Orfanos v. Athenian, Inc.

⁵⁰⁹ WILNER, Judge. On April 27, 1982, a fire erupted at the Athenian Restaurant at 4700-02 Eastern Avenue in Baltimore, substantially damaging both the restaurant furnishings and equipment and the buildings in which they were housed. The buildings were owned by appellants Evangelos and Mary Orfanos; they were leased to appellees Spiros Stavrakas and James Gianakos, who, through their corporation Athenian, Inc., owned and operated the restaurant. In force at the time of the fire was an insurance policy purchased by Athenian, Inc. and written by St. Paul Surplus Line Insurance Company (St. Paul).

The policy provided fire insurance coverage on the contents of the restaurant and liability coverage with respect to personal injury or property damage caused by Athenian, Inc. Appellants had a separate fire insurance policy on the buildings. In September, 1982, appellants filed an action in equity against Stavrakas, Athenian, Inc. and St. Paul, alleging, among other things, that the fire was due to hazardous conditions which the defendants failed to correct, that the existence of those conditions constituted both negligence and a breach of the lease, that, in contravention of the lease, the defendants had failed to restore the premises and had announced their intention to vacate it, that the defendants had made claim to St. Paul for their losses, and that, if they received payment, they were “unlikely to apply said insurance proceeds to the restoration of said personal property.” Appellants asked for a declaratory judgment that the lease remained in effect and for the appointment of a trustee to collect the insurance proceeds from St. Paul. Although it does not appear that any relief was ever granted to appellants in that action, it sufficed to preclude St. Paul from actually paying the fire insurance proceeds to its insureds. In January, 1983, appellants dismissed the equity action and filed, in place of it, a three-count declaration at law against Stavrakos, Gianakos, Athenian, and St. Paul.

All ⁵¹⁰ three counts were based on the underlying claim that the fire resulted from hazardous conditions around the cooking units. Count I charged breach of the lease; Count II charged negligence; and Count III charged intentional and malicious destruction of property. Those counts, of course, sought money damages. In a separate claim at the end of the declaration, however, appellants sought an injunction restraining St. Paul from distributing the proceeds of its policy.

In support of that claim, they incorporated the averments of Counts I, II, and III, and stated that Athenian, Inc. was “no longer a viable business entity,” that the right to collect the insurance proceeds was its only asset, and that the defendants would render those proceeds “inaccessible” if paid to them. Three pertinent things occurred thereafter: (1) at some point, St. Paul filed an interpleader and deposited the fire insurance proceeds in court; (2) appellants filed an amended, and then a two-count second amended, declaration, alleging breach of the lease and negligence but abandoning the intentional injury claim; and (3) Athenian, Inc. filed a counterclaim (and then an amended counterclaim) against appellants contending that, by filing the actions against St. Paul and thereby causing St. Paul not to pay the fire insurance proceeds to it, appellants had intentionally and maliciously interfered with its insurance contract. The proceedings terminated in the Circuit Court when (1) on June 7, 1984, the court sustained appellants’ demurrer to the amended counterclaim without leave to amend and (2) on March 28, 1985, after a non-jury trial, the court found no liability under the second amended declaration and therefore entered judgment thereon for appellees. Neither side is pleased with its loss, and so we have cross-appeals.

Appellants complain that certain of the court’s critical findings and conclusions are erroneous and that the court erred in striking certain rebuttal testimony. Athenian, Inc. believes that its amended counterclaim stated a cause of action. ⁵¹¹ I. Complaints By Appellants The gravamen of appellants’ action, as set forth in their second amended declaration, both as to the breach of lease and negligence counts, was that the fire resulted from hazardous conditions which appellees created and allowed to remain in the vicinity of the cooking units. Count I of the second amended declaration states that, in contravention of the lease appellees “carelessly allowed dangerous conditions to exist in and about the cooking units upon the demised premises” and that “as a direct and proximate result of [appellees’] breach of the aforesaid Lease Agreement, a fire did occur upon the demised premises” on April 27, 1982, causing damage to the buildings. Count II was a bit more specific in describing the dangerous conditions — permitting the cooking units to remain in a state of disrepair by allowing an accumulation of cooking grease, failing to clean the hood and duct area “of said units” with sufficient frequency, failing to inspect the automatic dry chemical extinguishing system on a regular basis, failing to have fire extinguishers in the immediate vicinity of the cooking units, and failing to disconnect unused cooking units from the power sources — but it too alleged that the breach of these “duties” “directly and proximately resulted in the aforesaid fire on the demised premises.” There were a number of issues and sub-issues raised at trial, but it is fair to say that appellees’ principal defenses were that (1) they had regularly cleaned and attended to the cooking units and the hood and duct located directly above those units, and (2) in any event, the fire did not start in or near the cooking units, and, thus, any accumulation of grease in or about those units or in the hood or duct was not the cause of the fire.

