## I L L I N O I S 

## O F F I C I A L 

## RE P O R T S Appellate Court

Nationw ide Mutu al Fire In suran ce Co. v . T&N Master Builder & Renovators , 2011 IL App (2d) 101143

Appellate Court Caption NA TI ONWI DE MUTUAL FI RE I NSURANCE COMPANY, as Subrog ee of Michae l Markowitz, Plainti ff -Appellant, v. T AND N MASTER BU I L DER A

N D RE N O VA T O RS
, d

/b /a T N Construction, and TONY DEL I GI O, Individually and d/b/a TN Construction, DefendantsAppellee s.

District & N o. Second District Docke t No. 2-10-1143

Filed October 25, 2011

Held (N ote : This syl lab us

con st it ute s no par t of the opi nio n of the cour t but has bee n pre

par ed by t h e Repo rt er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) Where plaintiff insurer issued an insurance policy cover ing the proper ty rente d by defe ndants and owned by plainti ff’s s ubrog or and defe ndants occupie d the proper

ty as holdover tena n t s at the time of a fire that damag ed the proper

ty , the trial co urt proper ly deter mined that plaintiff could not sue defe ndants as subrog ee of the owner and enter ed judgme nt

on the pleading s for defe ndants o n t h e ground that defe ndants wer e coinsureds under the policy issued to the owner and that plaintiff’s action

was barr ed by Dix, and, further more, even if plaintiff had not forf eited the argument that the “holdover ” p rovision of the lease made defe ndants liable for all damag es resulting from th eir continued possession of the proper ty , the more specific provision of the lease reg ardingfire da mag e controlled ove r the provision per taining to damag es g ener ally

.Dec ision Under

Review Appea l from the Circuit Court of L ake County
, No. 09-L -748; the Hon. Marg are t J . Mullen, J udg e, pre siding.

J udg ment Affir med.

Counsel on Appea l Stuart M. Br ody
, of Sneckenbe rg , Thompson & Br ody
, L L P, of Chicag o, for a ppellant.

Daniel P. Costello and J ames C. Ba rrow, both of Dan i el P

. C ostello & Associates, of

Chicag o, for a

ppellees.

Panel J USTI CE HUDSON deliver ed the judgment of the c ourt, with opinion. Presiding Justice J org ensen and J ustice Birke tt concur red in the judgme nt and opinion.

OP INION

¶ 1 P l ai n t i ff

, Na t i o n wi d e M u t u al Fi re I nsuranc e Company (as subrog ee of Michae l Markowitz), appea ls a

n order of the circ uit c ourt of L ake County g ranting judgme nt on the pleading s (735 I L CS 5/ 2-615(e ) (W est 2008)) in favor of defendants T&N Ma ster B uilder and Renovators and Tony Delig io. Plaintiff had issued an insurance policy cover ing proper ty owned by Markowitz. Def endants we re te nants upon the prope rty . Whil e the pr operty was occupie d by defe ndants, a fire occur red, damag ing the building. The trial court deter mined that plaintiff could not maintain an action as subrog ee ag ainst defe ndants, beca use they wer e coinsureds under Markowitz’s policy with pla intiff. For the rea sons that follow, we aff irm.

¶ 2 I . BA CKGROUND ¶ 3 On Fe bruar

y 9, 2007, a fire occur

red in a building rente d by defe ndants. The proper ty was insured under a poli cy issued by pl ai n t i ff. As a result of t he fire, pl aintiff was obligated t o pay the owner of t he property $140,328.98. Plaintiff now bring s this action in subrog ation to rec over the $140, 3 2 8

. 9 8 from defe ndants. Plaintiff alleg es that the fire resulted from defe ndants’ neg lige nce. ¶ 4 On December 11, 2005, Markowitz enter ed int o a co m merc ial leasing agree ment with defe ndants. At the time of t h e fi re, the lease was expired. A holdover tenanc y resulted. Plaintiff alleg es 11 counts in all, including neg lige nce, spoliation of evidenc e, and brea ch of

-2-contra ct. Defendants filed a motion for judgme nt on the pleading s pursuant to section 2-

