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Docket No. 96805-Agenda 22-September 2004.

JEWELERS MUTUAL INSURANCE COMPANY et al., Appellees, v. FIRSTAR BANK ILLINOIS, Appellant.

Opinion filed November 18, 2004.

JUSTICE THOMAS delivered the opinion of the court:

At issue is whether the exculpatory clause in defendant FirstarBank's safety deposit box rental agreement is enforceable under thefacts of this case. We hold that it is not.

BACKGROUND

More than $1 million worth of loose diamonds and jewelry wasstolen from three safety deposit boxes that defendant leased to jeweldealers at one of its Chicago branches. The safety deposit box leaseagreements provided that the relationship of the parties was that oflandlord and tenant, not bailor and bailee. Additionally, the agreementcontained the following paragraph:

"1. It is understood that said bank has no possession orcustody of, nor control over, the contents of said safe andthat the lessee assumes all risks in connection with thedepositing of such contents, that the sum mentioned is for therental of said safe alone, and that there shall be no liability onthe part of said bank, for loss of, or injury to, the contents ofsaid box from any cause whatever unless lessee and said bankenter into a special agreement in writing to that effect, inwhich case such additional charges shall be made by saidbank as the value of contents of said safe, and the liabilityassumed on account thereof may justify. The liability of saidbank is limited to the exercise of ordinary care to prevent theopening of said safe by any person not authorized and suchopening by any person not authorized shall not be inferablefrom loss of any of its contents."

None of the dealers had entered into the "special agreement"referenced in the first sentence of this paragraph (hereinafter, theexculpatory clause). Two of the dealers, Annaco Corporation andIrving M. Ringel, Inc., had the contents of their boxes insured byplaintiff Jewelers Mutual Insurance Company. The third dealer, BachuVaidya, did not have the contents insured. Jewelers Mutual paid lossestotaling $887,400.37 to its two insureds, and then brought asubrogation action against defendant. The complaint alleged breach ofcontract and negligence. Vaidya sued defendant directly in a separateaction and sought recovery under the same theories. In its answer inboth cases, defendant admitted that it had been negligent in one ormore of the respects alleged by plaintiffs and that it had breached theagreement in one or more of the respects alleged by plaintiffs.

Relying on the exculpatory clause, defendant moved for and wasgranted summary judgment in both cases. In Vaidya's case, the courtdismissed the negligence count based on Moorman ManufacturingCo. v. National Tank Co., 91 Ill. 2d 69, 88-89 (1982). Although thatissue was also raised by defendant in the other case, the trial courtmade no specific findings on that issue. Plaintiffs appealed, and thetwo cases were consolidated.

The appellate court affirmed the dismissal of the negligence countin Vaidya's case, holding that the negligence count was barred byMoorman. 341 Ill. App. 3d 14, 22. However, the court reversed thesummary judgment in favor of defendant in both cases on the breachof contract counts, holding that the exculpatory clause wasunenforceable. The court gave two reasons for finding the clauseunenforceable. First, that the contract was ambiguous because the firstsentence of paragraph one provided that "there shall be no liability,"while the second sentence said that the "liability of said bank is limitedto the exercise of ordinary care." 341 Ill. App. 3d at 18. The courtheld that the ambiguity had to be resolved against defendant becauseit drafted the contract. 341 Ill. App. 3d at 18. Next, the court heldthat, because the parties had defined their relationship as landlord andtenant, they subjected their relationship to the Landlord and TenantAct (765 ILCS 705/.01 et seq. (West 2002)). The Act provides thatexculpatory clauses that excuse a landlord from liability for his ownnegligence are void as against public policy. 765 ILCS 705/1 (West2002). The court rejected defendant's argument that the Act did notapply because a lease of a safety deposit box is not a lease of "realproperty." The court held that the boxes were fixtures to realproperty, and that therefore the Act applied. 341 Ill. App. 3d at 20.The court stated that defendant had admitted that it allowedunauthorized access to the safety deposit boxes in both cases, andtherefore the court granted in part Jewelers Mutual's motion forsummary judgment and directed the entry of partial summaryjudgment for Vaidya. The court remanded for proof of damages. 341Ill. App. 3d at 23.

