No. 1-17-2918 Opinion filed June 13, 2019

FOURTH DIVISION

IN THE

APPELLATE COURT OF ILLINOIS

FIRST DISTRICT

DIRECT AUTO INSURANCE ) Appeal from the Circuit Court COMPANY, ) of Cook County. ) Plaintiff-Appellant, ) ) v. ) ) No. 14 CH 14413 ERICA BAHENA, JESSICA BAHENA, ) and NOEL HERNANDEZ, ) The Honorable ) Kathleen M. Pantle, Defendants-Appellees. ) Judge, presiding.

JUSTICE GORDON delivered the judgment of the court, with opinion. Presiding Justice McBride and Justice Reyes concurred in the judgment and opinion.

OPINION

¶1 Plaintiff, Direct Auto Insurance Company (Direct Auto), 1 raises two issues in its brief

to this court: (1) whether the trial court erred in entering a default judgment against it and

(2) whether, prior to entry of the default judgment, the trial court erred in denying its motion

1 Since Noel Hernandez is the plaintiff in the underlying action in which he sued to recover for his injuries in an auto accident, we refer to Direct Auto as Direct Auto rather than as plaintiff in order to avoid confusion. No. 1-17-2918

to dismiss defendant Noel Hernandez’s countercomplaint. For the following reasons, we find

no error and affirm.

¶2 BACKGROUND

¶3 This appeal concerns two actions: a prior action (12-CH-4515) filed by Direct Auto

on December 26, 2012, and this current action (14-CH-14413), filed by Direct Auto on

September 5, 2014, in which Direct Auto seeks to give preclusive effect to the judgment in

the prior case.

¶4 Both actions arise out of a single auto accident and concern the coverage of a single

insurance policy. Direct Auto issued a policy to Erica Bahena that insured a 2008 Chevy

Malibu owned by her and that specifically listed Jessica Bahena as an additional driver. On

April 1, 2012, Jessica Bahena was driving the Chevy Malibu in Chicago when it collided

with a vehicle driven by Ahmed Kishta, in which Noel and Ariel Hernandez 2 were

passengers.

¶5 On December 26, 2012, Direct Auto filed the first action which asked the circuit court

of Cook County to declare that there was no coverage under its policy because of Erica

Bahena’s alleged failure to disclose all the residents in her household over the age of 15. This

prior action (12-CH-4515) by Direct Auto named as defendants Jessica and Erica Bahena;

Sana Kishta, as next friend of Ahmed Kishta, deceased; Ariel Hernandez; and Ean Services,

LLC, d/b/a Enterprise Rent A Car, but it did not name Noel Hernandez. Ahmed Kishta was

driving a 2011 Nissan Altima owned by Enterprise in which Ariel and Noel Hernandez were

2 Since there were two passengers with a last name of Hernandez, we refer to defendant as Noel Hernandez. There is no allegation in the record regarding the relationship, if any, between Ariel and Noel Hernandez. -2- No. 1-17-2918

passengers. Jessica Bahena was driving the vehicle that is the subject of the Direct Auto

policy and that is owned by Erica Bahena.

¶6 On January 24, 2014, Erica Bahena filed for Chapter 7 bankruptcy.

¶7 As a result of the accident, Noel Hernandez filed suit in Cook County against both

Jessica and Erica Bahena on March 21, 2014. On July 9, 2014, Noel Hernandez filed a

motion, in the bankruptcy action, to lift the automatic stay that had been entered by the

federal bankruptcy court. He moved the court to lift the stay on the sole ground that he

sought “to prosecute his lawsuit against the Debtor only to the extent of the Debtor’s

insurance coverage” and that he would not “seek any monetary recovery from the Debtor or

Debtor’s estate.” He represented to the bankruptcy court “that any amount of said claim shall

not exceed the amount of available insurance.” 3

¶8 On August 20, 2014, five months after Noel Hernandez filed suit for his injuries, the

circuit court granted summary judgment in the first action (No. 12-CH-4515). The order

states that “the matter” came “to be heard” on both Direct Auto’s motion, as well as

“Bahena’s motion to withdraw.” The order does not specify whether the motion to withdraw

was by Jessica or Erica Bahena or both. The order stated that the trial court granted judgment

in favor of Direct Auto and “against Defendants,” finding that “there is no duty to defend or

indemnify imposed upon Direct Auto Insurance and that no Defendant is entitled to any

money from Direct Auto.” This short, one-paragraph handwritten order does not provide the

basis or reasons for its finding.

