American Nat. Bank and Trust Co. v. Steiner, 1-90-1254

• Decision Date: 24 December 1991
• Docket Number: No. 1-90-1254,1-90-1254
• Citation: 235 Ill.App.3d 1101,177 Ill.Dec. 227,603 N.E.2d 8
• Parties: , 177 Ill.Dec. 227 AMERICAN NATIONAL BANK AND TRUST COMPANY, Plaintiff-Appellee, Cross-Appellant, v. Lester STEINER, Defendant Paul Skulsky, Defendant-Appellant, Cross-Appellee.
• Court: United States Appellate Court of Illinois

Page 8

603 N.E.2d 8

235 Ill.App.3d 1101, 177 Ill.Dec. 227

AMERICAN NATIONAL BANK AND TRUST COMPANY Plaintiff-Appellee, Cross-Appellant, v. Lester STEINER, Defendant Paul Skulsky, Defendant-Appellant Cross-Appellee.

No. 1-90-1254.

Appellate Court of Illinois First District, Second Division.

Dec. 24, 1991.

Robert A. Holstein, John M. Mack, Aron D. Robinson, Holstein, Mack & Klein, Chicago, for defendant-appellant, cross-appellee.

Gerald G. Saltarelli, Michael A. Stick, Mary L. Hayes, Butler, Rubin, Newcomer, Saltarelli, Boyd & Krasnow, Chicago, for plaintiff-appellee, cross-appellant.

Presiding Justice SCARIANO delivered the opinion of the court:

On May 20, 1982, in exchange for a $1.2 million loan obtained from plaintiff American National Bank and Trust Company (Bank), defendant Lester Steiner gave his two promissory notes, on which defendant Paul Skulsky agreed to be guarantor. Each of Skulsky's guaranties contained provisions which gave the Bank the right to recover costs and attorney fees "paid or incurred by the Bank in endeavoring to collect the indebtedness, * * * or in enforcing this guaranty * * *."

At the same time, Skulsky executed another agreement with the Bank in which he pledged several notes issued by Tele-Communications, Inc. (TCI), as collateral on his guaranties. The pledge contained its own attorney fees provision which stated, "[u]pon non-payment when due of any of the Obligations, * * * the Bank may apply the net proceeds, after deducting all costs, expenses and attorneys' fees incurred at any time in the collection, protection and sale of the collateral and the Obligations * * *." When Steiner defaulted on March 3, 1983, the Bank brought suit in the circuit court against Steiner and Skulsky to recover on the notes and the guaranties. In his answer, Skulsky admitted that he had executed the guaranties but raised several affirmative defenses.

After the default, the Bank notified TCI that it had acquired a security interest in the notes which Skulsky had pledged as collateral for his guaranties of Steiner's obligations, and although the Bank requested TCI to take no action adverse to the Bank, it nevertheless made some payments on the notes to Skulsky. As a result, on February 27, 1984, the Bank filed suit against TCI in Colorado, TCI's principal place of business, and joined Skulsky as a party. The Bank's complaint sought a declaration as to its rights in the notes and judgment for the balance due thereon, plus the Bank's "costs in this action and * * * costs of collection including its attorney's fees." In his answer, Skulsky again admitted that he had executed the guaranties, but raised the same affirmative defenses, among others, that he had asserted in the Illinois action.

On August 13, 1985, the Bank was awarded summary judgment in the Illinois action. While defendant's appeal was pending in this court, the Bank filed supplemental proceedings to domesticate the Illinois judgment in Florida, where Steiner and Skulsky resided or had assets, and in New Jersey, where Skulsky also had a residence and owned property.

On October 25, 1985, the Colorado trial court issued a ruling in favor of the Bank, giving full faith and credit to the judgment rendered against Skulsky by the Illinois circuit court. On July 22, 1986, this court, in an unpublished order rendered under Supreme Court Rule 23, reversed and remanded the judgment of the circuit court, holding that there were genuine issues of material fact to be tried regarding Skulsky's affirmative defenses. Thereupon, the Bank dismissed its New Jersey action but was granted leave to refile the case at a later date, and it "terminated" the Florida proceeding.

After Skulsky appealed the Colorado judgment, the Court of Appeals of that state remanded the case to the trial court for further consideration, giving full faith and credit to this court's reversal of the circuit court's ruling. When, however, in January of 1988, the trial court in Colorado conducted proceedings on Skulsky's affirmative defenses, it rejected all of them, including those he had raised in the Illinois action, and entered an order granting declaratory relief in favor of the Bank, all of which was upheld by the Colorado appellate court. Neither fees nor costs were litigated in Colorado, New Jersey, or Florida.

