Kasang v. Grzesik

2021 IL App (1st) 192258-U

• Court: Appellate Court of Illinois
• Decided: June 24, 2021
• Docket: 1-19-2258
• Status: Unpublished

Opinion

2021 IL App (1st) 192258-U

FOURTH DIVISION June 24, 2021

No. 1-19-2258

NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1). ______________________________________________________________________________

IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT ______________________________________________________________________________

) Appeal from the ERIC KASANG and CHRISTINA ) Circuit Court of KASANG, ) Cook County ) Plaintiffs-Appellants, ) ) v. ) No. 18 L 12206 ) BEATA GRZESIK and ) MOM THE BUILDER, INC., ) ) Honorable Defendants, ) Jerry A. Esrig, ) Judge Presiding. (Grange Mutual Casualty Company, ) ) Intervenor-Appellee). )

______________________________________________________________________________

JUSTICE REYES delivered the judgment of the court. Presiding Justice Gordon and Justice Lampkin concurred in the judgment.

ORDER

¶1 Held: Affirming the judgment of the circuit court of Cook County where res judicata barred plaintiffs’ negligent misrepresentation claim.

¶2 After plaintiffs, Eric and Christina Kasang, obtained a final judgment against defendants,

Beata Grzesik (Grzesik) and Mom the Builder, Inc. (Mom the Builder) for their intentional 1-19-2258

misrepresentation in a real estate disclosure report, plaintiffs filed a new action for negligent

misrepresentation against the same defendants based on the same facts. Defendants’ insurer,

Grange Mutual Casualty Company (insurer), intervened in the new action and filed a motion to

dismiss pursuant to section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619

(West 2016)).1 The circuit court granted the insurer’s motion. Plaintiffs now appeal, arguing that

the circuit court’s dismissal of their negligent misrepresentation action was in error. For the

following reasons, we affirm.

¶3 BACKGROUND

¶4 The underlying controversy arose from a real estate transaction. Plaintiffs purchased a

home from defendant Grzesik, president and CEO of defendant Mom the Builder. Prior to

closing, Grzesik, in her personal capacity and as agent of Mom the Builder, provided plaintiffs

with a residential real property disclosure report indicating that she was not aware of flooding

problems in the basement. After closing, the basement flooded repeatedly, and plaintiffs were

forced to evacuate and rent a second home.

¶5 The Initial Action

¶6 Plaintiffs filed a complaint and an amended complaint in the chancery division. The

amended complaint alleged a violation of the Real Property Disclosure Act (Disclosure Act)

(765 ILCS 77/1 et seq. (West 2012)), contract rescission, breach of implied warranty of

habitability, and in the alternative, negligent misrepresentation. The chancery division then

transferred plaintiffs’ complaint to the law division. After the complaint was transferred,

plaintiffs moved to voluntarily dismiss the complaint, including their negligent misrepresentation

claim, and the circuit court in the law division granted the motion.

1 In its motion, the insurer did not specify under which subsection it moved to dismiss. As explained below, it is clear the insurer moved pursuant to 735 ILCS 5/2-619(a)(4), (a)(9) (West 2016).

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¶7 Then, after multiple amendments, plaintiffs refiled in the chancery court their operative

complaint without the negligent misrepresentation claim. This complaint alleged a violation of

the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/12 et seq. (West

2012)), a violation of the Disclosure Act, common law fraud, breach of implied warranty of

habitability, and in the alternative, contract rescission for a material mistake of fact. For each

count, the complaint requested that the circuit court rescind the real estate contract.