¶9 On September 5, 2014, just two weeks after the grant of summary judgment in the

first action, Direct Auto filed the current complaint for declaratory judgment. This time,

3 The record before us does not indicate whether the federal bankruptcy court granted his motion. -3- No. 1-17-2918

Direct Auto named Noel Hernandez as a defendant, as well as Erica and Jessica Bahena. In

the current complaint (14-CH-14413), Direct Auto seeks a declaratory judgment that,

because of summary judgment in the prior suit, Noel Hernandez is not entitled to receive

money under the policy and that neither Jessica nor Erica Bahena is entitled to

indemnification or defense with respect to his suit. The current complaint alleges that, on

December 26, 2012, when the prior declaratory action (No. 12-CH-4515) was filed, Noel

Hernandez had not yet made a claim or filed suit, and that was the reason that Direct Auto

failed to name him as a defendant. However, Direct Auto does not allege that it was unaware

that he was a passenger and does not allege that it sought to amend its complaint once he did

file suit on March 21, 2014.

¶ 10 On November 3, 2014, the trial court entered an order in the current action defaulting

Erica and Jessica Bahena for failing to appear and answer, and on May 5, 2015, Noel

Hernandez filed an answer.

¶ 11 On May 19, 2015, Direct Auto moved for summary judgment, reiterating the same

facts and claims set forth in its complaint. Direct Auto argued:

“A court of competent jurisdiction has already found that Erica [Bahena] made a

material misrepresentation that entitled [Direct Auto] to rescind the policy. This is the

law of the case. The rule of the ‘law of the case’ provides that where an issue has

been litigated and decided, a court’s unreversed decision on a question of law or facts

settles the question for all subsequent stages of the suit.”

¶ 12 On June 30, 2015, Noel Hernandez filed a motion for relief pursuant to Illinois

Supreme Court Rule 191(b) (eff. Jan. 4, 2013), seeking leave to pursue discovery

-4- No. 1-17-2918

“regarding the process or criteria used to determine an applicant’s eligibility for a

Direct Auto Insurance policy: the soliciting, screening and processing of Defendant

Erica Bahena’s application; what, if any, information [Direct Auto] has indicating

there were undisclosed residents in [her] household at the time of the application

process; when the information was obtained by [Direct Auto]; the agents and/or

employees of [Direct Auto] who obtained the information; the agents and/or

employees of [Direct Auto] who determined the omission was material; the agents

and/or employees of [Direct Auto] who determined the policy was invalid due to the

material misrepresentation; [and] the rules, policies and guidelines of Direct Auto

Insurance Company on which the rescission of Defendant Erica Bahena’s insurance

policy was based.”

¶ 13 In support of his motion, Noel Hernandez observed that Direct Auto had not attached

affidavits, sworn testimony, or other evidence concerning the alleged material

misrepresentation made by Erica Bahena or regarding the decision by Direct Auto to rescind

the policy as a result of the alleged misrepresentation.

¶ 14 In its response to Noel Hernandez’s Rule 191(b) motion, Direct Auto acknowledged

that its motion for summary judgment is “based solely upon th[e] prior judgment.” Direct

Auto conceded that, “[i]f this Court believes that [Direct Auto] is required to prove the

matters that [Noel Hernandez] now seeks to develop in discovery, then [Direct Auto’s]

motion [for summary judgment] will and must be denied because [Direct Auto] offered no

such argument or proof.” (Emphasis added.)

-5- No. 1-17-2918

¶ 15 In his response to Direct Auto’s summary judgment motion, Noel Hernandez argued

that “the ‘law of the case’ doctrine only applies to a single case, not two different cases.”

Hernandez argued that, since this is a different case, the doctrine does not apply.

¶ 16 In reply, Direct Auto argued that Noel Hernandez was bound by the prior judgment

because his interests were so closely aligned with the defendants in the prior case that they

were his virtual representatives. Direct Auto argued that its summary judgment in the prior

case was opposed by Erica Bahena and “one of the other claimants,” but Direct Auto did not

name which claimant.

¶ 17 On November 12, 2015, the trial court entered a one-line order denying Direct Auto’s

motion for summary judgment. There is no report of proceedings or bystander’s report in the

appellate record for this day.

¶ 18 On January 8, 2016, Direct Auto filed a “renewed” motion for summary judgment. In

this motion, Direct Auto “concede[d] that [the] law of the case doctrine is not quite the right

fit for this second filed action” but argued that res judicata required summary judgment in its

favor. Direct Auto explained that, by the time Noel Hernandez filed suit, the first action was

“nearing resolution” and, thus, “to quiet the coverage matter with respect to him,” it filed

“the instant Declaratory action” instead.

¶ 19 On March 21, 2016, the trial court denied Direct Auto’s renewed motion for summary

judgment in a one-line order and ordered Direct Auto “to answer outstanding discovery by

April 1.” There is also no report of proceedings or bystander’s report in the appellate record

for this day. In its subsequent response to Noel Hernandez’s discovery requests, Direct Auto

objected to all 16 document requests and to 11 out of 15 interrogatories.

