Oshana v. FCL Builders, Inc. ( 2013 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
Oshana v. FCL Builders, Inc., 2013 IL App (1st) 120851
Appellate Court ANWAR OSHANA, Plaintiff, v. FCL BUILDERS, INC., Defendant and
Caption Counterplaintiff-Appellant (Suburban Iron Works, Inc., Defendant and
Counterdefendant-Appellee).
District & No. First District, Sixth Division
Docket No. 1-12-0851
Filed June 28, 2013
Held In an action arising from the injuries suffered by an employee of a sub-
(Note: This syllabus subcontractor on a construction project, the doctrine of res judicata did
constitutes no part of not bar the general contractor’s counterclaim in the injured employee’s
the opinion of the court tort action alleging that the subcontractor failed to enforce the contract’s
but has been prepared provision requiring the sub-subcontractor to maintain insurance covering
by the Reporter of the general contractor, since neither the declaratory judgment action filed
Decisions for the by the sub-subcontractor’s insurer that resulted in a judgment that it was
convenience of the not required to insure the general contractor, nor the summary judgment
reader.)
in the tort action denying the general contractor’s counterclaim for
contribution claims against the subcontractor and sub-subcontractor,
involved the general contractor’s breach of contract claim.
Decision Under Appeal from the Circuit Court of Cook County, No. 06-L-13001; the
Review Hon. James N. O’Hara, Judge, presiding.
Judgment Reversed.
Counsel on Prusik Selby Daley & Kezelis, P.C., of Chicago (John P. Prusik and
Appeal Frank C. Gradishar, of counsel), for appellant.
Lindsay, Rappaport & Postel, LLC, of Chicago (Joseph P. Postel and
Christopher J. Pickett, of counsel), for appellee.
Panel PRESIDING JUSTICE LAMPKIN delivered the judgment of the court,
with opinion.
Justices Gordon and Reyes concurred in the judgment and opinion.
OPINION
¶1 Defendant and counterplaintiff FCL Builders, Inc. (FCL), appeals from the circuit court’s
order dismissing FCL’s counterclaim against defendant and counterdefendant Suburban Iron
Works, Inc. (Suburban), based on the doctrine of res judicata. On appeal, FCL contends that
the final judgment in the declaratory judgment action concerning an insurer’s obligation to
defend or indemnify FCL in the underlying tort action did not bar FCL’s breach of contract
counterclaim against Suburban in the tort action because neither the parties nor their privies
were identical in both actions and there was no identity of cause of action.
¶2 For the reasons that follow, we reverse the judgment of the circuit court.
¶3 I. BACKGROUND
¶4 FCL was a general contractor that was hired on a construction project. FCL subcontracted
out the steel fabrication and erection for the project to Suburban, which in turn further
subcontracted out the steel erection to JAK Iron Works, Inc. (JAK). JAK employed plaintiff
Anwar Oshana as an ironworker. After Oshana was injured at the construction site, he filed
a negligence lawsuit (the tort case) against FCL and Suburban, alleging breach of various
duties of care regarding jobsite safety that they allegedly owed to Oshana. After Oshana filed
a second amended complaint in 2008, FCL, in 2009, filed a third-party complaint for
contribution against JAK and a counterclaim for contribution against Suburban.
¶5 Provisions in FCL’s subcontract with Suburban addressed Suburban’s obligation to
obtain a certain amount of commercial general liability (CGL) insurance, which would cover
not only Suburban and its employees but also FCL as the general contractor. Moreover, any
subcontractors that Suburban might further subcontract with also were required to maintain
the same level of CGL insurance and include FCL as an insured under the policy. Relying
on those and other contract provisions, FCL turned to Westfield Insurance Company
(Westfield), which insured JAK under a CGL policy, for defense and indemnification in the
tort case. Westfield, however, refused to either defend or indemnify FCL, asserting that FCL
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did not qualify as an additional insured under Westfield’s policy with JAK.
¶6 Westfield filed a declaratory judgment action against FCL, seeking a declaration that it
was not obligated to defend or indemnify FCL in the tort case. Suburban was not a party to
the declaratory judgment action. In January 2010, the circuit court held that FCL was not an
additional insured on the Westfield policy issued to JAK and granted summary judgment in
Westfield’s favor. FCL appealed.
