Polanco v. Southern Holdings, LLC

• Court: Supreme Court of The Virgin Islands
• Decided: January 18, 2024
• Docket: SCT-CIV-2021-0103
• Status: Published

Opinion

For Publication

IN THE SUPREME COURT OF THE VIRGIN ISLANDS MILADY POLANCO, ) S. Ct. Civ. No. 2021-0103 Appellant/Plaintiff, ) Re: Super. Ct. Civ. No. 108/2019 (STT) ) v. ) ) SOUTHERN HOLDINGS, LLC and RICHARD ) WASHBURN, ) Appellees/Defendants. )

On Appeal from the Superior Court of the Virgin Islands Division of St. Thomas-St. John Superior Court Judge: Hon. Renee Gumbs-Carty

Argued: March 8, 2022 Filed: January 18, 2024

BEFORE: RHYS S. HODGE, Chief Justice; MARIA M. CABRET, Associate Justice; and IVE ARLINGTON SWAN, Associate Justice.

APPEARANCES:

Joel H. Holt, Esq. Law Offices of Joel H. Holt St. Croix, U.S.V.I.

Ryan W. Greene, Esq. Law Office of Ryan Greene St. Thomas, U.S.V.I. Attorneys for Appellant,

Matthew J. Duensing, Esq. Joseph Sauerwein, Esq. Law Offices of Duensing & Carter St. Thomas, U.S.V.I. Attorneys for Appellee.

OPINION OF THE COURT HODGE, Chief Justice. Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 2 of 11

¶1 Appellant Milady Polanco appeals from the Superior Court’s September 1, 2021 order

entering summary judgment in favor of Southern Holdings, LLC, and Richard Washburn. For the

reasons that follow, we reverse.

I. BACKGROUND

¶2 For approximately sixteen years, Polanco worked for ABC Construction, a business owned

by William Koenig. ABC Construction operated from a property located at No. 13F Estate

Lindberg Bay on St. Thomas, which was owned by Jerome Jackson Sr. and Eleanor Jackson Berg

(collectively “the Jacksons”). The Jacksons leased the property to Southern Holdings, of which

Washburn was the sole managing member, but gave Southern Holdings permission to sublease the

property to Koenig. Southern Holdings and Koenig executed a sublease agreement for the period

from January 1, 2007, to May 31, 2011, but after this period, Koenig and ABC Construction

continued to remain on the property as month-to-month holdover tenants for all times pertinent to

this case.

¶3 On November 24, 2017, Polanco sustained injuries when she fell while walking down a

vehicle ramp that served as the entrance to ABC Construction’s premises, which was wet from

rain as well as oil that had leaked from a forklift driven on the ramp. Polanco filed suit against

Southern Holdings and Washburn on March 1, 2019, alleging that they possessed a duty to keep

the premises in a reasonably safe condition and to warn of any known dangerous conditions.

Southern Holdings and Washburn filed a third-party complaint against Koenig, which resulted in

a default judgment due to Koenig’s failure to participate in the litigation, and sought summary

judgment with respect to Polanco’s claims against them. After briefing, the Superior Court issued

a September 1, 2021 order entering summary judgment in favor of Southern Holdings and Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 3 of 11

Washburn, concluding that they did not owe a duty of care to Polanco because they were not the

“land possessors” of the property because they had leased their interest to Koenig, who the

Superior Court concluded had exclusive possession of the property at the time Polanco sustained

her injury. Polanco timely filed a notice of appeal with this Court on September 24, 2021. See

V.I. R. APP. P. 5(a)(1).

II. DISCUSSION

A. Jurisdiction and Standard of Review

¶4 Pursuant to the Revised Organic Act of 1954, this Court has appellate jurisdiction over “all

appeals from the decisions of the courts of the Virgin Islands established by local law[.]” 48 U.S.C.

§ 1613a(d). Title 4, section 32(a) of the Virgin Islands Code vests this Court with jurisdiction over

“all appeals arising from final judgments, final decrees, [and] final orders of the Superior Court.”

Because the Superior Court’s September 1, 2021, order resolved all of the claims between the

parties, it is a final judgment under section 32(a). See Joseph v. Daily News Publishing Co., Inc.,

57 V.I. 566, 578 (V.I. 2012).

¶5 This Court exercises plenary review over all questions of law, including the grant or denial

of motions for summary judgment, and reviews findings of fact for clear error. See St. Thomas-

St. John Bd. of Elections v. Daniel, 49 V.I. 322, 329 (V.I. 2007).