-6- No. 1-17-2918

¶ 20 On April 8, 2016, Direct Auto filed a motion for a Rule 308 finding to certify the

issue for immediate appeal to the appellate court. In response, Noel Hernandez moved the

court to order the contested discovery before requiring briefing on Direct Auto’s Rule 308

motion. In response to Noel Hernandez’s motion to compel discovery, Direct Auto argued

that “[a]nything that occurred after the application” by Erica Bahena for the insurance policy

“is not relevant to any issues.” On June 8, 2016, the trial court denied Noel Hernandez’s

motion to compel without prejudice and ordered him to respond to Direct Auto’s motion for

a Rule 308 finding. On August 3, 2016, the trial court denied Direct Auto’s motion for a Rule

308 finding. The order does not provide the trial court’s findings or reasons, and the record

does not contain a bystander’s report or report of proceedings for this day.

¶ 21 On September 6, 2018, Noel Hernandez moved to compel discovery. On December

13, 2016, the trial court granted his motion and ordered Direct Auto to answer and produce

discovery by January 17, 2017. On May 8, 2017, Noel Hernandez filed a notice to depose

Rosa Miranda, a Direct Auto employee.

¶ 22 On May 17, 2017 Direct Auto filed a motion for leave to voluntarily “non-suit this

matter without prejudice.” However, on June 1, 2017, the trial court entered an order

observing that this motion was withdrawn. On June 7, 2017, Noel Hernandez moved for

leave to file a counterclaim for declaratory judgment, arguing that, “at this late date,” it

would be unjust to allow Direct Auto to voluntarily dismiss the action. On June 12, 2017, the

trial court entered an order granting Direct Auto’s motion to non-suit and granting Noel

Hernandez’s motion for leave to file a counterclaim. On June 27, 2017, Noel Hernandez filed

his countercomplaint for declaratory judgment.

-7- No. 1-17-2918

¶ 23 On July 7, 2017, Noel Hernandez noticed the depositions of Mike Torrello and Rosa

Mirandez, employees of Direct Auto. On July 24, 2017, Direct Auto moved to dismiss Noel

Hernandez’s countercomplaint pursuant to sections 2-615 and 2-619 of the Code of Civil

Procedure (735 ILCS 5/2-615, 2-619 (West 2016)). On July 31, 2017, Noel Hernandez

moved to compel the depositions of Mike Torrello and Rosa Mirandez. In its reply in support

of its motion to dismiss, Direct Auto observed that Erica and Jessica Bahena were being

defended by Direct Auto’s retained counsel and, thus, there was “no dispute regarding

[Direct Auto’s] duty to defend.” Direct Auto argued that, “because there is no judgment

entered against [Erica or Jessica Bahena], this Court is not permitted to issue an advisory

opinion as to whether [Direct Auto] would be required to indemnify if a judgment is entered

sometime in the future.” On September 28, 2017, the trial court entered an order denying

Direct Auto’s motion to dismiss and granting Noel Hernandez’s motion to compel discovery.

¶ 24 On November 7, 2017, the trial court entered an order defaulting Direct Auto. Since

this order is one of the orders at issues on this appeal, we provide the order in full:

“This matter coming before the Court on the continued motion of the

Defendant/Counter Plaintiff Noel Hernandez, to compel Direct Auto to answer

written discovery and produce witnesses Mike Torello and Rosa Mira[ndez] for

deposition; the Court being advised and the parties, being represented by counsel[:]

IT IS ORDERED that the motion to compel is withdrawn. Direct Auto Ins.

Company is defaulted for the reasons stated on the record. Judgment is entered in

favor of Noel Hernandez and against Direct Auto. The Court finds that Direct Auto

Ins. Co. owes a duty to defend Erica Bahena in Case 14 L 3287.”

-8- No. 1-17-2918

¶ 25 The November 7, 2017, order states that it was issued “for the reasons stated on the

record,” and the transcript of the November 7, 2017, proceeding is the only transcript in the

report of proceedings filed with this court.

¶ 26 Since the one-page transcript is very short and is at the heart of the issue on appeal,

we provide it below in full:

“MR. ENRIGHT: Thomas Enright for the defendant. It’s the defendant counter

plaintiff Noel Hernandez.

MR. NEWMAN: Jim Newman for the defendant Direct Auto.

THE COURT: Where are we at this point?

MR. ENRIGHT: Well, it’s here today, your Honor—it’s on our motion which

[ha]s been entered and continued to compel. It’s on behalf of Noel Hernandez and he

is against Direct Auto.

We are—for the written discovery as well as the deposition of two of their

employees, Mike Torello, and Ms. Miranda.

THE COURT: So, where are we at, Mr. Newman?