¶7 Meanwhile, in the tort case, Suburban moved for summary judgment, contending there
was no evidence that Suburban had sufficient supervisory, operational or contractual control
over JAK’s work to give rise to a duty to Oshana. In May 2010, the circuit court granted
Suburban’s motion for summary judgment against Oshana and FCL on the issues of
negligence and contribution. Oshana and FCL appealed.
¶8 In March 2011, in the declaratory judgment action, this court affirmed the award of
summary judgment in Westfield’s favor, holding that FCL was not an additional insured
under the policy that Westfield had issued to JAK. Westfield Insurance Co. v. FCL Builders,
Inc., 407 Ill. App. 3d 730, 731 (2011). Specifically, this court determined that the plain
language of the insurance policy required that, in order for an entity to qualify as an
additional insured, JAK and that entity must have agreed in writing in a contract that the
entity be added to the policy as an additional insured. Id. at 733. This court concluded that
there was no evidence in the record that JAK had agreed in writing with FCL for FCL to be
an additional insured. Id. at 734. FCL argued that it should be deemed an additional insured
based, inter alia, on the Suburban/JAK contract that incorporated the FCL/Suburban
contract. Id. at 736. This court, however, stated that the terms of the Suburban/JAK and
FCL/Suburban contracts were irrelevant to whether Westfield was obligated to cover FCL
as an additional insured under the policy issued to JAK. Id. at 735. Rather, the dispositive
issue was Westfield’s contractual obligations to its insured, and those obligations were
controlled by the insurance policy itself. Id.
¶9 In September 2011, in the tort case, FCL amended with leave of court its counterclaim
against Suburban to add a claim of breach of contract. Specifically, FCL alleged that
Suburban breached its contract with FCL when Suburban failed to require its subcontractor,
JAK, to maintain insurance covering FCL for the construction project at issue in the tort case.
¶ 10 In November 2011, Suburban moved to dismiss, pursuant to section 2-619(a)(4) of the
Code of Civil Procedure (735 ILCS 5/2-619(a)(4) (West 2010)), FCL’s amended
counterclaim on the basis of res judicata. Suburban argued that two prior judgments barred
FCL’s cause of action: (1) the appellate court’s 2011 opinion affirming summary judgment
in favor of Westfield in the declaratory judgment action, which held that FCL was not an
additional insured under Westfield’s CGL policy issued to JAK; and (2) the trial court’s 2010
summary judgment in the tort case, which was pending on appeal and disposed of Oshana’s
tort claims and FCL’s contribution claim against Suburban.
¶ 11 In January 2012, this court affirmed in the tort case the award of summary judgment in
favor of Suburban and against Oshana and FCL. Oshana v. FCL Builders, Inc., 2012 IL App
(1st) 101628. Thereafter, in February 2012, the circuit court granted Suburban’s motion to
dismiss FCL’s amended counterclaim on the basis of res judicata; the circuit court, however,
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did not specify which prior judgment barred FCL’s counterclaim. Pursuant to Illinois
Supreme Court Rule 304(a) (eff. Feb. 26, 2010), the circuit court found that there was no just
reason to delay the enforcement or appeal of the order. FCL timely appealed.
¶ 12 II. ANALYSIS
¶ 13 On appeal, FCL argues that the circuit court erred in determining that res judicata applied
to FCL’s breach of contract counterclaim against Suburban. The issue of whether a claim is
barred by res judicata comprises a question of law, which is subject to de novo review by this
court. Agolf, LLC v. Village of Arlington Heights, 409 Ill. App. 3d 211, 218 (2011).
Furthermore, a section 2-619 motion to dismiss admits the legal sufficiency of the complaint
and raises defects, defenses, or other affirmative matters that defeat the claim. IFC Credit
Corp. v. Magnetic Technologies, Ltd., 368 Ill. App. 3d 898, 900 (2006). We review a section
2-619 dismissal de novo. Id.