Presiding Justice McBride dissented from the reversal ofsummary judgment for defendant. She disagreed with the majority'sconclusion that the contract was ambiguous. She believed that the twosentences in paragraph one could be reconciled by reading the secondsentence as referring to the "special agreement" mentioned in the firstsentence. 341 Ill. App. 3d at 27 (McBride, P.J., concurring in part anddissenting in part). In other words, the paragraph means thatdefendant has no liability for any loss whatsoever, unless the partiesenter into the special agreement referenced in the first sentence. Ifthey do, then defendant's liability is limited to the exercise of ordinarycare to prevent unauthorized access to the box. 341 Ill. App. 3d at 27(McBride, P.J., concurring in part and dissenting in part).Additionally, Presiding Justice McBride disagreed with the majority'sconclusion about the Landlord and Tenant Act. She argued that thelease was for personal property rather than real property, and that theparties had not subjected themselves to the Act merely by definingtheir relationship as landlord and tenant. 341 Ill. App. 3d at 24(McBride, P.J., concurring in part and dissenting in part). Finally, shedid not believe that the exculpatory clause was void as against publicpolicy because safety deposit companies are not generally insurers ofthe safety of the box contents. 341 Ill. App. 3d at 27 (McBride, P.J.,concurring in part and dissenting in part). We allowed defendant'spetition for leave to appeal. 177 Ill. 2d R. 315.

ANALYSIS

Summary judgment is proper where the pleadings, affidavits,depositions, admissions, and exhibits on file, when viewed in the lightmost favorable to the nonmovant, reveal that there is no issue as toany material fact and that the movant is entitled to judgment as amatter of law. 735 ILCS 5/2-1005(c) (West 2002). We reviewsummary judgment orders de novo. Roth v. Opiela, 211 Ill. 2d 536,542 (2004).

Defendant first argues that the court erred in finding paragraphone ambiguous. According to defendant, although this provision couldhave been drafted better, its meaning is clear. Defendant contends thatthe word "liability" is used two different ways in the first and secondsentences. In the first sentence, it refers to the amount of damages forwhich defendant can be held responsible. In the second sentence, theword "liability" addresses the standard of care. Thus, the secondsentence means that defendant has a duty to exercise ordinary care toprevent the unauthorized opening of the box, but the first sentencelimits the amount of damages that can be collected for a breach of thatduty. At oral argument, defendant clarified that its position was thatthe only damages that a customer could recover if defendant breachesits duty of care would be a return of the rental fee. Defendant arguesthat this interpretation takes into account the commercial setting inwhich the parties contracted and also fairly allocates the liability to theparty who elected to bear the risk of loss. Here, none of the partiesentered into the special agreement referenced in the first sentence toinsure the contents of the box. Defendant argues that AnnacoCorporation and Irving M. Ringel, Inc., insured the contents of theboxes with Jewelers Mutual and thus elected that Jewelers Mutualwould bear the risk of loss. Vaidya did not purchase insurance andthus chose to bear the risk of loss himself.

We disagree with defendant's argument. First, the first sentenceof paragraph one is simply not a limitation of damages clause. Thatsentence provides that the customer assumes all risks of depositing thecontents of the box with defendant and that there "shall be no liabilityon the part of said bank, for loss of, or injury to, the contents of saidbox from any cause whatever." The clause does not say that, in theevent of a breach, the plaintiff's damages are limited to a return of therental fee. Rather, it is a general exculpatory clause purporting toexculpate defendant from all liability for loss of or damage to thecontents of the box. In the very next sentence, however, defendantassumes one particular liability: it must exercise ordinary care toprevent the unauthorized opening of the box. We do not believe thatthe clauses can be reconciled in the manner suggested by defendant.

Further, defendant's invocation of insurance law "risk of loss"concepts is a red herring. The issue in this case is not a disputebetween insurance companies over who bore the risk of loss. Theissues are whether defendant breached the contract it entered into withplaintiffs and whether defendant can exculpate itself from all liabilityfor breach of an express obligation assumed in the contract.

The construction placed on paragraph one by the dissentingjustice in the appellate court must also be rejected. The dissent arguedthat the second sentence referred to defendant's liability in the eventthat the parties entered into the "special agreement" listed in clauseone. This obviously cannot be the case because the first sentenceprovides, in part, that there is "no liability on the part of said bank, forloss of, or injury to, the contents of said box from any cause whateverunless lessee and said bank enter into a special agreement in writingto that effect." (Emphasis added.) In other words, there is no liabilityfor loss of or injury to the contents of the box from any causewhatsoever unless the parties enter into an agreement that there willbe liability on the part of the bank for loss of, or injury to, the contentsof the box from any cause whatsoever. If the parties entered into suchan agreement, defendant's liability would not be limited to a failure toexercise ordinary care to keep unauthorized persons out of the box.Rather, defendant would become a general insurer of the contents ofthe box. Thus, the two sentences cannot be reconciled in the mannersuggested by the appellate court dissent.

