                           ILLINOIS OFFICIAL REPORTS
                                         Appellate Court




Nationwide Mutual Fire Insurance Co. v. T&N Master Builder & Renovators, 2011 IL App
                                     (2d) 101143




Appellate Court            NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, as
Caption                    Subrogee of Michael Markowitz, Plaintiff-Appellant, v. T AND N
                           MASTER BUILDER AND RENOVATORS, d/b/a TN Construction, and
                           TONY DELIGIO, Individually and d/b/a TN Construction, Defendants-
                           Appellees.



District & No.             Second District
                           Docket No. 2-10-1143


Filed                      October 25, 2011


Held                       Where plaintiff insurer issued an insurance policy covering the property
(Note: This syllabus       rented by defendants and owned by plaintiff’s subrogor and defendants
constitutes no part of     occupied the property as holdover tenants at the time of a fire that
the opinion of the court   damaged the property, the trial court properly determined that plaintiff
but has been prepared      could not sue defendants as subrogee of the owner and entered judgment
by the Reporter of         on the pleadings for defendants on the ground that defendants were
Decisions for the          coinsureds under the policy issued to the owner and that plaintiff’s action
convenience of the         was barred by Dix, and, furthermore, even if plaintiff had not forfeited the
reader.)
                           argument that the “holdover” provision of the lease made defendants
                           liable for all damages resulting from their continued possession of the
                           property, the more specific provision of the lease regarding fire damage
                           controlled over the provision pertaining to damages generally.
Decision Under             Appeal from the Circuit Court of Lake County, No. 09-L-748; the Hon.
Review                     Margaret J. Mullen, Judge, presiding.



Judgment                   Affirmed.


Counsel on                 Stuart M. Brody, of Sneckenberg, Thompson & Brody, LLP, of Chicago,
Appeal                     for appellant.

                           Daniel P. Costello and James C. Barrow, both of Daniel P. Costello &
                           Associates, of Chicago, for appellees.


Panel                      JUSTICE HUDSON delivered the judgment of the court, with opinion.
                           Presiding Justice Jorgensen and Justice Birkett concurred in the judgment
                           and opinion.




                                             OPINION

¶1          Plaintiff, Nationwide Mutual Fire Insurance Company (as subrogee of Michael
        Markowitz), appeals an order of the circuit court of Lake County granting judgment on the
        pleadings (735 ILCS 5/2-615(e) (West 2008)) in favor of defendants T&N Master Builder
        and Renovators and Tony Deligio. Plaintiff had issued an insurance policy covering property
        owned by Markowitz. Defendants were tenants upon the property. While the property was
        occupied by defendants, a fire occurred, damaging the building. The trial court determined
        that plaintiff could not maintain an action as subrogee against defendants, because they were
        coinsureds under Markowitz’s policy with plaintiff. For the reasons that follow, we affirm.

¶2                                         I. BACKGROUND
¶3          On February 9, 2007, a fire occurred in a building rented by defendants. The property was
        insured under a policy issued by plaintiff. As a result of the fire, plaintiff was obligated to
        pay the owner of the property $140,328.98. Plaintiff now brings this action in subrogation
        to recover the $140,328.98 from defendants. Plaintiff alleges that the fire resulted from
        defendants’ negligence.
¶4          On December 11, 2005, Markowitz entered into a commercial leasing agreement with
        defendants. At the time of the fire, the lease was expired. A holdover tenancy resulted.
        Plaintiff alleges 11 counts in all, including negligence, spoliation of evidence, and breach of

