Indian Harbor Ins. Co. v. MMT Demolition, Inc.

• Decision Date: 13 June 2014
• Docket Number: No. 1–13–1734.,1–13–1734.
• Citation: 13 N.E.3d 108
• Parties: INDIAN HARBOR INSURANCE COMPANY, as Subrogee of Podmajersky Management, Inc., Plaintiff–Appellant, v. MMT DEMOLITION, INC., Defendant–Appellee.
• Court: United States Appellate Court of Illinois

13 N.E.3d 108

INDIAN HARBOR INSURANCE COMPANY, as Subrogee of Podmajersky Management, Inc., Plaintiff–Appellant

v.MMT DEMOLITION, INC., Defendant–Appellee.

No. 1–13–1734.

Appellate Court of Illinois, First District, Fifth Division.

June 13, 2014.

Russell M. Barnett, of Wheaton, for appellant.

Robert R. Dlugajczyk, of Law Offices of Robert R. Dlugajczyk, of Chicago, for appellee.

OPINION

Presiding Justice GORDON

delivered the judgment of the court, with opinion.

¶ 1 Plaintiff Indian Harbor Insurance Company appeals an order granting summary judgment to defendant MMT Demolition, Inc., on the ground that plaintiff's subrogation lawsuit for negligence was precluded by res judicata. The lawsuit concerned property damage to a building managed by its insured, Podmajersky Management, Inc. (Podmajersky). Prior to the filing of plaintiff's subrogation suit for negligence against defendant, two tenants in the building filed a lawsuit against defendant in small claims court concerning their property damage, which they claimed was also caused by defendant. After a bench trial, the trial court found for defendant. Defendant argues in the instant case that the judgment had a preclusive effect against plaintiff in the case at bar. The trial court agreed and granted summary judgment in defendant's favor. For the following reasons, we reverse.

¶ 2 BACKGROUND

¶ 3 Podmajersky is the property manager of the subject property, which consists of a two-story, mixed residential and commercial building located on South Halsted Street in Chicago. Plaintiff is the subrogee of Podmajersky. Defendant is an Illinois corporation engaged in the demolition business, with its principal place of business located in Chicago. Developing Environments, LP (Developing Environments), which is not a party to this case, is an Illinois limited partnership that owns a parcel of real property (the neighboring property) adjacent to the subject property.

¶ 4 I. The Demolition

¶ 5 This appeal concerns a lawsuit for negligence arising from the demolition of the neighboring property. Plaintiff alleges the following facts in its complaint: On or about May 30, 2007, Developing Environments retained defendant to demolish the neighboring property and remove its debris. Defendant obtained the necessary permits from the City of Chicago to demolish the neighboring property and the demolition occurred on September 10, 2007.

¶ 6 The front wall of the neighboring property was attached, by interlocking running board, to the front wall of the subject property. In order to demolish the neighboring property, defendant was required to “address the issue of the front walls of both buildings attached via interlocking running board.” Plaintiff alleges that, despite the front walls being attached, defendant at no relevant time ever isolated the two buildings or cut the roof trusses of the neighboring property away from the walls of the subject property. Instead, defendant chose to “push and pull the entire roof framing in order to separate it from the [subject property], thus transferring the force to the front wall of the [subject property] and causing said wall to move outward by approximately five inches and become permanently bowed.” Defendant's actions caused vertical cracks through the masonry walls of the structure of the subject property, rendered doors and windows inoperable, left the front wall of the subject property unable to resist any structural loads, compromised the structural integrity, and rendered the entire building uninhabitable.

¶ 7 II. The Investigation

¶ 8 On September 11, 2007, Structure Evaluation Engineers, Inc. (SEE), was authorized by Podmajersky to conduct an evaluation of the subject property to review the “existing conditions and damages caused by [defendant] while demolishing the adjacent building.” On September 20, 2007, SEE submitted a letter to Podmajersky detailing its findings. SEE opined that defendant did not implement proper demolition procedures and, as a result, damaged the front masonry wall of the subject property and compromised the structural integrity of the wall. On October 30, 2007, L.J. Shaw & Co. (Shaw), an independent insurance adjustor hired by defendant to investigate the property damage sent a letter to defendant stating that its preliminary investigation of the subject property indicated that defendant was responsible for the damages and warned it to notify its insurer that it might be liable for damages. In the course of its investigation, Shaw retained a structural engineering firm (Engineering Systems, Inc. (ESI)). On November 14, 2007, ESI submitted a report of its investigation of the subject property to Shaw. The ESI report states, in summary, that the masonry on the front wall of the subject property was “tied to” the front wall of the neighboring property by interlocking running bond masonry, that defendant should have isolated the two buildings, and that the “cause of distress” to the subject property was from defendant's demolition operations.

