                                  Illinois Official Reports

                                          Appellate Court



        Indian Harbor Insurance Co. v. MMT Demolition, Inc., 2014 IL App (1st ) 131734




Appellate Court              INDIAN HARBOR INSURANCE COMPANY, as Subrogee of
Caption                      Podmajersky Management, Inc., Plaintiff-Appellant, v. MMT
                             DEMOLITION, INC., Defendant-Appellee.



District & No.               First District, Fifth Division
                             Docket No. 1-13-1734



Filed                        June 13, 2014



Held                         Res judicata did not bar plaintiff insurer from pursuing its subrogation
(Note: This syllabus         claim against defendant demolition company for the damages suffered
constitutes no part of the   by a building plaintiff insured as a result of defendant’s alleged
opinion of the court but     negligence in demolishing a neighboring building, notwithstanding
has been prepared by the     the fact that judgment was entered for defendant in an earlier small
Reporter of Decisions        claims action brought by tenants of the damaged building, since
for the convenience of       defendant failed to establish the identity of the two causes of action or
the reader.)                 that the tenants were in privity with plaintiff; therefore, the trial
                             court’s entry of summary judgment for defendant on the ground that
                             res judicata barred plaintiff’s action was reversed.




Decision Under               Appeal from the Circuit Court of Cook County, No. 10-L-007509; the
Review                       Hon. Kathy Flanagan, Judge, presiding.




Judgment                     Reversed and remanded.
     Counsel on               Russell M. Barnett, of Wheaton, for appellant.
     Appeal
                              Robert R. Dlugajczyk, of Law Offices of Robert R. Dlugajczyk, of
                              Chicago, for appellee.




     Panel                    PRESIDING JUSTICE GORDON delivered the judgment of the
                              court, with opinion.
                              Justices McBride and Palmer concurred in the judgment and opinion.



                                               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

                                                  -2-
       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.



                                                   -3-
¶ 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


          1
           The record does not disclose the grounds on which Podmajersky sought to be dismissed, nor the
       grounds on which the trial court based its decision to dismiss Podmajersky.

                                                    -4-
       available[2] 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 damages related to damage to the subject property.
       Plaintiff’s damages were not fully known until after the tenant lawsuit proceeded to trial, so the
       tenants could not have represented plaintiff’s interests. In a footnote, plaintiff argues that,
       because there is no transcript or bystander’s report, it is impossible to determine why the trial
       court entered judgment for defendant and that the judgment could have been based on the
       tenants’ failure to prove that defendant owed them a duty, the tenants’ failure to prove their
       damages, or the tenants’ failure to prove defendant’s breach of duty (negligence).
¶ 19       Plaintiff also argues that there was no identity of parties because the tenants do not share
       the same interests as plaintiff. Plaintiff argues that the tenants did not seek damages related to
       the damage to the subject property, the tenants did not share property rights with plaintiff’s
       subrogor, and the tenants did not have access to the engineering reports.
¶ 20       On April 5, 2013, the trial court granted defendant’s motion for summary judgment,
       finding that plaintiff’s cause of action was barred by the doctrine of res judicata. Specifically,
       the trial court found that the decision in the tenant lawsuit was a final judgment on the merits.
       The trial court found that res judicata applies not only to matters that were decided, but matters
       that could have been decided in the original lawsuit. The trial court found that an identity of
       interests exists because the tenants and plaintiff sought recovery for damages resulting from
       defendant’s negligence in demolishing the adjacent property. The trial court found that the
       difference in “amount or extent” of damages was inconsequential because they arose from the
       same operative facts. The trial court found an identity of parties, because (1) the tenants and
       plaintiff shared the same property interests, and (2) Podmajersky was a party to the tenant
       lawsuit, and it could have filed a cross-claim against defendant. The trial court found that
       Podmajersky was in possession of at least one engineering report at the time it was a party to
       the tenant lawsuit, and could have introduced it in evidence.
¶ 21       Plaintiff filed a timely notice of appeal, and this appeal followed.