¶8 After a bench trial, the chancery court found in favor of plaintiffs on all counts, ordering

defendants pay a rescission award to return plaintiffs to the status quo and that plaintiffs return

the property back to defendants upon payment. The chancery court further ordered defendants to

pay punitive damages. The judgment was later affirmed by this court. See Kasang v. Grzesik,

2018 IL App (1st) 163100-U (unpublished pursuant to Illinois Supreme Court Rule 23).

¶9 After the bench trial, defendants’ insurer, Grange Mutual, filed a declaratory judgment

asking the chancery court to declare that the insurer was not required to indemnify defendants for

the court’s judgment. In response, plaintiffs filed an answer, affirmative defense, and

counterclaim, which alleged one count of negligent misrepresentation against defendants. The

chancery court then ordered that the counterclaim be transferred to the law division.

¶ 10 The Subsequent Action

¶ 11 Plaintiffs’ negligent misrepresentation claim was transferred to the law division,

establishing the subsequent action and instant case on appeal. Plaintiffs’ negligent

misrepresentation claim was against the same defendants based on the same set of operative

facts. Specifically, this claim alleged that Grzesik had falsely indicated in the disclosure report

that she was not aware of any flooding problems in the basement and that defendants were

“careless and negligent in ascertaining the truth of their Answer.” Plaintiffs requested a judgment

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equal to their damages, including their purchase of the home “for a grossly inflated price.”

¶ 12 In this new action, the insurer filed a petition to intervene, and over plaintiffs’ objection,

the circuit court granted the petition. The insurer then filed a motion to dismiss plaintiffs’ claim

pursuant to section 2-619 of the Code (735 ILCS 5/2-619 (West 2016)), arguing that the doctrine

of judicial estoppel prevented plaintiffs from alleging that Grzesik engaged in negligent conduct

since that position was inconsistent with their position in the initial action that Grzesik engaged

in intentional conduct. Although the insurer did not specify under which subsubsection it moved

to dismiss, as to its judicial estoppel argument, it is clear that the insurer moved to dismiss under

subsection (a)(9) on the ground that “the claim asserted against the defendant is barred by other

affirmative matter avoiding the legal effect of or defeating the claim.” 735 ILCS 5/2-619(a)(9)

(West 2016). In the alternative, the insurer argued that the doctrine of res judicata barred

plaintiffs’ claim, and with this argument, the insurer moved under subsection (a)(4) on the

ground that “the cause of action is barred by a prior judgment.” 735 ILCS 5/2-619(a)(4) (West

2016). Finally, the insurer asserted that plaintiffs’ claim was simply an attempt to obtain

insurance coverage as “presumably, the Kasangs have now realized that [the chancery court’s]

findings are inconsistent with coverage under [the insurance] policy.”

¶ 13 In response, plaintiffs argued that alleging negligent misrepresentation was consistent

with alleging intentional consumer fraud. Plaintiffs also argued that res judicata did not apply as

no part of their action went to a final judgment on the merits before they voluntarily dismissed

their claims in the law division. In addition, plaintiffs argued that they could receive additional

relief as plaintiffs had not yet received the full rescission award from defendants and could not

give defendants their property back. As defendants had not been able to pay the rescission award,

plaintiffs asserted that they were forced to file their negligent misrepresentation claim to recover

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legal damages from their “purchase of the flood-prone property at a grossly inflated price.”

¶ 14 In its reply, the insurer argued that plaintiffs may not file a separate lawsuit alleging the

same facts, against the same parties, for the same damages, merely because they cannot fully

recover a judgment. The insurer noted that plaintiffs may pursue other legal recourse to execute a

judgment. The insurer further argued that since plaintiffs had already received a judgment for the

full amount of money, any additional relief would be a windfall to them. Finally, the insurer

reiterated that res judicata barred plaintiffs’ refiled action.

¶ 15 While the motion to dismiss was pending, plaintiffs filed a motion for partial summary

judgment on their negligent misrepresentation claim, arguing that collateral estoppel barred the

parties from relitigating defendants’ liability and certain damages awarded to plaintiffs. The

insurer responded that plaintiffs were arbitrarily applying collateral estoppel: “[p]laintiffs claim

the issue of liability should not be relitigated, yet they want to relitigate the issue of some (but

not all) of their damages even though the issue of damages, including punitive damages, was

already fully adjudicated in the prior lawsuit.” In its reply, plaintiffs argued that they were not

arbitrarily applying collateral estoppel as to certain damages since they “simply have no

opportunity to seek estoppel on the remaining damage issue present here of reduced home value,

where that damage issue was never decided in the prior rescission action.”

