Court Opinion

ID: 9711905
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:41:47.510684+00
Date Added: 2024-06-11T18:23:08.227886
License: Public Domain

JUSTICE McGLOON, dissenting: I respectfully dissent from the decision of my esteemed colleagues because I believe that it is, in essence, a revision of the contract between the parties. Rather, I find that the parties agreed to hold Polk liable for damage to the premises caused by its negligence. The only statement in the majority opinion with which I can agree is that all provisions of the lease must be considered as a whole to determine the intent of the parties. (One Hundred South Wacker Drive, Inc. v. Szabo Food Service, Inc. (1975), 60 Ill. 2d 312, 326 N.E.2d 400; Stein v. Yarnall-Todd Chevrolet, Inc. (1968), 41 Ill. 2d 32, 241 N.E.2d 439; Cerny-Pickas & Co. v. C.R. Jahn Co. (1955), 7 Ill. 2d 393, 131 N.E.2d 100.) I would add, however, that the terms of the lease should be construed against defendant Polk because Polk’s attorney prepared the lease. Windsor at Seven Oaks v. Kelly (1983), 113 Ill. App. 3d 978, 448 N.E.2d 251. Paragraph 9, the yield-back clause of the lease, is particularly relevant. This paragraph provides in part: “*** At the termination of this lease by lapse of time or otherwise, Lessee shall return the premises and all equipment and fixtures therein in as good condition as when Lessee took possession, ordinary wear and tear excepted, failing which the Lessor may restore the premises, equipment and fixtures to such condition and Lessee shall pay the cost thereof upon request.” Conspicuously absent from this clause is an exclusion for loss by fire caused either by the lessee’s negligence or otherwise. Under common law, a lessee was liable for damage to leased premises caused by his own negligence. (Ford v. Jennings (1979), 70 Ill. App. 3d 219, 387 N.E.2d 1125.) Unless the yield-back clause exempts the lessee from such liability, it does no more than restate the lessee’s common law obligation. Cerny-Pickas & Co. v. C.R. Jahn Co. (1955), 7 Ill. 2d 393, 397, 131 N.E.2d 100, 103. Thus, I disagree with my colleagues’ statement that the failure to exempt fire damage in the yield-back clause merely raises an ambiguity with respect to intent to hold the lessee liable for its negligence. Rather, the absence of exculpatory language raises the inference that the parties intended to hold the lessee liable where the lessee caused the loss to occur. Indeed a similar inference was drawn in Englehardt v. Triple X Chemical Laboratories, Inc. (1977), 53 Ill. App. 3d 926, 369 N.E.2d 67, appeal denied (1978), 67 Ill. 2d 591, wherein the yield-back clause excepted only loss by fire or other casualty not caused by the lessee. The cases relied on by the majority interpreted leases in which the yield-back clauses excluded loss by fire. In Cerny-Pickas and One Hundred South Wacker Drive, loss by fire was excepted. Again in Stein, loss by fire or other casualty beyond the lessee’s control was excepted. Here, the yield-back clause did not state such exclusion. Admittedly, the lease contains some provisions similar to those examined in Stein to determine the parties’ intent. Here, Rand was obligated to procure insurance on the building and Polk was required to insure the contents. Also Polk covenanted not to use the premises in any manner which would invalidate the insurance or increase the premiums. But other provisions of the lease between Polk and Rand distinguish this case from Stein and when read together with all the lease provisions, indicate that the parties intended to hold the lessee liable for its negligence. As stated by the majority, paragraph 6 requires Polk to waive claims against the lessor for damage sustained by the lessee or any occupant of the building. However, it further provides: “This Section 6 shall apply especially, but not exclusively, to the flooding of basements or other sub-surface areas, and to damage caused by refrigerators, sprinkling devices, air-conditioning apparatus, water, snow, frost, steam, excessive heat or cold, falling plaster, broken glass, sewage, gas, odors or noise, or the bursting or leaking of pipes or plumbing fixtures, and shall apply *** whether such damage be caused or result from any thing or circumstance above mentioned or referred to, or any other thing or circumstance whether of a like nature or of a wholly different nature. If any such damage, whether to the demised premises or to the Building or any part thereof, or whether to Lessor or to other tenants in the Building, result from any act of neglect of Lessee, Lessor may, at Lessor’s option, repair such damage and Lessee shall, upon demand by Lessor, reimburse Lessor forthwith for the total cost of such repairs. Lessee shall not be liable for any damage caused by its act or neglect if Lessor or a tenant has recovered the full amount of the damage from insurance and the insurance company has waived in writing its right of subrogation against Lessee.” (Emphasis added.) Clearly, this paragraph contemplates holding the lessee liable for damage to or destruction of the premises by perils specified therein and caused by the tenant’s neglect. Even in One Hundred South Waclcer Drive, the court held that a clause virtually identical to paragraph 6 caused the tenant to assume such liability. Here, Polk also agreed to be held liable for damage by perils of a wholly different nature resulting from its neglect. The possibilities of holding the lessee liable for its negligent destruction of the premises and of incurring such liability by way of a subrogation action are recognized and agreed to herein. Contrary to the opinion of my colleagues, I would also find that paragraph 13 evidences an intent to hold the lessee liable for fire damage caused by its neglect. This paragraph provides in part: “If the premises or the Building are made wholly untenantable by fire or other casualty, Lessor may elect (a) to terminate this lease as of the date of the fire or casualty by notice to Lessee within thirty days after that date, or (b) to repair, restore or rehabilitate the Building or the premises at Lessor’s expense ***. If