B. Summary Judgment

¶6 “Premises liability actions in the Virgin Islands follow the same four-factor test as

traditional negligence claims: (1) a legal duty of care to the plaintiff, (2) a breach of that duty of

care by the defendant (3) constituting the factual and legal cause of (4) damages to the plaintiff.”

Rymer v. Kmart Corp., 68 V.I. 571, 576 (V.I. 2018) (internal citations and quotation marks Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 4 of 11

omitted). In her appellate brief, Polanco contends that the Superior Court erred when it entered

summary judgment in favor of Southern Holdings and Washburn upon concluding that they did

not owe her a legal duty because they had subleased the property to Koenig. As we have previously

explained,

A summary judgment movant is entitled to judgment as a matter of law if the movant can demonstrate the absence of a triable issue of material fact in the record. A drastic remedy, a court should only grant summary judgment when the pleadings, the discovery and disclosure materials on file, and any affidavits, show there is no genuine issue as to any material fact. Once the moving party has identified the portions of the record that demonstrate no issue of material fact, the burden shifts to the non-moving party to present affirmative evidence from which a jury might reasonably return a verdict in his favor. The non-moving party may not rest upon mere allegations, but must present actual evidence showing a genuine issue for trial. Further, the reviewing court must consider the record evidence in the light most favorable to the non-moving party.

Id. at 575-76 (internal citations and quotation marks omitted).

¶7 We agree with Polanco that the Superior Court erred when it entered summary judgment

in favor of Southern Holdings and Washburn solely on the ground that they were not “land

possessors.” For more than a decade, this Court has rejected the use of outdated and formalistic

distinctions pertaining to ownership or possession of property or chattels. In Banks v. International

Rental & Leasing Corp., 55 V.I. 967 (V.I. 2011), we set aside the long-standing rule that only

sellers of goods, and not lessors, are liable for injuries resulting from a defective product. In Perez

v. Ritz-Carlton (V.I.) Inc., 59 V.I. 522 (V.I. 2013), we agreed with the courts that had concluded

that “[f]oreseeability . . . is the touchstone of the existence of the duty of reasonable or ordinary

care” in “premises liability actions” because “[l]iability for such foreseeable harms is based on the

possessor’s superior knowledge of the property, as the possessor is in the best position to know of

potentially dangerous conditions on the property—and therefore has a heightened duty to protect Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 5 of 11

those it invites onto the property from foreseeable harm caused by those conditions.” Id. at 533-

34 (collecting cases). And in Machado v. Yacht Haven U.S.V.I., LLC, 61 V.I. 373 (V.I. 2014), we

abolished the distinction between invitees, licensees, and trespassers in premises liability cases

because “[t]he division of entrants on another’s land between invitees, licensees, and trespassers

was inherited from a culture deeply rooted to the land, a culture which traced many of its standards

to a heritage of feudalism.” Id. at 384. We said that “[o]nce the history and purpose of dividing

entrants into invitees, licensees, and trespassers to define a land possessor’s duty of care in

premises liability actions is understood, it becomes clear that the maintenance of this trichotomy

conflicts with this Court's jurisprudence and modern negligence law generally.” Id. at 385. We

determined that the “[c]haracterization of an entrant as an invitee, licensee, or trespasser has no

bearing on the possessor’s superior knowledge of the property, and to allow summary judgment

where there is evidence that a plaintiff’s injury was foreseeable to a land possessor, yet the

possessor did not take reasonable action to prevent that injury, inappropriately places the focus of

attention on the plaintiff's actions alone.” Id. at 386. We abolished this trichotomy in favor of

what we determined constituted “the soundest common law rule for the Virgin Islands”: “to extend

the holding of Perez—that the foreseeability of harm ‘is the touchstone of the existence of [a land

possessor's] duty of reasonable or ordinary care’—to all premises liability actions.” Id. at 387

(quoting Perez, 59 V.I. at 593).

