O'Callaghan v. Waller & Beckwith Realty Co.

• Decision Date: 26 November 1958
• Docket Number: No. 34723,34723
• Citation: 15 Ill.2d 436,155 N.E.2d 545
• Parties: Virginia O'CALLAGHAN, Admr., Appellant, v. WALLER & BECKWITH REALTY COMPANY, Appellee.
• Court: Illinois Supreme Court

Page 545

155 N.E.2d 545

15 Ill.2d 436

Virginia O'CALLAGHAN, Admr., Appellant, v. WALLER & BECKWITH REALTY COMPANY, Appellee.

No. 34723.

Supreme Court of Illinois.

Nov. 26, 1958.

As Modified on Denial of Rehearing Jan. 22, 1959.

James A. Dooley, Chicago, for appellant.

Peterson, Lowry, Rall, Barber & Ross, Chicago (A. R. Peterson, Owen Rall, Harold W. Huff and Herbert C. Loth, Jr., Chicago, of counsel), for appellee.

SCHAEFER, Justice.

This is an action to recover for injuries allegedly caused by the defendant's negligence in maintaining and operating a large apartment building. Mrs. Ella O'Callaghan, a tenant in the building, was injured when she fell while crossing the paved courtyard on her way from the garage to her apartment. She instituted this action to recover for her injuries, alleging that they were caused by defective pavement in the courtyard. Before the case was tried Mrs. O'Callaghan died and her administrator was substituted as plaintiff. The jury returned a verdict for the plaintiff in the sum of $14,000, and judgment was entered on the verdict. Defendant appealed. The Appellate Court held that the action was barred by an exculpatory clause in the lease that Mrs. O'Callaghan had signed, and that a verdict should have been directed for the defendant. 15 Ill.App.2d 349, 146 N.E.2d 198. It therefore reversed the judgment and remanded the cause with directions to enter judgment for the defendant. We granted leave to appeal.

In reaching its conclusion the Appellate Court relied upon our recent decision in Jackson v. First National Bank, 415 Ill. 453, 114 N.E.2d 721. There we considered the validity of such an exculpatory clause in a lease of property for business purposes. We pointed out that contracts by which one seeks to relieve himself from the consequences of his own negligence are generally enforced 'unless (1) it would be against the settled public policy of the State to do so, or (2) there is something in the social relationship of the parties militating against upholding the agreement.' 415 Ill. at page 460, 114 N.E.2d at page 725. And we held that there was nothing in the public policy of the State or in the social relationship of the parties to forbid enforcement of the exculpatory clause there involved.

The exculpatory clause in the lease now before us clearly purports to relieve the lessor and its agents from any liability to the lessee for personal injuries or property damage caused by any act or neglect of the lessor or its agents. It does not appear to be amenable to the strict construction to which such clauses are frequently subjected. See 175 A.L.R. 8, 89. The plaintiff does not question its applicability, and she concedes that if it is valid it bars her recovery. She argues vigorously, however, that such a clause is contrary to public policy, and so invalid, in a lease of residential property.

Freedom of contract is basic to our law. But when that freedom expresses itself in a provision designed to absolve one of the parties from the consequences of his own negligence, there is danger that the standards of conduct which the law has developed for the protection of others may be diluted. These competing considerations have produced results that are not completely consistent. This court has refused to enforce contracts exculpating or limiting liability for negligence between common carriers and shippers of freight or paying passengers (Chicago and Northwestern Railway Co. v. Chapman, 133 Ill. 96, 24 N.E. 417, 8 L.R.A. 508), between telegraph companies and those sending messages (Tyler, Ullman & Co. v. Western Union Telegraph Co., 60 Ill. 421), and between masters and servants (Campbell v. Chicago, Rock Island and Pacific Railway Co., 243 Ill. 620, 90 N.E. 1106). The obvious public interest in these relationships, coupled with the dominant position of those seeking exculpation, were compelling considerations in these decisions, which are in accord with similar results in other jurisdictions. See 175 A.L.R. 8.

