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12/20/88 Signode Corporation, v. Normandale Properties

December 20, 1988

SIGNODE CORPORATION, PLAINTIFF-APPELLANT

v.

NORMANDALE PROPERTIES, INC., ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

532 N.E.2d 482, 177 Ill. App. 3d 526, 126 Ill. Dec. 797 1988.IL.1835

Appeal from the Circuit Court of Cook County; the Hon. Myron T. Gomberg, Judge, presiding.

APPELLATE Judges:

JUSTICE BILANDIC delivered the opinion of the court. HARTMAN, P.J., and EGAN, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE BILANDIC

Plaintiff, Signode Corporation (Signode), appeals the dismissal with prejudice of its complaint against defendants Normandale Properties, Inc. (Normandale), and Rauenhorst Corporation (Rauenhorst).

This appeal arises from an insurance subrogation action for property damage involving the collapse of a roof. On March 3, 1978, defendant Normandale entered into a written lease with plaintiff Signode, whereby Normandale, as landlord, agreed to "furnish all of the material and labor and to do all things necessary for the construction of a Warehouse/Office Building . . ., at Landlord's sole cost and expense." The landlord also agreed to prepare final plans and specifications in accordance with applicable building and zoning regulations; to appoint a competent and experienced engineer to work with the tenant in the "design of the Building" so that the same would meet the requirements of the tenant. The tenant agreed to appoint an officer or employee of the tenant to work with the landlord in the "design of the Building." Defendant Normandale is a wholly owned subsidiary of defendant Rauenhorst, both Minnesota corporations. Normandale engaged Rauenhorst as a general contractor to construct the building.

The term of 10 years was to commence upon the date of "substantial completion" of the improvements. The parties agreed that the building was substantially completed on December 5, 1978, and the term began on that date. Approximately one month later, on January 14, 1979, the roof collapsed. Signode was paid by its insurance carrier. Through Signode, the insurance carrier brings this subrogation action to recover the monies paid to Signode. Counsel for the insurance carrier concedes that it stands in the same position as Signode and that if Signode has no basis for recovery, the subrogation claim must fail.

Plaintiff filed its original action on July 25, 1983, against Rauenhorst and Burger Iron Company. Normandale was not joined as a defendant until plaintiff filed its second amended complaint on September 21, 1984. After a series of dismissals and amendments, we reach plaintiff's fourth amended complaint, which is at issue here. Count I alleged breach of express warranties against Normandale; count V alleged breach of contract against Normandale; and count IX alleged negligence against Rauenhorst. On July 6, 1987, all of the counts were dismissed with prejudice. Signode appeals the dismissal of counts I, V and IX. I

Counts I and V against Normandale are based upon the interpretation of the lease between Signode and Normandale. The trial court held that reading the lease as a whole leads to the Conclusion that the parties intended to shift the risk of loss for damages to the structure to the third-party insurer. It relied on Cerny-Pickas & Co. v. C.R. Jahn Co. (1955), 7 Ill. 2d 393, 131 N.E.2d 100. The insurance company, as subrogee, stepped into the shoes of the subrogor, Signode, for purposes of enforcing a right against a third party. (See William Aupperle & Sons, Inc. v. American Indemnity Co. (1979), 75 Ill. App. 3d 722, 394 N.E.2d 725; London & Lancashire Indemnity Co. of America v. Tindall (1941), 377 Ill. 308, 36 N.E.2d 334.) The rights and obligations of Signode are governed by the provisions of the lease agreement, dated March 3, 1978, between Normandale and Signode.

The tenant was required to carry all of the customary insurance, to include the landlord as an additional insured, and to pay all premiums. In addition, if other insurance became available during the term of the lease for risks not contemplated at the time the lease was executed, the tenant, at its sole cost and expense but for the mutual benefit of landlord and tenant, was required to maintain such other insurance, in such amounts as might from time to time be reasonably required by the landlord. The tenant further agreed that it would not, on its own initiative or pursuant to the request or requirement of any third party, take out separate insurance unless the landlord was included as a named insured with the loss payable to the landlord.

Article XIII, dealing with "Destruction and Restoration," provided:

"13.1 Tenant covenants and agrees that in case of damage to or destruction of the Building, or the machinery, fixtures and equipment therein contained (exclusive of Tenant's personal property and trade fixtures), by fire or otherwise, Tenant will promptly, at its sole cost and expense, repair, restore and rebuild the same as nearly as possible to the condition that the same were in immediately prior to such damage or destruction . . .. If the net amount of insurance proceeds recovered by Landlord is insufficient to restore, repair and rebuild the Building, machinery, fixtures and equipment therein contained (exclusive of Tenant's personal property and trade fixtures) Tenant will deposit with Landlord upon Landlord's request either a cash deposit equal to the reasonable estimate of the amount necessary to restore, repair and rebuild the same, less the amount of such insurance proceeds available (or other security reasonably satisfactory to Landlord). Said deposit shall be made upon written request of Landlord.

13.2 All insurance monies recovered by Landlord on account of such damage or destruction, less the costs, if any, to Landlord of such recovery, shall be applied by Landlord to the payment of the costs of repairing, restoring and rebuilding (hereinafter in this Article referred to as the 'Work'), and shall be paid out ...


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