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Integrity Material Handling Systems, Inc. v. M.G. Demolition

A-4472-03T2 (N.J. Super. App. Div. 2006) (Unpublished)

VICARIOUS LIABILITY; AGENCY — The doctrine of vicarious liability was designed as a vehicle for imposing responsibilities upon a principal for the acts of its agent, not on the agent for the acts of its principal.

A company was in the business of designing large material handling systems such as conveyors, pallet racks, and flow racks. It was a subtenant in the first-floor of a warehouse. The sublandlord was a management company that leased the entire warehouse and subleased the first-floor space to the material handling company. Nonetheless, the subtenant claimed that it primarily dealt with the owner of the warehouse, and that it paid rent to the owner, believing that the owner, the management company (which leased the warehouse), and a transport company (which subleased the second floor of the warehouse) were all the same company.

A demolition company was summoned to the warehouse by the transport company who subleased the second-floor space in the warehouse. The demolition company dealt mostly with the landlord in arranging for a demolition subcontract at the building. The demolition company’s responsibility, as a subcontractor retained by a general contractor, was to remove an old ice house from the second floor of the building. Like the material handling systems company, the demolition company believed that all the entities involved were related, including the general contractor. In fact, the demolition company believed that the general contractor was the owner of the warehouse.

The material handling company’s equipment was damaged by several weeks of leaking from the second floor. The leakage caused rust and other damage to the extent that the equipment allegedly became useless. Inspection of the floor above disclosed that the water came from the work of the demolition company. Smoldering fires occurred on several occasions. Those fires were extinguished in each instance by the fire department using water.

When the material handling company asked the owner about the situation, the owner told it that a fire had been the source of the water problem and assured the material company that he would look into the matter.

The material handling company filed a complaint claiming negligence and nuisance against the demolition company and against the building’s owner, the management company, and the general contractor. Prior to proceedings, the general contractor company dissolved and did not participate in the trial. Following a trial, the jury awarded damages in favor of the material handling company. The jury also found that the demolition company and the general contractor both were negligent and both liable on the legal theory of nuisance. The jury apportioned their liability as 40% for the demolition company and 60% for the general contractor. Lastly, the jury found no liability on the part of the building’s owner or the management company (the sublandlord). The material handling company appealed from the judgment and from a subsequent order denying its motion for judgment notwithstanding the verdict, for a new trial. In its appeal, the material handling company argued that, based on the legal theory of nuisance, the demolition company and the general contractor were each liable to the material handling company, jointly and severally, for the entire damages.

The Appellate Division concluded that the record disclosed sufficient evidence for the jury to have found that personnel connected with the building’s owner and other companies actually directed the reconstruction effort, and that each had at least as much to do with the work choices made that led to the material handling company’s damages as did the demolition company.

The material handling company sought a determination that the demolition company was responsible for the entire judgment under a theory of vicarious liability. However, the Appellate Division explained that vicarious liability did not work in two directions. The doctrine was designed as a vehicle for imposing responsibility upon a principal for the acts of its agent, not on the agent for the acts of its principal. The Appellate Division reasoned that no facts in the record would justify inverting the relationship between the demolition company/subcontractor and the general contractor. It also found that the demolition company/subcontractor became the principal and the general contractor became the agent regarding the work that caused the material company’s damages. Accordingly, the Court reasoned that the goal of the material handling company to shift the emphasis of fault to the demolition company and away from the general contractor could not be accomplished under a theory of vicarious liability, but rather would have to rely upon the evidence directly implicating each company. Along those lines, the Court concluded that the jury had ample evidence before it to support the factual determination it made that the general contractor was more responsible than the demolition company for the events that led to the material handling company’s losses. Further, the Court explained that the outcome of an appeal is largely determined by the way the matter was tried; a theory or claim newly developed for the purposes of appeal can have no bearing. Thus, the Court concluded that to the extent the material handling company sought reversal of the jury verdict of no liability in favor of the building’s owner and management companies, the material handling company’s failure to make any argument in its brief on appeal signaled by a point heading constituted a waiver.

Furthermore, the Appellate Division declined to change the jury’s verdict as to the quantum of damages. It reasoned that there was ample evidence in the record to support the jury’s conclusion and there was no basis in the record for finding any injustice. Accordingly, the judgment of the lower court was affirmed.

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