¶ 16 In a written order, the circuit court granted the insurer’s motion to dismiss, finding that

plaintiffs were judicially estopped from alleging negligent misrepresentation, and the court

denied plaintiffs’ partial summary judgment motion as moot. Plaintiffs then filed a motion to

reconsider, which the circuit court denied. The circuit court found that its original basis for

granting the insurer’s motion to dismiss was correct and that res judicata was an independent

basis to deny plaintiffs’ motion to reconsider. The circuit court further ordered that the case

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remained dismissed with prejudice and that “plaintiffs are now precluded from asserting different

theories or seeking additional relief for claims arising out of the same constellation of facts that

were previously tried.” This appeal follows.

¶ 17 ANALYSIS

¶ 18 On appeal, plaintiffs maintain that the circuit court erred in dismissing their complaint.

The motion to dismiss at issue here raised two separate issues: that plaintiffs’ negligent

misrepresentation claim was barred by res judicata and that it was similarly barred by judicial

estoppel. For the reasons which follow, we conclude that the doctrine of res judicata bars

plaintiffs’ claim and thus need not address the judicial estoppel claim.

¶ 19 Pursuant to 735 ILCS 5/2-619(a)(4) (West 2016), a party may move to dismiss a

complaint on the ground that “the cause of action is barred by a prior judgment.” Further, a

section 2-619 motion “admits well-pleaded facts but does not admit conclusions of law and

conclusory factual allegations unsupported by allegations of specific facts.” Better Government

Ass’n v. Illinois High School Ass’n, 2017 IL 121124, ¶ 21. When considering a dismissal under

section 2-619, we must determine whether the existence of a genuine issue of material fact

should have precluded the dismissal or whether dismissal is proper as a matter of law. Id. We

review the section 2-619 dismissal of plaintiffs’ claim de novo, which means that we perform the

same analysis that a trial judge would perform. Elam v. O’Connor & Nakos, Ltd., 2019 IL App

(1st) 181123, ¶ 23. Under a de novo standard of review, we need not defer to the circuit court’s

reasoning and may affirm on any basis supported by the record. Fifth Third Bank v. Brazier,

2019 IL App (1st) 190078, ¶ 13.

¶ 20 Under res judicata, “a final judgment on the merits rendered by a court of competent

jurisdiction bars a subsequent action between the same parties or their privies involving the same

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cause of action.” Richter v. Prairie Farms Dairy, Inc., 2016 IL 119518, ¶ 21. Critically, res

judicata bars not only claims decided in the first action but also claims that could have been

decided in that action. Ward v. Decatur Memorial Hospital, 2019 IL 123937, ¶ 44. For res

judicata to apply, there must be (1) a final judgment on the merits, (2) an identity of causes of

action, and (3) an identity of parties. Nelson v. Chicago Park District, 408 Ill. App. 3d 53, 60

(2011).

¶ 21 Here, plaintiffs filed a complaint in the chancery court, which was then transferred to the

law division. Plaintiffs then voluntarily dismissed their complaint, which included their negligent

misrepresentation claim, and in the chancery court, they refiled their action without the negligent

misrepresentation claim. Plaintiffs proceeded to trial, and the chancery court found in favor of

plaintiffs on all counts, ordering defendants to pay a rescission award and punitive damages.

Thereafter, plaintiffs filed a new action against defendants alleging negligent misrepresentation.

¶ 22 Thus, all three requirements of res judicata are satisfied: first, there was a final judgment

on the merits in the initial action; second, the causes of action are the same since both rely on the

same set of operative facts; and third, the parties in both actions are the same.

