ILLINOIS OFFICIAL REPORTS

Appellate Court

Nationwide Mutual Fire Insurance Co. v. T&N Master Builder & Renovators, 2011 IL App

(2d) 101143

Appellate Court

Caption

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, as

Subrogee of Michael Markowitz, Plaintiff-Appellant, v. T AND N

MASTER BUILDER ANDRENOVATORS, d/b/aTNConstruction, and

TONY DELIGIO, Individually and d/b/a TN Construction, DefendantsAppellees.

 District & No. Second District

Docket No. 2-10-1143

Filed October 25, 2011

Held

(Note: This syllabus

constitutes no part of

the opinion of the court

but has been prepared

by the Reporter of

Decisions for the

convenience of the

reader.)

Where plaintiff insurer issued an insurance policy covering the property

rented by defendants and owned by plaintiff’s subrogor and defendants

occupied the property as holdover tenants at the time of a fire that

damaged the property, the trial court properly determined that plaintiff

could not sue defendants as subrogee of the owner and entered judgment

on the pleadings for defendants on the ground that defendants were

coinsureds under the policy issued to the owner and that plaintiff’s action

was barred byDix, and, furthermore, even if plaintiff had not forfeited the

argument that the “holdover” provision of the lease made defendants

liable for all damages resulting from their continued possession of the

property, the more specific provision of the lease regarding fire damage

controlled over the provision pertaining to damages generally.
Decision Under 

Review

Appeal from the Circuit Court of Lake County, No. 09-L-748; the Hon.

Margaret J. Mullen, Judge, presiding.

Judgment Affirmed.

Counsel on

Appeal

Stuart M. Brody, of Sneckenberg, Thompson & Brody, LLP, of Chicago,

for appellant.

Daniel P. Costello and James C. Barrow, both of Daniel P. Costello &

Associates, of Chicago, for appellees.

Panel JUSTICE HUDSON delivered the judgment of the court, with opinion.

PresidingJustice Jorgensen and Justice Birkett concurred in the judgment

and opinion.

OPINION

¶ 1 Plaintiff, Nationwide Mutual Fire Insurance Company (as subrogee of Michael

Markowitz), appeals an order of the circuit court of Lake County granting judgment on the

pleadings (735 ILCS 5/2-615(e) (West 2008)) in favor of defendants T&N Master Builder

and Renovators and TonyDeligio. Plaintiff had issued an insurance policy covering property

owned by Markowitz. Defendants were tenants upon the property. While the property was

occupied by defendants, a fire occurred, damaging the building. The trial court determined

that plaintiff could not maintain an action as subrogee against defendants, because theywere

coinsureds under Markowitz’s policy with plaintiff. For the reasons that follow, we affirm.

¶ 2 I. BACKGROUND

¶ 3 On February9, 2007, a fire occurred in a building rented by defendants. The property was

insured under a policy issued by plaintiff. As a result of the fire, plaintiff was obligated to

pay the owner of the property $140,328.98. Plaintiff now brings this action in subrogation

to recover the $140,328.98 from defendants. Plaintiff alleges that the fire resulted from

defendants’ negligence.

¶ 4 On December 11, 2005, Markowitz entered into a commercial leasing agreement with

defendants. At the time of the fire, the lease was expired. A holdover tenancy resulted.

Plaintiff alleges 11 counts in all, including negligence, spoliation of evidence, and breach of

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contract. Defendants filed a motion for judgment on the pleadings pursuant to section 2-

615(e) of the Civil Practice Law (735 ILCS 5/2-615(e) (West 2008)), which the trial court

granted. It found that defendants were coinsureds under the terms of the lease and therefore

plaintiff could not maintain an action against them, relying on Dix Mutual Insurance Co. v.

LaFramboise, 149 Ill. 2d 314 (1992).

¶ 5 The relevant provisions of the lease are as follows:

“4. REPAIR. The Lessee covenants and agrees with Lessor to take good care of and

keep in clean and healthy condition the Premises and their fixtures, and to commit or

suffer no waste therein; that no changes or alterations of the Premises shall be made or

partitions erected, nor walls papered without the consent in writing of Lessor; that Lessee

will make all repairs required to the walls, windows, glass, ceilings, paint, plastering,

plumbing work, pipes, and fixtures belonging to the Premises, whenever damage or

injury to the same shall have resulted from misuse or neglect; and Lessee agrees to pay

for any and all repairs that shall be necessary to put the Premises in the same condition

as when he entered therein, reasonable wear and loss by fire excepted, and the expense

of such repairs shall be included within the terms of the lease.