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     contract. Defendants filed a motion for judgment on the pleadings pursuant to section 2-
     615(e) of the Civil Practice Law (735 ILCS 5/2-615(e) (West 2008)), which the trial court
     granted. It found that defendants were coinsureds under the terms of the lease and therefore
     plaintiff could not maintain an action against them, relying on Dix Mutual Insurance Co. v.
     LaFramboise, 149 Ill. 2d 314 (1992).
¶5       The relevant provisions of the lease are as follows:
             “4. REPAIR. The Lessee covenants and agrees with Lessor to take good care of and
         keep in clean and healthy condition the Premises and their fixtures, and to commit or
         suffer no waste therein; that no changes or alterations of the Premises shall be made or
         partitions erected, nor walls papered without the consent in writing of Lessor; that Lessee
         will make all repairs required to the walls, windows, glass, ceilings, paint, plastering,
         plumbing work, pipes, and fixtures belonging to the Premises, whenever damage or
         injury to the same shall have resulted from misuse or neglect; and Lessee agrees to pay
         for any and all repairs that shall be necessary to put the Premises in the same condition
         as when he entered therein, reasonable wear and loss by fire excepted, and the expense
         of such repairs shall be included within the terms of the lease.
                                               ***
             8. HOLDING OVER. If the Lessee retains possession of the Premises or any part
         thereof after the termination of the term by lapse of time or otherwise, then the Lessor
         may at Lessor’s option within thirty days after the termination of the term serve written
         notice upon Lessee that such holding over constitutes either (a) renewal of this lease for
         one year, and from year to year thereafter, at double the rental specified under Section 1
         for such period, or (b) creation of a month to month tenancy, upon the terms of this lease
         except at double the monthly rental specified under Section 1, or (c) creation of a tenancy
         at sufferance, at a rental of $75.00 dollars per day for the time Lessee remains in
         possession. If no such written notice is served then a tenancy at sufferance with rental as
         stated at (c) shall have been created. In such a case if specific per diem rental shall not
         have been inserted herein at (c) such per diem rental shall be one-fifteenth of the monthly
         rental specified under Section 1 of this lease. Lessee shall also pay to Lessor all damages
         sustained by Lessor resulting from retention of possession by Lessee.
                                               ***
             15. FIRE AND CASUALTY. In case the Premises shall be rendered untenantable
         [sic] by fire or other casualty, Lessor may at his option terminate this lease, or repair the
         Premises within thirty days, and failing so to do, or upon the destruction of the Premises
         by fire, the term hereby created shall cease and determine.”

¶6                                        II. ANALYSIS
¶7       Plaintiff raises two main issues on appeal. First, it contends that the rule announced by
     the supreme court in Dix, 149 Ill. 2d 314, should not apply in this case, because Dix involved
     a residential lease and the instant case involves sophisticated, commercial parties. Second,
     plaintiff asserts that certain provisions of the lease make defendants liable for the damages
     to the building. We find neither contention well founded.

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¶8          As this appeal comes to us following a grant of a motion for judgment on the pleadings
       (735 ILCS 5/2-615(e) (West 2008)), review is de novo. Wakulich v. Mraz, 203 Ill. 2d 223,
       228 (2003). When a defendant makes a motion for judgment on the pleadings, he concedes
       the truth of the well-pled facts of the plaintiff’s complaint. Parkway Bank & Trust Co. v.
       Meseljevic, 406 Ill. App. 3d 435, 442 (2010). In reviewing the motion, we must draw all
       reasonable inferences in favor of the nonmovant (Parkway, 406 Ill. App. 3d at 442) and
       construe the allegations strictly against the movant (Pioneer Bank & Trust Co. v. Austin Bank
       of Chicago, 279 Ill. App. 3d 9, 13 (1996)). We must determine whether there is an issue of
       material fact presented by the pleadings. Pioneer, 279 Ill. App. 3d at 13. If no such issue is
       presented, then we determine whether the movant is entitled to judgment. Pioneer, 279 Ill.
       App. 3d at 13.
¶9          We further note that this is an action in subrogation. As the supreme court explained in
       Dix, subrogation is an action in chancery. Dix, 149 Ill. 2d at 319. It is “designed to place the
       ultimate responsibility for the loss upon the one on whom in good conscience it ought to fall
       and to reimburse the innocent party who is compelled to pay.” Reich v. Tharp, 167 Ill. App.
       3d 496, 500-01 (1987). As an action in equity, a claim may be subrogated only in order to
       prevent injustice or unjust enrichment and will not be maintained when it would be
       inequitable to do so. Dix, 149 Ill. 2d at 319. Subrogation is not allowed against a tenant
       where the tenant is considered a coinsured under the landlord’s insurance policy. Reich, 167
       Ill. App. 3d at 501. With these principles in mind, we now turn to the issues raised by
       plaintiff.