The court accepted the second of these defenses, finding that “the fire probably originated in an area that would not be directly affected by the cooking grease,” and that, as a result, appellants had not met their burden of proof on the issue of causation — whether the fire resulted from the conditions alleged to exist in or around the cooking units. Although early in its oral opinion, the ⁵¹² court, referring to Count I, indicated that “[t]he contract action basically seems to have been abandoned” as there was “[v]ery little testimony” as to that count, it seems clear in context that the ruling on Count I was not based on abandonment as much as on appellants’ failure to meet their burden of proof as to causation. Appellants make two complaints about that finding: first, they argue that it was clearly erroneous on the facts; second, they contend that, even if the fire did not start in or near the cooking units, the accumulation of grease in the vicinity of those units caused the fire to spread or become more severe than otherwise would have been the case, which itself is actionable. We find some merit in the second contention.

We shall avoid the temptation to. recount all of the voluminous and conflicting evidence as to how and where the fire started and spread, for it really is not necessary. A quick summary will suffice. The restaurant was located on the corner of Eastern Avenue and Newkirk Street. It was divided, essentially, into three parts.

The first part was the dining area, which patrons entered from Eastern Avenue. In back of the dining area was the kitchen, and behind that was a freezer and storage area. Each part was separated from the adjoining part by a wall that ran from the New-kirk Street side of the building partway across the width of the restaurant; because these walls did not extend all the way across, there was access from one area to another on the right-hand side. Two ventilation systems served the restaurant, one serving the dining room, the other serving the kitchen.

The dining room system consisted of two rectangular-shaped ducts suspended about six inches below the ceiling, one along the right wall and the other about one-third distant from the left (Newkirk Street) wall. These ducts ran back to the kitchen and then joined a rectangular duct that ran perpendicularly and vented through the Newkirk Street wall. ⁵¹³ The second system consisted of a hood suspended from the ceiling directly over the cooking units and a round duct that ran through the back wall of the kitchen into or toward the storage area, then turned up through the ceiling, and eventually vented through the roof near the back wall of the building. 1 There was evidence that these two systems were entirely separate from each other and did not interconnect. Although parts of both systems ran through the kitchen and therefore were in somewhat close proximity, they were at different locations and elevations and did not abut each other. The part of the dining room system that ran along the right wall of the dining area had been rendered dysfunctional by a baffler that a former tenant had placed at the point where the other duct coming from the dining room joined the perpendicular duct in the kitchen.

There was no evidence establishing precisely where, or how, the fire started. There was some evidence, however, to show that it either commenced or initially was confined in that part of the dining room ventilation duct running perpendicularly near the kitchen ceiling toward Newkirk Street. From that evidence, coupled with the layout of the two systems, the court could reasonably infer that the fire was not ignited by any grease accumulated in or about the cooking units or the ventilation system serving those units. Accordingly, notwithstanding some evidence to the contrary, the court’s finding to that effect was not clearly erroneous.

Md. Rule 1086. As noted, appellants alternatively contend that, even if the grease accumulated in the ventilation system serving ⁵¹⁴ the cooking units did not cause the fire to ignite, it contributed to the spread and ferocity of the fire and therefore was a proximate cause of the ultimate damage suffered. They argue that liability may exist for creating a hazardous condition that enables a fire to spread or to become especially dangerous, even if that condition did not actually cause the fire initially to ignite. This was not the theory actually pled by appellants, and indeed it was not the theory that they sought to prove.

The charge made, and the charge sought to be proved, was that the fire was started by the ignition of grease in the hood and duct over the cooking units. This alternative theory was, however, presented to the court in argument, considered by the court, and rejected on its merits. It is therefore properly before us for review. Md. Rule 1085.