* * *

8. HOLDING OVER. If the Lessee retains possession of the Premises or any part

thereof after the termination of the term by lapse of time or otherwise, then the Lessor

may at Lessor’s option within thirty days after the termination of the term serve written

notice upon Lessee that such holding over constitutes either (a) renewal of this lease for

one year, and from year to year thereafter, at double the rental specified under Section 1

for such period, or (b) creation of a month to month tenancy, upon the terms of this lease

except at double the monthly rental specified under Section 1, or (c) creation of a tenancy

at sufferance, at a rental of $75.00 dollars per day for the time Lessee remains in

possession. If no such written notice is served then a tenancy at sufferance with rental as

stated at (c) shall have been created. In such a case if specific per diem rental shall not

have been inserted herein at (c)such per diem rental shall be one-fifteenth of the monthly

rental specified under Section 1 of this lease. Lessee shall also pay to Lessor all damages

sustained by Lessor resulting from retention of possession by Lessee.

* * *

15. FIRE AND CASUALTY. In case the Premises shall be rendered untenantable

[sic] by fire or other casualty, Lessor may at his option terminate this lease, or repair the

Premises within thirty days, and failing so to do, or upon the destruction of the Premises

by fire, the term hereby created shall cease and determine.”

¶ 6 II. ANALYSIS

¶ 7 Plaintiff raises two main issues on appeal. First, it contends that the rule announced by

the supreme court in Dix, 149 Ill. 2d 314, should not apply in this case, because Dix involved

a residential lease and the instant case involves sophisticated, commercial parties. Second,

plaintiff asserts that certain provisions of the lease make defendants liable for the damages

to the building. We find neither contention well founded.

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¶ 8 As this appeal comes to us following a grant of a motion for judgment on the pleadings

(735 ILCS 5/2-615(e) (West 2008)), review is de novo. Wakulich v. Mraz, 203 Ill. 2d 223,

228 (2003). When a defendant makes a motion for judgment on the pleadings, he concedes

the truth of the well-pled facts of the plaintiff’s complaint. Parkway Bank & Trust Co. v.

Meseljevic, 406 Ill. App. 3d 435, 442 (2010). In reviewing the motion, we must draw all

reasonable inferences in favor of the nonmovant (Parkway, 406 Ill. App. 3d at 442) and

construe the allegations strictly against the movant (Pioneer Bank &Trust Co. v. Austin Bank

of Chicago, 279 Ill. App. 3d 9, 13 (1996)). We must determine whether there is an issue of

material fact presented by the pleadings. Pioneer, 279 Ill. App. 3d at 13. If no such issue is

presented, then we determine whether the movant is entitled to judgment. Pioneer, 279 Ill.

App. 3d at 13.

¶ 9 We further note that this is an action in subrogation. As the supreme court explained in

Dix, subrogation is an action in chancery. Dix, 149 Ill. 2d at 319. It is “designed to place the

ultimate responsibility for the loss upon the one on whom in good conscience it ought to fall

and to reimburse the innocent party who is compelled to pay.” Reich v. Tharp, 167 Ill. App.

3d 496, 500-01 (1987). As an action in equity, a claim may be subrogated only in order to

prevent injustice or unjust enrichment and will not be maintained when it would be

inequitable to do so. Dix, 149 Ill. 2d at 319. Subrogation is not allowed against a tenant

where the tenant is considered a coinsured under the landlord’s insurance policy. Reich, 167

Ill. App. 3d at 501. With these principles in mind, we now turn to the issues raised by

plaintiff.

¶ 10 A. Whether This Action Can Proceed in Light of Dix

¶ 11 The first issue presented in this appeal is rather straightforward. If the rule our supreme

court announced in Dix, 149 Ill. 2d 314, controls, as the trial court held, this action cannot

proceed. Quite simply, it is well settled that an insurer maynot subrogate against a coinsured.

Chubb Insurance Co. v. DeChambre, 349 Ill. App. 3d 56, 60 (2004). In Dix, 149 Ill. 2d at

323, our supreme court held that a “tenant, by payment of rent, has contributed to the

payment of the insurance premium, thereby gaining the status of co-insured under the

insurance policy.” Hence, unless Dix does not apply for some reason, defendants are

coinsureds and plaintiff cannot subrogate against them.