We believe that paragraph one of the lease agreement isambiguous and that its two sentences are conflicting. In the firstsentence, defendant disclaims liability for any loss whatsoever. In thesecond sentence, defendant assumes one particular liability. It mustexercise ordinary care to prevent unauthorized persons from accessingthe box. Defendant argues that, if we find this paragraph ambiguous,then the resolution of its meaning is a question of fact and the casecannot be decided on a motion for summary judgment. See FarmCredit Bank of St. Louis v. Whitlock, 144 Ill. 2d 440, 447 (1991).Defendant thus contends that, if we find an ambiguity, we mustremand the case to the fact finder to resolve the ambiguity. Wedisagree.

Whatever the meaning of the exculpatory clause, it clearly cannotbe applied to a situation in which defendant is alleged to havebreached its duty to exercise ordinary care to prevent unauthorizedpersons from opening the box. This is a specific duty that defendantassumed in the contract, and it formed the heart of the parties'agreement. A party cannot promise to act in a certain manner in oneportion of a contract and then exculpate itself from liability for breachof that very promise in another part of the contract. See, e.g., ShorrPaper Products, Inc. v. Aurora Elevator, Inc., 198 Ill. App. 3d 9, 13-14 (1990) (criticizing the defendant for focusing solely on exculpatoryprovision of contract to the exclusion of its specifically articulatedobligations, noting that such an interpretation would renderdefendant's contractual duties illusory); Contact Lenses Unlimited,Inc., v. Johnson, 176 Ill. App. 3d 875, 879-80 (1988) (holding thatcontractual requirements imposed upon the defendant would bemeaningless if the defendant could ignore those provisions with nopenalty). Here, plaintiffs have received nothing in return for theirrental fee if they cannot hold defendant to its contractual obligation toexercise ordinary care to prevent unauthorized persons from accessingtheir safety deposit boxes.

This same conclusion was reached by the Florida District Courtof Appeal in Sniffen v. Century National Bank of Broward, 375 So.2d 892 (Fla. App. 1979). In that case, the safety deposit box rentalagreement was similar to the one here in that it contained twoconflicting provisions. One was a general, broad exculpatory clausedenying liability for any loss: "It is expressly understood . . . .that inmaking this lease the Bank does not assume the relation and duty ofbailee and shall not be liable for loss or damage to, the contents of saidbox, caused by burglary, fire or any cause whatsoever, but that theentire risk of such of loss or damage is assumed by the lessee."Sniffen, 375 So. 2d at 893. In the second provision, the bank assumeda duty to prevent unauthorized access: "No person other than therenter or approved deputy named in the books of Bank . . . shall haveaccess to the safe." Sniffen, 375 So. 2d at 893. The plaintiff allegedthat the bank breached this agreement when it allowed an authorizedperson, his ex-wife, to access his safety deposit box. She removedover $250,000 worth of bearer bonds and other valuables. The trialjudge dismissed the complaint on the ground that the exculpatoryclause barred plaintiff's action. Sniffen, 375 So. 2d at 893.

The Florida District Court of Appeal reversed, holding that,"[w]hatever the possible effect of the exculpatory clause in othersituations *** it is clear that it cannot be employed, as it was below,to negate the specific contractual undertaking to restrict access to thevault." Sniffen, 375 So. 2d at 893. The court cited Ivey Plants, Inc.v. FMC Corp., 282 So. 2d 205, 208 (Fla. App. 1973), for theproposition that an exculpatory clause cannot be applied to defeat abreach of contract action based on a breach of a specific contractualobligation. If such was the case, then the contract would be lacking inmutuality of obligation, mutuality of remedy, and would beunenforceable. Sniffen, 375 So. 2d at 893. The Sniffen court furtherelaborated on how this principle applies to safety deposit box rentalagreements:

"It should be emphasized that, as the court noted in IveyPlants, an acceptance of the bank's position in this casewould render the agreement between the parties entirelynugatory. If a safety deposit customer cannot enforce thebank's undertaking to preclude unauthorized persons fromentry to his box which is the very heart of the relationship andthe only real reason that such a facility is used at all, see 5Fla. Jur. 2d Banks and Banking,