¶ 14 A prior judgment may have preclusive effects in a subsequent action under the doctrine
of either res judicata or collateral estoppel. Nowak v. St. Rita High School, 197 Ill. 2d 381,
389 (2001).
¶ 15 “The doctrine of res judicata provides that a final judgment on the merits rendered by a
court of competent jurisdiction bars any subsequent actions between the same parties or their
privies on the same cause of action.” Hudson v. City of Chicago, 228 Ill. 2d 462, 467 (2008).
“Three requirements must be satisfied for res judicata to apply: (1) a final judgment on the
merits has been rendered by a court of competent jurisdiction; (2) an identity of cause of
action exists; and (3) the parties or their privies are identical in both actions.” Id. “If the three
elements necessary to invoke res judicata are present, res judicata will bar not only every
matter that was actually determined in the first suit, but also every matter that might have
been raised and determined in that suit.” Id. at 471 (citing Torcasso v. Standard Outdoor
Sales, Inc., 157 Ill. 2d 484, 490 (1993)). A plaintiff is not permitted to engage in claim
splitting. Hudson, 228 Ill. 2d at 474. Res judicata thereby prevents repetitive lawsuits and
protects parties from being forced to bear the burden of relitigating essentially the same
claim. Agolf, LLC, 409 Ill. App. 3d at 219. The party invoking the defense of res judicata
bears the burden of demonstrating it applies. Cload v. West, 328 Ill. App. 3d 946, 950 (2002).
¶ 16 Under collateral estoppel, the adjudication of a fact or issue in one cause bars relitigation
of the same fact or issue in a subsequent suit. LaSalle Bank National Ass’n v. Village of Bull
Valley, 355 Ill. App. 3d 629, 635 (2005). The party asserting collateral estoppel must show:
“(1) the issue previously adjudicated is identical to the question presented in the subsequent
action; (2) a final judgment on the merits exists in the prior case; and (3) the party against
whom estoppel is directed was a party to the prior litigation or is in privity with such a
party.” Yorulmazoglu v. Lake Forest Hospital, 359 Ill. App. 3d 554, 558 (2005).
¶ 17 FCL does not contest the fact that the summary judgment in either (1) the declaratory
judgment action, which held that Westfield did not owe a duty to defend or indemnify FCL,
or (2) the tort case, which disposed of Oshana’s tort claims and FCL’s contribution claim
against Suburban, constitutes a final judgment on the merits that was rendered by a court of
competent jurisdiction. FCL, however, argues that two elements of res judicata are missing:
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an identity of parties or their privies and an identity of cause of action.
¶ 18 First, we address Suburban’s argument that FCL had forfeited review of the issues on
appeal. Specifically, Suburban argues that FCL has failed in its opening appellant’s brief to
challenge the summary judgment in the tort case as a possible basis for the circuit court’s
determination that FCL’s breach of contract counterclaim is barred under res judicata.
According to Suburban, FCL has thereby conceded that the summary judgment in the tort
case precludes that counterclaim and was a proper basis for dismissal. We disagree. The
record indicates that FCL addressed all relevant issues in the proceedings before the circuit
court. Furthermore, FCL has responded in its reply brief to Suburban’s argument about the
summary judgment in the tort case. Specifically, FCL states that the summary judgment in
the tort case, which addressed Suburban’s liability for Oshana’s injuries, has no legal effect
on FCL’s breach of contract counterclaim against Suburban for its alleged failure to procure
insurance for FCL. In addition, forfeiture is a limitation on the parties and not the court, the
issue raised concerns a clear question of law, and we choose to address the merits of FCL’s
appeal. People v. Tomczak, 395 Ill. App. 3d 877, 879 (2009).
¶ 19 A. Declaratory Judgment Action
¶ 20 1. Identity of Parties or Their Privies
¶ 21 FCL argues that res judicata does not apply because the declaratory judgment action did
not involve the same parties or their privies as the tort case. FCL contends that Suburban,
which had the burden to prove res judicata, failed to establish that Westfield represented the
same legal interest as Suburban in the declaratory judgment action.