MR. NEWMAN: Judge, as I informed you when we were last in Court, I think

about six weeks ago, you had denied our Motion to Dismiss and we are declining to

participate further in the case.

We are not answering the complaint. We’re not at issue. I’ve advised the Court

that the Court’s free to enter a default judgment against my client and enter the relief

requested in the complaint.

-9- No. 1-17-2918

And then we will—if my client wants to appeal, we will appeal, but the case

doesn’t have value for my client to participate in the case any further. So that’s the

position that we are taking.

MR. ENRIGHT: It’s a default?

THE COURT: Enter a judgment of default against Direct Auto today and the

declaration that you seek. So go ahead and draft the order then.

MR. NEWMAN: Thank you, your Honor.”

¶ 27 Seven days later, on November 14, 2017, Direct Auto filed a notice of appeal “from

the November 7, 2017 order granting judgment against Defendant, Direct Auto Insurance

Company, and the September 28, 2017 order denying Defendant Direct Auto Insurance

Company’s Motion to Dismiss Noel Hernandez’s Counter Complaint.”

¶ 28 On November 27, 2017, Noel Hernandez moved to modify the trial court’s November

7, 2017, order “to rule that the Direct Auto policy number 74170-0-0 issued to Erica Bahena

was in effect at the time of the April *** 2012 accident, that Direct Auto policy number 741

70-0-0 covers the April *** 2012 accident *** and that Direct Auto owes a duty to defend

both Erica Bahena and Jessica Bahena in Case No. 14 L 3287.”

¶ 29 On January 12, 2018, the record on appeal (both the common law record and the

report of proceedings) were filed in this court. Other than the request for preparation of the

record, the last item appearing in the common law record is Hernandez’s November 27,

2017, motion seeking to modify the November 7, 2017, order.

¶ 30 On February 28, 2018, Direct Auto filed an amended notice of appeal stating that it

was also appealing “the January 31, 2018 order granting Noel Hernandez’s post-judgment

motion to modify.” However, the January 31, 2018, order is not attached to the amended

- 10 - No. 1-17-2918

notice of appeal and is not in either plaintiff or defendant’s appendices. Neither party moved

to supplement the record to add it, and it is not in the record on appeal, which was filed with

this court before the order was entered. As a result, this order is, quite literally, not before us.

We have neither the order itself nor the report of proceedings for that day.

¶ 31 ANALYSIS

¶ 32 Direct Auto raises two issues in its brief to this court (1) whether the trial court erred

in entering a default judgment against it and (2) whether, prior to entry of the default

judgment, the trial court erred in denying its motion to dismiss Noel Hernandez’s

countercomplaint. For the following reasons, we find no error and affirm.

¶ 33 I. Default Judgment

¶ 34 Direct Auto argues that the trial court erred in entering a default judgment against it.

After the trial court had twice 4 ordered Direct Auto to schedule the depositions of two of its

employees and to provide requested documents, Direct Auto asked the trial court, instead, to

enter a default judgment against it, which the trial court did.

¶ 35 Illinois Supreme Court Rule 219(c)(v) (eff. July 1, 2002) permits a trial court to enter

a default judgment against a party for a party’s failure to comply with the court’s orders

compelling discovery. A trial court’s decision concerning a discovery sanction is reviewed

only for an abuse of discretion. “The decision to impose a particular sanction under Rule

219(c) is within the discretion of the trial court and, thus, only a clear abuse of discretion

justifies reversal.” Shimanovsky v. General Motors Corp.,

(1998). An

abuse of discretion occurs when the trial court’s ruling is arbitrary, fanciful, or unreasonable

4 The trial court twice granted Noel Hernandez’s motions to compel discovery: on December 13, 2016, and on September 28, 2017. - 11 - No. 1-17-2918

or where no reasonable person would take the view adopted by the trial court. Thomas v.

Weatherguard Construction Co.,

, ¶ 53. “The issue, then, is not

what decision we would have reached if we were reviewing the facts on a clean slate, but

whether the trial court acted in a way that no reasonable person would.” Vivas v. Boeing Co.,

(2009).

¶ 36 In the case at bar, the trial court entered a default judgment at Direct Auto’s request.

A party cannot invite an error by the trial court and then use it as a basis for appeal. “Under

the invited-error doctrine, a party cannot acquiesce to the manner in which the trial court

proceeds and later claim on appeal that the trial court’s actions constituted error.” People v.

Manning,

; see also People v. Cox,

; People v. Hughes,

(“the invited error rule” states that “a party

cannot complain of error that it brought about or participated in”); People v. Bush,

(2005) (when a party “procures, invites, or acquiesces” to a trial court’s evidentiary

ruling, even if the ruling is improper, he cannot contest the ruling on appeal). “Simply stated,

a party cannot complain of error which that party induced the court to make or to which that

party consented.” In re Detention of Swope,

(2004).

