FOURTH DIVISION August 13, 2015

No. 1-14-1967

ROBERT GADSON, ) Appeal from the ) Circuit Court of Plaintiff-Appellant, ) Cook County ) v. ) No. 13 L 1840 ) AMONG FRIENDS ADULT DAY CARE, INC., ) Honorable JOHN G. KLIMEK and NICOLE M. PETERS, ) John H. Ehrlich, ) Judge Presiding. Defendants-Appellees. )

JUSTICE ELLIS delivered the judgment of the court, with opinion. Presiding Justice Fitzgerald Smith and Justice Howse concurred in the judgment and opinion.

OPINION

¶1 Plaintiff Robert Gadson was involved in an automobile accident in which he allegedly

sustained both damage to his car and personal injury. He was compensated by his automobile

insurance company for the damage to his car (minus a deductible). So the insurance company

filed a subrogation claim against defendants for the property damage to the car. The insurance

company did not file that lawsuit in its own name, but rather in the name of its insured, plaintiff.

Plaintiff later filed a separate lawsuit of his own against defendants, alleging personal injury.

Defendants moved to dismiss the personal-injury lawsuit as barred by res judicata, in light of the

earlier property-damage lawsuit in the name of plaintiff against the same defendants, which by

that point had been resolved by settlement. The trial court agreed with defendants and dismissed

the personal-injury suit. We must determine whether the trial court properly interpreted section

2-403 of the Code of Civil Procedure (735 ILCS 5/2-403 (West 2010)) in dismissing this action No. 1-14-1967

based on res judicata. We hold that it did not. We reverse the trial court’s dismissal and remand

for further proceedings.

¶2 I. BACKGROUND

¶3 After a March 18, 2011 auto accident, plaintiff's automobile insurer, American Access

Insurance Company (American Access), compensated plaintiff for his automobile damage,

minus a $500 deductible plaintiff paid. On August 31, 2011, American Access retained a lawyer,

Ronald J. Scaletta, and filed a subrogation action against defendants, Among Friends Adult Day

Care, Inc. (Among Friends) and Nicole M. Peters, in the municipal division of the circuit court of

Cook County (docket no. 12 M1 015955). The lawsuit sought $7,287.85 for property damage to

plaintiff's vehicle. The action was styled, "Robert Gadson v. Among Friends Adult Day Care,

Inc., John G. Klimek & Nicole M. Peters." The complaint did not mention American Access or

the fact that the action was brought in subrogation. 1

¶4 On February 20, 2013, while the subrogation case was still pending, plaintiff, through a

different attorney, filed this action in the law division of the circuit court of Cook County (docket

no. 13 L 1840), naming the same defendants and based on the same car accident, but in this case

seeking damages for personal injuries only.

¶5 On April 23, 2013, after arbitration, the parties reached a settlement in the subrogation

action and dismissed it. The record contains a copy of a release of claims against defendant

Peters and her auto insurer that purports to be signed by plaintiff and Scaletta, in consideration of

payment of $2,089.47. (As we will see, plaintiff denies ever signing that release.) The release

discharged Peters from any further present or future claims of property damage arising from the

1 According to the record, the third named defendant, John G. Klimek, was Among Friends' agent and the driver of its vehicle, but he is not a party to this appeal.

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March 18 car accident. (We are not aware of any release executed between plaintiff and the other

defendant, Among Friends, and none has been called to our attention.)

¶6 The record also contains copies of two settlement checks, one from each defendant's

insurance company. The first check is for $2,089.47 from Peters' auto insurer, made payable to

"Law Offices of Ronald J. Scaletta & American Access." The second check, from defendant

Among Friends' auto insurer in the amount of $3,134.19, was made payable to "Ameican [sic]

Access A.S.O. Robert Gadson and its attorneys Ronald J. Scalleta [sic] Law Offices." The parties

acknowledge that "A.S.O." is shorthand for "as subrogee of."