¶ 22 Suburban responds that even though it was not a party in the declaratory judgment action,
it was in privity with Westfield because Suburban is an additional insured on the policy
Westfield issued to JAK and Westfield has at all times provided a defense and indemnity to
Suburban, without a reservation of rights. Suburban contends it is in privity with Westfield
because they are an insured and insurer with respect to the tort lawsuit, Westfield has at all
times provided a defense to Suburban, and Westfield has agreed to indemnify Suburban
against any judgment entered in the tort case. Suburban argues that it had a substantial
interest in the declaratory judgment action and benefitted from the ruling that FCL was not
an additional insured on the Westfield/JAK policy because Suburban no longer had to share
the policy limits with FCL.
¶ 23 “A nonparty may be bound pursuant to privity if his interests are so closely aligned to
those of a party that the party is the ‘virtual representative’ of the nonparty.” City of Chicago
v. St. John’s United Church of Christ, 404 Ill. App. 3d 505, 513 (2010) (quoting City of
Rockford v. Unit Six of the Policemen’s Benevolent & Protective Ass’n, 362 Ill. App. 3d 556,
563 (2005)). Privity generally exists when parties adequately represent the same legal
interests. People ex rel. Burris v. Progressive Land Developers, Inc., 151 Ill. 2d 285, 296
(1992) (in determining whether privity exists, the identity of the interest controls, not the
nominal identity of the parties). “There is no generally prevailing definition of ‘privity’ that
the court can apply in all cases; rather, determining privity requires careful consideration of
the circumstances of each case.” Apollo Real Estate Investment Fund, IV, L.P. v. Gelber, 403
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Ill. App. 3d 179, 190 (2010).
¶ 24 Suburban cites Preferred America Insurance v. Dulceak, 302 Ill. App. 3d 990 (1999), for
the proposition that “insured and insurers share a special relationship: they are in privity of
contract.” While we agree with the soundness of the general proposition, it is of no avail to
Suburban in the instant case. In Preferred America, the insurer had provided a defense to its
insured driver, who was sued for negligence in an automobile collision case (prior case). Id.
at 992-93. The insurer obtained counsel for its insured driver, whom counsel sought to show
was not at fault. The jury, however, found the insured driver 100% liable for the accident in
question. Thereafter, the insured driver’s wife brought an uninsured motorist claim against
her husband (present case). The insurer filed a complaint for declaratory relief against the
wife, seeking a judgment that collateral estoppel did not bar the insurer from relitigating all
issues concerning liability in the present case.
¶ 25 The court, which found no conflict of interest between the insurer and its insured driver
in the prior case, concluded that they were in privity and, thus, the insurer was estopped from
relitigating any issue or defense with respect to its insured driver’s liability. Id. at 995. The
court stated:
“Insureds and insurers share a special relationship: they are in privity of contract.
[Citation.] When the insurer retains the attorney to defend the insured, the attorney
represents both the insured and the insurer in furthering the interests of each. [Citation.]
Ordinarily, since the interests of the insurer and the insured are harmonious, there is no
conflict and the attorney is able to exercise independent judgment for both clients. ***
***
The nonliability of the insured is potentially the most effective bar to any policy
claims against the insurer. That is what [the insurer, First American Insurance,]
undertook to show in defending its insured. ***
Where one party is liable to indemnify another against a particular loss, either by law
or by contract, the primary liability is upon the party indemnifying. In such a case, the
party bound to indemnify is in privity with the party to be indemnified, and the
indemnifying party therefore has a direct interest in defending any suit whereby there
may be a recovery against the party indemnified as to the subject matter of the indemnity.
[Citations.] ‘The party to be indemnified, moreover, is, manifestly, directly interested in
having him defeat all recovery in such suit, and so their respective interests and duties
in respect of such suit must be the same.’ [Citation.]” Id. at 995-96.
The court noted, however, the reason for this rule concerning insurer and insured privity
“does not exist when there is no identity of interests between the insured and the insurer in
the original tort action.” Id. at 997.
¶ 26 Suburban’s reliance on Preferred America is misplaced. Although privity exists between
Westfield and Suburban in the tort action, Preferred America does not support Suburban’s
claim of privity with Westfield in the declaratory judgment action because Westfield and
Suburban did not share an identity of interests in the declaratory judgment action.