¶ 9 Plaintiff alleges that it is the bona fide owner of the cause of action set forth in its complaint, by virtue of having made payments “to or on behalf of” Podmajersky, pursuant to its insurance policy.

¶ 10 III. The Tenant Lawsuit

¶ 11 On February 19, 2008, two tenants in the subject property, John Bomher and Elizabeth Jochum (the tenants), filed a pro se lawsuit (the tenant lawsuit) in the small claims court of the municipal division of the circuit court of Cook County against defendant and Podmajersky. In their complaint, the tenants allege the following: that they leased a residence at the subject property and operated home occupation freelance businesses from their residence. As a result of the demolition defendant performed on September 10, 2007, the tenants' residence “suffered major damage to the exterior and interior.” Podmajersky gave notice to the tenants to vacate the premises on October 9, 2007, as a result of the damage caused by defendant. The tenants submitted a claim for their damages, and both defendant and Podmajersky failed to honor the claim. The tenants alleged $9,912.38 in damages, plus costs.

¶ 12 On May 15, 2008, the trial court granted Podmajersky's motion to dismiss in the tenant lawsuit.¹ Podmajersky did not participate in any further proceedings in the tenant lawsuit. On October 16, 2008, the tenant lawsuit proceeded to a bench trial, and the trial court entered judgment in favor of defendant. The record does not contain a trial transcript of the trial proceedings or a bystander's report, nor is there a written order that explains the basis for the court's rulings.

¶ 13 IV. The Lawsuit at Issue

¶ 14 On June 29, 2010, plaintiff filed a subrogation lawsuit against defendant, alleging that defendant was negligent in its demolition of the neighboring property, causing $218,343.08 in damages.

¶ 15 In its answer, defendant asserts the affirmative defense of res judicata. Defendant argues that the lawsuit at issue in this appeal “involves the same cause of action as [did] the Tenant Lawsuit.” Defendant argues that the tenants “shared mutual property rights in the [subject property]” with Podmajersky, plaintiff's subrogor, and are in privity with Podmajersky for res judicata purposes.

¶ 16 On December 19, 2012, defendant filed a motion for summary judgment pursuant to section 2–1005 of the Code of Civil Procedure (735 ILCS 5/2–1005 (West 2010)

), claiming that it was entitled to judgment under the doctrine of res judicata. Defendant claims that all three factors required for resolution under res judicata had been met because (1) the trial court's judgment in the tenant lawsuit was final; (2) there is an identity of interests in the tenant lawsuit and the lawsuit at bar because the tenants and plaintiff both filed negligence causes of action arising from defendant's demolition activities; and (3) there is an identity of parties because Podmajersky was a defendant in the tenant lawsuit and Podmajersky shared the same interests in the subject property as the tenants.

¶ 17 Plaintiff responded to defendant's motion, claiming that none of the requirements for res judicata had been met. First, plaintiff claims that defendant cannot support its claim that a final judgment on the merits had been issued in the tenant lawsuit because defendant did not include a transcript of the proceedings or a bystander's report before the trial court. Plaintiff claims that, other than unverified statements by defendant in its brief before this court, “there is nothing to show that the Court which ruled on the small claims action filed by two tenants of Podmajersky's building considered any of the evidence disclosed in the instant matter.” Plaintiff next claims that it was not aware of the existence of the tenant lawsuit, claiming that Podmajersky never informed it of the proceedings. Furthermore, the damage estimation in the instant case had not yet been finalized when the tenant lawsuit proceeded to trial. Therefore, plaintiff could not have participated on the merits even if it were aware of the trial in the tenant lawsuit. Plaintiff also asserts that discovery is not permitted in small claims court, and defendant never claimed that any discovery occurred in the tenants' lawsuit. Plaintiff claims that there is “no indication” in the instant case that the two engineering reports were introduced into evidence in the tenant lawsuit, and it concludes that, because the reports were “not available² to the tenants in their lawsuit,” defendant cannot claim that the tenant lawsuit functioned as a final judgment on the merits in this case for purposes of res judicata.

¶ 18 Plaintiff argues that the claims were not identical because the tenants filed a cause of action for lost profits resulting from the interruption of the businesses operated out of the tenants' residence, whereas plaintiff's lawsuit sought damages for repairs to the subject property and lost rent. The tenants did not seek any...