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Jewelers Mutual Insurance Company v. Firstar Bank Illinois

March 31, 2003

JEWELERS MUTUAL INSURANCE COMPANY, AS SUBROGEE OF ANNACO CORPORATION, AND AS SUBROGEE OF IRVING M. RINGEL, INC., PLAINTIFF-APPELLANT,
v.
FIRSTAR BANK ILLINOIS, DEFENDANT-APPELLEE.
BACHU VAIDYA, PLAINTIFF-APPELLANT,
v.
FIRSTAR BANK ILLINOIS, DEFENDANT-APPELLEE.



Appeals from the Circuit Court of Cook County 97 L 05654 Honorable James F. Henry, Judge Presiding. 99 L 7181 Honorable Richard A. Siebel, Judge Presiding.

The opinion of the court was delivered by: Justice Cahill

In the fall of 1996, more than $1 million worth of loose diamonds and fine jewelry were stolen from three safety deposit boxes that defendant Firstar Bank Illinois (Firstar) rented to jewel dealers at one of its Chicago branches. Plaintiff Jewelers Mutual Insurance Company (Jewelers Mutual), a subrogee of boxholders Annaco Corporation (Annaco) and Irving M. Ringel, Inc. (Ringel), sued the bank under theories of breach of contract and negligence for the loss of the boxes' contents. In a separate action, the third boxholder, plaintiff Bachu Vaidya, sued the bank under the same theories. In both cases the bank moved for and was granted summary judgment based on an exculpatory clause in the box rental contract. In this consolidated appeal, plaintiffs argue that under the public policy of Illinois even a clearly worded exculpation of negligence is void. Plaintiff Jewelers Mutual also appeals the denial of its cross-motion for summary judgment. Plaintiff Vaidya argues that the trial court abused its discretion in denying his motion for reconsideration of the grant of summary judgment and erred earlier in dismissing count II of his complaint in reliance on Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 88-89, 435 N.E.2d 443 (1982).

The procedural histories of these two cases differ slightly. Jewelers Mutual, as subrogee of Ringel and Annaco, filed its four-count complaint on May 13, 1997, alleging breach of contract and negligence. The bank argued that an exculpatory clause in the contract was valid and that the negligence counts were barred by the Moorman doctrine. On April 13, 2000, the trial court granted the bank's motion for summary judgment on all counts, but made no specific findings on the Moorman issue orally or in its written order.

Plaintiff Vaidya filed his two-count complaint on June 29, 1999, also alleging breach of contract and negligence. The bank filed a motion to dismiss the negligence count, which the court granted based on Moorman on October 13, 1999. The court then granted the bank summary judgment on the breach of contract count on January 21, 2000. Vaidya filed a motion to reconsider the grant of summary judgment, which was denied on April 28, 2000.

We affirm the dismissal of count II of plaintiff Vaidya's complaint. In both cases we reverse the grants of summary judgment in defendant's favor on the breach of contract counts. We grant partial summary judgment to plaintiffs on their breach of contract counts and remand to the trial court to assess damages.

Diamond dealers Annaco and Ringel rented safety deposit boxes at the Firstar branch office at 30 North Michigan Avenue in Chicago for $82 and $72 per year, respectively. Each signed a form contract that stated:

"1. It is understood that said bank has no possession or custody of, nor control over, the contents of said safe and that the lessee assumes all risks in connection with the depositing of such contents; that the sum above mentioned is for the rental of said safe alone, and that there shall be no liability on the part of said bank, for loss of, or injury to, the contents of said box from any cause whatever unless lessee and said bank enter into a special agreement in writing to that effect, in which case such additional charges shall be made by said bank as the value of contents of said safe, and the liability assumed thereof may justify. The liability of said bank, is limited to the exercise of ordinary care to prevent the opening of said safe by any person not authorized and such opening shall not be inferable from loss of any of its contents." (Emphasis added.)

Neither Annaco nor Ringel entered into the "special agreement" mentioned in the contract. Each insured its inventory through Jewelers Mutual and paid an additional fee for a special endorsement covering the contents of a safety deposit box.

