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East Hampton Dewitt Corp. v. State Farm Mutual Automobile Insurance Co.

decided: December 28, 1973.

EAST HAMPTON DEWITT CORPORATION AND GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORPORATION, PLAINTIFFS-APPELLANTS,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY A/K/A STATE FARM INSURANCE COMPANIES, DEFENDANT-APPELLEE-APPELLANT. WARNER NATIONAL, INC., AND UTICA MUTUAL INSURANCE COMPANY, PLAINTIFFS-APPELLEES, V. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY A/K/A STATE FARM INSURANCE COMPANIES, DEFENDANT-APPELLANT. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT, V. MAURICE L. ROSEN, M. L. ROSEN MANAGEMENT CO. AND ROSEN-KLEIN CONSTRUCTION CO., INC., THIRD-PARTY DEFENDANTS-APPELLEES. STATE FARM INSURANCE COMPANY, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT, V. EAST HAMPTON DEWITT CORPORATION, MAURICE L. ROSEN, M. L. ROSEN MANAGEMENT CO. AND ROSEN-KLEIN CONSTRUCTION CO., INC., THIRD-PARTY DEFENDANTS-APPELLEES



Appeals and cross-appeal from judgments of the District Court for the Northern District of New York, rendered after trial before Judge Port and a jury, in two actions for damages resulting from a fire in a building in Syracuse.

Waterman, Friendly and Timbers, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

We owe these appeals, raising difficult issues of New York tort law for which no precise New York precedents have been cited, to the circumstance that defendant State Farm Insurance Companies (State Farm) is an Illinois corporation having its principal place of business in that state, whereas the plaintiffs East Hampton Dewitt Corporation (East Hampton) and Warner National, Inc. (Warner) are New York corporations with their principal offices in Syracuse. The trial alone consumed 16 days of the time of this undermanned district court, heavily pressed with state prisoner petitions under 28 U.S.C. §§ 1343(3) and 2254. There was, of course, never the slightest reason to think that these Syracuse-based plaintiffs could not have obtained full justice from the Supreme Court of New York for Onondaga County and on appeal to the Appellate Division and, if need be, to the New York Court of Appeals, respected appellate tribunals with a knowledge of and authority to declare New York law beyond anything that we possess. However, the case is here, and we must deal with it as best we can.

I.

East Hampton is the owner and managing agent of the Romax Office Building in Syracuse, which was erected in 1956 and 1957 by Rosen-Klein Construction, Inc. Maurice Rosen was president of both companies and, although plaintiffs now slightly dispute this, admitted to having had general supervision of the construction. In 1968 East Hampton leased a suite on the third floor of the building to State Farm.

In the morning of February 27, 1969, a fire started in a small interior room, known as the "recorder room," of State Farm's suite. At the start it was not regarded as serious, and State Farm employees tried to fight it by filling wastebaskets with water and then by means of fire extinguishers. By 11 A.M. smoke was coming out one of the corridor doors of the main office, into which the recorder room opened. No alarm was given until 11:18 A.M., at least 18 minutes after the fire was discovered. When the engines promptly arrived, the firemen found smoke pushing from the outside windows of State Farm's office; flames were mixed in with the smoke within the recorder room and at the door of that room, and possibly to some extent in the main office as well. Ultimately the fire spread throughout the third and fourth floors, on the latter of which Warner's office was located, and there was water and other damage elsewhere. It is not disputed that total damage to East Hampton alone, including loss of rentals during repairs, was in the general range of $820,000.

Actions were brought against State Farm by East Hampton and Warner, each joined by its partially subrogated insurer. The claim was that State Farm had been negligent both in allowing the fire to start and in failing to turn in an alarm earlier, which, as plaintiff contended, would have permitted the fire to be contained in State Farm's own suite. State Farm denied negligence and took the positions (1) that it was insulated from any liability to East Hampton by a clause in its lease, and (2) that the spread of the fire was due to faulty construction of the building; it claimed that but for such construction the fire, even after the delay in reporting it, would not have spread beyond the recorder room and certainly would not have extended so far as it did.