The court accepted the premise that a person who allows a fire hazard to exist on his property may be liable for damage caused to others by a fire emanating from his property if (1) the hazardous condition contributed to the spread or ferocity of the fire and (2) it was reasonably foreseeable that the condition might so contribute. It concluded, however, that, because appellants failed to show how the fire started, they failed in their burden of proving the requisite element of foreseeability. We think that the court erred in reaching that conclusion. Proof of foreseeability does not depend on proof of how the fire started.

The one Maryland case in this area of law is Texas Company v. Pecora, 208 Md. 281 , 118 A.2d 877 (1955). The defendant company owned a gasoline storage tank that was once used in connection with a service station. When the dealership agreement was terminated, the company permitted the dealer to have the tank removed from the ground. The dealer did, indeed, have it removed to a nearby lot where children often played.

The tank was left in a dangerous condition; there was some residue of gasoline in it and the vent pipes were not capped. The tank exploded and several children playing in the area were injured when one ⁵¹⁵ of the children ignited a puddle of gasoline that had escaped from the tank. Affirming judgments against the company, the Court held at 292, 118 A.2d 377 : “The jury could have found from the evidence that these tanks were known to the Texas Company to be highly dangerous if brought in contact with sparks or fire. It could have found that there were safety measures well known to the Texas Company whereby the tanks could be rendered harmless.

It could have found that the Texas Company knew that the tanks must be moved and that it took no action to render them safe for removal. The jury could have found that the Texas Company should have foreseen that others ignorant of the danger might remove them and leave them in an unsafe condition. The jury could have found from the evidence that the Texas Company should have foreseen that these tanks thus exposed and dangerous would constitute a hazard to others and that the explosion which occurred in this case was a reasonably foreseeable result. Such finding by the jury would establish the negligence of the Texas Company.” The Court then rejected the argument that either the removal of the tanks to another property by the dealer or the ignition of the gasoline by the child constituted an intervening cause sufficient to break the chain of causation.

Both events, said the Court, were “links in a chain of foreseeable circumstances.” Id., 294 , 118 A.2d 377 . It is true, as the Circuit Court here pointed out, that in Texas Company v. Pécora, the immediate cause of the explosion was known, and thus the Court could determine whether that event was a reasonably foreseeable one. But the caselaw generally does not require that the immediate cause be known. In Prince v. Chehalis Savings & Loan Ass’n, 186 Wash. 372 , 58 P.2d 290 (1936), the defendant owned a garage which, by reason of its state of disrepair, saturation with grease and oil, and openness to children and vagrants, had ⁵¹⁶ become a fire hazard.

A fire of unknown origin erupted in the garage, spread to an adjoining property, and spread from there to the next adjoining property, owned by the plaintiffs. Recovery was affirmed, the Court holding at 292: “It is first contended that the evidence failed to establish liability on the part of the appellant, because there was no evidence or finding as to the origin of the fire, it being claimed that that was a necessary element for the respondents to prove. The courts generally support the rule, in such a case as that now before us, that evidence as to the origin of the fire is not a necessary element to entitle a recovery where the property causing the fire has gotten into such a condition that it creates a fire hazard, and that, if fire should occur in it, it is .reasonably probable that it would spread to the adjacent property.” A similar result was reached in Chicago, Milwaukee, St. Paul & Pacific R. Co. v. Poarch, 292 F.2d 449 (9th Cir. 1961). There too the plaintiffs, whose property was damaged by the spread of a fire emanating from the defendant’s property, claimed that the defendant had been negligent in allowing its property to become a fire hazard.

The specific cause and origin of the fire were unknown. Applying Washington law and, in particular, the Prince case, supra, the Court affirmed a judgment for the plaintiffs, holding, at 451: “[Ojnce it is established that the owner of a building has negligently allowed it to become a fire hazard and a fire does start[,] the actual cause — whether deliberate, accidental, or an act of God — is immaterial. The negligence is not in the ignition of the fire but rather it is in allowing a condition to exist which will be reasonably likely to cause injury to another if a fire does start.” (Emphasis in the original.) See also Reid & Sibell, Inc. v. Gilmore