the demised premises shall be partially damaged by fire or other casualty without the fault or neglect of Lessee, Lessee’s servants, employees, agents, visitors or licensees, the premises shall be repaired, restored or rehabilitated by and at the expense of Lessor. ***” Beginning with the partial damage provision, it is clear that the lessor is obligated to repair only if the damage was not caused by the lessee. Granted, this clause is not the specific one applicable to this case since the premises were totally destroyed by fire. However, it is probative of the parties’ intent and refutes the majority’s conclusion that Rand intended to look solely to insurance for reimbursement. Regarding the total destruction provision, I disagree with the majority’s holding that this clause unequivocally requires Rand to bear the entire cost of repairs where the building has been rendered untenantable by fire. A reading of all the language in this clause indicates that Rand could either terminate the lease or repair the premises at its own expense. The majority ignored the former option in reaching its conclusion and thus the clause is not as determinative of the parties’ intent as the majority so holds. If in fact Rand elected to terminate the lease, the lessee would be required, under the yield-back clause, to return the premises in good condition. The yield-back clause expressly requires the lessee to do so upon “termination of the lease by lapse of time or otherwise.” (Emphasis added.) As noted above, the yield-back clause does not exclude loss by fire and thereby evidences the parties’ intent to hold the lessee liable for negligent destruction of the premises. In my opinion the failure to consider all the language of the total destruction provision has substantially altered the agreement of the parties as expressed in the lease. In summary, I find that the lease evidences the parties’ intent to hold the lessee liable for its negligent destruction of or damage to the premises. This conclusion is inescapable considering the absence of exculpatory language in the yield-back clause and the language in paragraphs 6 and 13 which indicates that the lessee’s negligence could be the basis for liability. Other matters discussed by my colleagues and others apparent in the record also warrant discussion here. First, the majority noted the corporate relationship between Rand and Polk and concluded that if Polk were held liable, the same business entity would bear the loss . which the insurance was obtained to recover. However, this conclusion is refuted by the well-established principle that affiliated corporations are separate and distinct entities. (Main Bank v. Baker (1981), 86 Ill. 2d 188, 427 N.E.2d 94.) The record shows that Rand has its own corporate charter, corporate minute books, books of accounts, and bank account. It purchases property with its own funds, holds title in its name, and takes tax deductions as owners of the realty. The same business entity would therefore not bear the loss and the inference opposite that drawn by the majority is equally sound. In fact, the close corporate relationship supports the equally plausible inference that the parties intended to retain the option of assigning the loss to the entity which would incur the more beneficial tax consequence. An important lease provision not addressed by the majority is that concerning the procedure for releasing the lessee from liability. Paragraph 6, which specifically contemplates the insurance companys’ right of subrogation, provides: <¡*** Lessee shan not be liable for any damage caused by its act or neglect if Lessor or a tenant has recovered the full amount of the damage from insurance and the insurance company has waived in writing its right of subrogation against Lessee.” Polk stipulated that Rand was not fully reimbursed for the damage and the record contains no written waivers by plaintiffs. Rather, Samuel Polk, as president of Rand, signed subrogation receipts which expressly subrogated the insurance companies to all claims which Rand may have had against any person or corporation liable for the loss. Defendant argues in its brief that clause D of the insurance policy eliminated the need for a written waiver. Clause “D” provides: “It is hereby stipulated that this insurance shall not be invalidated should the insured waive in writing prior to loss any and all rights or recovery against any party for loss occurring to the property described herein.” While this clause may eliminate the need for a written waiver from the insurance company as required by the lease, it is not a substitute for a written waiver which, under the terms of clause “D”, was to be executed prior to loss. The interpretation urged by Polk would only encourage collusion between insureds and tortfeasors. Furthermore, Polk’s waiver argument cannot stand in view of the subrogation receipts which specifically warranted that Rand had not settled or released any party who may have been liable for the loss and would not do so without the consent of the insured. Finally, I disagree with the majority’s application of Windsor at Seven Oaks v. Kelly (1983), 113 Ill. App. 3d 978, 448 N.E.2d 251, wherein the court found the lessee was exempted from liability even though the yield-back clause was almost identical to that in the case at bar. Windsor involved the interpretation of a residential lease which, as a general rule, is interpreted in favor of the tenant. The lease in the case at bar is a commercial lease which was prepared by Polk and thus is subject to stricter construction against Polk. Furthermore, the lessee in Windsor had no contractual duty to repair the premises in case of fire. Under paragraphs 6, 9, and 13 of the lease in this case, Polk was not exempted from liability for fire damage caused by its neglect. Thus, Windsor is not controlling on this issue. For the foregoing reasons, I would find that plaintiffs can properly state a cause of action against Polk because the lease indicates an intent to hold Polk liable for its negligence. I would reverse the judgment of the trial court and remand the cause for a trial on the merits.