¶ 22                                             ANALYSIS
¶ 23       Plaintiff raises four issues on appeal: (1) whether the trial court erred in granting
       defendant’s motion for summary judgment; (2) whether a bench trial in small claims court
       brought by a tenant of the subject property constitutes a final judgment on the merits with
       respect to all issues involved in plaintiff’s lawsuit; (3) whether a small claims lawsuit brought
       by a tenant of the subject property presented an identity of causes of action sufficient to invoke

           2
            Defendant disputes the unavailability of at least the SEE report to the tenants. The SEE report was
       addressed to Podmajersky, and defendant asserts that Podmajersky’s office manager testified on the
       tenants’ behalf during trial. The SEE report was issued nearly one year before the trial in the tenant
       lawsuit. However, as plaintiff asserts, there is no transcript of the proceedings or bystander’s report,
       and, thus, the only indications in the record that the Podmajersky office manager testified at trial are the
       statements made by defendant in its answer and motion for summary judgment.

                                                        -5-
       the doctrine of res judicata and bar plaintiff’s lawsuit; and (4) whether a small claims lawsuit
       brought by a tenant in the subject property presented an identity of parties sufficient to invoke
       the doctrine of res judicata and bar plaintiff’s lawsuit. For the following reasons, we reverse
       the decision of the trial court and remand for further proceedings.

¶ 24                                       I. Standard of Review
¶ 25       Summary judgment is appropriate only where the pleadings, depositions, and admissions
       on file, together with the affidavits, if any, show that there is no genuine issue of material fact
       and that the moving party is entitled to a judgment as a matter of law. Williams v. Manchester,
       228 Ill. 2d 404, 417 (2008). In determining whether a genuine issue of material fact exists, a
       court must construe the pleadings, depositions, admissions, and affidavits strictly against the
       movant and liberally in favor of the opponent. Williams, 228 Ill. 2d at 417.
¶ 26       Summary judgment is a drastic means of disposing of litigation and should therefore be
       allowed only when the right of the movant to a judgment in its favor is clear and free from
       doubt. Williams, 228 Ill. 2d at 417. The standard of review for appeals arising from summary
       judgment is de novo. Williams, 228 Ill. 2d at 417. De novo consideration means we perform the
       same analysis that a trial judge would perform. Khan v. BDO Seidman, LLP, 408 Ill. App. 3d
       564, 578 (2011).

¶ 27                                           II. Res Judicata
¶ 28       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. Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 334 (1996).
       Res judicata extends not only to what was actually decided in the original action, but also to
       matters which could have been decided in the original action. Rein, 172 Ill. 2d at 334-35. “For
       the doctrine of res judicata to apply, three requirements must be met: (1) there was a final
       judgment on the merits rendered by a court of competent jurisdiction; (2) there was an identity
       of causes of action; and (3) there was an identity of parties or their privies.” Rein, 172 Ill. 2d at
       335 (citing Downing v. Chicago Transit Authority, 162 Ill. 2d 70, 73-74 (1994)). If any
       requirement is not met, res judicata will not apply. See Goodman v. Hanson, 408 Ill. App. 3d
       285, 300 (2011) (finding that although the second and third requirements of res judicata were
       satisfied, “we cannot find that the first requirement is satisfied and thus the claim would not be
       barred by res judicata”). The burden of showing that res judicata applies is on the party
       invoking the doctrine. Hernandez v. Pritikin, 2012 IL 113054, ¶ 41.

¶ 29                                 A. Final Judgment on the Merits
¶ 30       The first requirement of res judicata is a final decision on the merits. “A final judgment is
       a determination of the issues presented which ascertains and fixes absolutely and finally the
       rights of the parties.” Gallaher v. Hasbrouk, 2013 IL App (1st) 122969, ¶ 23. In Gallaher, we
       found that an administrative order from the Director of the Department of Public Health which
       concluded “only a preliminary, procedural matter *** and left open the substantive issue of
       whether [the plaintiff] should lose her teaching credentials” was not a final judgment on the
       merits for purposes of res judicata. Gallaher, 2013 IL App (1st) 122969, ¶ 23. River Park, Inc.
       v. City of Highland Park, 184 Ill. 2d 290 (1998), examined whether a dismissal could operate