615(e) of the Civil Practice L aw (735 I L CS 5/2-615(e) (West 2008)), which the t rial cour t g rante d. I t found that defe ndants wer e coinsureds under the terms of the lease and there fore plaintiff could not maintain an action ag ainst them, rely ing on Dix Mutual Insurance Co. v. LaFramboise , 149 I ll. 2d 314 (1992). ¶ 5 The re levant provisions of the lea se ar e as f ollows: “4. REPAI R. The L essee covena nts and agree s with L essor to take g ood car e of and keep in clea

n and healthy condition the Premises and their fix tures, and to commit or suffe r no wa ste there in; that no c hang es or alterations of the Premises shall be made or partitions ere cted, nor walls paper ed without the consent in writing of L essor; that L essee will make all repa irs require d to t h e walls, windows, g lass, ceiling s, paint, plastering
, plumbing work, pipes, and fix tures belong ing to th e Premises, whene ver damag e or injury to the same shall have resulted from misuse or neg lect; and L essee agree s to pa y for any and all repa irs that shall be nece ssary to put the Premises in the same condition

as when he enter ed there in, r easona ble wea r and loss by

fire e x cepte d, and the expense of such r epair s shall be included within the ter ms of the lease

. * * * 8. HOL DING OV ER. I f the L essee reta ins possession of the Premises or any part ther eo f af ter the termination of t he term by lapse of time or ot herw ise, then t he L essor may at L essor’s option within thirty day s afte r the termination of the term serve written notice upon L essee that such holding over constitutes either (a) rene wal of this lease for

one year , and from y ear to y ear there afte r, at double the renta l specifie d under Section 1 for such period, or (b) cre ation of a month to month tenanc y , upon the terms of this lease except at double the monthly renta l specifie d under Section 1, or (c) cre ation of a tenanc y at suffe ranc e, at a rent al of $75.00 dollars per day for the time L essee rema ins in possession. I f no such written notice is serve d then a tenanc y at suffe ranc e with renta l as stated at (c) shall have been c reated. In such a c ase if specific per diem renta l shall not have been inserted here in at (c) such per diem renta l shall be one-f ifteenth of the monthly renta l specifie d under Section 1 of this lease

. L essee shall also pay to L essor all damag es sustained by

L essor re sulting fr om retention of possession by L essee

. * * * 15. FIRE AND CASUAL TY. In case the Premises shall be rende red u n t enantable [ sic ] by fire or other casua lty
, L essor may at his option terminate this lease
, or repa ir the Premises within thirty day s, and failing so to do, or upon the destruction of the Premises by fire, the term her eby

cre ated sha ll cease and dete rmine.”

¶ 6 I I . ANALYSI S ¶ 7 Plaintiff raises two main issues on appea l. F irst, it contends that the r ule announc ed by the supreme court in Dix
, 149 I ll. 2d 314, should not apply in this case , beca use Dix involved

a re sidential lease a

nd the instant case involves sophisticated, commerc ial parties. Sec ond, plaintiff asser

ts that c erta in pr ovisions of the lease make defe ndants liable for the damag es to the building. We find neither contention well founde d.

-3-¶ 8 As this appea l comes to us following a g rant of a motion for judgme nt on the pleading s

(735 I L CS 5/ 2-615(e ) (W est 2008)), review is de novo

. W akulich v. Mraz
, 203 I ll. 2d 223, 228 (2003). When a defe ndant makes a motion for judgme nt on the pleading s, he conce des the truth of the well-pled fac ts of the plaintiff’s complain t

. Parkway Bank & Trust Co. v. Mese ljevic
, 406 I ll. App. 3d 435, 442 (2010). In revie wing the mot i o n , we must draw all

rea sonable infere nces in favor of t h e nonmovant ( Parkway
, 406 I ll. App. 3d at 442) and construe the alleg ations strictly ag ainst the movant ( Pioneer Bank & Trust Co. v. Austin Bank of Chicago
, 279 I ll. App. 3d 9, 13 (1996))

. We must deter mine whether there is a

n issue of materia l f act prese nted by the pleading s. Pioneer
, 279 I ll. App. 3d at 13. I f no such issue is prese nted, then we deter

mine whether the movant is e ntitled to judgme nt. Pioneer
, 279 I ll. App. 3d at 13. ¶ 9 We f

urther note that this is an action in subrog ation. As the supreme court explained in Dix
, subrog ation is an action in chanc ery

