St Paul Fire & Marine Insurancev.Guardian Alarm Co.

Michigan Court of AppealsMar 23, 1982
115 Mich. App. 278 (Mich. Ct. App. 1982)
115 Mich. App. 278320 N.W.2d 244

Docket No. 53536.

Decided March 23, 1982.

Richard A. Smith, for plaintiff.

Leonard M. Nathanson, P.C., for defendant.

Before: J.H. GILLIS, P.J., and BEASLEY and P.E. DEEGAN, JJ.

Circuit judge, sitting on the Court of Appeals by assignment.


Plaintiff brought this action as subrogee of FLX Corporation (hereinafter FLX) against defendant for recovery of sums paid to FLX pursuant to an insurance contract between plaintiff and FLX. Defendant filed a motion for accelerated judgment contending the matter in controversy involved a sum less than the amount necessary to vest jurisdiction in the circuit court. The motion was granted pursuant to an order entered August 21, 1980. Plaintiff appeals as of right.

On April 11, 1975, FLX entered into a contract with defendant for burglar alarm direct wire central station service. Paragraph 3 of the Service Agreement stated in bold type that defendant was not an insurer. Paragraph 3 also stated that the charges were based solely on the value of the services and were unrelated to the value of the property located on the subscriber's premises. The paragraph stated that insurance, if any, would be obtained by the subscriber. As to damages, paragraph 3 stated that it was extremely difficult to fix actual damages, if any, which may result from failure of the system to operate properly. The paragraph limited defendant's liability to a refund of an amount equal to the aggregate of six monthly payments or the sum of $250, whichever is less, as liquidated damages. These provisions were to apply "in the event loss or damage, irrespective of cause or origin, results directly or indirectly to person or property from the performance or nonperformance of the obligations set forth by the terms of this contract or from negligence, active or otherwise, of Company, its agents or employees".

The cost of the burglar alarm service was $793 upon installation of the system and $60 per month for five years. Under paragraph 8, defendant agreed to maintain and repair the system with reasonable diligence upon receipt of notice of a problem. In paragraph 9, FLX acknowledged that defendant retained ownership of the entire alarm system.

On December 11, 1977, the FLX Corporation was burglarized and the alarm system failed to function. Plaintiff, insurer of FLX, paid its insured's loss of $13,417.43.

Plaintiff then filed suit against defendant, alleging negligence and breach of contract. In its amended complaint plaintiff alleged that the liquidated damage clause was nonnegotiable and that such clause was a sham "against public policy, manifestly unconscionable and invalid."

Defendant brought a motion for accelerated judgment under GCR 1963, 116.1(2), alleging that as a result of the limitation of liability as set forth in the contract the circuit court lacked jurisdiction. The parties filed briefs and the trial judge heard oral argument. The trial judge thereafter granted defendant's motion.

Lack of subject-matter jurisdiction is a ground appropriately raised by a motion for accelerated judgment. GCR 1963, 116.1(2). Baker v Detroit, 73 Mich. App. 67, 71; 250 N.W.2d 543 (1976). Under a motion for accelerated judgment by defendant, the facts well pleaded by plaintiff and the reasonable inferences therefrom must be construed most favorably towards the plaintiff. Williams v Polgar, 391 Mich. 6, 11; 215 N.W.2d 149 (1974). In ruling on a motion for accelerated judgment, the judge is not permitted to make factual findings, and, if factfinding occurred, this Court must reverse, Baker, 73 Mich. App. 67, 72-73.

Plaintiff claims disputed issues of fact exist as to:

"(a) negligence of appellee; (b) breach of contract by appellee; (c) validity of the denial of subrogation provision."

It seems fairly obvious that any facts which may be disputed as to these issues are moot if the court lacked jurisdiction. Whether or not the court properly had jurisdiction turns on the validity of the liquidated damages clause. Plaintiff has not suggested any particular fact which needed further development before resolution of this issue. Thus, we reject plaintiff's claim that "[a]t the very least, the circuit court should have ordered an evidentiary hearing * * *".

