Young v. Illinois Athletic Club

• Decision Date: 07 December 1923
• Docket Number: No. 15478.,15478.
• Citation: 310 Ill. 75,141 N.E. 369
• Parties: YOUNG v. ILLINOIS ATHLETIC CLUB.
• Court: Illinois Supreme Court

310 Ill. 75

141 N.E. 369

YOUNG

v.ILLINOIS ATHLETIC CLUB.

No. 15478.

Supreme Court of Illinois.

Oct. 20, 1923.

Rehearing Denied Dec. 7, 1923.

Action by Adelaide B. Young against the Illinois Athletic Club. Judgment of dismissal by municipal court was affirmed by the Appellate Court (228 Ill. App. 504), and the plaintiff appeals.

Affirmed.

Appeal from Second Branch Appellate Court, First District, on Appeal from Municipal Court of Chicago; Wells M. Cook, Judge.

Haight, Adcock, Haight & Harris, of Chicago (Edmund D. Adcock, of Chicago, of counsel), for appellant.

John F. Voigt and Sims, Welch, Godman & De Young, all of Chicago (John F. Voigt, E. G. Godman, Frederick R. De Young, and Frank Niedner, all of Chicago, of counsel), for appellee.

STONE, J.

Appellant filed a statement of claim against the appellee in the municipal court of Chicago to recover certain sums paid by her as income tax on rentals received by her from certain property in the city of Chicago of which appellee is a tenant under the terms of a lease for 99 years. The amounts sought to be recovered are the income taxes for the years 1919 and 1920, amounting in total to $3,097.52, which appellant sought to recover as additional rent under the terms of the lease. After an amendment of the statement of claim appellee moved to strike the same and dismiss the cause. The statement of claim was accordingly stricken, and appellant having elected to stand by the same, the motion to dismiss the cause was allowed. On appeal the judgment of the municipal court was affirmed by the Appellate Court, and the cause comes here on a certificate of importance.

The sole question in the case is the construction of the fourth paragraph of the lease. This paragraph reads as follows:

‘Fourth. The lessee further covenants and agrees with the lessor to pay in the name of the lessor, as additional rent for the real estate hereby demised, promptly when due, all water rates, and all taxes, assessments and municipal or governmental charges, general and special, ordinary and extraordinary, of every nature and kind whatsoever, which may be ( a) levied, imposed or assessed upon the real estate hereby demised, or upon any improvements thereon, at any time after the date of this lease and prior to the first (1st) day of July, A. D. 2004; or ( b) levied, imposed or assessed upon any interest of the lessor in or under this lease; or ( c) which the lessor shall be required to pay by reason of or on account of his interest in the real estate hereby demised and the improvements on said real estate. Every such tax, assessment and charge shall in any event be paid in time to prevent the addition of any interest or penalty thereto. Original or duplicate official receipts for every such tax, assessment or charge shall be delivered to the lessor within thirty days after the payment thereof.’

Appellant contends that the appellee lessee under this lease is liable for the income tax paid upon rentals received by the appellant, because, first, it is bound to pay the taxes, under clause ( b) of the fourth paragraph of the lease, which are levied upon any interest of the lessor under the lease, and also under clause ( c) of the fourth paragraph, which covenants that the lessee shall pay any taxes or assessments which the lessor shall be required to pay by reason or on account of his interest in the real estate demised. Appellee contends there is nothing in the language of the lease which either expressly or by implication would include as rental any income taxes paid on the rentals by the lessor; that neither clause ( b) nor clause ( c) of the fourth paragraph of the lease embraces either expressly or by implication an agreement on the part of the lessee to pay such income taxes; that income taxes are taxes against the incomeof the individual lessor in this case and not against the property.

Whether or not the language of this lease can support any claim for reimbursement of taxes or assessments other than those which are assessed against the property itself has been settled in this state by the case of Northern Trust Co. v. Buck & Rayner, 263 Ill. 222, 104 N. E. 1114. The language of the lease in that case was almost identical with the lease in question, and while the tax sought to be recovered by the lessor as additional rent was an inheritance tax, and is therefore in no wise controlling in determining whether an income tax is a tax against the property, the two taxes being of different natures, that case is controlling on the question as to what taxes are comprised in the language of such a lease. It was there said:

‘It seems to be clear that the covenants therein imposed [by the lease] on the lessees referred to taxes, charges and assessments which might be imposed upon the property itself, and would exclude the idea that the lessees were bound to pay inheritance taxes, which, as we have seen, is a thing wholly apart from the property itself.’

The lease in that case contained a clause ( b) which is identical in language with the clause ( b) of the fourth paragraph of the lease before us, and a clause ( c) which is likewise identical in meaning but which contains a phrase making clause ( c) in that lease even broader than clause ( c) of the lease in this case. The language of this lease has in substance been construed by this court to limit the taxes for which the lessee would be liable to those imposed on the property, and the sole question in this case is whether or not an income tax is a tax imposed upon an interest in real estate. In support of the contention that it is such a tax, counsel for appellants cite Philadelphia City Passenger Co. v. Philadelphia Rapid Transit Co., 263 Pa. 561, 107 Atl. 329;North Pennsylvania Railroad Co. v. Philadelphia & Reading Railway Co., 249 Pa. 326, 95 Atl. 100;Catawissa Railroad Co. v. Philadelphia & Reading Railway Co., 255 Pa. 269, 99 Atl. 807;Suter v. Jordan-Marsh Co., 225 Mass. 34, 113 N. E. 580;Woodruff v. Oswego Starch Factory, 177 N. Y. 23, 68 N. E. 994;Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, 15 Sup. Ct. 673, 39 L. Ed. 759.

An examination of the above cases will show that in each there was a specific provision in the lease that the lessee should pay the taxes imposed upon the lessor's income or rentals derived from the property leased. In the first case cited the lessee agreed to ‘pay all taxes, charges and assessments chargeable on account of the earnings or profits of the lessor.’ In the North Pennsylvania Railroad Case the lessee agreed ‘to pay the taxes on the yearly payments herein agreed to be made.’ The Catawissa Railroad Case was a suit to recover federal income taxes paid by the lessor upon the rentals received, and in this regard is similar to the action in this case. The lease in that case provided that the railway company lessee should during the term pay all taxes, charges, and assessments which were or might be imposed on the premises or any part thereof, or on the business carried on, ‘or on the receipts, gross or net, derived therefrom,’ issuance of bonds, etc. The Supreme Court of Pennsylvania in construing the language of this lease held that the lessee was not bound to pay income taxes on the rent received by the lessor, on the ground that the language did not justify such a construction; that the income tax was not imposed by the government upon the premises demised or any part thereof, nor on the business carried on, nor on the receipts derived therefrom, nor upon stocks or bonds, but that it was imposed upon the rental received by the lessor, and that the parties did not by their lease contemplate that a burden not imposed on the property itself, but upon the rentals thereof, should be met. In the Suter Case the lease provided that the lessee should pay ‘all taxes or charges upon or in respect of the rent payable hereunder by the lessee, howsoever and to whomsoever assessed.’ The court held, as will be clearly seen, that this covered federal income taxes imposed upon the rent. In the Woodruff Case a tax provided by statute was imposed upon the rentals. The lease provided that the lessee should pay all taxes, charges, and assessments imposed on ‘the hereby demised premises and privileges, or any part thereof, or on the said parties of the first part, their heirs and assigns in respect thereof.’ The court held that the lessee was not bound to pay the taxes assessed by the statute of the state of...