. Dix
, 149 I ll. 2d at 319. It is “designed to place the ultimate responsibility for the loss upon the one on whom in g ood conscie nce it oug ht to fall and to reimburse the innocent party who is compelled to pay .” Reich v. Tharp
, 167 I ll. App. 3d 496
, 500-01 (1987). As an action in equity
, a claim may be subrogated onl y in order to preve nt injusti ce or unjust enric hment and will not be maintai n ed when it would be inequitable to do so. Di

x , 1 49 I ll. 2d at 319. Subrog ation is not allowed ag ainst a tenant wher e the tenant is considere d a coinsured under the landlord’s insurance policy

. Reich
, 167 I ll. App. 3d at 501. Wit h these principles in mind, we now turn to the issues raised by plaintiff.

¶ 10 A. Whether This Ac tion Can Proceed in L ight of Dix ¶ 11 The first issue prese nted in this appea l is rathe r straig htforwa rd. I f the rule our supre me court announced in Dix , 149 I ll. 2d 314, controls, as t he trial court held, this action cannot proce ed. Quite simply
, it is well settled that an insurer may not subrog ate ag ainst a coinsured. Chubb In s u r a n ce Co. v. DeChambre
, 349 I ll. App. 3d 56, 60 (2004). In Dix
, 149 I ll. 2d at 323, our supreme court held that a “tena nt, by pay

ment of re n t , h as contribut ed to the pay ment of the insurance premium, ther eb y gai ning the status of co-insure d under the insurance policy .” Henc e, unless Dix does not app l y for some rea son, defe ndants are coinsureds a

nd plaintiff ca

nnot subrog ate a g ainst them. ¶ 12 Plaintiff believes that it has identified such a rea son. It poin t s o u t t h at Dix involved a residential lease, while in the i nstant case , a commercial lease is at i ssue. As sophisticated parties, plaintiff and defe ndants could have allocate d risks and costs of insurance as they saw fit. M o re o v er , as commerc ial tenants, defe ndants wer e in a better barg aining position to neg otiate the question of insurance cover ag e. It is cer tainly t rue that the law often distinguishes betwee n sophisticated and nonsophisticated parties. See, e.g. , McRaith v. BDO Seidman, LLP
, 391 I l l

. Ap p

. 3d 565, 575-76 (2009); Tower Inve stors, LLC v. 111 East Chestnut Consultant

s, Inc.
, 371 I ll. App. 3d 1019, 1037 (2007); Topps v. Unicorn Insurance Co.
, 271 I ll. Ap p

. 3 d 111, 115 (1995). Thus, the distinction plaintiff seeks to draw finds support in the l aw

. Indeed, plaintiff calls our attention to substantial fore ign authority in support of its positi on. See, e.g. , State Farm Fl orida Insurance Co. v. L oo , 27 So. 3d 747,

-4-750 n.4 (F la. Dist. Ct. App. 2010) (collec ting c ases)

.

¶ 13 Def

endants re spond that the supreme court dre w no such distinction in Dix

. Moreove r, they point out, Dix relies extensively on Cerny-Pic kas & Co. v. C.R. Jahn Co.
, 7 I ll. 2d 393 (1955), whic h involved a commer cial lea se. In that case , the cour t stated: “While the case s are not in accord, we believe that the result here rea ched is supported by better rea soned decisions. Seventy year s ag o in Lothrop v. Thayer
, 138 Mass. 466, 475 [(1883)], the court s ai d : ‘T h e ancie nt law has been acquie sced in, and consciously or unconsciously
, the cost of i nsuranc e to the l andlord
, o r t he value of t he risk enter s into the amount of rent.’ And in the leading case of Gene ral Mills v. Goldman
, 184 [F.2d 359, 3 6 6 (8 t h Cir. 1950)], the court said ***: ‘They nece ssarily consciously figured on the renta ls to be paid by the tenant as the source of th e fi re insurance premiums and i n t ended that the cost of insurance was to come from the tenants. In prac tical eff

ect the tenant paid the cost of the fire insurance .’ Day W ood Hee l Co. v. Rove r , 123 Ohio St. 349 *** [ (1931)], also supports our conc lusion. The principal case s to the contra ry are Carstens v