¶ 37 At the November 7, 2017, hearing on the motion to compel, Direct Auto informed the

trial court that it was “declining to participate further in the case.” Direct Auto informed the

court that it refused to answer the complaint and “advised the Court that the Court’s free to

enter a default judgment against my client and enter the relief requested in the complaint.”

The trial court then took exactly the action that Direct Auto had requested. Direct Auto

cannot be heard now to complain on appeal that the trial court erred by taking the requested

- 12 - No. 1-17-2918

action. Thus, we cannot find that the trial court abused its discretion by entering a default

judgment.

¶ 38 If Direct Auto had desired an immediate appeal of the trial court’s December 13,

2016, or September 28, 2017, orders compelling discovery, it could have sought a friendly

contempt order. E.g., Doe v. Township High School District 211,

,

¶ 67 (“ ‘it is well settled that the correctness of a discovery order may be tested through

contempt proceedings’ ” (quoting Norskog v. Pfiel,

(2001))); Ill. S. Ct. R.

304(b)(5) (eff. Mar. 8, 2016) (permitting the appeal of an “order finding a person or entity in

contempt of court”). However, Direct Auto chose not to proceed in that manner.

¶ 39 Direct Auto also argues that the trial court erred in entering a default judgment

against it because the entry of a default judgment ignored the res judicata effect of the

judgment in the prior case. Since Direct Auto invited the trial court’s entry of a default

judgment, we will discuss the res judicata issue below in connection with the trial court’s

denial of Direct Auto’s motion to dismiss.

¶ 40 II. Denying the Motion to Dismiss

¶ 41 A. For Failure to State a Cause of Action

¶ 42 In addition to appealing the entry of a default judgment, Direct Auto appeals the trial

court’s September 28, 2017, order denying its motion to dismiss Noel Hernandez’s

countercomplaint.

- 13 - No. 1-17-2918

¶ 43 While the denial of a motion to dismiss is not ordinarily appealable, 5 we may

consider “an order that was a necessary step to the order at issue before us.” People v. Maxey,

; CitiMortgage, Inc. v. Hoeft,

(an appeal is deemed to include an interlocutory order “if that order was a step in the

procedural progression” leading to the final judgment). In the case at bar, the denial was a

necessary step in the procedural progression to the order before us, since without it, Direct

Auto would not have sought the entry of a default judgment.

¶ 44 Although Direct Auto filed a combined motion to dismiss in the court below, it

argues in its appellate brief that the trial court erred by failing to dismiss Noel Hernandez’s

countercomplaint pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-

615 (West 2016)) for failure to state a cause of action.

¶ 45 A motion to dismiss under section 2-615 challenges the legal sufficiency of the

complaint by alleging defects apparent on the complaint’s face. Young v. Bryco Arms,

(2004). The question is whether the allegations in the complaint are sufficient to

state a cause of action upon which a court may grant relief. Wakulich v. Mraz,

(2003). To answer this question, a court will consider as true all the well-pleaded

facts in the complaint, as well as any reasonable inferences that may be drawn from them.

Young,

. In addition, a court will construe the allegations in the complaint in

the light most favorable to the nonmoving party. Young,

.

¶ 46 An appellate court will review de novo a trial court’s section 2-615 determination.

Young,

. De novo consideration means that we perform the same analysis

5 The denial of a motion to dismiss is “not generally reviewable on appeal as any error in the denial of the motion merges into the final judgment *** and it is from that final judgment that an appeal is taken.” Ovnik v. Podolskey,

. - 14 - No. 1-17-2918

that a trial judge would perform. Rico Industries, Inc. v. TLC Group, Inc.,

. In addition, we may affirm on any basis appearing in the record, whether or not

the trial court relied on that basis or its reasoning was correct. Rico Industries,

.

¶ 47 Direct Auto argues that the trial court should have dismissed Noel Hernandez’s claim

that Direct Auto has an obligation to defend and indemnify the Bahenas because (1) Noel

Hernandez has no standing to assert an injury on behalf of the Bahenas and (2) his claim is

not ripe for adjudication since the issue of the Bahena’s liability to him has not yet been

adjudicated and, thus, any opinion by this court would be an advisory one. 6

¶ 48 “Illinois public policy7 dictates that insurance is ‘not necessarily a private matter

between an insurer and its insured,’ and as such, an injured party’s rights against the liability

insurer vests at the moment of the accident giving rise to the underlying claim.” State Farm

Fire & Casualty Co. v. Perez,

(2008) (quoting Skidmore v.