¶7 After the subrogation action was dismissed with prejudice, both defendants filed motions

to dismiss the personal-injury action that is the subject of this appeal. Defendant Among Friends,

moving for dismissal under sections 2-619(a)(4) and (a)(9) (735 ILCS 5/2-619(a)(4),(a)(9) (West

2010)), argued that this action was barred by res judicata, in light of the previous property-

damage lawsuit arising from the same car accident and involving the same plaintiff and

defendants. Defendant Peters additionally argued that the personal-injury action was barred by

the release of claims plaintiff signed in the property-damage claim, pursuant to section 2-

619(a)(6) (permitting dismissal where "claim set forth in the plaintiff's pleading has been

released, satisfied of record, or discharged in bankruptcy"). 735 ILCS 5/2-619(a)(6) (West 2010).

¶8 The dispute concerning res judicata revolved around section 2-403 of the Code of Civil

Procedure (735 ILCS 5/2-403(d) (West 2010), a section of the Code that in part governs how

subrogation claims must be brought and which provides an exception to res judicata in the

subrogation context. Plaintiff claimed that subsection (d) of section 2-403 provided him that

exception to res judicata. Defendants argued that plaintiff did not follow the dictates of

subsection (c) in filing the subrogation claim, and thus plaintiff could not escape res judicata by

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relying on the exception to that doctrine contained in subsection (d). With regard to the

additional argument of release raised only by defendant Peters, plaintiff filed an affidavit saying

that the signature on the release purporting to be his was not—he swore he never signed that

release.

¶9 The trial court entered a written order dismissing the action based on Section 2-619 of the

Code, without specifying which subsection was the basis for its ruling and without otherwise

clarifying the grounds for dismissal. We have no transcript of any oral argument or ruling from

the bench, and the parties cite to none.

¶ 10 Plaintiff moved for reconsideration. In his motion, plaintiff once again swore that he did

not sign the release of all claims relied upon by defendant Peters for dismissal. Regarding res

judicata, his motion included an affidavit from the attorney in the subrogation case, Mr. Scaletta,

who swore that the defense attorneys in the subrogation case knew that it was a claim brought in

subrogation. In further support of his sworn contention, Mr. Scaletta noted that the checks were

written out to the insurance company, American Access (one of which was written to American

Access "as subrogee of" plaintiff). He also noted that the estimate of repairs tendered to

defendants showed a deductible of $500 paid by plaintiff. From all of this, plaintiff argued,

defendants obviously knew that the property-damage lawsuit was a claim brought in subrogation,

even if plaintiff did not properly follow the dictates of subsection (c) of section 2-403.

¶ 11 Unlike the hearing on the motion to dismiss, we do have a transcript from the motion for

reconsideration. The trial court ruled that, even if the affidavit of Mr. Scaletta were taken as true

and defendants did, in fact, affirmatively know that the first lawsuit was a subrogation claim, it

would not affect his ruling. The trial court said it did not matter whether defendants knew that

the property-damage action was one in subrogation; the statute, section 2-403(c), required that

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the insurance company bring the lawsuit in its own name and attach a verification explaining that

the insurance company had become subrogated to plaintiff due to the reimbursement of

plaintiff’s property loss. American Access did none of that—the complaint was filed in

plaintiff’s name, and no verification was attached—and thus the initial action could not be

considered a “subrogation” claim under subsection (c). As such, plaintiff could not rely on the

exception to res judicata for “subrogation” claims in subsection (d).

¶ 12 This appeal followed.

¶ 13 II. ANALYSIS

¶ 14 A section 2-619 motion to dismiss provides a means of obtaining a summary disposition

when a plaintiff's claim can be defeated as a matter of law or on the basis of easily proven issues

of fact. Zurich Insurance Co. v. Amcast Industrial Corp.,

(2000). A

section 2-619 motion to dismiss admits all well-pleaded facts in the complaint, and all

documents submitted in support of the motion must be considered in a light most favorable to the

nonmoving party.

In reviewing the trial court's dismissal of an action based on section 2-619,

we consider (1) whether a genuine issue of material fact exists and, if not, (2) whether the

defendant is entitled to a judgment as a matter of law.

¶ 15 The trial court's ruling on a section 2-619 motion presents a question of law, which we

review de novo. DeLuna v. Burciaga,

(2006). Similarly, we review de novo the

construction of a statute, also a question of law.