¶ 23 First, the chancery court’s judgment following the trial was a final judgment on the

merits. A judgment is on the merits when it decides the parties’ rights and liabilities (SDS

Partners, Inc. v. Cramer, 305 Ill. App. 3d 893, 896 (1999)), and a judgment is final when it

terminates litigation on the merits such that the only thing left to do is execute the judgment.

People v. Brown, 2017 IL App (2d) 160971, ¶ 23. Thus, the chancery court’s judgment was on

the merits as it found for plaintiffs on all counts and ordered defendants to pay a rescission award

and punitive damages. See SDS Partners, Inc., 305 Ill. App. 3d at 896. Further, the judgment was

final as the only thing left to do under the adjudicated chancery claim was to execute the

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judgment. See Brown, 2017 IL App (2d) 160971, ¶ 23.

¶ 24 Second, there was an identity as to the causes of action. To make this determination, we

must ask whether the causes of action arise from a single group of operative facts. River Park,

Inc. v. City of Highland Park, 184 Ill. 2d 290, 310 (1998). We find that there is an identity of

causes of action as the adjudicated chancery claims, and the negligent misrepresentation claim

arise out of the same set of operative facts—that Grzesik provided plaintiffs with a disclosure

report indicating that she was not aware of flooding problems and sold plaintiffs a home in which

the basement flooded repeatedly. See id. at 310.

¶ 25 Finally, there is an identity of parties since the initial action’s operative complaint and the

subsequent action name the same parties. See Nelson, 408 Ill. App. 3d at 61.

¶ 26 Our conclusion is controlled by Rein v. David A. Noyes & Co., 172 Ill. 2d 325 (1996),

and Hudson v. City of Chicago, 228 Ill. 2d 462 (2008). In Rein, the plaintiffs’ complaint

contained counts asking for rescission of their purchase and counts seeking recovery under

common law fraud and breach of fiduciary duty. Rein, 172 Ill. 2d at 328-29. The circuit court

dismissed with prejudice the counts seeking rescission, and the plaintiffs voluntarily dismissed

their common law counts. Id. at 329-30. After voluntarily dismissing their remaining counts, the

plaintiffs filed a second complaint also seeking rescission and recovery under common law fraud

and breach of fiduciary duty. Id. at 331. The circuit court dismissed the new complaint, finding

all counts were barred by res judicata. Id. at 332.

¶ 27 The supreme court agreed. In its analysis, the court applied the elements of res judicata

to both the new rescission counts and the new common law counts. As to the new rescission

counts, the supreme court found all three elements were satisfied because the circuit court’s

dismissal with prejudice of the previous rescission counts was a final judgment on the merits and

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because the plaintiffs were suing the same defendants based on the same facts. Id. at 335-36. As

to the new common law claims, the supreme court found that the third element was satisfied

since the parties were the same. Id. at 338. In determining whether the first element was satisfied,

the supreme court explained that even though the plaintiffs’ previous common law counts were

voluntarily dismissed and never adjudicated on the merits, that fact was not dispositive. Id. This

was because res judicata bars not only claims decided in the first action but also those that could

have been decided in that action. Id. Thus, if the new common law counts could have been

decided in the first action, then the circuit court’s dismissal of the previous rescission counts will

act as a final judgment barring the new common law counts. Id.

¶ 28 To determine whether the new common law counts could have been decided in the first

suit, the key question was whether there was an identity of causes of action. Id. The court in Rein

concluded there was an identity of causes of action, thereby satisfying the second element, since

the new common law counts and the previous rescission counts arose out of the same set of

operative facts; therefore, the final judgment of the previous rescission counts also served as a

final judgment for the new common law counts, thereby satisfying the first element. Id. at 339.