The two actions were tried together, which was a good idea, and the trial was bifurcated, which in this case may not have been. In theory the first trial was to be on liability and the second on damages. However, the first trial could more accurately be described as having been on State Farm's negligence and the causal relation of this, standing alone, to "the spread of the fire." For that reason the judge, over State Farm's objection, refused to allow the introduction of evidence of faulty construction at that time; he had previously dismissed as insufficient in law State Farm's defense based on the language of its lease. He submitted to the jury the two theories of State Farm's negligence and the issue of proximate causation. The jury found for State Farm with respect to negligence in allowing the fire to start, and against it on negligence in delaying the alarm and on the proximate causation of the "spread of the fire" by this. With two exceptions, see note 1 infra, which have not been seriously pressed, State Farm has not contested these findings, although it continues to insist, with its eye on a possible new trial, that the question of how the fire "spread" in any actionable sense could not legitimately be submitted until the evidence on contributory negligence was in. In the second phase of the trial the judge, this time over East Hampton's objection, admitted evidence of faulty construction of the building on the theory that the jury could properly take this into account by way of "mitigation" of damages. The jury returned a verdict in favor of Warner in the sum of $25,000, very nearly the sum demanded and about whose amount no one complains, and in favor of East Hampton in the sum of $120,000, a figure whose derivation is inscrutable.

In simplified form the positions on appeal are about as follows: East Hampton claims that it is entitled to damages of $820,000 or thereabouts; that we should order the district court to enter such a judgment in its favor notwithstanding the verdict; or failing this, that there should be a new trial solely on the issue of damages from which considerations of any negligence in construction should be excluded. State Farm is willing to have us leave things as they are, indeed urges us to do so, except that it would like some way to make East Hampton contribute to the payment to Warner. However, if East Hampton wants to fight, State Farm will join in the fray. It says that judgment for $820,000 notwithstanding the verdict cannot possibly be awarded since the jury's finding of liability on the part of State Farm was made in the absence of the evidence on faulty construction. It says further and for similar reasons that if we yield to East Hampton's demand for a new trial, such a trial must cover both liability and damages, with evidence of negligent construction to be admitted in the liability phase. Alternatively, and still only if we are favorably impressed with East Hampton's claims, State Farm urges us to reverse Judge Port's dismissal of its defense based on the language of its lease.*fn1 In view of our disposition of East Hampton's claims, we shall not have to reach any of these issues. There are also some peripheral questions about the court's denying two applications of State Farm to serve a third party complaint under F.R.Civ.P. 14; we will deal with these in the final section of this opinion.

II.

East Hampton devotes some effort to a semantic battle. It says in effect that the second phase of the trial was to be devoted solely to damages, and it was improper for the judge to allow, on a theory of "mitigation," the introduction of evidence of conditions that had long existed, about which East Hampton could do nothing after the fire started, and which are not claimed to have diminished the value of the building. We may grant the correctness of this as an abstract proposition, without accepting the conclusion East Hampton would have us draw from it. As already noted, despite confusing verbiage about "liability" and "damages", what the judge did in effect was to deal in the first phase of the trial solely with State Farm's negligence and its causal relation to "the spread of the fire," reserving the claim of faulty construction for the second phase. If the jury had found no negligence by State Farm, or lack of proximate cause of the spread of the fire from State Farm's negligence, that would have ended the case; if it found negligence and initial causation, the trial could go on to the second phase where all other issues would be considered. No contention is or could be made that admission of evidence of faulty construction occasioned unfair surprise. If, as a matter of law, there was an issue in regard to East Hampton's contributory negligence and this was properly put to the jury in the second phase of the trial, we will not reverse simply because of a misnomer.

A contention of East Hampton requiring much more consideration is that the concept of contributory negligence simply had no place in a case like this. Here East Hampton relies on three lines of New York decisions -- cases holding that where a railroad engine starts a fire on plaintiff's premises, it is of no consequence that the plaintiff had inflammable material near the tracks; personal injury cases holding that a defendant takes the plaintiff "as he finds him" and cannot avoid or reduce liability because an ordinary plaintiff would not have been injured or injured so much; and cases upholding the insulating effect of an "intervening cause".

Before discussing these cases, it will be useful to state what our view would be if New York precedents do not compel us to take a different one. We have here a rather special problem in the area of contributory negligence; in fact it might be better to phrase the question in terms of a plaintiff's right to recover for consequences which would not have occurred but for his fault. It is common ground that a plaintiff cannot recover for such consequences if the fault occurs after the accident. Here, for example, if the fire had started at night as a result of a State Farm employee's having negligently left a burning cigarette in a wastebasket and a watchman employed by East Hampton had seen the fire but failed to turn in an alarm, it is plain that plaintiff could not recover for damages that a prompt alarm would have prevented. 2 Harper & James, Torts § 22.10 at 1231-32 (1956); Restatement of Torts 2d § 918(1) (Tent. Draft No. 19, 1973). ...


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