Specifically, Westfield had an interest to defeat FCL’s claim for defense and indemnification
under the JAK policy. That interest was in conflict with Suburban’s interest because
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Suburban allegedly had a contractual obligation to require JAK to provide insurance
coverage for FCL. Contrary to the situation in Preferred America, Westfield did not, in the
declaratory judgment action, undertake to show that Suburban, as Westfield’s additional
insured, was not liable for any failure to procure insurance coverage for FCL. Accordingly,
Suburban was not so identified in interest with Westfield that Westfield represented the same
legal right in the declaratory judgment action.
¶ 27 Suburban argues that it benefitted from Westfield’s success in the declaratory judgment
action because Suburban did not have to share JAK’s coverage with FCL. Even assuming
that Suburban obtained such a benefit, that is not dispositive of the issue of privity for
purposes of res judicata, which requires an identity of interests.
¶ 28 Illinois courts have relied on the Restatement (Second) of Judgments for guidance in
defining privity. State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co., 394
Ill. App. 3d 548, 559 (2009). “The Restatement (Second) of Judgments explains that
‘ “privity” refers to a cluster of relationships, [citation], under which the preclusive effects
of a judgment extend beyond a party to the original action and apply to persons having
specified relationships to that party.’ ” Id. (quoting Restatement (Second) of Judgments,
Introduction at 1 (1982)). Section 75 of the Restatement (Second) of Judgments sets forth
three general categories of relationships that may establish privity: (1) relationships that are
“explicitly representative” (e.g., trustee, class representative designated by a court); (2)
“substantive legal relationships [in which one party to] the relationship is treated as having
the capacity to bind the other to a judgment in an action to which the latter is not a party”
(e.g., co-obligors, parties who are vicariously liable for one another, bailees and bailors, co-
owners of property, assignees and assignors, the promisee and intended beneficiary of a
contract, corporations and their officers, directors and shareholders, and members of
partnerships); and (3) “successors in interest to property.” Restatement (Second) of
Judgments § 75 cmt. a, at 210 (1982). See generally Restatement (Second) of Judgments
§§ 41-42, 45-61, 43 (1982). See also John J. Rickhoff Sheet Metal Co., 394 Ill. App. 3d at
559-60 (discussing the Restatement (Second) of Judgments).
¶ 29 The relationship between Suburban and Westfield in the declaratory judgment action
does not fall into any of the three general categories of relationships that may establish
privity. However, the relationship between FCL and Suburban does fall into the second
relationship category, i.e., that of promisee and intended beneficiary to a contract. See John
J. Rickhoff Sheet Metal Co., 394 Ill. App. 3d at 561-62 (where an insurer obtained a
declaration that it was not obligated to defend or indemnify a purported additional insured
under a liability policy, there was privity between the purported additional insured and the
insured because the purported additional insured adequately represented the insured’s
interests in the declaratory judgment action).
¶ 30 The promisee and intended beneficiary to a contract relationship is described by section
56 of the Restatement, which states:
“When a contract between two persons creates an obligation in favor of another
person as an intended beneficiary:
***
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(2) A judgment against the third party beneficiary in an action on the obligation to
him terminates the promisor’s obligation to the promisee.” Restatement (Second) of
Judgments § 56(2) (1982).
¶ 31 Here, where Suburban allegedly was required to procure insurance for FCL from
Westfield, the insurer of Suburban’s subcontractor JAK, Suburban is the promisee, Westfield
is the promisor, and FCL is an intended third-party beneficiary of the insurance contract. See
Restatement (Second) of Contracts § 2 (1981) (defining promise, promisor, promisee and
beneficiary). The declaratory judgment action between Westfield and FCL, which determined
that Westfield, as promisor, did not have a duty to insure and defend FCL, as third-party
beneficiary, was a judgment that terminated Westfield’s obligation to Suburban, as promisee.