. W

estern Pipe and Steel Co.
, 142 Wash. 259 *** [(1927)]; Morris v. W arner , 207 Cal. 498 *** [(1929)], and W inkler v. Appalachian Amuseme nt Co.
, 238 N.C. 589 *** [(1953)]. In the first two of these case s it does not appea

r that the lease s contained provisions with respe ct to insurance like those in the lease befor e us. In the third case , simil ar insurance provisions wer e involved, but the court relied upon the dissenting opinion in the Gene ral Mills case and upon the first opinion of the Appellate Court in the prese nt case .” Cerny-Pic kas & Co.
, 7 I ll. 2d at 398- 99. Thus, not only did the court favor ably cite fore ign authority supporting the proposition that

a tenant, throug h the pay

ment of rent, eff

ectively pay s to insure rente d proper ty , it expressly reje cted a contra ry rule. More over, it did so in the commerc ial rea lm. ¶ 14 Acc ording ly
, we are compelled to agree with defe ndants’ argument on this issue. The law is well settled that we are bound by the decisions of our supreme court. In re Clif ton R.
, 368 I ll. App. 3d 438, 440 (2006). Both Dix and Cerny-Pic ka s re m ain good l aw. Moreover
, we do not believe they are distinguishable as plaintiff sug gest s. Thoug h Dix did involve a resid en t i al l ease , Cerny-Pic kas did not. Acc ording ly
, we conclude that these cases control in the prese nt case

. Parenthe tically
, we note that the approa ch set forth in Dix appea rs to be the approa ch followed in the majority of Americ an jurisdictions

. S ee Dattel Family Ltd. Partnership v. W

intz , 250 S.W .3d 883, 888 (Tenn. Ct. App. 2007) ( collectingcase s). ¶ 15 Plaintiff corr ectly points out that the Dix court did not rely exclusively on the fact t h at the defe ndant in that c ase had paid rent in f inding subrog ation unavailable to the insurance company under the circ umstances of that case

. It also look ed t o t he lease as a whole and

co n cl u d ed that the parties intended that the tenant would not be responsible for damag es
cause d by fire and that the landlord would look solely to the insurer for co m p en s at ion for such a loss. See Dix
, 149 I ll. 2d at 321-23. P laintiff contends that the lease at issue in this

case does not manifest a

simil ar intent. ¶ 16 L ease s are a ty pe of contra ct and are there fore g ener ally g overne d by the rules of contra ct law. Napleton v. Ray Buick, Inc. , 302 I ll. App. 3d 191, 201 (1998). Accor dingly
, our chief

-5-g oal in analy zing a lea se i s to ascer

tain the intent of the pa

rties. Midland Manageme nt Co.

v. Helgason
, 158 I ll. 2d 98, 104 (1994). Where the languag e of a lease is una mbiguous, the parties’ intent must be ascerta ined from the l ease alone. Napleton , 302 I ll. App. 3d at 201. The lease mus t b e co nstrued in such a manner that no part of it is rende red meaning less. Fontana v. TLD Builders, Inc.
, 362 I ll. App. 3d 491, 510-11 (2005). Moreove r, portions of the lease should not be considere d in isolation, for “to asce rtain the intent of the parties, we must consider the lea se ‘a s a whole.’ ” Dix , 149 I ll. 2d at 320. ¶ 17 Plaintiff as s er t s t h at t h e l ea s e co n t ains no languag e exculpating defe ndants from neg lige nt acts and that it does not expressly identify defe ndants as coinsureds. Plaintiff here attempts to disti nguish Dix . The lea se i n Dix expressly made the te nant re sponsible for his own per sonal proper

ty without mentioning r esponsibility for the pr emises. Dix , 149 I ll. 2d
at 322. Fr om this provision, the supreme court inferr ed an intent th at t h e l an d lord would provide his own insurance ag ainst fire. Dix
, 149 I ll. 2d at 322. Conversely
, plaintiff contends, in t h i s ca s e, the lease is completely silent as to the tenant’s responsibility for its own neg lige nce. ¶ 18 We disag ree with plaintiff’s rea ding of the rele vant portions of the lease