Throgmorton,

(2001)); Reagor v. Travelers Insurance Co.,

(1980) (“liability insurance is no longer considered merely a private matter

between an insured and an insurer”). The injured party’s vested rights cannot be “defeated by

the joint efforts of the insured and the insurer.” State Farm,

;

6 The irony is rich here. Direct Auto has been litigating this suit for years as a plaintiff, seeking a declaratory judgment that it now claims is premature and not ripe. On November 3, 2014, the Bahenas were defaulted for failing to appear and answer. Thus, Direct Auto was seeking a declaratory judgment solely against Noel Hernandez for over two years. In addition, it is attempting to assert the preclusive effect of a prior judgment, which, according to its present argument, was, at least in part, not ripe for adjudication. 7 “The risk-spreading theories of liability insurance policies mandate that affected members of the public should be afforded the maximum protection possible in accord with fairness to the insurer.” Skidmore,

; Reagor,

(“liability insurance abounds with public policy considerations, one of which is that the risk-spreading theories of such policies should operate to afford affected members of the public the maximum protection possible consonant with fairness to the insurer”). - 15 - No. 1-17-2918

Skidmore,

. “The injured party’s relationship with the liability insurer

is that of a beneficiary, who becomes a real party in interest in the insurance contract at the

time of the occurrence giving rise to his injuries.” State Farm,

;

Skidmore,

(“The injured party’s rights come into existence at the

moment of the accident.”); Reagor,

(“As a beneficiary of a liability

insurance policy, an injured person has rights under the policy which vest at the time of the

occurrence giving rise to his injuries.”). “[E]ven though an injured party is not a party to the

insurance contract, he or she will always be allowed to file a declaratory judgment action in

order to determine the liable party’s coverage pursuant to that insurance contract.” Skidmore,

(found that an injured passenger was “allowed to directly sue”

insurance company to ascertain the coverage of a driver’s policy).

¶ 49 “While the policy of the State prohibits direct action by an injured party against an

insurer before judgment has been rendered against its insured, such policy is not violated as

long as the issue of coverage is effectively severed from any issue of the insured’s liability

and the assessment of damages.” State Farm,

; Reagor,

. “[T]he rationale underlying this policy,” of prohibiting direct actions against an

insurer before judgment has been rendered against the insured, “is that disclosure of liability

coverage at a trial against an insured for injuries resulting from his negligence” would be

“prejudicial.” Reagor,

. “Clearly, this is not the situation here” where

the issue of coverage has been effectively divorced from any question of liability. Reagor,

.

¶ 50 Thus, under long-established Illinois precedent, Noel Hernandez, as an injured party,

has standing and his suit is not premature. Further, ripeness is an issue that can be waived.

- 16 - No. 1-17-2918

Continental Casualty Co. v. Howard Hoffman & Associates,

(citing Lebron v. Gottlieb Memorial Hospital,

(2010)). Direct Auto

waived the issue of ripeness with respect to the question of coverage, when it filed suit

seeking a resolution of the same question.

¶ 51 In addition, “where an insurer brings a declaratory judgment action to determine

coverage of a claim made against its insured, the injured person is a necessary party to the

suit [citations], and the injured person may appeal from a judgment that there is no

coverage.” Reagor,

; see also State Farm,

(an

injured passenger was “a necessary party” in a declaratory judgment action by an insurance

company against its insured driver); Continental,

(“despite

the fact that no liability has yet been determined with respect to its claim,” the injured party

was a necessary party to the coverage litigation since it has “ ‘a substantial right in the

insurance policy’s viability’ ” (quoting Skidmore,

)); Skidmore,

(“the injured party is a necessary party to the suit” concerning coverage

“because he or she has a substantial right in the insurance policy’s viability”).

¶ 52 In the case at bar, Direct Auto failed to name Noel Hernandez as a necessary party to

the prior suit, and now is attempting to use its own failure to foreclose that party’s rights to

appeal that determination. To allow that would be a miscarriage of justice. “The injured

person must be given the opportunity to litigate the question of coverage under the liability

insurance policy before his interest *** may be terminated.” (Emphases added.) Reagor,

(this court found that an injured party could bring a declaratory judgment

action against an insurer to determine coverage for any damages that may be awarded).

- 17 - No. 1-17-2918

¶ 53 B. Res Judicata

¶ 54 Although Direct Auto does not raise 8 the res judicata issue in the section of its

appellate brief concerning the denial of its motion to dismiss, we address it here because we

already concluded above that the trial court committed no error when it entered a default

judgment at Direct Auto’s request.

¶ 55 Direct Auto argued in the court below and before this court that Noel Hernandez’s

countercomplaint is barred by the judgment entered in Direct Auto’s prior suit, in which

Direct Auto failed to name him as a party. Section 2-619(a)(4) permits an involuntary

dismissal on the ground that “the cause of action is barred by a prior judgment.” 735 ILCS

5/2-619(a)(4) (West 2016).