See Rickhoff Sheet Metal Co., 394 Ill. App. 3d at 560. Under the second premise of section
56, the determination that Westfield did not have a duty to insure FCL also terminated
Westfield’s obligation to Suburban to provide additional insured coverage to FCL for the job
in question. Restatement (Second) of Judgments § 56(2) & Illustration 4 (1982); see also
Rickhoff Sheet Metal Co., 394 Ill. App. 3d at 560. Accordingly, the judgment that FCL was
not covered by JAK’s policy has a preclusive effect on Suburban’s ability to relitigate that
issue, not because Suburban is bound by the judgment, but because Suburban could have no
cause of action against Westfield for failure to cover FCL. See Restatement (Second) of
Judgments § 56 cmt. a, at 73-74 (1982).
¶ 32 For the foregoing reasons, we conclude that Suburban was not in privity with Westfield
in the declaratory judgment action.
¶ 33 2. Identity of Cause of Action
¶ 34 FCL also argues, and we agree, that res judicata does not apply to bar FCL’s breach of
contract counterclaim because there was no identity of cause of action between the
declaratory judgment action and the tort action. Illinois has adopted the transactional test in
determining whether an identity of cause of action exists for purposes of res judicata. River
Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 309-11 (1998).
“Under this test, claims are part of the same cause of action if they arise from the same
transaction or series of connected transactions. [Citation.] Subsequent claims may be
barred if they originate from a single group of operative facts. [Citation.] This
proposition applies regardless of whether the claims assert different theories of relief or
are based on evidence that does not substantially overlap, as long as they arise from the
same transaction. [Citation.]
***
In determining whether claims are part of the same cause of action, *** we consider
the claims in factual rather than evidentiary terms. [Citation.] We must examine the facts
that give rise to the plaintiff’s right to relief [citation] and assess whether they are linked
in a manner such that they are part of a single transaction. The factors relevant to
ascertaining whether they are so linked include their relation in time, space, origin, and
motivation, whether they form a convenient trial unit, and whether their treatment as a
single unit conforms to the parties’ expectations and business usage or understanding.
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[Citation.] The test is to be applied pragmatically. [Citations.]” Cload, 328 Ill. App. 3d
at 950-51.
¶ 35 It is clear that the claims asserted in the previous declaratory judgment action and the
breach of contract counterclaim in the instant case do not arise from a single group of
operative facts. The claims do not share a close temporal, spatial, origin, or motivation
relationship. In the declaratory judgment action, the coverage dispute between FCL and
Westfield involved the construction of the terms of the additional insured endorsement clause
in the policy Westfield had issued to JAK. Specifically, Westfield asserted that FCL did not
qualify as an additional insured on JAK’s policy because there was no written agreement
between JAK and FCL for FCL to be an additional insured. In contrast, the dispute at issue
in FCL’s counterclaim arose from facts involving Suburban’s alleged failure to abide by the
terms of its separate contract with FCL. That contract addressed, inter alia, the delegation
of work at a construction site and Suburban’s obligation to provide FCL with insurance
coverage from any subsequent subcontractors.
¶ 36 Furthermore, when FCL alleged its breach of contract counterclaim against Suburban,
FCL was not attempting to relitigate the previously adjudicated issue of additional insured
coverage under the JAK policy. Instead, FCL alleged an entirely new cause of action that had
arisen. The events that gave rise to Westfield’s contractual obligations to its insured, JAK,
pursuant to its insurance policy and any breach by Suburban, a subcontractor, of its
contractual obligations to FCL, the general contractor, are not sufficiently related in time,
space, origin, or motivation to constitute a single transaction. Because FCL’s breach of
contract claim against Suburban does not arise out of the same core of operative facts as
FCL’s previous claim for coverage as an additional insured under JAK’s policy, there is not
an identity of causes of action for purposes of res judicata.
¶ 37 In addition, the events that constitute the basis of the declaratory judgment action and
breach of contract counterclaim do not form a convenient trial unit. When this court
efficiently and expeditiously construed the terms of the additional insured endorsement of
the Westfield policy and determined that FCL was not an additional insured under the terms
of that policy, this court refused to consider on the basis of relevancy any contractual
obligations between FCL and Suburban. Westfield Insurance Co., 407 Ill. App. 3d at 735.
This court never considered whether Suburban had breached its contract with FCL by failing
to procure insurance.