¶ 29 Further, in Hudson, the plaintiffs alleged negligence as well as willful and wanton

misconduct. Hudson, 228 Ill. 2d at 465-66. The circuit court dismissed with prejudice the

negligence claim and continued the case for the willful and wanton misconduct claim. Id. at 466.

The plaintiffs then voluntarily dismissed the willful and wanton misconduct claim, and after their

voluntary dismissal, filed a new action again alleging willful and wanton misconduct. Id. The

circuit court found that res judicata barred the new action. Id.

¶ 30 On appeal, the parties disputed whether the first element of res judicata was satisfied; the

plaintiffs argued that their willful and wanton misconduct claim was never adjudicated on the

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merits. Id. at 467-68. The Hudson court disagreed, finding that Rein applied directly to bar the

plaintiffs’ new willful and wanton misconduct claim. Id. at 469. Applying Rein, the Hudson

court found that the circuit court’s dismissal with prejudice of the negligence count was a final

adjudication on the merits barring every matter determined, and every matter that could have

been determined, in that suit. Hudson, 228 Ill. 2d at 473-74 (citing Rein, 172 Ill. 2d at 337-39).

The supreme court concluded that the new willful and wanton misconduct count could have been

determined in the first suit since that count and the dismissed negligence count arose out of the

same operative facts. Id. at 474 (citing Rein, 172 Ill. 2d at 337-39).

¶ 31 Similar to the new claims in Rein and Hudson, plaintiffs’ negligent misrepresentation

claim is barred, even though it was never adjudicated on the merits, because it could have been

decided in the first action. See Hudson, 228 Ill. 2d at 474; Rein, 172 Ill. 2d at 338-39. Further,

plaintiffs’ negligent misrepresentation claim could have been decided in the first action because

there is an identity of causes of action between plaintiffs’ adjudicated chancery claims and

plaintiffs’ negligent misrepresentation claim; that is, the adjudicated chancery claims, and the

negligent misrepresentation claim arise out of the same set of operative facts. See Hudson, 228

Ill. 2d at 474; Rein, 172 Ill. 2d at 338.

¶ 32 Thus, under Rein and Hudson, the chancery court’s final judgment bars plaintiffs from

bringing their negligent misrepresentation claim because it could have been decided in the first

action. See Rein, 172 Ill. 2d at 336; Hudson, 228 Ill. 2d at 474 (citing Rein, 172 Ill. 2d at 337-

39). Moreover, the chancery court’s judgment bars plaintiffs from bringing any claim arising out

of the same set of operative facts. See Richter, 2016 IL 119518, ¶ 21.

¶ 33 In reaching this conclusion, we have considered plaintiffs’ argument that an adverse final

judgment on one part of a plaintiff’s action must occur before the voluntary dismissal of another

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part of plaintiff’s action. But it is not dispositive that plaintiffs voluntarily dismissed their

complaint in the law division prior to the chancery court’s final judgment. As stated above, a

final judgment on the merits bars subsequent actions between the same parties involving the

same cause of action. Richter, 2016 IL 119518, ¶ 21. Moreover, the refiling of a voluntarily

dismissed claim is an entirely new action. Hudson, 228 Ill. 2d at 469, 474 n.3 (citing Dubina v.

Mesirow Realty Development, Inc., 178 Ill. 2d 496, 503-04 (1997)). Here, when plaintiffs

voluntarily dismissed their complaint in the law division and then received a final judgment in

chancery court, that judgment barred plaintiffs’ subsequent negligent misrepresentation claim

because it was a new action between the same parties involving the same cause of action; thus,

the fact that plaintiffs voluntarily dismissed their claims in the law division prior to receiving a

final judgment does not change the result. See Richter, 2016 IL 119518, ¶ 21; Hudson, 228 Ill.

2d at 469, 474 n.3 (citing Dubina, 178 Ill. 2d at 503-04).