¶ 12 Plaintiff believes that it has identified such a reason. It points out that Dix involved a

residential lease, while in the instant case, a commercial lease is at issue. As sophisticated

parties, plaintiff and defendants could have allocated risks and costs of insurance as they saw

fit. Moreover, as commercial tenants, defendants were in a better bargaining position to

negotiate the question of insurance coverage. It is certainly true that the law often

distinguishes between sophisticated and nonsophisticated parties. See, e.g., McRaith v. BDO

Seidman, LLP, 391 Ill. App. 3d 565, 575-76 (2009); Tower Investors, LLC v. 111 East

Chestnut Consultants, Inc., 371 Ill. App. 3d 1019, 1037 (2007); Topps v. Unicorn Insurance

Co., 271 Ill. App. 3d 111, 115 (1995). Thus, the distinction plaintiff seeks to draw finds

support in the law. Indeed, plaintiff calls our attention to substantial foreign authority in

support of its position. See, e.g., State Farm Florida Insurance Co. v. Loo, 27 So. 3d 747,

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750 n.4 (Fla. Dist. Ct. App. 2010) (collecting cases).

¶ 13 Defendants respond that the supreme court drew no such distinction in Dix. Moreover,

they point out, Dix relies extensively on Cerny-Pickas & Co. v. C.R. Jahn Co., 7 Ill. 2d 393

(1955), which involved a commercial lease. In that case, the court stated:

“While the cases are not in accord, we believe that the result here reached is

supported by better reasoned decisions. Seventy years ago in Lothrop v. Thayer, 138

Mass. 466, 475 [(1883)], the court said: ‘The ancient law has been acquiesced in, and

consciously or unconsciously, the cost of insurance to the landlord, or the value of the

risk enters into the amount of rent.’ And in the leading case of General Mills v. Goldman,

184 [F.2d 359, 366 (8th Cir. 1950)], the court said ***: ‘They necessarily consciously

figured on the rentals to be paid by the tenant as the source of the fire insurance

premiums and intended that the cost of insurance was to come from the tenants. In

practical effect the tenant paid the cost of the fire insurance.’ Day Wood Heel Co. v.

Rover, 123 Ohio St. 349 *** [(1931)], also supports our conclusion.

The principal cases to the contrary are Carstens v. Western Pipe and Steel Co., 142

Wash. 259 *** [(1927)]; Morris v. Warner, 207 Cal. 498 *** [(1929)], and Winkler v.

Appalachian Amusement Co., 238 N.C. 589 *** [(1953)]. In the first two of these cases

it does not appear that the leases contained provisions with respect to insurance like those

in the lease before us. In the third case, similar insurance provisions were involved, but

the court relied upon the dissenting opinion in the General Mills case and upon the first

opinion of the Appellate Court in the present case.” Cerny-Pickas &Co., 7 Ill. 2d at 398-

99.

Thus, not only did the court favorably cite foreign authority supporting the proposition that

a tenant, through the payment of rent, effectively pays to insure rented property, it expressly

rejected a contrary rule. Moreover, it did so in the commercial realm.

¶ 14 Accordingly, we are compelled to agree with defendants’ argument on this issue. The law

is well settled that we are bound by the decisions of our supreme court. In re Clifton R., 368

Ill. App. 3d 438, 440 (2006). Both Dix and Cerny-Pickas remain good law. Moreover, we

do not believe they are distinguishable as plaintiff suggests. Though Dix did involve a

residential lease, Cerny-Pickas did not. Accordingly, we conclude that these cases control

in the present case. Parenthetically, we note that the approach set forth in Dix appears to be

the approach followed in the majority of American jurisdictions. See Dattel Family Ltd.

Partnership v. Wintz, 250 S.W.3d 883, 888 (Tenn. Ct. App. 2007) (collecting cases).

¶ 15 Plaintiff correctly points out that the Dix court did not rely exclusively on the fact that

the defendant in that case had paid rent in finding subrogation unavailable to the insurance

company under the circumstances of that case. It also looked to the lease as a whole and

concluded that the parties intended that the tenant would not be responsible for damages

caused by fire and that the landlord would look solely to the insurer for compensation for

such a loss. See Dix, 149 Ill. 2d at 321-23. Plaintiff contends that the lease at issue in this

case does not manifest a similar intent.