¶ 10                    A. Whether This Action Can Proceed in Light of Dix
¶ 11        The first issue presented in this appeal is rather straightforward. If the rule our supreme
       court announced in Dix, 149 Ill. 2d 314, controls, as the trial court held, this action cannot
       proceed. Quite simply, it is well settled that an insurer may not subrogate against a coinsured.
       Chubb Insurance Co. v. DeChambre, 349 Ill. App. 3d 56, 60 (2004). In Dix, 149 Ill. 2d at
       323, our supreme court held that a “tenant, by payment of rent, has contributed to the
       payment of the insurance premium, thereby gaining the status of co-insured under the
       insurance policy.” Hence, unless Dix does not apply for some reason, defendants are
       coinsureds and plaintiff cannot subrogate against them.
¶ 12        Plaintiff believes that it has identified such a reason. It points out that Dix involved a
       residential lease, while in the instant case, a commercial lease is at issue. As sophisticated
       parties, plaintiff and defendants could have allocated risks and costs of insurance as they saw
       fit. Moreover, as commercial tenants, defendants were in a better bargaining position to
       negotiate the question of insurance coverage. It is certainly true that the law often
       distinguishes between sophisticated and nonsophisticated parties. See, e.g., McRaith v. BDO
       Seidman, LLP, 391 Ill. App. 3d 565, 575-76 (2009); Tower Investors, LLC v. 111 East
       Chestnut Consultants, Inc., 371 Ill. App. 3d 1019, 1037 (2007); Topps v. Unicorn Insurance
       Co., 271 Ill. App. 3d 111, 115 (1995). Thus, the distinction plaintiff seeks to draw finds
       support in the law. Indeed, plaintiff calls our attention to substantial foreign authority in
       support of its position. See, e.g., State Farm Florida Insurance Co. v. Loo, 27 So. 3d 747,


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       750 n.4 (Fla. Dist. Ct. App. 2010) (collecting cases).
¶ 13        Defendants respond that the supreme court drew no such distinction in Dix. Moreover,
       they point out, Dix relies extensively on Cerny-Pickas & Co. v. C.R. Jahn Co., 7 Ill. 2d 393
       (1955), which involved a commercial lease. In that case, the court stated:
                 “While the cases are not in accord, we believe that the result here reached is
            supported by better reasoned decisions. Seventy years ago in Lothrop v. Thayer, 138
            Mass. 466, 475 [(1883)], the court said: ‘The ancient law has been acquiesced in, and
            consciously or unconsciously, the cost of insurance to the landlord, or the value of the
            risk enters into the amount of rent.’ And in the leading case of General Mills v. Goldman,
            184 [F.2d 359, 366 (8th Cir. 1950)], the court said ***: ‘They necessarily consciously
            figured on the rentals to be paid by the tenant as the source of the fire insurance
            premiums and intended that the cost of insurance was to come from the tenants. In
            practical effect the tenant paid the cost of the fire insurance.’ Day Wood Heel Co. v.
            Rover, 123 Ohio St. 349 *** [(1931)], also supports our conclusion.
                 The principal cases to the contrary are Carstens v. Western Pipe and Steel Co., 142
            Wash. 259 *** [(1927)]; Morris v. Warner, 207 Cal. 498 *** [(1929)], and Winkler v.
            Appalachian Amusement Co., 238 N.C. 589 *** [(1953)]. In the first two of these cases
            it does not appear that the leases contained provisions with respect to insurance like those
            in the lease before us. In the third case, similar insurance provisions were involved, but
            the court relied upon the dissenting opinion in the General Mills case and upon the first
            opinion of the Appellate Court in the present case.” Cerny-Pickas & Co., 7 Ill. 2d at 398-
            99.
       Thus, not only did the court favorably cite foreign authority supporting the proposition that
       a tenant, through the payment of rent, effectively pays to insure rented property, it expressly
       rejected a contrary rule. Moreover, it did so in the commercial realm.
¶ 14        Accordingly, we are compelled to agree with defendants’ argument on this issue. The law
       is well settled that we are bound by the decisions of our supreme court. In re Clifton R., 368
       Ill. App. 3d 438, 440 (2006). Both Dix and Cerny-Pickas remain good law. Moreover, we
       do not believe they are distinguishable as plaintiff suggests. Though Dix did involve a
       residential lease, Cerny-Pickas did not. Accordingly, we conclude that these cases control
       in the present case. Parenthetically, we note that the approach set forth in Dix appears to be
       the approach followed in the majority of American jurisdictions. See Dattel Family Ltd.
       Partnership v. Wintz, 250 S.W.3d 883, 888 (Tenn. Ct. App. 2007) (collecting cases).
¶ 15        Plaintiff correctly points out that the Dix court did not rely exclusively on the fact that
       the defendant in that case had paid rent in finding subrogation unavailable to the insurance
       company under the circumstances of that case. It also looked to the lease as a whole and
       concluded that the parties intended that the tenant would not be responsible for damages
       caused by fire and that the landlord would look solely to the insurer for compensation for
       such a loss. See Dix, 149 Ill. 2d at 321-23. Plaintiff contends that the lease at issue in this
       case does not manifest a similar intent.
¶ 16        Leases are a type of contract and are therefore generally governed by the rules of contract
       law. Napleton v. Ray Buick, Inc., 302 Ill. App. 3d 191, 201 (1998). Accordingly, our chief