¶ 56 A motion to dismiss pursuant to section 2-619 admits the legal sufficiency of the

claim but asserts defects, defenses or another affirmative matter, appearing on the face of the

complaint or established by external submissions, that defeats the claim or operates to avoid

its legal effect. Daniels v. Union Pacific R.R. Co.,

(2009); Zahl v.

Krupa,

(2006). “ ‘Such a motion admits the legal sufficiency of

the plaintiff’s complaint but interposes some affirmative matter that prevents the lawsuit

from going forward.’ ” Daniels,

(quoting Travis v. American

Manufacturers Mutual Insurance Co.,

(2002)). “In a section 2-

619 motion to dismiss, the [movant] bears the burden of proving the affirmative defense.”

Daniels,

(citing Luise, Inc. v. Village of Skokie,

(2002)). Thus, the burden is on Direct Auto to prove its claim of res judicata.

8 “[F]orfeiture is a limitation on the parties and not the court.” Oshana v. FCL Builders, Inc.,

; Skidmore, 322 Ill. App. 3d at 420 (“the doctrine of waiver serves as a warning to the parties rather than a limitation on the appellate court’s jurisdiction”). - 18 - No. 1-17-2918

¶ 57 Generally, section 2-619 motions present a question of law, which we review

de novo. DeLuna v. Burciaga,

(2006); Schacht v. Lome,

. De novo consideration means that we perform the same analysis that a trial

court would perform. Schacht,

.

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

a court of competent jurisdiction acts as an absolute bar to a subsequent action between the

same parties or their privies involving the same claim, demand, or cause of action. Wilson v.

Edward Hospital,

. The bar extends not only to all matters that were

actually decided but also to those matters that could have been decided in the prior action.

Wilson,

; Cload v. West,

(2002) (“Res judicata

bars not only those issues that were actually litigated ***; it bars those that could have been

raised as well.”). Three requirements must be met for res judicata to apply: (1) a final

judgment on the merits rendered by a court of competent jurisdiction, (2) an identity of the

cause of action, and (3) an identity of parties or their privies. Wilson,

.

“The party invoking the defense of res judicata bears the burden of demonstrating it applies.”

Oshana,

; Cload,

.

¶ 59 Where “the same set of facts was necessary to maintain and prove both cases, the

causes of action were identical for purposes of res judicata.” Wilson,

.

“The principle that res judicata prohibits a party from later seeking relief on the basis of

issues that might have been raised in the prior action also prevents a litigant from splitting a

single cause of action into more than one proceeding.” Wilson,

. Thus,

where a plaintiff could have litigated its claims in the first action, “the claims were barred by

res judicata.” Wilson,

.

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¶ 60 In the case at bar, Direct Auto had to prove the same set of facts in both cases; thus,

from the perspective of Direct Auto as plaintiff, its burden of proof concerning coverage was

identical. However, it chose to split its cause of action into two proceedings when it chose

not to add Noel Hernandez as a party, even though it was aware of his claims and lawsuit for

five months before the first proceeding ended. Where Direct Auto could have litigated this

claim in the first action but chose not to, its present claim against Noel Hernandez is barred

by the principles underlying res judicata.

¶ 61 The purpose of res judicata is to insure that litigation has an end, to prevent claim-

splitting, and to protect the public from the cost of multiple litigations. Wilson,

. To allow Direct Auto to use res judicata as a sword in this case would

make the doctrine meaningless.

¶ 62 In addition, Direct Auto cannot prove privity, the third requirement of res judicata. 9

“ ‘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.’ ” Oshana,

(quoting City of Chicago v. St. John’s United Church of Christ,

(2010), quoting City of Rockford v. Unit Six of the Policemen’s

Benevolent & Protective Ass’n,

(2005)). “Privity generally exists

when parties adequately represent the same legal interest.” State Farm Fire & Casualty Co.

v. John J. Rickhoff Sheet Metal Co.,

(2009); Oshana,

.

9 “A prior judgment may have preclusive effects on a subsequent action under either the doctrine of res judicata or the doctrine of collateral estoppel.” State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co.,

(2009). Direct Auto does not argue collateral estoppel. However, “regardless of which of the two doctrines applies, *** privity is the same under either doctrine.” State Farm Fire,

. - 20 - No. 1-17-2918

¶ 63 There is no one prevailing definition of ‘privity’ that Illinois courts apply in all cases.

Oshana,

. Instead, Illinois courts have generally applied the

Restatement (Second) of Judgments (Restatement) to determine privity. Oshana,

; State Farm Fire,

. “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.’ ” State Farm Fire,

(quoting Restatement (Second) of Judgments, Introduction at 1 (1982)); Oshana,

. The Restatement sets forth three categories of relationship

on which Illinois courts have relied. Oshana,

; State Farm

Fire,

.