¶8 The reasoning we employed in Banks, Perez, and Machado likewise compels us to reject

the formalistic distinction between owners who are “land possessors” or “occupiers” and those

who are not. See Bober v. N.M. State Fair, 808 P.2d 614, 618 (N.M. 1991) (“[T]he duty of a

landowner to exercise ordinary care to avoid creating, or permitting, an unreasonable risk of harm

to others is not determined by the nature of the owner’s property interest (e.g., outright ownership, Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 6 of 11

a leasehold, or another possessory interest).”); Sargent v. Ross, 308 A.2d 528, 533 (N.H. 1973)

(“We think that now is the time for the landlord’s limited tort immunity to be relegated to the

history books where it more properly belongs.”). Rather, we reiterate the rule first announced in

Perez and later extended by Machado: that in all premises liability actions the touchstone is the

foreseeability of harm, and not the labels attached to the plaintiff or the defendant.1

¶9 Having determined that the Superior Court erred when it held that Southern Holdings and

Washburn did not possess a duty to Polanco because they lost their status as “land possessors” by

virtue of entering into a sublease agreement with Koenig, we must now determine whether the

evidence, when viewed in the light most favorable to Polanco, establishes a genuine issue of

material fact with respect to the elements of her premises liability claim. Applying this standard,

the record unquestionably establishes that (1) while there was another entrance, the vehicle ramp

served as the ordinary entrance to ABC Construction’s facility, (2) the vehicle ramp was steep and

1 In her appellate brief, Polanco asserts that the Superior Court erred by failing to conduct a Banks analysis to determine whether the Virgin Islands should adopt section 53 of the Restatement (Third) of Torts: Physical and Emotional Harm, which Polanco asserts establishes a higher standard of duty for landlords in premises liability cases. However, as we have previously explained, a Banks analysis “is necessary only for issues of common law . . . that this Court has not addressed.” In re L.O.F., 62 V.I. 655, 661 n.6 (V.I. 2015) (emphasis added). As explained above, this Court held in Machado that the rule announced in Perez—that the foreseeability of harm is the touchstone of the existence of a duty—would extend to “all premises liability actions.” 61 V.I. at 387. Therefore, while the Superior Court erred by misapplying the rule announced in Perez and Machado, it did not err by failing to consider whether a common law rule already adopted by this Court through a Banks analysis should be replaced by a different common law rule, for “[i]t goes without saying that the Superior Court may not overrule [the] Supreme Court.” Gerace v. Bentley, 65 V.I. 289, 304 (V.I. 2016) (quoting Ebersole v. Southeastern Pa. Transp. Auth., 111 A.3d 286, 290 n.2 (Pa. Commw. Ct. 2015)). See also, e.g., Francis v. Arizona Dep't of Transp., 963 P.2d 1092, 1094 (Ariz. Ct. App. 1998) (“Under the doctrine of stare decisis, once a point of law has been established, it must be followed by all courts of lower rank in subsequent cases where the same legal issue is raised.”); McKay v. Indus. Comm'n, 438 P.2d 757, 759 (Ariz. 1968) (“Whether prior decisions of the highest court in [the] state are to be disaffirmed is a question for the court which makes the decisions.”). Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 7 of 11

lacked railings, (3) Polanco slipped because the vehicle ramp was wet from rain and oil that leaked

from a forklift that had been driven on the ramp, and (4) Polanco sustained injuries from her fall

which required surgery on her elbow. The question, then, is whether Southern Holdings and

Washburn possessed, and breached, a legal duty of care to Polanco.

¶ 10 As we emphasized earlier, the foreseeability of harm is the touchstone of the existence of

a duty in all premises liability cases, and such duty is breached if the defendant failed to take

reasonable action to prevent a foreseeable injury to the plaintiff. See Machado, 61 V.I. at 387;

Perez, 59 V.I. at 533-34. Southern Holdings and Washburn contend that they could not have

breached a duty to Polanco because they lacked the legal authority to enter the property or to make

any repairs or changes to the premises due to the terms of the sublease agreement with Koenig,

and in any event lacked actual or constructive knowledge of the condition of the vehicle ramp.

¶ 11 We disagree. While Southern Holdings and Washburn maintain that the sublease

agreement precluded them from entering the property or ordering repairs or changes to the vehicle

ramp, the plain text of that agreement establishes the contrary. Paragraph 13 of the sublease

agreement, titled “Repairs by Lessee,”2 states, in its entirety, as follows:

Lessee shall take good care of the demised premises (interior, exterior, mechanical and structural) and the fixtures and appurtenances therein, specifically including the cistern and water supply, and at its sole cost and expense make all repairs thereto as and when needed to preserve them in good working order and condition, ordinary wear and tear excepted. All damage or injury to the demised premises and to its fixtures, appurtenances and equipment from any cause shall be repaired and restored promptly by Lessee and its cost and expense to the satisfaction of Lessor. If the premises are damaged by fire or other cause, the damages shall be properly repaired by and at the expense of Lessee. If Lessee fails to make such repairs or restorations, or maintain the premises in at least as good a condition as upon commencement of this Lease, ordinary wear and tear excepted the Lessor may