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       goal in analyzing a lease is to ascertain the intent of the parties. Midland Management Co.
       v. Helgason, 158 Ill. 2d 98, 104 (1994). Where the language of a lease is unambiguous, the
       parties’ intent must be ascertained from the lease alone. Napleton, 302 Ill. App. 3d at 201.
       The lease must be construed in such a manner that no part of it is rendered meaningless.
       Fontana v. TLD Builders, Inc., 362 Ill. App. 3d 491, 510-11 (2005). Moreover, portions of
       the lease should not be considered in isolation, for “to ascertain the intent of the parties, we
       must consider the lease ‘as a whole.’ ” Dix, 149 Ill. 2d at 320.
¶ 17       Plaintiff asserts that the lease contains no language exculpating defendants from
       negligent acts and that it does not expressly identify defendants as coinsureds. Plaintiff here
       attempts to distinguish Dix. The lease in Dix expressly made the tenant responsible for his
       own personal property without mentioning responsibility for the premises. Dix, 149 Ill. 2d
       at 322. From this provision, the supreme court inferred an intent that the landlord would
       provide his own insurance against fire. Dix, 149 Ill. 2d at 322. Conversely, plaintiff contends,
       in this case, the lease is completely silent as to the tenant’s responsibility for its own
       negligence.
¶ 18       We disagree with plaintiff’s reading of the relevant portions of the lease. As defendants
       point out, section four of the lease states:
           “The Lessee covenants and agrees with Lessor to take good care of and keep in clean and
           healthy condition the Premises and their fixtures, and to commit or suffer no waste
           therein; that no changes or alterations of the Premises shall be made or partitions erected,
           nor walls papered without the consent in writing of Lessor; that Lessee will make all
           repairs required to the walls, windows, glass, ceilings, paint, plastering, plumbing work,
           pipes, and fixtures belonging to the Premises, whenever damage or injury to the same
           shall have resulted from misuse or neglect; and Lessee agrees to pay for any and all
           repairs that shall be necessary to put the Premises in the same condition as when he
           entered therein, reasonable wear and loss by fire excepted, and the expense of such
           repairs shall be included within the terms of the lease.” (Emphasis added.)
       Plaintiff argues that this section, read as a whole, does not apply to negligent acts. However,
       the plain language of this section indicates that it is concerned with damages resulting from
       defendants’ negligence. Indeed, it expressly imposes a duty upon defendants to “make all
       repairs required to the walls, windows, glass, ceilings, paint, plastering, plumbing work,
       pipes, and fixtures” when the “damage or injury to the same shall have resulted from misuse
       or neglect.” “[L]oss by fire” is specifically excluded, and the exclusion is clearly broad
       enough to encompass defendants’ negligence.
¶ 19       Another passage confirms the parties’ intent that the landlord provide insurance for loss
       by fire. Section 12 states:
           “Lessee will in every respect comply with the ordinances of the municipality aforesaid,
           with the rules and orders of the health officers thereof, with the orders and requirements
           to the police department, with the requirements of any underwriters’ association so as not
           to increase the rates of insurance upon the building and contents thereof, and with the
           rules and orders of the fire department in respect to any matters coming within their
           jurisdiction.”


                                                 -6-
       Initially, we note that this section imposes a duty upon the tenant to take steps that would
       prevent the rate of insurance on the building from increasing. Obviously, this would be of
       concern to the landlord only if the landlord were responsible for paying those rates. Further,
       it requires the tenant to comply with orders of the fire department. Such matters would be of
       no concern to the landlord if the landlord were not responsible for damages caused by fire.
¶ 20        Accordingly, given the plain language of the lease–taken as a whole–along with the fact
       that, in accordance with Dix, defendants contributed to the insurance premiums by virtue of
       paying rent, we hold that defendants were coinsureds under the policy issued by plaintiff. As
       an insurance company cannot subrogate against a coinsured (Chubb Insurance Co., 349 Ill.
       App. 3d at 60), the trial court properly granted judgment on the pleadings. We therefore
       affirm its judgment.

