WILLIAMS-BOWMAN RUBBER v. INDUS. MAINTENANCE, ETC., 85 C 08964

• Citation: 677 F. Supp. 539
• Decision Date: 29 December 1987
• Docket Number: No. 85 C 08964,85 C 10456.,85 C 08964
• Parties: WILLIAMS-BOWMAN RUBBER COMPANY, an Illinois corporation, now known as Wilbow, Inc., Western National Bank as Trustee under Trust No. 9236, an Illinois banking corporation, and Cicero Real Estate Venture, an Illinois proprietorship, and Affiliated FM Insurance Company as Subrogee of Williams Bowman Rubber Company, Plaintiffs, v. INDUSTRIAL MAINTENANCE, WELDING AND MACHINING COMPANY, INC., an Indiana corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

677 F. Supp. 539

WILLIAMS-BOWMAN RUBBER COMPANY, an Illinois corporation, now known as Wilbow, Inc., Western National Bank as Trustee under Trust No. 9236, an Illinois banking corporation, and Cicero Real Estate Venture, an Illinois proprietorship, and Affiliated FM Insurance Company as Subrogee of Williams Bowman Rubber Company, Plaintiffs, v. INDUSTRIAL MAINTENANCE, WELDING AND MACHINING COMPANY, INC., an Indiana corporation, Defendant.

Nos. 85 C 08964, 85 C 10456.

United States District Court, N.D. Illinois, E.D.

December 29, 1987.

Daniel J. Leahy, Anne M. Bedinghaus, James M. DeZelar, Robbins, Rubenstein, Salomon & Greenblatt, Chicago, Ill., for plaintiffs.

Clinton J. Feil, Edward L. Cooper, Robert L. Kiesler, Duane J. St. Pierre, Kiesler & Berman, Chicago, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

ZAGEL, District Judge.

The plaintiffs, Wilbow, Inc. ("Wilbow"), Cicero Real Estate Venture and Affiliated FM Insurance Company ("AFM"), brought this action for breach of contract and negligence against the defendant, Industrial Maintenance, Welding and Machining Co., Inc. ("Industrial"), seeking to recover damages for injuries to Wilbow's real and personal property which resulted from a fire on December 10, 1984.

Before the court is Industrial's motion to bar the plaintiffs from recovering "depreciation" as an element of the damages. Specifically, Industrial contends that approximately $150,000 of the $420,000 that the plaintiffs seek to recover constitute "improvements" to the property which the plaintiffs should be barred from recovering.¹ Unsurprisingly, the plaintiffs do not take the same view of the matter. Before addressing the substance of Industrial's motion, however, we examine Illinois law on damages.

I. ILLINOIS LAW ON DAMAGES

A. Personal Property

Ascertaining the measure of damages for injuries to personal property is straightforward. If the personal property is repairable, then the measure of damages is the reasonable cost of repairs. Wall v. Amoco Oil Co., 92 Ill.App.3d 921, 48 Ill. Dec. 432, 435, 416 N.E.2d 705, 708 (5th Dist.1981); People v. Tidwell, 33 Ill.App.3d 232, 338 N.E.2d 113, 117 (1st Dist.1975). If, however, the value of the personal property after repairs is less than the value before the injury, then the measure of damages also includes the difference in value. Kroch's & Brentano's, Inc. v. Barber-Colman Co., 16 Ill.App.3d 412, 306 N.E.2d 522, 525 (1st Dist.1973); Trailmobile Division of Pullman, Inc. v. Higgs, 12 Ill.App. 3d 323, 297 N.E.2d 598, 600 (5th Dist.1973).

If, on the other hand, the damage is not capable of being repaired, as where the personal property is totally destroyed, or if the repair costs exceed the fair market value of the personal property before the injury, then the measure of damages is the fair market value of the property immediately prior to the damage.² Gannon v. Freeman, 103 Ill.App.3d 917, 919, 59 Ill. Dec. 546, 548, 431 N.E.2d 1303, 1305 (1st Dist.1982); Wall, 48 Ill.Dec. at 435, 416 N.E.2d at 708; Higgs, 297 N.E.2d at 600; Behrens v. W.S. Bills & Sons, Inc., 5 Ill. App.3d 567, 576, 283 N.E.2d 1, 7 (3d Dist. 1972); Santiemmo v. Days Transfer, Inc., 9 Ill.App.2d 487, 502, 133 N.E.2d 539 (1st Dist.1956).

B. Real Property

The rules governing the measure of damages for injuries to real property, unfortunately, are not as easily determined as those applying in cases involving injuries to personal property. Indeed, it is difficult (if not impossible) to reconcile the decisions of the Illinois courts addressing the issue of the proper measure of damages for injuries to real property. Happily, our task is not to harmonize Illinois law, but to apply it. See Palmer v. Beverly Enterprises, 823 F.2d 1105, 1114 (7th Cir.1987) (Easterbrook, J., concurring). Nevertheless, in order to determine the proper measure of damages for the injuries to Wilbow's building, we believe that a thorough review of Illinois law is necessary.

