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Cerny-pickas & Co. v. C.r. Jahn Co.





APPEAL from the Appellate Court for the First District; — heard in that court on appeal from the Superior Court of Cook County; the Hon. GEORGE M. FISHER, Judge, presiding.


Rehearing denied January 16, 1956.

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 repeated 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. ...

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