                                                     -6-
       as a final decision on the merits. In River Park, our Illinois Supreme Court found that “the
       dismissal of a complaint for failure to state a claim is an adjudication on the merits [citations],
       while the dismissal of a complaint for lack of subject matter jurisdiction is not considered a
       decision on the merits of that complaint.” River Park, 184 Ill. 2d at 303. A judgment entered in
       a small claims court case may be a final judgment on the merits for the purposes of barring a
       cause of action in a subsequent non-small-claims case. Kasny v. Coonen & Roth, Ltd., 395 Ill.
       App. 3d 870, 873 (2009) (the parties agreed that a judgment in a small claims lawsuit satisfied
       the final on the merits requirement of res judicata).
¶ 31       Plaintiff admits that a court of competent jurisdiction rendered a verdict in the tenant
       lawsuit and that the tenants’ alleged damages arose from the same negligent demolition that
       gave rise to plaintiff’s claimed damages. However, plaintiff argues that other factors present in
       this case undermine the fact that a court of competent jurisdiction rendered a final verdict. For
       example, plaintiff states that it was not a party to the tenant lawsuit and was unaware of the
       tenant lawsuit during its pendency. Plaintiff cites Agolf, LLC v. Village of Arlington Heights,
       409 Ill. App. 3d 211, 221 (2011), to argue that a nonparty’s knowledge of pending litigation is
       a factor to be considered when determining the applicability of res judicata. However, in
       Agolf, the parties agreed that the first two requirements of res judicata, including a final
       judgment on the merits, had been satisfied and the remainder of the analysis focused on
       whether an identity of parties existed. Agolf, 409 Ill. App. 3d at 219. Therefore, any
       consideration of knowledge would be relevant to the third requirement, and not the first. Since
       plaintiff does not argue that the trial court’s verdict in the tenant lawsuit was not final and was
       not rendered by a court of competent jurisdiction, we cannot say that there was no final
       judgment on the merits in the tenant lawsuit. Points not argued in an appellant’s brief are
       waived. Halpin v. Schultz, 234 Ill. 2d 381, 390 (2009) (citing Ill. S. Ct. R. 341(h)(7) (eff. Sept.
       1, 2006)).

¶ 32                                  B. Identity of Causes of Action
¶ 33        The second requirement of res judicata is an identity of the causes of action. Our Illinois
       Supreme Court “has recognized the validity of the transactional test” to determine whether
       there is an identity of the causes of action. River Park, 184 Ill. 2d at 309-10. Under the
       transactional test, a court examines the causes of action in “ ‘factual terms,’ ” which are
       considered “ ‘coterminous with the transaction[,] regardless of the number of substantive
       theories, or variant forms of relief flowing from those theories, that may be available to the
       plaintiff, *** and regardless of the variations in the evidence needed to support the theories or
       rights.’ ” River Park, 184 Ill. 2d at 309 (quoting Restatement (Second) of Judgments § 24
       cmt. a (1982)). To determine whether there is an identity of the causes of action between the
       first and second lawsuit, courts must examine the facts that give rise to the plaintiff’s right to
       relief, not simply the facts which support the judgment in the first action. Rein v. David A.
       Noyes & Co., 172 Ill. 2d 325, 338-39 (1996). The factors relevant to ascertaining whether the
       two lawsuits are 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.” Cload v. West, 328 Ill. App. 3d
       946, 951 (2002). The test is to be applied pragmatically. Cload, 328 Ill. App. 3d at 951 (citing
       River Park, 184 Ill. 2d at 309, citing Restatement (Second) of Judgments § 24 (1982)). Courts


