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Kernan v. One Washington Park Urban Renewal Associates

154 N.J. 437, 713 A.2d 411 (1998)

SIDEWALKS; LIABILITY; BANKRUPTCY—Where a bankruptcy trustee operates a property owned by a debtor in a Chapter 11 proceeding, the trustee, not the owner, may be liable for sidewalk accidents.

A woman slipped and fell on an icy sidewalk abutting a commercial office building. As a result, she fractured her left hip. At all times relevant to this action, the sidewalk’s owner was a debtor in a Chapter 11 bankruptcy. Under the bankruptcy, a trustee was responsible for leasing, rental collection, tenant contact, and submitting monthly accounting reports to the courts or the owners of the property. In addition, the trustee was also responsible for maintaining the interior and exterior of the building and hiring suppliers to operate the building. The trustee hired a company to remove snow and ice from the sidewalks adjacent to the building. The injured pedestrian sued the building’s owner, who responded by claiming that the trustee was responsible because “the alleged damages were caused by other persons over whom this defendant had no control.”

The New Jersey Supreme Court accepted the owner’s defense, finding that the owner had no duty to the plaintiff because of the nature of the appointment of the trustee. The trustee had control over the day to day operations of the corporation and this served to insulate the building’s owner from liability. Had the owner retained control of the day to day operations, the appointment of a trustee would not have immunized it from liability. Therefore, the outcome would have been different if the owner had remained a debtor in possession. The Court noted that this holding was based on the unique status of this particular building owner as a Chapter 11 debtor where the bankruptcy court appointed a trustee and managing agent. The Court also noted that it was improper to conclude that the trustee and managing agents were agents of the owner.


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