Case Name: Cerny-Pickas & Company et al., Appellees, vs. C. R. Jahn Company, Appellant
Court: Illinois Supreme Court
Jurisdiction: Illinois
Decision Date: 1955-11-23
Citations: 7 Ill. 2d 393
Docket Number: No. 33567
Parties: Cerny-Pickas & Company et al., Appellees, vs. C. R. Jahn Company, Appellant.
Judges: 
Reporter: Illinois Reports, Second Series
Volume: 7
Pages: 393–402

Head Matter:
(No. 33567.
Cerny-Pickas & Company et al., Appellees, vs. C. R. Jahn Company, Appellant.
Opinion filed November 23, 1955
Rehearing denied Jan. 16, 1956.
Klingbiel, and Maxwell, JJ., dissenting.
Clausen, Hirsh & Miller, of Chicago, for appellant.
Edward S. Coath, Edward J. Bradley, and Katherine Nohelty, all of Chicago, for appellees.

Opinion:
Mr. Justice Schaefer
delivered the opinion of the court:
Cerny-Pickas & Company leased to C. R. Jahn Company a large industrial building with machinery and equipment. The building was destroyed by fire. A jury found that the fire was caused by the negligence of the lessee, and the primary question here is whether under the provisions of the lease the lessee is responsible for the loss.
The lessor and the Orient Insurance Company, as subrogee under the lessor's insurance policy, brought an action in the superior court of Cook County against the lessee to recover damages for the loss of the leased building, machinery and equipment. The lessor claimed $125,000; the subrogee, $23,617.54. The complaint alleged that the fire was caused by the lessee's violation of ordinances of the city of Chicago regulating the construction of partitions in the building and the installation of a gas water heater, and by other acts of negligence. The lessee denied the charges of negligence and made the special defense that the lease wholly exempted and exonerated it from any liability to the lessor, or anyone claiming to be subrogated to it, for any loss or damage caused by fire, whether or not the fire was caused by the lessee's negligence.
The case was first decided on the pleadings. A judgment was entered in favor of the lessee upon the ground that the provisions of the lease, as a matter of law, completely exonerated it from liability for loss due to fire. Upon appeal the Appellate Court for the First District held that, because of considerations of public policy, exculpatory provisions in contracts should not be construed to exempt a party from liability for loss resulting from its own negligence or the violation of a positive duty imposed by law, and that the provisions of the lease were not a bar to recovery. (347 Ill. App. 379.) This judgment of the Appellate Court was interlocutory, and so was not subject to review by this court. After the case was remanded, and before it was tried upon the merits, this court, in Jackson v. First National Bank of Lake Forest, 415 Ill. 453, expressed different views with respect to the public policy applicable to exculpatory clauses in leases.
Upon remandment a jury trial resulted in a verdict and judgment against the lessee in the sum of $49,538.29. The Appellate Court affirmed, (4 Ill. App. 2d 164,) and we granted leave to appeal.
The relevant provisions of the lease are these:
"2. Lessee will keep said premises, including all appurtenances, in good repair, ; and upon the termination of this lease, in any way, will yield up said premises to Lessor in good condition and repair (loss by fire and ordinary wear excepted) .
"8. Lessor shall not be obliged to incur any expense for repairing any improvements upon said demised premises or connected therewith save as in this clause provided, and the Lessee at his own expense will keep all improvements otherwise in good repair (injury by fire, or other causes beyond Lessee's control excepted) as well as in a good tenantable and wholesome condition, and will comply with all local or general regulations, laws and ordinances applicable thereto .
"14. Lessor shall pay for fire insurance on the building and equipment and machinery hereby leased, and Lessee agrees to pay for any increase in fire insurance premium on such insurance policies, due to any increase in the insurance rate due to the nature of Lessee's business, or the manner of its conduct of the business.
"26. Before entering into possession of said premises, Lessee shall pay for and deliver to Lessor public liability insurance in the amount of Ten Thousand Dollars; also civil riot and commotion insurance, covering the leased property.
"29. In case said premises shall be rendered untenantable by fire or other casualty, Lessor may, at his option, terminate this lease, or repair said premises within sixty days, and failing so to do, or upon the destruction of said premises by fire, or other casualty, the term hereby created shall cease and determine."
The effect of public policy upon exculpatory clauses in leases of business property generally was considered in Jackson v. First National Bank of Lake Forest, 415 Ill. 453, and what was there said need not be repated here. More particularly, provisions which relieve the lessee from responsibility for its own negligence with respect to fires have been held to be valid contracts between private individuals with reference to private interests and not against public policy. (Santa. Fe, Prescott & Phoenix Railway Co. v. Grant Bros. Construction Co. 228 U.S. 177; Cf. Checkley v. Illinois Central Railroad Co. 257 Ill. 491; Kansas City Stock Yards Co. v. A. Reich & Sons, Inc.-Mo.-, 250 S.W. 2d 692.) That one of the grounds of negligence charged in this case was the lessee's failure to comply with the building ordinances in making alterations in the building is not, we think, of controlling significance. See, Johnson v. Pendergast, 308 Ill. 255.