¶ 16 Leases are a type of contract and are therefore generally governed by the rules of contract

law. Napleton v. Ray Buick, Inc., 302 Ill. App. 3d 191, 201 (1998). Accordingly, our chief

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goal in analyzing a lease is to ascertain the intent of the parties. Midland Management Co.

v. Helgason, 158 Ill. 2d 98, 104 (1994). Where the language of a lease is unambiguous, the

parties’ intent must be ascertained from the lease alone. Napleton, 302 Ill. App. 3d at 201.

The lease must be construed in such a manner that no part of it is rendered meaningless.

Fontana v. TLD Builders, Inc., 362 Ill. App. 3d 491, 510-11 (2005). Moreover, portions of

the lease should not be considered in isolation, for “to ascertain the intent of the parties, we

must consider the lease ‘as a whole.’ ” Dix, 149 Ill. 2d at 320.

¶ 17 Plaintiff asserts that the lease contains no language exculpating defendants from

negligent acts and that it does not expressly identify defendants as coinsureds. Plaintiff here

attempts to distinguish Dix. The lease in Dix expressly made the tenant responsible for his

own personal property without mentioning responsibility for the premises. Dix, 149 Ill. 2d

at 322. From this provision, the supreme court inferred an intent that the landlord would

provide his own insurance against fire. Dix, 149 Ill. 2d at 322. Conversely, plaintiff contends,

in this case, the lease is completely silent as to the tenant’s responsibility for its own

negligence.

¶ 18 We disagree with plaintiff’s reading of the relevant portions of the lease. As defendants

point out, section four of the lease states:

“The Lessee covenants and agrees with Lessor to take good care of and keep in clean and

healthy condition the Premises and their fixtures, and to commit or suffer no waste

therein; that no changes or alterations of the Premises shall be made or partitions erected,

nor walls papered without the consent in writing of Lessor; that Lessee will make all

repairs required to the walls, windows, glass, ceilings, paint, plastering, plumbing work,

pipes, and fixtures belonging to the Premises, whenever damage or injury to the same

shall have resulted from misuse or neglect; and Lessee agrees to pay for any and all

repairs that shall be necessary to put the Premises in the same condition as when he

entered therein, reasonable wear and loss by fire excepted, and the expense of such

repairs shall be included within the terms of the lease.” (Emphasis added.)

Plaintiff argues that this section, read as a whole, does not apply to negligent acts. However,

the plain language of this section indicates that it is concerned with damages resulting from

defendants’ negligence. Indeed, it expressly imposes a duty upon defendants to “make all

repairs required to the walls, windows, glass, ceilings, paint, plastering, plumbing work,

pipes, and fixtures” when the “damage or injury to the same shall have resulted from misuse

or neglect.” “[L]oss by fire” is specifically excluded, and the exclusion is clearly broad

enough to encompass defendants’ negligence.

¶ 19 Another passage confirms the parties’ intent that the landlord provide insurance for loss

by fire. Section 12 states:

“Lessee will in every respect comply with the ordinances of the municipality aforesaid,

with the rules and orders of the health officers thereof, with the orders and requirements

to the police department, with the requirements of any underwriters’ association so as not

to increase the rates of insurance upon the building and contents thereof, and with the

rules and orders of the fire department in respect to any matters coming within their

jurisdiction.”

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Initially, we note that this section imposes a duty upon the tenant to take steps that would

prevent the rate of insurance on the building from increasing. Obviously, this would be of

concern to the landlord only if the landlord were responsible for paying those rates. Further,

it requires the tenant to comply with orders of the fire department. Such matters would be of

no concern to the landlord if the landlord were not responsible for damages caused by fire.

¶ 20 Accordingly, given the plain language of the lease–taken as a whole–along with the fact

that, in accordance with Dix, defendants contributed to the insurance premiums by virtue of

paying rent, we hold that defendants were coinsureds under the policy issued by plaintiff. As

an insurance company cannot subrogate against a coinsured (Chubb Insurance Co., 349 Ill.

App. 3d at 60), the trial court properly granted judgment on the pleadings. We therefore

affirm its judgment.