. As defe ndants point out, section four of the le ase state s: “The L essee covena

nts and agree s with L essor to take g ood car e of and keep in clea n and healthy condition the Premises and thei r fix tures, and to commit or suffe r no waste there in; that no chang es or alterations of the Premises shall be made or partitions ere cted,

nor walls p ap er ed without the consent in writing of L essor; that L essee will make all repa irs require d to the walls, windows, g lass, ceiling s, paint, plastering
, plumbing work, pipes, and fix tures belong ing to the Premis es , wh en ever damag e or injury to the same shall have resulted from misuse or neg lect; and L essee agree s to pay for any an d all repa irs that shall be nece s s ary to put the Premises in the same condition as when he enter ed there in, rea sonable wea r an d l o s s by fire exc epted
, and the expense of such repa irs shall be included w ithin the terms of the lea se.” ( Emphasis added.) Plaintiff argues that this section, rea d as a whole, does not apply to neg lige nt acts. Howeve r, the plain languag e of this section indicates that it is conce rned with damag es resulting from defe ndan ts’ neg lige nce. Indeed, it expressly imposes a duty upon defe ndants to “make all repa irs re qu i re d to the walls, windows, g lass, ceiling s, paint, plastering
, plumbing work, pipes, and fix tures” when the “dama g e or injury to the same shall have resulted from misuse

or neg lect.” “[L ]oss by fire” is specific ally excluded, and the ex cl u s ion is clea rly broad enough to encompass de fenda nts’ neg lige nce. ¶ 19 Another passag e confirms the parties’ intent that the landlord provide insurance for loss by fire. Sec tion 12 states:
“L essee will in ever

y respe ct comply with the ordinanc es of the municipality afor esaid, with the rules and order s of the health office rs there of, with the order s and require ments to the police depar

tment, with the require ments of any underwriters’ association so as not to incre ase the rate s of insurance upon the buildi n g an d co ntents there of, and with the rules and order s of the fire depar tment in respe ct to any mat t er s co m i n g within their jurisdiction.”

-6-Initial l y , we note that this section imposes a duty upon the tenant to take steps that would

prev en t t he rate of insurance on the bui lding from incre asing

. Obviously
, this would be of

conce rn to the landlord only if the landlord wer e responsible for paying those rate s. Fur ther, it require s the tenant to comply with order s of the fire depar tment. Such matters would be of

no conce rn to the landlord if the landlord we re not re sponsible for damag es cause d by fire. ¶ 20 Acc ording ly
, g iven the plain languag e of the lease–taken as a whole–along with the fac t that, in acc ordanc e with Dix
, defe ndants contributed to the insurance premiums by virtue of paying rent, we hold that defe ndants wer e coinsureds under the policy issued by plaintiff. As

an insurance company cannot subrog ate ag ainst a coinsured ( Chubb Insurance Co.
, 349 I ll. App. 3d at 60), the trial court proper ly g rante d judgme nt on the pleading s. We there fore aff irm its judgment.

¶ 21 B. Whether Other Provisions of the L ease Render D efe ndants L iable ¶ 22 Be fore clo sing, we must addre ss one additional argument. Plaintiff points to section eight of the lea se, titled “HOLDI NG OVE R.” That sec tion states as follows: “I f the L essee reta ins possession of the Premises or any part there of afte r the termination of the term by lapse of time or otherwise, then the L essor may at L essor’s option within thirty day s afte r t he termination of t he term serve written not ice upon L essee that such holding over constitutes ei t h er (a) rene wal of this lease for one y ear , and from y ear to y ear there afte r, at double the renta l specifie d under Section 1 for such period, or (b)

cre ation of a month to month tena ncy , upon the terms of this lea se except at double the monthly renta l spe cified under Section 1, or (c) cre ation of a tenanc y at suffe ranc e, at a renta l of $75.00 dollars per day for the time L essee rema ins in possessi o n

. I f n o such written notice is serve d then a tenanc y at suffe ranc e with renta l as stated at (c) shall have been cre ated. In such a case if specific per diem renta l shall not have been inserted here in
at (c) such per diem renta l shall be one-f ifteenth of the mo n t h l y renta l specifie d under Section 1 of this lease