¶ 34 As further support for their argument, plaintiffs cite to Ward v. Decatur Memorial

Hospital, 2019 IL 123937, and Piagentini v. Ford Motor Co., 387 Ill. App. 3d 887 (2009). But

neither case supports plaintiffs’ argument. In Ward, the supreme court concluded that res

judicata did not apply because the circuit court dismissed the plaintiff’s original, first amended,

and second amended complaints “without prejudice.” Ward, 2019 IL 123937 ¶ 48 (quoting

Richter, 2016 IL 119518, ¶¶ 24-25). Further, in Piagentini, this court found that res judicata did

not apply because the circuit court’s partial summary judgment as to the plaintiffs’ complaint did

not dismiss any count entirely and gave leave to replead. Piagentini, 387 Ill. App. 3d at 893.

Ward and Piagentini are inapplicable because both concluded that there was no final judgment

on the merits, whereas here, there was a final judgment on the merits barring plaintiffs’ negligent

misrepresentation claim. See Richter, 2016 IL 119518, ¶ 21; Rein, 172 Ill. 2d at 336.

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¶ 35 Plaintiffs also argue that their negligent misrepresentation claim was dismissed by the

chancery court for lack of subject matter jurisdiction, and therefore, res judicata does not apply.

In support, plaintiffs cite Nowak v. St. Rita High School, 197 Ill. 2d 381 (2001). There, the

plaintiff brought a federal claim and a state claim in federal court, and the federal court granted

summary judgment on the federal claim and declined to exercise jurisdiction over the state claim.

Id. at 385. Then, in state court, the plaintiff filed his state claim, which the state court dismissed.

Id. at 387. On appeal, the supreme court in Nowak rejected the defendant’s argument that res

judicata barred the plaintiff’s state claim because it was already alleged in federal court. Id. at

392. As to the state claim, the supreme court concluded that a dismissal for lack of subject matter

jurisdiction was not a final adjudication on the merits and that “plaintiff did not get his day in

court.” Id. Nowak is distinguishable because in this case there was a final adjudication on the

merits. Id. Furthermore, plaintiffs did get their day in court—they could have pursued their

negligent misrepresentation claim in the law division but voluntarily dismissed the claim. See id.

¶ 36 In further support, plaintiffs cite to Rotogravure Service, Inc. v. R.W. Borrowdale Co., 77

Ill. App. 3d 518, 525 (1979), but they fail to explain how Rotogravure supports their contention

that res judicata does not apply. See Rotogravure Service, Inc., 77 Ill. App. 3d at 525; see also

Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020).

¶ 37 Next, plaintiffs argue that “res judicata still is inapplicable where plaintiffs could not

have obtained the same relief of legal damages in the prior action in any event once they pursued

and received the rescission award.” Plaintiffs then cite to both Newton v. Aitken, 260 Ill. App. 3d

717, 720 (1994), and Herrington v. McCoy, 105 Ill. App. 3d 527, 531 (1982), for their

proposition that “a remedy based on a theory of disaffirmance of a contract (rescission) is

inconsistent with a remedy arising out of its affirmance (e.g., damages).” Plaintiffs apparently

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argue that res judicata does not apply because they could not pursue inconsistent remedies.

Although it is true that rescission and damages are inconsistent remedies, plaintiffs fail to explain

how this fact precludes res judicata. See Newton, 260 Ill. App. 3d at 720; Herrington, 105 Ill.

App. 3d at 531; see also Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020).

¶ 38 In sum, we conclude that plaintiffs’ negligent misrepresentation claim is barred by the

doctrine of res judicata and therefore affirm the circuit court’s judgment dismissing plaintiffs’

complaint. Because we affirm the circuit court’s judgment dismissing the complaint, we need

not address plaintiff’s additional arguments as to their partial motion for summary judgment and

motion to reconsider. See Brazier, 2019 IL App (1st) 190078, ¶ 13.

¶ 39 CONCLUSION

¶ 40 For the reasons stated above, the judgment of the circuit court of Cook County is

affirmed.

¶ 41 Affirmed.

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