We may affirm the judgment of the circuit

court on any basis appearing in the record, even if it was not the grounds on which the circuit

court relied, and even if the trial court’s basis for dismissal was incorrect. Rodriguez v. Sheriff's

Merit Comm'n of Kane County,

(2006).

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¶ 16 The doctrine of res judicata provides that a final judgment on the merits, rendered by a

court of competent jurisdiction, bars any later actions between the same parties (or their privies)

on the same cause of action. Rein v. David A. Noyes & Co.,

(1996). The bar

extends both to issues actually decided in the original action and to those which could have been

decided.

. A defendant invoking the defense of res judicata must show: (1) a final

judgment on the merits by a court of competent jurisdiction; (2) an identity of causes of action;

and (3) an identity of the parties or their privies.

. A “cause of action” is defined as the

set of facts giving the plaintiff the right to relief.

.

¶ 17 Thus, where a plaintiff and a defendant are involved in a car accident, and the plaintiff

sues the defendant for property damage to his car, resulting in a final judgment, the plaintiff is

barred from later filing a second lawsuit, against the same defendant, arising from the same car

collision, seeking damages for personal injuries. Mason v. Parker,

, 1097-

99 (1998). Generally speaking, Illinois law does not allow such claim-splitting. As explained in

Mason, to allow a plaintiff to chop his claims up in such a fashion "leav[es] the courtroom doors

open to a possibility of never-ending legal battles between the same parties based upon the same

set of facts. Litigation should have an end. No person should be harassed with a multiplicity of

lawsuits arising out of one cause of action."

.

¶ 18 But the legislature recognized an exception to the res judicata doctrine in the context of

subrogation claims. See 735 ILCS 5/2-403(d) (West 2010). It is not difficult to see why. If an

insurance company makes its insured whole (or close to whole) for property damage the insured

suffered, the insurance company has the right to recover that reimbursement from the party

responsible for the damage in the first place. It does so through subrogation—it steps into the

shoes of the insured and pursues the property-damage claim against the tortfeasor. But suppose

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that, out of that same occurrence that produced the property damage, the insured also suffered

personal injuries. The insured has not been compensated by the insurance company for those

injuries, and he or she should have the right to pursue any claims for personal injury against the

tortfeasor, independently of whether the insurance company is seeking recovery for property

damage from that same defendant in a different lawsuit. After all, the insured typically has no

control over whether the insurance company files its own lawsuit for property damage; the

insured may not even know it did so. Thus, the General Assembly long ago determined that, in

the subrogation context, the benefits of res judicata “were outweighed by the potential harm that

could be suffered by [the insured-subrogor] who did not know of the prior action brought by the

[insurer-subrogee] or did not have any control over the prior action if he did know." Landrum v.

Time D.C., Inc.,

(1980).

¶ 19 We have cited with approval the reasoning of a Florida court that provided this additional

reason for exempting subrogation claims from the res judicata bar:

" 'The policy reason behind this insurance subrogation exception is to

facilitate the prompt settlement of property damage claims by an insured as

against his own insurance carrier without prejudicing either the insured's right to

sue the tortfeasor for personal injuries or the insurance carrier's right to bring a

subrogated property claim against the same tortfeasor. A contrary rule would

discourage such settlements by requiring the plaintiff insured to bring all of his

claims together in a single lawsuit and not settle his property damage claim with

his own carrier as soon as possible.' " Zurich Insurance Co. v. Amcast Industrial

Corp.,

(2000) (quoting McKibben v. Zamora,

(Fla. Dist. Ct. App. 1978)).

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¶ 20 Indeed, as we also noted in Zurich, courts in other jurisdictions have found the need to

exempt subrogation claims from the res judicata doctrine to be so compelling that they imposed

the exception by judicial fiat in the absence of a state statute. Id. at 336 (collecting cases).