¶ 38 Suburban argues that FCL is now precluded from raising the breach of contract
counterclaim against Suburban because FCL could have raised it as part of the declaratory
judgment action. This argument lacks merit. In Illinois, counterclaims are generally
permissive rather than mandatory. See 735 ILCS 5/2-608(a) (West 2002); Marsh v.
Nellessen, 235 Ill. App. 3d 998, 1001 (1992). Thus, a defendant generally may raise his or
her claim against the plaintiff by way of a counterclaim or by way of a separate action.
Marsh, 235 Ill. App. 3d at 1001. However, if the defendant’s claim involves the same
operative facts as the plaintiff’s claim, res judicata may bar the defendant from raising his
or her claim in a subsequent action. Torcasso v. Standard Outdoor Sales, Inc., 232 Ill. App.
3d 500, 503-04 (1992), rev’d on other grounds, 157 Ill. 2d 484 (1993). Specifically, res
judicata bars a subsequent action if successful prosecution of that action would in effect
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nullify the judgment entered in the initial action. Restatement (Second) of Judgments
§ 22(2)(b) (1982); Carey v. Neal, Cortina & Associates, 216 Ill. App. 3d 51, 58 (1991)
(describing subsection 22(2)(b) of the Restatement as a “ ‘common law’ rule of compulsory
counterclaim”).
¶ 39 Neither the successful nor unsuccessful prosecution of FCL’s current breach of contract
counterclaim against Suburban would nullify the previous declaratory judgment.
Furthermore, as discussed above, the counterclaim does not involve the same operative facts
as the earlier declaratory judgment. FCL’s breach of contract claim was evident after the
court ruled in the declaratory judgment action that FCL was not an additional insured under
the policy Westfield issued to JAK. The narrow purpose of the declaratory judgment action
was to settle the controversy of FCL’s status as an additional insured before Westfield
violated any contractual obligation. See Waste Management, Inc. v. International Surplus
Lines Insurance Co., 144 Ill. 2d 178, 205-06 (1991). Moreover, Suburban was not a party to
the declaratory judgment action, did not seek to intervene in that matter, and its presence was
not necessary in the declaratory judgment action. In the declaratory judgment action, the
court was obviously able to reach a final judgment without the presence of Suburban, and
FCL and Westfield never suggested that their interests were somehow compromised by
Suburban’s absence. See John J. Rickhoff Sheet Metal Co., 394 Ill. App. 3d at 563.
¶ 40 Accordingly, we conclude that an identity of cause of action does not exist between the
declaratory judgment action and FCL’s present counterclaim and, thus, FCL’s counterclaim
is not barred by res judicata.
¶ 41 B. Summary Judgment in the Tort Action
¶ 42 Suburban argues that FCL’s counterclaim is also barred by res judicata due to the circuit
court’s May 2010 award of summary judgment in favor of Suburban in the tort case. That
final judgment disposed of both Oshana’s tort claim and FCL’s contribution claim against
Suburban, and this court affirmed that judgment in January 2012.
¶ 43 Suburban’s argument lacks merit. Although there is an identity of parties in the May
2010 summary judgment and the breach of contract counterclaim, there is no identity of
cause of action between that summary judgment and the counterclaim. Specifically, Oshana’s
claim and FCL’s contribution counterclaim against Suburban alleged, in tort, Suburban’s
negligence concerning its failure to supervise and failure to warn. In contrast, FCL’s present
breach of contract counterclaim alleged that Suburban failed to abide by contract provisions
that required Suburban to ensure that its subcontractors obtained CGL insurance coverage
for FCL. Moreover, when FCL alleged breach of contract against Suburban in its amended
counterclaim, FCL was not attempting to relitigate the previously adjudicated issue of
Suburban’s liability in tort for Oshana’s injuries. Instead, FCL alleged an entirely new cause
of action that arose upon the adjudication of the declaratory judgment action.
¶ 44 III. CONCLUSION
¶ 45 FCL’s breach of contract counterclaim was not litigated in the prior declaratory judgment
action and May 2010 summary judgment, and res judicata does not bar FCL’s breach of
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contract counterclaim. Accordingly, the judgment of the circuit court is reversed.
¶ 46 Reversed.
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