Fitzsimons & Connell Co. v. Braun, 199 Ill. 390, 65 N.E. 249 (1902) is our starting point. In Fitzsimons, the defendant, while detonating explosives in order to excavate a tunnel, "permanently and irreparably impaired the appearance, strength and stability" of the plaintiff's building. The Illinois Supreme Court, over the defendant's contention that the measure of damages was "the depreciation in value resulting from the injuries," held that "the costs of repairing the building and restoring it to its proper condition is the true measure of damages." Id. at 397, 65 N.E. 249. The court, recognizing the potential conflict between these different formulae, explained that in deciding which measure of damages to apply, a court should adopt "that valuation * * * which will be most beneficial to the injured party, for he is entitled to the benefit of the premises intact and to the value of any part separated. The damages for injury done to a house are measured by the cost of restoring it to its previous condition."³ Id. at 398, 65 N.E. 249, quoting 3 Sutherland on Damages sec. 1018.

Two years later, in Beidler v. Sanitary District of Chicago, 211 Ill. 628, 71 N.E. 1118 (1904), several dock owners sued after the defendant dug out a sanitary canal which caused the water level at the plaintiffs' docks to drop to a level which rendered their docks unusable. The plaintiffs were forced at considerable expense to excavate in order to return the water level to normal, and they sued to recover their expense. The court, however, held that where real property is damaged by reason of a public improvement, the measure of damages is the depreciation in the value of the property which results from the improvement, not the cost of repair. Id. 71 N.E. at 1121. The court did not discuss its apparent disagreement with the rule stated in Fitzsimons.

In Swanson v. Nelson, 127 Ill.App. 144 (1st Dist.1906), the defendant, through a trespass, caused the plaintiff's building to settle and crack. The appellate court, citing neither Fitzsimons nor Beidler, held that the proper measure of damages was the expense which the plaintiff had incurred in repairing the building. Id. at 149. The cost of repair measure of damages was proper because it:

makes the damages conform to the general theory of law that they are to be indemnity or compensation. But it frequently happens that an injury or trespass to real property may be in a certain sense irreparable. The conditions before the trespass was committed or the injury done cannot be restored at all, or can be restored only at a very great and disproportionate expense. In either of these cases another measure of damages is properly adopted by the courts, namely, the difference in market value of the property before and after the act complained of. The result of this reasonable view * * * has been to establish a rule that makes the measure of damages, in cases of injury to real estate, the cost of restoration or the difference in market value, as one or the other is the less amount.

Id. at 149 (citations omitted). According to the Swanson Court, then, the proper measure of damages for injuries to real property is the lesser amount between the cost of repair and the diminution in value of the property as a result of the damage. This rule (which is very similar to the measure of damages applied in cases involving injuries to personal property) is squarely at odds with Fitzsimons's injunction that the court adopt "that valuation which is most beneficial to the injured party."

The appellate court revisited this issue in Donk Bros. Coal & Coke Co. v. Slata, 133 Ill.App. 280 (4th Dist.1907), and Donk Bros. Coal & Coke Co. v. Novero, 135 Ill.App. 633 (4th Dist.1907). Both Slata and Novero involved situations in which the defendant's mining operation had caused injury to the plaintiffs' buildings; and in both cases the court, relying on Fitzsimons, held that the proper measure of damages was the cost of repair.

In Slata, the court noted that the general measure of damages for injuries to real property is the depreciation in the market value of the property which results from the injury. The cost-of-repair measure of damages is an exception to the general rule:

The rule seems to be that, when the reasonable cost of repairing the injury * * * is less than what is shown to be the diminution in the market value of the whole property by reason of the injury, such cost of restoration is the proper measure of damages. On the other hand, when the cost of restoring is more than such diminution, the latter is generally the true measure of damages, the rule of avoidable consequences requiring that the plaintiff shall diminish the loss as far as possible.

Id., 133 Ill.App. at 283. Citing Fitzsimons, the court also stated that a court should adopt "that valuation * * * which will be most beneficial to the injured party * * *." Id. at 284. It is, however, somewhat difficult to reconcile these two passages. The first embraces the rule set forth in Swanson, which, as we noted above, is inconsistent with the rule stated in Fitzsimons, which is itself endorsed in the second.

Novero, although reaching the same conclusion as Slata, employed a different line of reasoning. The cost-of-repair rule was appropriate in Novero because:

the value of the real property at any time depended upon the condition of the buildings and the best evidence of the extent of the injury to the buildings is the cost of restoring them to the condition before the injury. Or put in another way, the value of the property as affected by the buildings will be depreciated by injury to the building, and a fair measure of that depreciation will be the necessary cost and expense to repair the building and restore it to its original condition.

135 Ill.App. at 636.⁴Novero thus attempts to harmonize the different formulae: although the measure of damages for injuries to real property is the diminution in value caused by the injuries, a "fair measure" of that diminution...