On December 9, 1988, after this court had remanded the case, the circuit court awarded summary judgment in favor of the Bank, and on January 6, 1989, the Bank filed its petition for the attorney fees and court costs it had expended in all four of its actions. On March 12, 1990, the circuit court granted the petition except for those fees and costs related to the Florida and New Jersey actions, stating "I will grant this motion with the exception of what's claimed for the work in New Jersey and Florida. The Colorado case and in this case, it seems to be involved with the same issues. I'm not sure what Florida involved."

On April 6, 1990, the court entered final judgment in the Bank's favor, awarding the Bank $769,449.01 as principal and $482,393.76 as accrued interest on the notes, plus $287,055.05 in fees and costs. Skulsky appeals the court's award of attorney fees and costs to the Bank in the Colorado action, as well as the award of certain fees in the Illinois action, and the Bank cross-appeals the court's denial of attorney fees and costs in the Florida and New Jersey proceedings.

The Colorado Claim

Skulsky contends that the Bank is not entitled to attorney fees relating to the Colorado action because "[a]ny claim arising from the action is now barred" by the defense of res judicata. Citing In re Marriage of Firestone (1987), 158 Ill.App.3d 887, 891, 110 Ill.Dec. 718, 511 N.E.2d 895, Skulsky maintains that since the Bank had the opportunity to litigate fees in the Colorado court, "[r]es judicata will bar relitigation of any issue or claim that was raised or could have been raised in the previous case." (Accord Housing Authority v. Young Men's Christian Association of Ottawa (1984), 101 Ill.2d 246, 251-52, 78 Ill.Dec. 125, 461 N.E.2d 959). The Bank responds that its "rights to such fees under the Guaranties was not and could not have been litigated in Colorado" because the purpose of the Colorado case was to enforce its rights in the TCI notes, and was not to enforce Skulsky's guaranties. The Bank further argues that "[h]ad the Bank attempted to collect attorney fees in Colorado, * * * Skulsky would have been confronted with clearly duplicative litigation" because "the issue of Skulsky's liability for legal expense under the Guaranties was already before the court in Illinois * * *."

We conclude that the doctrine of res judicata precludes the Bank from recovering in Illinois the fees and costs incurred in the Colorado action, a conclusion fully consistent with the principles followed by our courts. "A decree operates as res judicata of the claim presented in a later action when the facts and relief sought in both actions 'are substantially the same.' " Housing Authority, 101 Ill.2d at 254, 78 Ill.Dec. 125, 461 N.E.2d 959, quoting Midlinsky v. Rubin (1930), 341 Ill. 378, 385, 173 N.E. 368.

"To determine whether causes of action are the same for res judicata purposes, two tests have been employed. [Citation.] The first is a 'same evidence' test, under which the court inquires whether the same facts are essential to the maintenance of both cases or whether the evidence needed to sustain the second action would have sustained the first. [Citations.] Where the same factual allegations form the basis for the two allegedly different causes of action, the fact that a party proceeds on different theories or seeks different relief does not prevent the operation of res judicata. [Citation.]

* * * * * *

More recently, Illinois courts, as well as those of many other states, "have also used a 'transactional' approach to determine whether causes of action are identical for res judicata purposes, stating that 'the assertion of different kinds of theories of relief still constitutes a single cause of action if a single group of operative facts give [sic] rise to the assertion of relief.' [Citations]" Best Coin-Op, Inc. (1989), 189 Ill.App.3d 638, 652, 654, 136 Ill.Dec. 957, 545 N.E.2d 481.

Whether the "same evidence" test or the "transactional" approach is applied, we hold that under the facts of this case the doctrine of res judicata governs as to the Colorado litigation, for both the Illinois and Colorado cases arose out of the underlying contractual relationship between the parties; the complaints in both alleged that Steiner defaulted on his obligations, both alleged that upon notice to Skulsky he failed to abide by the terms of his guaranties; the Bank pleaded its attorney fees and costs in both complaints; and Skulsky's defenses were the same in both cases. As the Bank concedes, "the issues litigated in Colorado were exactly the same as those raised by Skulsky in the trial court here * * *." The trial judge recognized as much in her statement: "The Colorado case and in this case, it seems to be involved with the same issues." Therefore, since the facts, pleadings, issues, applicable law, and the relief sought in both cases were nearly identical, res judicata applies.

The Bank's thesis that the purpose of the Colorado action was to enforce the pledge agreement and not the guaranties is no...