a discovery interrogatory propounded by plaintiff, defendants stated that repairs were

made as complaints were received "unless impossible to do so because of weather conditions."

The matter was pretried on April 2, 1969, at which time the specification of legal issues was stated to be "[n]egligence, lease provisions and breach thereof if any, exculpatory provisions, damages." The case was then listed for trial on June 17, 1969 and, thereafter, adjournments were procured by plaintiff's substituted attorneys and the trial was rescheduled for July 30, 1969, which was again, at plaintiff's request, adjourned to September 25, 1969.

In the meantime, defendants, on May 8, 1969, filed a notice of motion for summary judgment and, on July 16, 1969, plaintiff filed a counter-motion for summary judgment and other relief, including leave to file a second amended complaint and to amend the pretrial order to include claims against defendants "for gross negligence and for wilful and wanton misconduct with respect to the damages sustained in the incident of October 19, 1966." These motions were heard on August 29, 1969, and an order was entered granting defendants' motion for summary judgment and denying plaintiff's counter-motion. It is from that order that plaintiff appeals, contending in substance that (1) defendants should be estopped from asserting as a defense the exculpatory clause in the lease; (2) defendants' violation of a municipal building ordinance and their covenants in the rental document to keep the roof in good repair rendered the exculpatory clause ineffective; (3) the trial court erred in denying its counter-motion to amend the complaint and the pretrial order, and (4) the trial court erred in granting summary judgment in defendants' favor.

We are here concerned with a commercial lease, a product of parties who negotiated its terms fairly and freely, at arm's length. There is no contention that either party was in an unfair bargaining position or that the negotiations were in any way tainted with fraud or misrepresentation. The parties saw fit to agree upon a distribution of risks with regard to their respective property interests and included

in their private contractual arrangements an exculpatory-indemnification provision in favor of the landlord which reads:

Eighth. -- The Landlord shall not be responsible for the loss of or damage to property, or injury to persons, occurring in or about the demised premises, by reason of any existing or future condition, defect, matter or thing in said demised premises or the property of which the premises are a part, or for the acts, omissions or negligence of other persons or tenants in and about the said property. The Tenant agrees to indemnify and save the Landlord harmless from all claims and liability for losses of or damage to property, or injuries to persons occurring in or about the demised premises.

In the context of a commercial or industrial lease, where the language is plain and unambiguous and the transaction is unaffected by public interest or unequal bargaining power, such, for example, as prevailed in Kuzmiak v. Brookchester , 33 N.J. Super. 575 (App. Div. 1955) (which dealt with an apartment lease), no problem ordinarily exists as to the validity of an exculpatory provision in a lease agreement. See Mayfair Fabrics v. Henley , 48 N.J. 483 (1967); Midland Carpet Corp. v. Franklin Assoc. Properties , 90 N.J. Super. 42 (App. Div. 1966). Accord, Wade v. ...

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