¶ 21 The statutory exemption to res judicata for subrogation claims, subsection (d) of section

2-403, reads as follows:

“(d) A judgment in an action brought and conducted by a subrogee [i.e., the

insurer] by virtue of the subrogation provision of any contract or by virtue of any

subrogation by operation of law, whether in the name of the subrogor [i.e., the insured] or

otherwise, is not a bar or a determination on the merits of the case or any aspect thereof

in an action by the subrogor to recover upon any other cause of action arising out of the

same transaction or series of transactions." 735 ILCS 5/2-403(d) (West 2010).

¶ 22 "There is no question that section 2-403(d) is designed to protect an insured from having

a claim for personal injury barred by res judicata because his subrogated insurance carrier has

previously litigated the issue of property damage arising out of the same accident." Zurich,

; accord Landrum,

(construing predecessor statute as

"a statutory exception to the basic rules of res judicata").

¶ 23 Defendants do not dispute as much; each of them at least generally recognizes section 2-

403(d) as providing an exception to the application of res judicata for subrogation claims. They

claim, however, that the property-damage action filed in the name of plaintiff by American

Access’s lawyer was not a subrogation claim, at least not for the purposes of section 2-403. They

argue that plaintiff cannot fall under the protection of section 2-403(d) because the initial

property-damage lawsuit failed to comply with subsection (c) of that statute:

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“(c) Any action hereafter brought by virtue of the subrogation provision of

any contract or by virtue of subrogation by operation of law shall be brought

either in the name or for the use of the subrogee [i.e., the insurer]; and the

subrogee shall in his or her pleading on oath, or by his or her affidavit if pleading

is not required, allege that he or she is the actual bona fide subrogee and set forth

how and when he or she became subrogee.” 735 ILCS 5/2-403(c) (West 2010).

¶ 24 It is undisputed here that the property-damage lawsuit at issue was filed in the name of

plaintiff, who was the subrogor, not the subrogee. It is likewise undisputed that the complaint

neither pleaded nor incorporated by affidavit that American Access was “the actual bona fide

subrogee,” nor did the complaint “set forth how and when [American Access] became

subrogee.”

Thus, defendant Among Friends argues, because the property-damage lawsuit

“was not styled as a subrogation action, *** the exception [to res judicata] does not apply.” As

defendant Peters puts it, the initial property-damage lawsuit “was not a subrogation action

because it did not comply with” subsection (c) and thus “was not ‘saved’ by” subsection (d).

¶ 25 At first blush, it might appear that the textual argument defendants raise has some merit,

because subsection (c) does require that “any” action brought in subrogation “shall be brought

either in the name or for the use of” the insurer-subrogee.

The word “any” covers the

universe, and “shall” is often given a mandatory construction. But the problem with this

interpretation is that "[a] long line of cases has established the principle that if an insured

plaintiff has even a de minimus pecuniary interest in the suit, that interest is sufficient to allow a

subrogation action to be maintained in the plaintiff's name." Radtke v. International Heater Co.,

(1986); see also Orejel v. York International Corp.,

(1997); Brooke Inns, Inc. v. S&R Hi-Fi & TV,

(1993);

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Scheibel v. Groeteka,

(1989); Nitrin, Inc. v. Bethlehem Steel Corp.,

(1976); In re Estate of Mallerdino,

(1974).

Neither defendant acknowledges the principle established in this long line of cases, nor did the

trial court address it.

¶ 26 Here, it is undisputed that plaintiff retained a $500 deductible interest in the outcome of

the subrogation lawsuit. Thus, even if his interest was minor compared to that of American

Access, he was still a real party-in-interest to the litigation. In accordance with the case law

above, it was entirely proper for American Access to name plaintiff, instead of itself, in the

subrogation suit; it was not a violation of section 2-403(c).

¶ 27 Defendants point to case law holding that "the interest of the subrogee cannot be

concealed in any proceeding brought for its benefit." But those cases reinforce our position.

Those cases only stand for the proposition that an action must be brought in the name of the

insurer-subrogee if that insurer-subrogee has compensated the insured for all the damages it

could seek against a defendant, and the insured thus no longer has any claim remaining. In Shaw

v. Close,

(1968), for example, the insured had fully resolved its claims; “the

only action which remained was [that] of the insurance company.” Thus, because the insured was

the only remaining real party-in-interest, the “action had to be brought either in the name of or

for the use of the [insurance] company.”

