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Briggs & Stratton Power Products Group, LLC v. Osram Sylvania, Inc.

Court of Appeals of Tennessee, Jackson

December 4, 2017


          Session: September 20, 2017

         Appeal from the Circuit Court for Dyer County No. 2011-CV-47 William B. Acree, Judge

         The tenant of a warehouse and the warehouse owner's property manager disagree over which party is responsible for the damage caused by a fire that destroyed the tenant's inventory. We have concluded that the "as is, where is" lease between the warehouse owner and the tenant places the responsibility for the damage on the tenant and that the trial court properly granted summary judgment in favor of the property manager.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed

          Samuel Joseph Welborn, Joshua Kyle Chesser, and Jefferson Cooper Orr, Nashville, Tennessee, for the appellant, Briggs & Stratton Power Products Group, LLC.

          Melissa Ann Maravich and Mary C. Hamm, Memphis, Tennessee, for the appellees, Quadrelle Realty Services, LLC and Quadrelle Group, Inc.

          Andy D. Bennett, J., delivered the opinion of the Court, in which J. Steven Stafford, P.J., W.S., and Brandon O. Gibson, J., joined.



         Factual and Procedural Background

         The two main parties involved in this appeal are Briggs & Stratton Power Products Group, LLC ("Briggs"), a multi-national manufacturer of lawn mowers and other equipment, and Quadrelle Realty Services, LLC ("Quadrelle"). The case arises out of a warehouse fire in Dyersburg, Tennessee in December 2008.

         On September 1, 2007, Briggs entered into a commercial lease with Bekaert Corporation ("Bekaert") for the lease of a portion of Bekaert's warehouse at One Bekaert Road in Dyersburg. The term of the lease was from September 1, 2007, through December 31, 2008. The leased premises consisted of a portion of the 636, 000-square-foot warehouse, with the leased footage increasing over the term of the lease.[1] Briggs used the warehouse to store inventory, including lawn mowers and snow blowers. The warehouse was partially lighted with metal halide bulbs (also called "lamps") manufactured by former defendants Osram Sylvania, Inc. and Osram Sylvania Products, Inc. (collectively, "Sylvania").[2]

         For purposes of this appeal, the relevant provisions of the lease are the following:

3. CONDITION OF LEASED PREMISES. The Premises are being leased to Tenant in the present "AS-IS" "WHERE-IS" condition, with all faults whether known, unknown, patent or latent. Tenant has had the opportunity to inspect the Premises and accepts it in its present condition. Unless Tenant has caused the Leased Premises to be in violation of any code or ordinance, Tenant shall have no responsibility for bringing the Leased Premises into compliance with any code or ordinance and shall have no responsibility for payment of any fines assessed for any code or ordinance violation which Tenant has not caused. Notwithstanding the foregoing, Tenant shall have responsibility for any changes, alterations or repairs to the Premises (including repairs to bring the Premises into compliance with codes) that are necessitated by or necessary for Tenant's intended use of the Premises. Tenant acknowledges [and] agrees that the Premises is not, and will not be, heated and that sprinklers will not be operational unless Tenant agrees to provide[] heating (including servicing and/or repairing existing heaters and additional cost of natural gas that is not included in Base Rent). In the event it becomes necessary to erect a fence or other barrier between the Premises and rest of the Building for security or other reasons, the Landlord shall install the fence or barrier, but the cost of such shall be split equally between Landlord and Tenant. . . . .
6. USE OF PREMISES. Tenant shall use and occupy the Leased Premises for warehousing, distribution, product repairs, rework and related office use and for no other purpose without Landlord's prior written consent, which consent may be withheld in Landlord's sole and absolute discretion. In no event shall the Premises [be] used in any way that constitutes a "hazardous occupation."
Tenant shall not use or occupy the Leased Premises or conduct its business in violation of any federal, state or local law or regulation, including all environmental laws and regulations, and shall discontinue any use of the Leased Premises which is declared by any governmental authority to be a violation of any such law or regulation. Tenant, at its sole cost and expense, shall comply with any directive of any governmental authority which shall impose any duty upon Tenant with respect to the Leased Premises or the use or occupation thereof, by reason of the nature of Tenant's use or occupancy of the Leased Premises. Tenant shall not commit, or suffer to be committed, any waste, nuisance or other act which may disturb the Leased Premises or any adjoining properties. . . . .
8. REPAIRS. During the Term, Tenant shall, at Tenant's own expense, keep the Leased Premises clean and pest-free and in good order, repair and condition, normal wear and tear expected. Landlord shall be responsible for any repairs to the roof, foundation, exterior walls of the Leased Premises. Tenant shall promptly and adequately repair the Leased Premises and replace or repair all damages or broken fixtures or appurtenance, subject to the approval of Landlord. If Tenant does not do so, Landlord may, at its option, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof. Landlord may, but shall not be required to, enter the Leased Premises at all reasonable times to make such repairs, alterations, improvements and additions to the Leased Premises or to any equipment located in the Leased Premises as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. The HVAC systems serving the Premises are in their as-is condition, without warranty or other representation as to condition. Neither Landlord nor Tenant shall have any responsibility for repairs or replacements to the HVAC system. However, in the event the HVAC system is not appropriate for Tenant's intended use, Tenant shall have sole responsibility for repairs to the HVAC systems serving the Premises that are necessitated by or necessary for Tenant's intended use of the Premises.
9. ADDITIONS AND ALTERATIONS. Tenant shall not, without the prior written consent of Landlord which consent may be withheld in Landlord's sole and absolute discretion, make any alterations, improvements or additions to the Leased [sic]. If Landlord consents to said alterations, improvements or additions, it may impose such conditions with respect thereto as Landlord deems appropriate, including, without limitation, requiring Tenant to furnish Landlord with security for the payment of all costs to be incurred in connection with such work, insurance against liabilities which may arise out of such work and plans, specifications and permits necessary for such work. The work necessary to make any alterations, improvements or additions to the Leased Premises shall be done at Tenant's expense and Tenant shall pay all contractors for such work. Tenant shall defend and hold Landlord harmless from all costs, damages, liens and expenses related to such work. All work done by Tenant or its contractors shall be done in a good and workmanlike manner using only good grades of materials and shall comply with all insurance requirements and all applicable laws and ordinances and rules and regulations of governmental departments or agencies. . . . .
25. MISCELLANEOUS. . . . .
The provisions of this Lease shall extend to and shall, as the case may require, bind and inure to the benefit not only of Landlord and Tenant, but also of their respective successors and assigns.
All of the representations and obligations of Landlord and Tenant are contained herein, and no modification, waiver or amendment of this Lease, or any of its conditions or provisions, shall be binding upon the Landlord or Tenant unless in writing, signed by the party to be charged or a duly authorized agent of the party to be charged.