The argument most strongly urged against exoneration of the lessee is that the lease does not in so many words provide that the lessee be free from liability for fires resulting from its own negligence. Of course, if the lease contained such an express provision, that would be the end of the matter. But because the contingency was not covered by express language, it does not follow that the instrument may not, when all of its provisions are considered, show that the parties themselves intended that the lessee should not be liable. That determination is to be made upon a consideration of the instrument as a whole. MacAndrews & Forbes Co. v. Mechanical Mfg. Co. 367 Ill. 288; Llewellyn v. Board of Education, 324 Ill. 254; West v. Ranney Refrigerator Co. 261 Ill. 560; Consolidated Coal Co. v. Peers, 150 Ill. 344.
Looking then to the terms of the lease, it is clear that the parties contemplated the contingency that the building might be damaged or destroyed by fire. The first reference to that possibility is in clause 2 of the lease which provides that upon termination of the lease the lessee will turn over the premises to the lessor "in good condition and repair (loss by fire and ordinary wear excepted) In the absence of any contrary expression in the lease, the lessee is not liable to the lessor for damages to the premises from fire which is not the result of his own negligence. (Tiffany, Landlord and Tenant, sec. 111.) Therefore, unless this clause of the lease exempts the lessee from liability for loss by fire resulting from his own negligence, it does no more than restate the lessee's common-law obligation. Upon the authority of Day Wood Heel Co. v. Rover, 123 Ohio St. 349, 175 N.E. 588, and Slocum v. Natural Products Co. 292 Mass. 455, 198 N.E. 747, the lessor concedes that the effect of this clause is "to relieve the lessee under the lease from the duty of restoring the building regardless of how it may have been damaged. Under this form of lease there was no longer any contractual duty on the lessee to restore the building." The lessor argues, however, that the lessee's liability in tort remains, although its liability in contract has been eliminated.
There are areas of the law in which the distinctions between liability in contract and liability in tort may be significant, despite their remote and accidental origin. We are not satisfied, however, that such distinctions are relevant in determining the meaning to be given to words used by laymen in defining their rights and obligations. The word "fire" is used without qualification throughout the lease before us. Its natural meaning would include all fires, regardless of their origin. To express the meaning for which the lessor contends, the lease would have to be altered to modify the word "fire" by the qualifying words "not due to lessee's negligence." It is more reasonable to assume, we think, that laymen would regard the word "fire" as including all fires whether of negligent origin or otherwise. Under familiar standard fire insurance policies the insurer is obligated to pay for fires caused by negligence. Lycoming Ins. Co. v. Barringer, 73 Ill. 230, 235; 6 Couch, Cyclopedia of Insurance Law, par. 1488; Brewer, An Inductive Approach to the Liability of the Tenant for Negligence, 31 Boston L. Rev. 47.
Under the construction urged by the lessor it would be necessary for both parties to the lease to carry fire insurance if they are to be protected. The lessee would have to insure against fires due to his negligence, and the lessor against fires due to other causes. Whether the kind of policy the lessee would have needed was commercially available when the present lease was entered into is at best dubious. (31 Boston L. Rev. 47.) In the present lease the lessor agrees in clause 14 to pay for fire insurance upon the leased building, equipment and machinery. The parties contemplated that the risk of loss by fire should be insured against and we see no reason to suppose that they did not contemplate the customary insurance policy which covers both accidental and negligent fires. Although clause 26 requires the lessee to carry specified kinds of insurance, its responsibility with respect to fire insurance is limited to the obligation to pay for any increase in the insurance premium due to the nature of its business or the manner in which it was conducted. From the lease as a whole we conclude that the lessee was not h> be liable for loss by fire regardless of the cause of the fire, and that the parties intended that the lessor should look solely to insurance as compensation for damage caused by any kind of fire.
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, 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 Fed. 2d 359, the court said (p. 366) : "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, 175 N.E. 588, also supports our conclusion.
The principal cases to the contrary are Carstens v. Western Pipe and Steel Co. 142 Wash. 259, 252 Pac. 939, Morris v. Warner, 207 Cal. 498, 279 Pac. 152, and Winkler v. Appalachian Amusement Co. 238 N.C. 79 S.E. 2d 185. 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.
The judgments of the Appellate Court and the superior court of Cook County are each reversed, and the cause is remanded to the superior court, with directions to dismiss plaintiff's amended complaint.
Reversed and remanded, with directions.