Likewise, in Nitrin, Inc.,

, the

court noted that the interest of the insurer-subrogee could not be concealed, but again, the

insurer-subrogee had already compensated the insured “for all damages it was seeking against

defendant,” and it was only because of that fact that the court held that the insurer-subrogee was

required to be disclosed as the real party in interest. In Orejel,

, we upheld

the trial court’s decision not to require the insurer-subrogee to be named as a plaintiff because

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the insured still had a remaining, if relatively small, pecuniary interest in the proceeding. Orejel

distinguished yet another case cited by defendants for their mistaken proposition, (Prudential

Insurance Co. v. Romanelli,

(1993)), where “the court held that the

insurance company was the actual party in interest because, based upon the record, the plaintiff

no longer had any interest in the subrogated claim.” (Emphasis in original). Orejel,

.

¶ 28 It is clear from this discussion that, under section 2-403(c), where the insurer-subrogee is

the only remaining real party-in-interest to the subrogation action because the pecuniary interest

of the insured has been fully satisfied, the insurer-subrogee is required to file the action in its

own name. It may not conceal its status, and in addition must swear to the facts that entitle it to

its subrogated status. 735 ILCS 5/2-403(c) (West 2010). But where, as here, the insured retains

even a de minimus financial stake in the outcome of the subrogation proceeding, the subrogation

claim may be brought in the insured’s name, and the remaining affidavit/verification language in

subsection (c) is inapplicable.

¶ 29 If the foregoing was not clear enough, we also would point to the language of section 2-

403(d), language which defendants do not address despite plaintiff’s repeated references to it,

which provides that the exception to the res judicata doctrine applies to “[a] judgment in an

action brought and conducted by a subrogee ***, whether in the name of the subrogor or

otherwise.” (Emphasis added.) 735 ILCS 5/2-403(d) (West 2010). If, as defendants claim, a

subrogation claim can never be brought in the name of the insured-subrogor, this highlighted

language would be unnecessary, if not nonsensical. Clearly, the General Assembly contemplated

that some subrogation claims might be brought in the name of the insured-subrogor, and the

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legislature intended that subrogation claims brought in the name of the insured-subrogor would

receive the same res judicata exception as those brought in the name of the insurance company.

¶ 30 We thus find section 2-403(d)’s exception to the res judicata doctrine applicable here.

The property-damage lawsuit filed by American Access in plaintiff’s name was unquestionably a

subrogation claim that complied with section 2-403(c) and that fell within the exception in

section 2-403(d). Thus, plaintiff's personal-injury action was not barred by res judicata and

should have been allowed to proceed in the circuit court.

¶ 31 It appears that the trial court’s ruling to the contrary was the basis for its dismissal of the

complaint, and we find that ruling to be in error. But defendant Peters raises an additional

argument, and even if the trial court did not rely on it, we have already noted that we may affirm

on any basis in the record. Rodriguez,

. So we will consider that remaining

argument.

¶ 32 Defendant Peters brought her motion to dismiss based on section 2-619(a)(6), which

permits dismissal upon proof that plaintiff had signed a valid release of all claims in a matter. We

do not find the release to be a basis for dismissal here for two reasons. First, plaintiff responded

to the motion to dismiss with an affidavit stating that he never signed that release, and his

affidavit was unopposed. The unopposed affidavit would be enough, by itself, to create a

question of fact as to the validity of the release. See Doe v. University of Chicago Medical

Center,

(plaintiff’s unopposed affidavit created question of fact

as to scope of defendant’s promises to her, precluding section 2-619 dismissal). Second, even if

the release were valid, it only discharged defendant with regard to any further present or future

property damage claims, and this lawsuit is a personal-injury action. The scope and extent of a

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release depends on the intent of the parties as expressed in the instrument. Shaw,

. The release said nothing about personal-injury claims, and we will not read it as such.

¶ 33 The judgment of the circuit court of Cook County is reversed. We remand the cause for

further proceedings.

¶ 34 Reversed and remanded.

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