We turn to the question of the validity of the liquidated damages clause. Plaintiff acknowledges that a clause which purports to fix damages to a sum certain in case of breach is enforceable when the nature of the transaction makes the damages difficult to ascertain. Ross v Loescher, 152 Mich. 386; 116 N.W. 193 (1908). In arguing that the clause involved here should not be enforced plaintiff asserts that the damages could have easily been ascertained by a periodic check of inventory. Plaintiff suggests that this check could have been provided for in the contract along with appropriate rate increases.

We reject plaintiff's argument because it refuses to acknowledge that a burglar alarm company is not in the insurance business. The actions which plaintiff suggests could have been taken are exactly the kind of things done by insurance companies. Moreover, in making these suggestions plaintiff implicitly acknowledges that without such actions potential damages are not readily ascertainable. Thus the liquidated damage clause is enforceable.

Plaintiff next argues that the clause is unconscionable, is against public policy and is part of a contract of adhesion.

Initially, we note that it is not contrary to public policy for a party to contract against liability for damage caused by his ordinary negligence. Klann v Hess Cartage Co, 50 Mich. App. 703; 214 N.W.2d 63 (1973). Tope v Waterford Hills Road Racing Corp, 81 Mich. App. 591; 265 N.W.2d 761 (1978).

Plaintiff relies heavily on Allen v Michigan Bell Telephone Co, 18 Mich. App. 632; 171 N.W.2d 689 (1969). In Allen, the telephone company contracted to publish an insurance agent's listing in the yellow pages but failed to do so. Upon the agent's suit for damages the telephone company asserted a clause which limited its liability to the price of the listing. On appeal, this Court refused to enforce the clause. The Court's primary concern was that the insurance agent was contracting with a public utility which was the only place for the type of advertising sought. See Michigan Ass'n of Psychotherapy Clinics v Blue Cross Blue Shield of Michigan, 101 Mich. App. 559, 573; 301 N.W.2d 33 (1980), modified 411 Mich. 869 (1981), wherein Allen was considered at length. The Court found the term was unconscionable under those circumstances.

The circumstances of the instant case are distinguishable. This is not an individual versus a monopoly. Here, both parties to the contract are corporations dealing at arm's length. Furthermore, we find the following statement in Allen particularly relevant in the instant case:

"Thus, merely because the parties have different options or bargaining power, unequal or wholly out of proportion to each other, does not mean that the agreement of one of the parties to a term of a contract will not be enforced against him; if the term is substantively reasonable it will be enforced." (Emphasis supplied.) Allen, supra, 638.

Reasonableness is the primary consideration. The contract clause limiting defendant's liability to the aggregate of six monthly payments or $250 is manifestly reasonable under the circumstances of this case. Defendant is not in the insurance business. Rather it provides an alarm service for a specific sum. That sum is not a premium for theft insurance. The contract in question made this clear. Under these circumstances a clause limiting defendant's liability in the event the alarm system did not work properly is not unconscionable.

In arguing that the contract in question is a contract of adhesion, plaintiff emphasizes the fact that the contract is standardized and is common in the alarm industry. The mere fact that a contract is standardized and preprinted does not make it unenforceable as a contract of adhesion. As stated in Brown v Siang, 107 Mich. App. 91, 107; 309 N.W.2d 575 (1981):

"A finding that the contract is one of adhesion is only the first step in rendering it unenforceable. It must also be determined that `the terms of which the adherent was unaware are beyond the reasonable expectations of an ordinary person or are oppressive or unconscionable'."

For the reasons stated, supra, we find that the contract in question was neither unconscionable, oppressive nor beyond the reasonable expectations of the ordinary person. Thus, the clause was enforceable.

The trial court's decision finding a lack of subject-matter jurisdiction is affirmed.