¶ 21 B. Whether Other Provisions of the Lease Render Defendants Liable

¶ 22 Before closing, we must address one additional argument. Plaintiff points to section eight

of the lease, titled “HOLDING OVER.” That section states as follows:

“If the Lessee retains possession of the Premises or any part thereof after the termination

of the term by lapse of time or otherwise, then the Lessor may at Lessor’s option within

thirty days after the termination of the term serve written notice upon Lessee that such

holding over constitutes either (a) renewal of this lease for one year, and from year to

year thereafter, at double the rental specified under Section 1 for such period, or (b)

creation of a month to month tenancy, upon the terms of this lease except at double the

monthly rental specified under Section 1, or (c) creation of a tenancy at sufferance, at a

rental of $75.00 dollars per day for the time Lessee remains in possession. If no such

written notice is served then a tenancy at sufferance with rental as stated at (c)shall have

been created. In such a case if specific per diem rental shall not have been inserted herein

at (c) such per diem rental shall be one-fifteenth of the monthly rental specified under

Section 1 of this lease. Lessee shall also pay to Lessor all damages sustained by Lessor

resulting from retention of possession by Lessee.” (Emphasis added.)

Plaintiff argues that this provision renders defendants liable for all damages resulting from

their continued possession of the premises.

¶ 23 Defendants respond that this issue is forfeited, as plaintiff did not raise it before the trial

court. It is certainly true that issues raised for the first time on appeal are forfeited. Helping

Others Maintain Environmental Standards v. Bos, 406 Ill. App. 3d 669, 695 (2010). In its

reply brief, plaintiff does not identify where it had previously raised this issue. Instead, it

contends that there is “no reason whatsoever that the court on appeal with a de novo review

cannot consider” this issue since the “contract and lease [are] part of the evidence and

[r]ecord on [a]ppeal.” We find this assertion unsupported, and we are unaware of any such

exception to the forfeiture doctrine. Such an exception would effectively eviscerate the rule.

If all it took to preserve an issue were that pertinent material be present in the record and that

review be de novo, under what circumstances would the failure to raise an issue in a case

involving a dispositive pretrial motion ever result in forfeiture? Accordingly, we agree with

defendants that this issue is forfeited. Moreover, it also lacks merit.

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¶ 24 In their briefs, the parties refer to defendants as holdover tenants rather than tenants at

sufferance. When a tenant remains in possession of premises after the expiration of a lease,

either a tenancy at sufferance or a holdover tenancy will result. Bransky v. Schmidt Motor

Sales, Inc., 222 Ill. App. 3d 1056, 1060 (1991). The original terms of the lease apply when

a tenant holds over. Roth v. Dillavou, 359 Ill. App. 3d 1023, 1027 (2005). Conversely, no

privity exists between a tenant at sufferance and the former landlord. Roth, 359 Ill. App. 3d

at 1027. There is a presumption–absent evidence to the contrary–that a tenant is holding over.

Bransky, 222 Ill. App. 3d at 1061. Given the presumption along with the parties’ apparent

agreement on the subject, we will consider defendants to be holdover tenants for the purpose

of resolving this issue. This is significant, as a landlord cannot enforce covenants of an

original lease against a tenant at sufferance. Troccoli v. L&B Products of Illinois, Inc., 189

Ill. App. 3d 319, 322 (1989). However, as we are dealing with a holdover tenancy, the terms

of the entire lease remain effective.

¶ 25 Therefore, plaintiff’s attempt to read the final sentence of section eight in isolation is

improper. Indeed, this is exactly the sort of analysis the supreme court counseled against in

Dix, 149 Ill. 2d at 320, where it explained, “In Illinois, courts must look to the lease ‘as a

whole’ and the spirit of the agreement between the parties rather than search for an express

provision in the lease.” Plaintiff’s analysis also conflicts with ordinary principles of

contractual construction. While the language that plaintiff relies upon in section eight does

place responsibility upon defendants to pay for all damages sustained due to their retention

of the premises, section four specifically excepts losses caused by fire. It is well established

that, where an inconsistency exists in a contract, a more specific provision controls over a

more general one. Jay v. United Defense Industries, Inc., 162 Ill. App. 3d 1071, 1077 (1987).

Hence, the more specific provision relating to damages resulting from fire controls over the

provision that pertains to damages generally. Even if plaintiff had not forfeited this argument,

we would not find it persuasive.

¶ 26 III. CONCLUSION

¶ 27 In light of the foregoing, the order of the circuit court of Lake County granting

defendants’ motion for judgment on the pleadings is affirmed.

¶ 28 Affirmed.

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