¶ 64 Section 75 of the Restatement sets forth three categories of relationships that may

establish privity: (1) relationships that are “explicitly representative,” such as a trustee,

executor or the class representative of a class designated by a court; (2) “substantive legal

relationships,” in which one of the parties to the relationship is “treated as having the

capacity to bind the other to a judgment,” such as parties who are vicariously liable for one

another (e.g. corporations and their officers); and (3) “successors in interest to property.”

Restatement (Second) of Judgments § 75, cmt. a, at 210 (1982); see also Restatement

(Second) of Judgments §§ 41-43, 45-61 (1982); Oshana,

;

State Farm Fire,

.

¶ 65 Direct Auto has not argued that one of these categories specifically applies, in part

because Direct Auto has not identified specifically who Noel Hernandez was in privity with.

The record before us does not disclose whether all of the parties named as defendants in the

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first case were served or whether they opposed Direct Auto’s motion in the first case. Before

the trial court in our case, Direct Auto claimed that its summary judgment in the first case

was opposed by Erica Bahena and “ ‘one of the other claimants.’ ” See supra ¶ 16. As for

Erica Bahena, Direct Auto observed that the Bahenas were being defended by Direct Auto’s

retained counsel in the underlying tort actions against the injured passengers. As a result, the

Bahenas and the injured passengers do not share the same legal interest. See also State Farm,

(a default judgment in favor of the insurance company and against its

insured driver “could not be imputed” to the injured passenger because the “vested rights” of

the passenger “may not be defeated” by the “behavior” of the insured in litigation); cf.

Skidmore,

(“an insurer and its insured cannot agree to policy

interpretations with the intent to keep an injured party from recovering”). In addition, Erica

Bahena had filed for bankruptcy, and at least one of the Bahenas had moved to withdraw

from the first case, all prior to the trial court’s grant of summary judgment in that action.

Thus, the defendants who were seeking to withdraw or who were in bankruptcy certainly did

not have the same legal interest as a party like Noel Hernandez who was still actively seeking

relief for his alleged injuries under the policy.

¶ 66 As for the other unnamed claimant, it could have been any of the other named

defendants in the prior action and, therefore, not necessarily one of the other injured

passengers. The defendants in the prior action were: Sana Kishta, as next friend of Ahmed

Kishta, the deceased driver of the vehicle in which Noel Hernandez was a passenger; Ariel

Hernandez, another passenger in the vehicle driven by Kishta; and Enterprise Rent A Car

(Enterprise), the owner of the vehicle driven by Kishta. Enterprise likely had its own separate

insurance to cover any potential liability from an accident, and the driver likely had such

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insurance as well. As a result, their interest in pursuing additional indemnification from

Direct Auto may not have been the same as Noel Hernandez’s interest in indemnification. As

for Ariel Hernandez, there is no indication on the record before us what—if any—injuries

she had. Thus, Direct Auto has failed in its burden to show that Noel Hernandez was in

privity with the parties in the prior action who allegedly defended against Direct Auto’s

summary judgment motion.

¶ 67 Further, we do not know what the prior court held. All we have in the record before

us is a short, one-paragraph handwritten order granting summary judgment that does not

provide the basis or reasons for its finding. No transcript or bystander’s report was provided

in the appellate record. The order states only that, with respect to these defendants, Direct

Auto has no obligation to defend or indemnify. However, the order does not state what Direct

Auto argues on this appeal—namely, that the policy was void ab initio because the

policyholder failed to name all the members of her household over the age of 15, even

though she specifically listed the driver involved in this particular accident. Direct Auto

seeks to give preclusive effect to an order where its preclusive effect is unclear. Since Direct

Auto had the burden of proof with respect to its res judicata claim, we cannot find that it

carried its burden.

¶ 68 In sum, Direct Auto failed to name Noel Hernandez as a defendant in a prior action

and now seeks to benefit from that failure by binding him to an order in an action to which he

was not a party, and when he sought information to challenge that order as it applied to him,

Direct Auto defaulted rather than provide the information.

¶ 69 Direct Auto knew Noel Hernandez was a necessary party but it chose not to amend its

complaint to add him in order to avoid delay in the first action, because that action was

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“nearing” resolution. As a result, there has been nothing but delay ever since—five years of it

and counting.

¶ 70 There are two different doctrines that must be interpreted to work together: necessary

party and res judicata. It cannot be the case that one violates the necessary party doctrine, by

knowingly and deliberately failing to add a necessary party, and then turns around and uses

res judicata as a sword against the very party that it failed to add. In addition, Direct Auto

has failed in its burden to show that the requirements of res judicata, such as privity, are

satisfied.

¶ 71 CONCLUSION

¶ 72 For the foregoing reasons, we affirm the trial court’s order.

¶ 73 Affirmed.

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