2 The sublease agreement identifies Washburn as the “Lessor” and Koenig as the “Lessee.” (J.A. 94.) Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 8 of 11

make the same at the expense of Lessee and collect as additional rent or otherwise the expense therefor. The Lessee shall pay the Lessor within thirty (30) days after rendition of a bill or statement for expenses for the repair or restoration. There shall be no liability on the part of Lessor by reason of inconvenience, annoyance or injury to business arising from Lessor, Lessee or others making any repairs, alterations or improvements in or to any portion of the building, or in or to fixtures, appurtenances, or equipment thereof, and no liability upon Lessor for failure of Lessor or others to make any repairs, alterations, additions or improvements in or to any portion of the building or of demised premises, or in or to the fixtures, appurtenances or equipment thereof. Except in the case of an emergency requiring immediate action on the part of Lessor, Lessor agrees to provide Lessee with twenty-four (24) hours notice before exercising its right to enter upon the premises in order to make repairs. Lessor shall have the right to enter upon the demised premises at all reasonable hours to inspect them or make repairs deemed essential by Lessor. In case of an emergency (the existence of which shall be determined solely by Lessor) if Lessee shall not be present to permit entry, lessor or its representatives may enter the same forcibly without rending Lessor or its representatives liable therefor or affecting Lessee’s obligations under this Lease.

(J.A. 97-98 (emphasis added).)3 Thus, the plain language of the sublease agreement expressly

granted Southern Holdings and Washburn a virtually unrestricted right to enter the premises to

inspect its condition and order any repairs that Koenig failed to make. Likewise, paragraph 17,

titled “Nuisance,” provides that

Lessee covenants that it shall not perform any acts or carry on any practices that may injure the premises or improvements, or be a nuisance or menace. Lessee shall keep all trash and garbage in closed containers, and shall arrange for daily removal of garbage from the premises. Lessee shall not allow vermin or noxious smells, gases or chemicals to be present on the premises, and shall keep the demised premises in a clean, healthful condition. It is agreed that if Lessee shall not comply with these provisions, Lessor shall have, in addition to its other rights regarding Lessee’s breach of the covenants of this Lease, the right to enter

3 Despite the exculpatory provision in the lease, courts addressing similar exculpatory clauses have held that such clauses “should not be construed to absolve a landlord from liability arising from the landlord’s breach of covenants in the lease . . . .” Swisscraft Novelty Co. v. Alad Realty Corp., 274 A.2d 59, 63 (N.J. Super. Ct. App. Div. 1971). Thus, “generally an exculpatory clause has as its purpose the imposition of the insurable risk of personal injury or property damage loss upon the tenant which in no way attenuates the landlord’s contractual covenant to repair.” Meyer v. Caribbean Interiors, Inc., 435 So.2d 936, 938 (Fla. Dist. Ct. App. 1983). The provisions are considered separate and distinct. Id. We agree with this reasoning. Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 9 of 11

upon the premises and abate the nuisance, in which event, Lessee agrees to pay to Lessor all charges and expenses incurred by Lessor. Lessee shall not be allowed to store any dangerous, flammable or explosive chemicals or substances on the premises. Lessee shall, at its own expense, comply with all laws, orders, rules and regulations of all governmental agencies and authorities affecting the demised premises.

(J.A. 99 (emphasis added).) Consequently, Southern Holdings and Washburn reserved unto

themselves the legal right to enter the premises and remedy any dangerous conditions caused by

Koenig, including the presence of harmful chemicals or substances on the premises or even a

general failure to keep the premises in “a clean, healthful condition.” (Id.); see Bober, 808 P.2d at

617 (“[A] reservation of a right to enter to make repairs extends the duty of the landlord to the

traveling public, who may be off the premises, to maintain the premises in a safe condition. It

follows that a landlord who reserves the privilege which bears directly upon his relation to the

passerby has not surrendered or divested himself of the duty of care.”); Torres v. Piggy Wiggly

Shop Rite Foods, Inc., 600 P.2d 1198, 1200 (N.M. Ct. App. 1979) (stating that a landlord can be

held liable “where the landlord has reserved the right to enter to make repairs, even in cases where

he has not covenanted to make any repairs”); Fed. Ins. Co. v. Evans Constr. of N.Y. Corp., 257

A.D.2d 508, 509 (N.Y. App. Div. 1999) (“[W]here a lease reserves the right to enter and make

repairs, the owner does not, by way of that lease, escape liability for dangerous conditions.”).

