Commercial browsing by tag


Premises Liability / Earthquake

Saturday, January 29th, 2011

The Acorn Building, reduced to rubble

Who’s to blame for a natural disaster?

PASO ROBLES, CA–On December 22, 2003, around 11:00 a.m., a 6.5 magnitude earthquake struck near San Simeon off the California coast.

The small town of Paso Robles, 25 miles inland, was hardest hit. Its historic downtown saw many injuries and extensive damage.

There were two fatalities. Marilyn Zafuto, 55, and Jennifer Myrick, 19, died as they fled the shaking in Ann’s Dress Shop. When they reached the sidewalk, the building collapsed on them.

The collapsed building had been a local landmark. Built in 1892, it was known as the “Acorn Building” for its distinctive clock tower and acorn-shaped roof line.

Aerial view of the collapsed building

The Acorn Building was owned by the Mastagni family. The elder Mastagnis, Armand and Mary, married in 1946 and raised three childrena as he worked as a dairyman and nurseryman and she ran a dress shop. They acquired the Acorn Building in 1973.

Armand and Mary managed the building together until 1995, when Armand suffered a series of strokes. As Mary took on more responsibilities, the couple established a family trust and transfered the building into the trust. Later, they transfered a 3% interest in the building into a separate trust set up for their three adult children. After Armand died in 1997, Mary became sole manager of the building and signed leases both on behalf of her family trust and on behalf of the children’s trust.

These details of the building’s ownership are of consequence because, when their survivors sued for wrongful death of Zafuto and Myrick, plaintiffs sued Mary, individually, and all the trustees (Mary and the three children).

At trial, plaintiffs argued that defendants were negligent in failing to perform seismic retrofitting of the 1892 brick and mortar building. Beginning in 1989, the city had inventoried unreinforced masonry buildings under its jurisdiction. The city identified the Acorn Building as potentially hazardous and sent a notice to the owners in December 1989.

Later, in 1992, the city passed an ordinance requiring owners of unreinforced masonry buildings to retrofit them to comply with earthquake safety standards. Under the ordinance an owner would have 15 years from the date of official notice to complete the retrofitting. The Mastagnis got their notice in November 1993. The city amended the ordinance in 1998 to extend the deadline for compliance to 2018. The Mastagnis did not perform retrofitting prior to the earthquake.

The jury found for plaintiffs, and awarded $700,000 in the death of Marilyn Zafuto and $1.2 million in the death of Jennifer Myrick. The judgment made each defendant jointly and severally liable as to all damages. The Mastagnis appealed.

On appeal the Mastagnis argued they had not been negligent because retrofitting was not required until 2018. They said the city ordinance represented a balancing of safety, public interest and costs and, as such, it reflected the city’s determination of what was reasonable.

The Court of Appeals disagreed, saying compliance with laws is not a complete defense to a tort action. Instead, the court said, “a statute, ordinance or regulation ordinarily defines a minimum standard of conduct” and does “not preclude a finding that a reasonable person would have taken additional precautions under the circumstances.”

The Acorn Building today, rebuilt and restored as original

The court also disagreed with the Mastagnis’ argument that each defendant should be liable for only a portion of the judgment, based on the jury’s calculation of their degrees of responsibility. For example, the jury found Mary Mastagni individually 30 percent responsible for the deaths, and the trusts 45 percent responsible. But, as the Court noted, the jury also found defendants operated the building as a joint venture and, consistent with partnership law, each partner is jointly and severably liable for partnership obligations, without regard to their partnership interests or, in this case, responsibility.

Moral: Because the Mastagni children were sued as trustees, presumably the judgment is enforceable only against their trust assets (mainly, the Acorn Building). Mary, on the other hand, may not fare as well since she was also sued in her individual capacity.

The Mastagnis may have liability insurance to cover this mess. Either way, owners should be mindful of this risk when shopping for commercial general liability insurance.

The case is reported as Myrick v. Mastagni, 185 Cal.App.4th 1082 (Cal. App. 2010).

Nine Points of the Law

Monday, October 25th, 2010

The mysterious rights of a party in possession.

KOKOMO, IN–When Park P, LLC, bought this 254-unit apartment complex they expected to inherit about 250 tenants. But there was an unexpected problem.

The Park Place apartments at Kokomo

Within the complex are two laundry rooms, housing 45 commercial, coin-operated laundry machines. In each laundry room there was a sign saying the machines were owned and operated by Commercial Coin Laundry Systems “pursuant to a written lease.” Each machine also bore a 3×5-inch label with the same information. The signs and labels included Commercial Coin’s logo, office telephone number, and a 24-hour toll-free service number.

Park P had purchased the complex in April 2005. Several weeks later, the owner of Park P wrote a letter to Commercial Coin complaining about maintenance of the machines and hazardous conditions in one of the laundry rooms. The owner said he was willing to honor “the agreement” that Commercial Coin had with a prior owner, but wanted Commercial Coin to agree in writing to “accept full liability for any eventual accident.”

Inside, some of the 254 units

Commercial Coin did not respond to the letter, but continued to operate the machines and pay rent to Park P. So it happened that, in February 2008, Park P filed suit for trespass, based on Commercial Coin’s refusal to remove its machines and vacate the premises.

Commercial Coin answered, saying it has a written lease giving it rights to operate without interference by Park P.

Problem is, the lease was not recorded, and Park P claims it is not legally bound by the past agreement.

On a motion for summary judgment, the trial court ruled in favor of Park P, saying the new owner was not subject to terms of the off-record lease. The court cited an Indiana statute, providing that a lease of real estate for a period longer than three years must be recorded in order to bind a subsequent good faith purchaser.  Commercial Coin appealed.

The Court of Appeals reversed, and remanded the case for further proceedings.

The Court reasoned that a good faith purchaser, of the type protected by the statute, must be one without notice of rights asserted by a party in possession. The court explained that notice sufficient to bind a purchaser could be actual, constructive (imparted by county land records), or implied (imparted by occupancy or possession of the land). In this case, the question for trial would be whether Commercial Coin’s occupancy was so apparent that Park P should have inquired to discover its alleged rights under the off-record lease.

Moral:  Possession, they say, is nine points of the law.

The old saying, rooted in English common law, has little meaning today except as shown by this case.

American courts uniformly hold that a purchaser of land, or a mortgage lender, may be subject to rights of parties in possession. It may be a lease, an option to purchase, right of first refusal, easement–whatever.

To know the condition of title to land, one should look not only to land records but to the land itself.

The case is Crown Coin Meter v. Park P, LLC, 934 N.E.2d 142 (Ind. App. 2010).