On the other hand, as pointed out in the Jackson case, the relation of lessor and lessee has been considered a matter of private concern. Clauses that exculpate the landlord from the consequences of his negligence have been sustained in residential as well as commercial leases. Manaster v. Gopin, 1953, 330 Mass. 569, 116 N.E.2d 134; Mackenzie v. Ryan, 1950, 230 Minn. 378, 41 N.W.2d 878; Kirshenbaum v. General Outdoor Advertising Co., 1932, 258 N.Y. 489, 180 N.E. 245, 84 A.L.R. 645; King v. Smith, 1933, 47 Ga.App. 360, 170 S.E. 546; Wright v. Sterling Land Co., 1945, 157 Pa.Super. 625, 43 A.2d 614; 6 Williston on Contracts, sec. 1715D; 6 Corbin on Contracts, sec. 1472. There are intimations in other jurisdictions that run counter to the current authority. See Kuzmiak v. Brookchester, Inc., 1955, 33 N.J.Super. 575, 111 A.2d 425; Kay v. Cain, 1946, 81 U.S.App.D.C. 24, 154 F.2d 305. The New Hampshire court applies to exculpatory clauses in all leases its uniform rule that any attempt to contract against liability for negligence is contrary to public policy. Papakalos v. Shaka, 1941, 91 N.H. 265, 18 A.2d 377. But apart from the Papakalos case we know of no court of last resort that has held such clauses invalid in the absence of a statute so requiring.

A contract shifting the risk of liability for negligence may benefit a tenant as well as a landlord. See Cerny-Pickas & Co. v. C. R. Jahn Co., 7 Ill.2d 393, 131 N.E.2d 100. Such an agreement transfers the risk of a possible financial burden and so lessens the impact of the sanctions that induce adherence to the required standard of care. But this consideration is applicable as well to contracts for insurance that indemnify against liability for one's own negligence. Such contracts are accepted, and even encouraged. See Ill.Rev.Stat.1957, chap. 95 1/2, pars. 7-202 (1) and 7-315.

The plaintiff contends that due to a shortage of housing there is a disparity of bargaining power between lessors of residential property and their lessees that gives landlords an unconscionable advantage over tenants. And upon this ground it is said that exculpatory clauses in residential leases must be held to be contrary to public policy. No attempt was made upon the trial to show that Mrs. O'Callaghan was at all concerned about the exculpatory clause, that she tried to negotiate with the defendant about its modification or elimination, or that she made any effort to rent an apartment elsewhere. To establish the existence of a widespread housing shortage the plaintiff points to numerous statutes designed to alleviate the shortage (see Ill.Rev.Stat.1957, chap. 67 1/2, passim) and to the existence of rent control during the period of the lease. 65 Stat. 145 (1947), 50 U.S.C.A.Appendix, § 1894.

Unquestionably there has been a housing shortage. That shortage has produced an active and varied legislative response. Since legislative attention has been so sharply focused upon housing problems in recent years, it might be assumed that the legislature has taken all of the remedial action that it thought necessary or desirable. One of the major legislative responses was the adoption of rent controls which placed ceilings upon the amount of rent that landlords could charge. But the very existence of that control made it impossible for a lessor to negotiate for an increased rental in exchange for the elimination of an exculpatory clause. We are asked to assume, however, that the legislative response to the housing shortage has been inadequate and incomplete, and to augment it judicially.

The relationship of landlord and tenant does not have the monopolistic characteristics that have characterized some other relations with respect to which exculpatory clauses have been held invalid. There are literally thousands of landlords who are in competition with one another. The rental market affords a variety of competing types of housing accommodations, from simple farm house to luxurious apartment. The use of a form contract does not of itself establish disparity of bargaining power. That there is a shortage of housing at one particular time or place does not indicate that such shortages have always and everywhere existed, or that there will be shortages in the future. Judicial determinations of public policy cannot readily take account of sporadic and transitory circumstances. They should rather, we think, rest upon a durable moral basis. Other jurisdictions have dealt with this problem by legislation. McKinney's Consol.Laws of N.Y.Ann., Real Property Laws, sec. 234, Vol. 49, Part I; Ann.Laws of Mass., Vol. 6, c. 186, sec. 15. On our opinion the subject is one that is appropriate for legislative rather than judicial action.

The judgment of the Appellate Court is affirmed.

Judgment affirmed.

BRISTOW, Justice, and DAILY, Chief Justice (dissenting).

We cannot accept the conclusions and analysis of the majority opinion, which in our judgment not only arbitrarily eliminates the concept of negligence in the landlord and tenant relationship, but creates anomalies in the law, and will produce grievous social consequences for hundreds of thousands of persons in this State.

According to the undisputed facts in the instant case, this form lease with its exculpatory clause, was executed in a metropolitan area in 1947, when housing shortages were so acute that 'waiting lists' were the order of the day, and gratuities to landlords to procure shelter were common. (U.S.S.en.Rep.1780, Committee on Banking & Currency, vol. II, 81st Cong., 2nd Sess. (1950) p. 2565 et seq.; Cremer v. Peoria Housing Authority, 399 Ill. 579, 589, 78 N.E.2d 276.) While plaintiff admittedly did not negotiate about the exculpatory clause, as the majority opinion notes, the record shows unequivocally that the apartment would not have been rented to her if she had quibbled about any clause in the form lease. According to the uncontroverted testimony, 'If a person refused to sign a (form)...