Appeal from the Circuit Court of Rock Island County; the Hon.
Wilbur S. Johnson, Judge, presiding.
PRESIDING JUSTICE SCOTT DELIVERED THE OPINION OF THE COURT:
David Peters and Beth Peters, the defendants, pursuant to an oral lease were tenants in an apartment owned by the plaintiffs, Charles E. Anderson and Elaine M. Anderson. On January 7, 1984, a fire occurred in the apartment which caused extensive damage. The defendants had exclusive control of the apartment and the fire started when defendants' cat knocked over a lighted candle which defendants had left unattended. The property of the plaintiffs was damaged in the amount of $16,223 and this sum was paid to the plaintiffs by their insurer, American Family Insurance Company.
The plaintiffs Andersons filed suit against the defendants alleging negligence. This complaint was dismissed with leave to refile. The American Family Insurance Company joined with the plaintiffs Andersons and filed an amended complaint on March 1, 1985, which contained three counts. Two counts were against the defendants individually for their alleged negligence and one count was against them jointly on the basis of res ipsa loquitur.
After various motions by the parties were filed, the trial court dismissed the complaint of the plaintiffs and this appeal ensued.
Several issues are raised in this appeal; however, the paramount issue is whether a tenant who is in possession of premises pursuant to an oral agreement is liable to damages to the premises caused by his own negligent conduct to the landlords' insurer who brings a subrogation action.
• 1 It is well-established law that exculpation agreements between a landlord and tenant commonly referred to as "yield up" clauses if properly drafted in a written lease may result in a tenant being liable for damage to premises which is caused by his negligence. (Englehardt v. Triple X Chemical Laboratories, Inc. (1977), 53 Ill. App.3d 926, 369 N.E.2d 67.) In the instant case, we are not confronted with a situation where the relationship between the landlord and tenant was defined by a written agreement. Their relationship was created by an oral agreement that the defendants would be tenants of the landlords, the plaintiffs Andersons, for an agreed-upon rental payment.
• 2 It may be stated as a basic proposition in the law of landlord and tenant that a tenant is liable to the landlord in damages for any injury to premises resulting from his wrongful acts or his failure to exercise due care. 49 Am.Jur.2d Landlord & Tenant sec. 934, 935 (1970); Annot., 10 A.L.R.2d 1012, 1016 et seq. (1950); Cerny-Pickas & Co. v. C.R. Jahn Co. (1955), 7 Ill.2d 393, 131 N.E.2d 100.
The plaintiffs have reminded this court of its decision in the case of Ford v. Jennings (1979), 70 Ill. App.3d 219, 387 N.E.2d 1125, wherein it was held that a sublessee could not rely on an exculpatory provision in the original lease to bar liability for his negligence as against the lessor of leased property. In the Ford case the lease contained a "yield up clause" whereby the tenant was required to yield up the premises to the lessor at the termination of the lease in as good condition as when entered upon by the tenant "loss by fire or inevitable accident, and ordinary wear excepted." The original tenant sublet the premises to the defendant Jennings, and subsequently the building was destroyed by fire. This court held that the "yield up clause" exculpated the original tenant, but since no privity of contract existed between the sublessee (Jennings) and the original landlord, damages could be recovered from the sublessee because of his negligence.
The plaintiffs equate the status of the defendants in the instant case with the status of the sublessee in the Ford case, in that neither of them were protected by a lease containing an "exculpatory yield up clause" and therefore this court in order to be consistent should hold that the defendants in the instant case should be liable for damages. The Ford case recognizes that in common law a tenant is responsible for damages to leased premises resulting from his own negligence, and since sublessee had no privity of contract with the primary landlord, the common law rule was applicable.
We do not find that the Ford case is so sweepingly persuasive as to compel this court to dogmatically apply its result as a determination of the issue presented in the instant case. The case of Ford and the one we now consider are distinguishable by one important fact. In Ford it was the primary landlord (actually the estate of the primary landlord) seeking to recover from a sublessee who did not have the benefit of an exculpatory "yield up" clause. In the instant case, the primary plaintiff is the American Family Insurance Company, which attempts to recover its payment for fire loss to the plaintiffs Andersons by bringing a subrogation action against the defendant tenants. We are unaware of any Illinois case which has determined the question whether the tenant in possession of premises by virtue of an oral lease is liable for his negligence to the landlord's insurer.
The issue presented in the case before us has a potential for consequences so far reaching that we are persuaded that public policy considerations must be considered in reaching a determination. Such a recognition of the public policy effects was made by the United States Court of Appeals in the case of Aetna Insurance Co. v. Craftwall of Idaho, Inc. (9th Cir. 1985), 757 F.2d 1030. This cited case presented a situation which is for all purposes identical to the one in the instant case. In the Aetna case the reviewing court theorized that the question as to the subrogation rights of a landlord's insurer to be of such importance that the same should be certified to the Idaho Supreme Court for determination. We note with interest that the circuit court of appeals in the Aetna case made the following observation:
"Therefore, even if we were to reach the question whether a tenant should be presumed to be a co-insured in the absence of any indication of the parties' intent, our decision would ultimately turn on the conflicting policy arguments raised by the various state supreme courts that have discussed the issue." (757 F.2d 1030, 1033.)
Since subrogation is an equitable doctrine, equity principles apply in determining its availability. Alaska Insurance Co. v. RCA Alaska Communications, Inc. (Alaska 1981), 623 P.2d 1216; Rock River Lumber Corp. v. Universal Mortgage Corp. (1978), 82 Wis.2d 235, 262 N.W.2d 114.
In directing our attention specifically to public policy provisions, we direct our attention to an Oklahoma case which presents a situation and question identical to that presented in the instant case. (See Sutton v. Jondahl (Okla. App. 1975), 532 P.2d 478.) In Sutton the landlord's fire insurance carrier sued a tenant and his 10-year-old son to recover a fire loss caused by the son's experimentation with an inexpensive chemistry set given to him by his father. The tenant was in possession of the damaged premises by virtue of an oral lease. A jury returned a verdict favoring the insurance company against only the father. The Oklahoma court of appeals reversed the trial court on several grounds and specifically held that while there was sufficient evidence to make a jury case out of actionable negligence in the father's ...