¶ 12 Moreover, there is substantial evidence, when viewed in the light most favorable to

Polanco, which creates a triable issue of fact as to whether Southern Holdings and Washburn knew

or should have known about the dangerous conditions that caused Polanco’s injuries. During his

deposition as the representative of Southern Holdings, Washburn testified that he generally visited

the property “[a]t least once a year, sometimes twice” in order “[t]o encourage Mr. Koenig to clean

up the property and pay his rent.” (J.A. 171.) Washburn further testified that although Koenig Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 10 of 11

was required to maintain the property, he knew that Koenig “failed to do so, and the property

literally went down year after year after year,” (J.A. 170) and that “every time” he visited the

property he would talk to Koenig “about cleaning up the place and not allowing it to get in this

kind of condition.” (J.A. 110.) In addition, Washburn acknowledged that “the ramp was for

vehicles” and not intended for pedestrians, and that on at least some occasions he personally had

walked up and down the vehicle ramp to access the property despite the availability of other

entrances suitable for pedestrians. (J.A. 108-09.) This testimony, when viewed in the light most

favorable to Polanco and considered in conjunction with the terms of the sublease agreement,

certainly creates various issues of material fact as to whether Southern Holdings and Washburn

(1) were largely absentee landlords who inspected the property very infrequently despite having

reserved in the sublease agreement the right to inspect the property at any reasonable hour; (2)

knew that Koenig had failed to maintain the property, with the condition of the property

deteriorating “year after year after year”; (3) were aware that at least on some occasions a vehicle

ramp not intended for use by pedestrians had been used by pedestrians; and (4) despite having the

unrestricted right under the sublease agreement to make repairs to and abate nuisances on the

property without Koenig’s consent, elected to not do so, and chose to only ask Koenig to clean the

property after each visit, even though these requests were always unsuccessful. Thus, we find that

there are triable issues of fact which preclude the issuance of summary judgment.4

4 In their appellate brief, Southern Holdings and Washburn maintain that Polanco contributed to her own injuries by choosing to use the vehicle ramp to enter ABC Construction’s facility despite being aware that it was not intended for use as a pedestrian walkway, and that in any event Koenig was in the best position to prevent Polanco’s injuries, such as by clearing debris and slippery substances from the vehicle ramp or by retrofitting it with handrails. Yet even if this is true, it cannot serve as a complete defense to Polanco’s premises liability claim, but instead only bears Polanco v. Southern Holdings LLC 2024 V.I. 8 S. Ct. Civ. No. 2021-0103 Opinion of the Court Page 11 of 11

III. CONCLUSION

¶ 13 The Superior Court erred when it held, at the summary judgment stage, that Southern

Holdings and Washburn did not owe a legal duty to Polanco. There are material issues of fact as

to whether Southern Holdings and Washburn possessed a legal right to enter the property and make

necessary repairs, and knew or should have known of the dangerous condition that caused

Polanco’s injury, yet failed to take any reasonable action to prevent that injury. Accordingly, we

reverse the September 1, 2021 order entering summary judgment in favor of Southern Holdings

and Washburn, and remand the case to the Superior Court for further proceedings consistent with

this opinion.

Dated this 18th day of January, 2024.

BY THE COURT:

/s/ Rhys S. Hodge_______ RHYS S. HODGE Chief Justice ATTEST:

VERONICA J. HANDY, ESQ. Clerk of the Court

By: /s/ Reisha Corneiro Deputy Clerk II

Dated: January 18, 2024

upon the potential amount of the damages award. See 5 V.I.C. § 1451(a) (“In any action based upon negligence to recover for injury to person or property, the contributory negligence of the plaintiff shall not bar a recovery, but the damages shall be diminished by the trier of fact in proportion to the amount of negligence attributable to the plaintiff.”); 5 V.I.C. § 1451(d) (“Where recovery is allowed against more than one defendant, the trier of fact shall apportion, in dollars and cents, the amount awarded against each defendant. Liability of defendants to plaintiff shall be joint and several but, for contribution between defendants, each defendant shall be liable for that proportion of the verdict as the trier of fact has apportioned against such defendant[.]”).