¶ 21             B. Whether Other Provisions of the Lease Render Defendants Liable
¶ 22        Before closing, we must address one additional argument. Plaintiff points to section eight
       of the lease, titled “HOLDING OVER.” That section states as follows:
            “If the Lessee retains possession of the Premises or any part thereof after the termination
            of the term by lapse of time or otherwise, then the Lessor may at Lessor’s option within
            thirty days after the termination of the term serve written notice upon Lessee that such
            holding over constitutes either (a) renewal of this lease for one year, and from year to
            year thereafter, at double the rental specified under Section 1 for such period, or (b)
            creation of a month to month tenancy, upon the terms of this lease except at double the
            monthly rental specified under Section 1, or (c) creation of a tenancy at sufferance, at a
            rental of $75.00 dollars per day for the time Lessee remains in possession. If no such
            written notice is served then a tenancy at sufferance with rental as stated at (c) shall have
            been created. In such a case if specific per diem rental shall not have been inserted herein
            at (c) such per diem rental shall be one-fifteenth of the monthly rental specified under
            Section 1 of this lease. Lessee shall also pay to Lessor all damages sustained by Lessor
            resulting from retention of possession by Lessee.” (Emphasis added.)
       Plaintiff argues that this provision renders defendants liable for all damages resulting from
       their continued possession of the premises.
¶ 23        Defendants respond that this issue is forfeited, as plaintiff did not raise it before the trial
       court. It is certainly true that issues raised for the first time on appeal are forfeited. Helping
       Others Maintain Environmental Standards v. Bos, 406 Ill. App. 3d 669, 695 (2010). In its
       reply brief, plaintiff does not identify where it had previously raised this issue. Instead, it
       contends that there is “no reason whatsoever that the court on appeal with a de novo review
       cannot consider” this issue since the “contract and lease [are] part of the evidence and
       [r]ecord on [a]ppeal.” We find this assertion unsupported, and we are unaware of any such
       exception to the forfeiture doctrine. Such an exception would effectively eviscerate the rule.
       If all it took to preserve an issue were that pertinent material be present in the record and that
       review be de novo, under what circumstances would the failure to raise an issue in a case
       involving a dispositive pretrial motion ever result in forfeiture? Accordingly, we agree with
       defendants that this issue is forfeited. Moreover, it also lacks merit.

                                                   -7-
¶ 24        In their briefs, the parties refer to defendants as holdover tenants rather than tenants at
       sufferance. When a tenant remains in possession of premises after the expiration of a lease,
       either a tenancy at sufferance or a holdover tenancy will result. Bransky v. Schmidt Motor
       Sales, Inc., 222 Ill. App. 3d 1056, 1060 (1991). The original terms of the lease apply when
       a tenant holds over. Roth v. Dillavou, 359 Ill. App. 3d 1023, 1027 (2005). Conversely, no
       privity exists between a tenant at sufferance and the former landlord. Roth, 359 Ill. App. 3d
       at 1027. There is a presumption–absent evidence to the contrary–that a tenant is holding over.
       Bransky, 222 Ill. App. 3d at 1061. Given the presumption along with the parties’ apparent
       agreement on the subject, we will consider defendants to be holdover tenants for the purpose
       of resolving this issue. This is significant, as a landlord cannot enforce covenants of an
       original lease against a tenant at sufferance. Troccoli v. L&B Products of Illinois, Inc., 189
       Ill. App. 3d 319, 322 (1989). However, as we are dealing with a holdover tenancy, the terms
       of the entire lease remain effective.
¶ 25        Therefore, plaintiff’s attempt to read the final sentence of section eight in isolation is
       improper. Indeed, this is exactly the sort of analysis the supreme court counseled against in
       Dix, 149 Ill. 2d at 320, where it explained, “In Illinois, courts must look to the lease ‘as a
       whole’ and the spirit of the agreement between the parties rather than search for an express
       provision in the lease.” Plaintiff’s analysis also conflicts with ordinary principles of
       contractual construction. While the language that plaintiff relies upon in section eight does
       place responsibility upon defendants to pay for all damages sustained due to their retention
       of the premises, section four specifically excepts losses caused by fire. It is well established
       that, where an inconsistency exists in a contract, a more specific provision controls over a
       more general one. Jay v. United Defense Industries, Inc., 162 Ill. App. 3d 1071, 1077 (1987).
       Hence, the more specific provision relating to damages resulting from fire controls over the
       provision that pertains to damages generally. Even if plaintiff had not forfeited this argument,
       we would not find it persuasive.

¶ 26                                  III. CONCLUSION
¶ 27       In light of the foregoing, the order of the circuit court of Lake County granting
       defendants’ motion for judgment on the pleadings is affirmed.

¶ 28      Affirmed.




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