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Stein v. Yarnall-todd Chevrolet





APPEAL from the Appellate Court for the First District, heard in that court on appeal from the circuit court of Cook County; the Hon. BEN SCHWARTZ, Judge, presiding.


Rehearing denied November 21, 1968.

A complaint filed in the circuit court of Cook County by the owners of a commercial building, Herbert M. Stein and Phyllis B. Stein, hereafter called the lessors, sought a judgment for $13,000 against the tenant, Yarnall-Todd Chevrolet, Inc., hereafter called the lessee. The complaint described damages to the leased property caused by a fire which, it was alleged, occurred because of the negligent use of an oxyacetylene torch in lessee's automobile repair shop by an employee of the lessee. The trial court dismissed the complaint on the motion of the lessee that under the lease it was relieved from responsibility for damage by fire, though caused by its own negligence. The Appellate Court for the First District reversed the judgment and remanded the cause to the trial court with directions to deny the motion to dismiss and to conduct appropriate further proceedings. (85 Ill. App.2d 228.) We have granted the lessee leave to appeal from this decision.

The issue presented for resolution is whether the parties to the lease, considering the lease as a whole and in light of our decision in Cerny-Pickas & Co. v. C.R. Jahn Co., 7 Ill.2d 393, manifested an intent to exculpate the lessee from liability in the event of loss by fire through negligence of the lessee.

The lease provided for a term of nine years at an annual rental which would average about $48,500, and, under it, the lessee was to use the premises for the conduct of an automobile and truck sales and service business. Pertinent provisions of the lease are these:

"5. * * * At the termination of this lease by lapse of time or otherwise, lessee shall return the premises and all leasehold improvements and fixtures therein in as good condition as when lessee took possession, ordinary wear and tear or damage by fire or other casualty beyond lessee's control excepted, * * *.

"7. * * * Lessee * * * will not make or permit any use of the premises * * * which may be dangerous to life, limb or property, or which may increase the premium cost of or invalidate any policy of insurance carried on the building or covering its operation or on the demised premises or any part or appurtance thereof. In addition to all other liabilities for breach of any provision of this Section 7, lessee shall pay to lessors an amount equal to the increased cost of any insurance coverage resulting from lessee's act or neglect and all damages sustained by lessors as a consequence thereof. * * *

"8. Lessee shall, during the term, at lessee's own expense, keep the premises in good order, condition and repair, including the replacement of all broken glass with glass of the same size and quality. Lessee shall maintain and deposit with lessors policy or policies or certificates of insurance * * * against breakage of all plate glass in the premises, * * *.

"20. Lessee shall procure and maintain during the term hereof policies of insurance insuring against:

(a) damage or injury to any of its employees in and about the operation of the demised premises and under the Workman's Compensation Act of the State of Illinois;

(b) public liability covering the demised premises and the use and operation thereof with limits of not less than $100,000 and $300,000 for bodily injury and $5,000 for property damage * * * said insurance to be carried for the benefit and protection of the lessors and lessee; and

(c) loss or damage by boiler or internal explosion by boiler, with limits of not less than $50,000 for each accident.

In Cerny-Pickas (7 Ill.2d 393) a large industrial building was destroyed by a fire which was caused by the negligence of the lessee. The lessor brought an action claiming $125,000 and the insurer as subrogee claimed $23,617.54. The jury returned a verdict for $49,538.29 against the lessee. The appellate court affirmed and the question presented to this court was whether the tenant, though negligent, was to be held not liable under the lease for damages. The lease there, as here, did not expressly provide for the tenant's non-liability for fires it might negligently cause. However, our court ruled that even where such an express provision is absent, the instrument may still, "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." (7 Ill.2d at 396.) Then, after considering various provisions of the lease, including the redelivery clause which called for the lessee, upon termination of the lease, to turn over the premises to the lessor "in good condition and repair (loss by fire and ordinary wear excepted)," the court declared: "The parties contemplated that the risk of loss by fire should be insured against [by the lessor] and we see no reason to suppose that they did not contemplate the customary insurance policy which covers both accidental and negligent fires. * * * From the lease as a whole we conclude that the lessee was not to 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." 7 Ill.2d at 398.

It is clear that the dominating consideration in this court's ruling in Cerny-Pickas was its determination that the parties had intended that the lessor would look only to fire insurance proceeds to compensate it for fire losses, though the losses might be attributed to the lessee's negligence. The result was economically realistic, for the cost to the lessor of fire insurance premiums is an item expected to be considered in fixing the amount of rent. Thus, in practical effect it is intended that the premiums will be paid by the lessee through payments of rent. ...

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