. Lessee shall also pay to Lessor all damages sustained by Lessor resulting from retention of possession by Lessee .” (Empha sis added.) Plaintiff argues that this provision rende rs defe ndants liable for all damag es resulting from their continued posse ssion of the premises. ¶ 23 Def

endants respond that this issue is forf eited, as plaintiff did not raise it befor e the trial court. I t is cer

tainly true that issues raised for the first time on appea l are forf eited. Helping Others Maint ain Environmental Standar ds v. Bos
, 406 I ll. App. 3d 669, 695 (2010)

. In its reply brief, plaintiff does not identify wher e i t had previously raised this issue. Instead, it contends that there is “no rea son whatsoeve r that the court on appea l with a de novo revie w cannot consider” this issue since the “contr act and lease [are] part of the eviden ce an d [r] ecor d on [a] ppeal.” We f ind this asser

tion unsupporte d, and we are unawa re of any such exception to the forf

eiture doctrine. Such an exception would eff ectively evisce rate the rule. I f all it took to prese rve an issue wer e that pertinent materia l be prese nt in the rec ord and that revie w be de novo , under what circ umstances would the failure to raise an issue in a case involving a dispositi ve pretria l motion ever result in forf eiture? Acc ording ly
, we agree with defe ndants that this issue is forfeited. More over, it also lac ks merit.

-7-¶ 24 In thei r b ri efs, the parties refe r t o defe ndants as hol dover tenants rathe r t han tenants at

suffe ranc e. When a tenant rema ins in possession of premises afte r the expiration of a lease
, either a tenanc y at s uffe ranc e o r a h o l d o v er tenancy will result. Bransky v. Schmidt Motor Sales, Inc.
, 222 I ll. App. 3d 1056, 1060 (1991). The orig inal terms of the lease apply when

a tenant holds over. R oth v. Dillavou
, 359 I ll. App. 3d 1023, 1027 (2005). Conversely
, no privity exis ts betwee n a tenant at suffe ranc e and the former landlord. Roth
, 359 I ll. App. 3d
at 1027. There is a presumption–absent evidenc e to the contra ry –that a tenant is holding over. Bransky
, 222 I ll. App. 3d at 1061. Given the presumption along with the parties’ appar ent agree ment on the subject, we will consider defe ndants to be holdover tenants for the purpose of resolving this issue. This is signific ant, as a l an d lord cannot enfor ce covena nts of an orig inal lease ag ainst a tenant at suffe ranc e. Troccoli v. L& B Products of I

llinois

, Inc.
, 189 I ll. App. 3d 319, 322 (1989). Howeve r, as we are dealing with a holdover tenanc y , the terms of the e ntire lea se re main eff ective. ¶ 25 There fore
, plaintiff’s attempt t o re ad t h e final sentenc e of section eight in isolation is improper. Indeed, this is exactly the sort of analy sis the supreme court counsele d ag ainst in Dix
, 1 4 9 I l l

. 2 d at 320, wher e it explained, “In I llinois
, courts must look to the lease ‘as a whole’ and the spirit of the agree ment betwee n the parties rathe r than sear ch for an express provision in the lease .” Plaintiff’s analy sis also conflicts with ordinary principles of contra ctual construction. Whil e the languag e that plaintiff relies upon in section eig ht does place responsibility upon defe ndants to pay for all damag es sustained due to their rete ntion of the premises, section four specific ally excepts losses cause d by fire. It is well established that, wher e an inconsistency exis ts in a contract , a more specific provision controls over a
more g ener al one. Jay v. United Defense Industries, Inc.
, 162 I ll. App. 3d 1071, 1077 (1987). Henc e, the more specific provision relating to damag es resulting from fire controls over the provision that perta ins to damag es g e n e r ally

. Even if plaintiff had not forf eited this argument, we would not find it persua sive.

¶ 26 I I I . CONCLUSI ON ¶ 27 In light of the for ego i n g, t h e o rd er o f t h e ci rc u i t court of L ake County g ranting defe ndants’ motion for judg ment on the pleading s is affirme d.

¶ 28 Affir

med.

-8-