The contract further stated:

"8. Relationship defined, the relationship of the bank and the lessee being hereby agreed to be that of landlord and tenant, not as bailee and bailor."

The contents of the boxes were removed by unauthorized persons in late September or early October 1996. Jewelers Mutual paid $805,552.37 toward Annaco's claimed loss of loose diamonds, and $81,848 toward Ringel's claimed loss of fine jewelry. Jewelers Mutual then obtained subrogation rights from both of them. The bank admitted in its answer to the complaint that it was negligent in allowing unauthorized persons access to the safety deposit box.

The court's summary judgment order noted that the exculpatory clause stated the bank would not be liable for loss of the contents of the box unless the renter paid additional charges for a special agreement to that effect and that neither insured entered into the special agreement. The trial court also found that the contract: (1) was not a lease of real property subject to the Landlord and Tenant Act (the Act) (765 ILCS 705/1 (West 1998)); (2) was not otherwise against Illinois public policy; and (3) was not ambiguous.

Diamond dealer Vaidya had rented a box for $26 a year at the bank's 30 North Michigan Avenue branch. He signed the form contract quoted above but did not opt for the additional "special agreement." Vaidya sued the bank for an unspecified amount to be proven, but at least $50,000, for diamonds and jewelry discovered missing in late September 1996. The bank again admitted that it failed to exercise ordinary care as required under the contract. The bank moved for dismissal of Vaidya's negligence count under Moorman, 91 Ill. 2d at 88-89, and for summary judgment on his breach of contract count based on the contract's exculpatory language. After the trial court granted both motions, Vaidya filed a motion to reconsider the grant of summary judgment. He argued that the Act (765 ILCS 705/1 (West 1998)) governed the parties' relationship and voided the exculpatory clause. The trial court's findings were identical to those in the Jewelers Mutual action. The court found that the box rental agreement: (1) was not a lease of real property subject to the Act (765 ILCS 705/1 (West 1998)); (2) was not otherwise against Illinois public policy; and (3) was not ambiguous.

We review the grant of summary judgment de novo. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102, 607 N.E.2d 1204 (1992).

We first note an ambiguity in this contract that affects our analysis of the consequences of a possible breach of the contract by the bank. The contract early on states that "there shall be no liability." But the contract later states that "the liability of said bank is limited to the exercise of ordinary care." Ambiguity in a contract may be construed against the drafter, in this case, the bank. Signal Capital Corp. v. Lake Shore National Bank, 273 Ill. App. 3d 761, 772, 652 N.E.2d 1364 (1995). In resolving an ambiguity we may look to the agreement itself. See DuQuoin National Bank v. Vergennes Equipment, Inc., 234 Ill. App. 3d 998, 1003, 599 N.E.2d 1367 (1992) (court looks to agreement as a whole to determine intent of parties, and if ambiguous, to the circumstances under which the contract was made). Here, the parties unambiguously defined their relationship in the contract as landlord and tenant, but then sent mixed signals about liability.

By defining their relationship as landlord and tenant, the parties subjected their relationship to the Act (765 ILCS 705/1 (West 1998)). The Act invalidates exculpatory clauses that excuse a landlord from liability for his own negligence. Courts presume parties contract in light of existing law. Allstate Insurance Co. v. Boston Whaler, Inc., 157 Ill. App. 3d 785, 790, 510 N.E.2d 1100 (1987). If they claim to define their relationship by contract as that of landlord and tenant, we must presume that they intended to take advantage of the benefits conferred by the Act, along with the limitations imposed by the Act. Lastly, logical inference would negate an intent to exculpate the bank from its own negligence since the whole purpose of renting a safe deposit box is for reasons of security.

All that aside, even if the contract was not ambiguous with regard to the bank's attempt to exculpate itself from liability, such effort would fail by reason of its invocation of the Act (765 ILCS 705/1 (West 1998)). In the absence of contractual language to the contrary, laws and statutes in existence at the time the contract is executed are considered part ...


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