         The warehouse is a U-shaped building with two wings connected by an office. During the relevant time period, Briggs occupied the east wing of the warehouse, and the west wing of the warehouse was vacant.

         In December 2007, Tower Dyersburg, LLC and DM Dyersburg, LLC ("Tower") purchased the entire warehouse property from Bekaert. In conjunction with the sale of the property, Bekaert and Tower entered into an Assignment and Assumption of Lease pursuant to which Bekaert assigned to Tower all of its rights, title, and interest in, as well as its liabilities and obligations under, the 2007 lease between Bekaert and Briggs. Briggs also signed a Tenant Estoppel Certificate dated January 29, 2008, in which it acknowledged that the 2007 lease was in full force and effect; that it did not have any defense, credit offset, claim or counter-claim against Bekaert; that neither party was in default of its obligations under the lease; and that "tenant has no knowledge of any material defects in the Premises or the Property or any related improvements."

         On January 2, 2008, Tower entered into a Management Agreement with Quadrelle for the latter to provide management services for the entire One Bekaert Road property. The agreement provided that Quadrelle was to manage and operate the property in accordance with the management agreement and with the 2007 lease. The duties of the manager, as detailed in the management agreement, were primarily financial in nature:

(a) To use its best efforts on behalf of the Owner to maintain high occupancy so that the Property may be operated profitably and to assist Owner's leasing agent in obtaining new tenants. Provided, however, if there is no leasing agent with respect to the Property, in the absence of such outside broker, Manager shall endeavor to lease such vacant space which now, or in the future, may become available, consistent with the terms of the attached Leasing Agreement. From time to time Manager will propose advertising plans to Owner for Owner's approval.
(b) To use its best efforts to collect all rents (including percentage rent, escalation billings and billings attributable to tenant participation in operating expenses, taxes and common area maintenance charges) and other sums due Owner from any tenant, subtenant or others in the ordinary course of business, to employ such lawyers and accountants and other professional persons as may be necessary, subject to Owner's direction and approval, and to proceed in the name of the Owner against any person, firm or corporation indebted to the Owner for rentals or otherwise.
(c) To maintain a separate bank account . . . in which all receipts from the Property will be deposited and from which all payments with respect to the Property will be made. Manager shall pay all leases and mortgage payments required and other authorized items of costs or expenses to the extent funds are available and Manager shall promptly notify Owner if additional funds are required. From time to time at the discretion of Owner, if funds are available, Manager shall distribute amounts to Owner or its partners.
(d) To pay all taxes and insurance premiums when due to the extent that funds are available and to promptly notify Owner if additional funds are required.
(e) To maintain the Property in a neat and first-class manner at the expense of the owner. For any item of repair or replacement costing in excess of Ten Thousand Dollars ($10, 000) (except for emergencies, in which case Manager may make repairs in excess of the aforementioned amount), such expenditures must be specifically authorized in advance by Owner.
(f) To employ such professional services, including lawyers, accountants, surveyors and engineers, on behalf of Owner as may be required in the ordinary course of the business of operating the Property subject to approval of Owner.
(g) To prepare an annual budget of operating and capital expense to be incurred in the promotion, operation, repair and maintenance of the Property and to deliver the same to Owner for its approval at least thirty (30) days prior to December 31 each year. . . .
(h) Manager is authorized in the name of and at the expense of Owner to make contracts for electricity, gas, steam, telephone, window cleaning, vermin extermination, and other services, or such of them as Agent shall deem advisable, provided that any such contracts (except for utilities) shall be terminable within thirty (30) days. . . .
(i) Manager shall pay interest or amortization on mortgages, taxes, assessments, water charges, premiums on insurance, unless Owner in writing expressly directs Manager not to do so.

(Emphasis added).

         On April 1, 2008, Quadrelle entered into a written contract with Mike Montgomery, an independent contractor, to provide on-site property management services for the One Bekaert Road facility. Mr. Montgomery's responsibilities included building security, landscaping, responding to alarms on a 24-hour basis, initiating first response to building problems and contacting contractors, monitoring tenant activity, and reporting at least weekly to the management agent regarding "overall property operation further defined as property maintenance, tenant issues, ...

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