                                                    -7-
       shall find identical causes of action even if there is not a substantial overlap of evidence needed
       to prove the causes of action, so long as the causes of action arise from the same transaction.
       River Park, 184 Ill. 2d at 311.
¶ 34        Defendant argues that Podmajersky was in a position to file a counterclaim 3 against
       defendant in the tenants’ lawsuit, and, therefore, Podmajersky could have pursued the cause of
       action which plaintiff is now pursuing as Podmajersky’s subrogee. In Illinois, counterclaims
       are generally permissive, rather than mandatory. Kasny v. Coonen & Roth, Ltd., 395 Ill. App.
       3d 870, 873 (2009). A defendant in a lawsuit may choose to pursue its claim against a plaintiff
       or codefendant by way of a counterclaim or by way of a separate lawsuit. Kasny, 395 Ill. App.
       3d at 873. However, if the defendant’s claim involves the same operative facts as the plaintiff’s
       claim, res judicata may bar the defendant from raising its claim in a subsequent action. Kasny,
       395 Ill. App. 3d at 873. Specifically, res judicata bars a subsequent action if successful
       prosecution of that action would in effect nullify the judgment entered in the initial action.
       Kasny, 395 Ill. App. 3d at 873. In addition, res judicata “extends only to claims that ‘ “could
       have been presented by the exercise of due diligence.” ’ ” (Emphasis in original.) Kasny, 395
       Ill. App. 3d at 874 (quoting Hughey v. Industrial Comm’n, 76 Ill. 2d 577, 582 (1979), quoting
       46 Am. Jur. 2d Judgments § 417). If a claim exists and a litigant does not discover it despite the
       litigant’s due diligence, res judicata does not apply. Kasny, 395 Ill. App. 3d at 874.
¶ 35        In Kasny, the plaintiff hired the defendant law firm to represent him in the dissolution of
       his marriage. Kasny, 395 Ill. App. 3d at 871. The plaintiff failed to pay the defendant for its
       services, and the defendant filed a lawsuit against the plaintiff in small claims court to recover
       its outstanding legal fees. Kasny, 395 Ill. App. 3d at 871. The plaintiff did not appear in the
       small claims matter, and the trial court entered a judgment in favor of the defendant. Kasny,
       395 Ill. App. 3d at 871. Subsequently, the plaintiff filed the lawsuit at issue in Kasny, alleging
       that the defendant committed legal malpractice and breach of contract. Kasny, 395 Ill. App. 3d
       at 871. The defendant filed a motion to dismiss the case, arguing that the judgment in the small
       claims court barred the plaintiff’s lawsuit. Kasny, 395 Ill. App. 3d at 872. On appeal, the
       parties agreed that there was a final judgment on the merits and that there was an identity of
       parties. Kasny, 395 Ill. App. 3d at 873. The defendant argued that the plaintiff could have
       discovered the legal malpractice cause of action had he participated in the small claims lawsuit
       and contested his liability. Kasny, 395 Ill. App. 3d at 875. However, the Second District found
       small claims litigation is intended to be expedient, and that it could “not necessarily attribute
       [the plaintiff’s] default in the small claims case to a lack of diligence in exploring his
       defenses.” Kasny, 395 Ill. App. 3d at 875. The Second District found that, even if the plaintiff
       had participated in the small claims litigation and “had any inkling of malpractice, he would

           3
             Defendant uses the term “cross-claim” in its brief to refer to a cause of action by Podmajersky, as
       a defendant in the tenant lawsuit, filed against defendant, which was also named as a defendant in the
       tenant lawsuit. The Code of Civil Procedure defines the term “counterclaim” as follows: “[a]ny claim
       by one or more defendants against one or more plaintiffs, or against one or more codefendants, whether
       in the nature of setoff, recoupment, cross claim or otherwise, and whether in tort or contract, *** may
       be pleaded as a cross claim in any action, and when so pleaded shall be called a counterclaim.”
       (Emphases added.) 735 ILCS 5/2-608 (West 2010). We shall therefore refer to a potential cause of
       action filed by Podmajersky, as a defendant in the tenant lawsuit, against defendant, its codefendant in
       the tenant lawsuit, as a counterclaim.

                                                       -8-
       not necessarily have been unreasonable for failing to rely on the prospect of small claims
       discovery, which he could not conduct as a matter of right, to flesh it out.” Kasny, 395 Ill. App.
       3d at 875. See Ill. S. Ct. R. 287(a) (eff. Aug. 1, 1992) (“No depositions shall be taken or
       interrogatories or other discovery proceeding or requests to admit be used prior to trial in small
       claims except by leave of court.”). “While a small claims defendant cannot use the expediency
       of the proceeding as a shield if he has truly failed to be diligent, the small claims plaintiff
       cannot use it as a sword if the defendant, despite his diligence, is unable to marshal a
       counterclaim in time.” Kasny, 395 Ill. App. 3d at 875-76. The Second District concluded that a
       question of fact existed because the plaintiff argued that he had been diligent in pursuing his
       legal malpractice cause of action and the defendant argued the opposite. Kasny, 395 Ill. App.
       3d at 876. As a result, the Second District determined that dismissal was improper. Kasny, 395
       Ill. App. 3d at 876.
¶ 36        As with a dismissal, summary judgment is not appropriate if a question of material fact
       exists. Williams, 228 Ill. 2d at 417. Although plaintiff does not argue that it was unaware of its
       negligence claim at the time of the tenants lawsuit, plaintiff does argue that the damages in the
       negligence cause of action were not yet finalized, and, thus, it could not have participated in a
       trial on the merits. The record does not include any discovery from the tenant lawsuit, nor does
       it include any orders giving leave to conduct discovery. The record also does not include a
       report of proceedings or a bystander’s report from the trial. As a result, we have no way of
       knowing whether or not the trial court gave the parties leave to conduct discovery. Therefore,
       although plaintiff certainly had an “inkling” of a negligence cause of action, we cannot say that
       it was not unreasonable for Podmajersky not to pursue the cause of action in small claims
       court, because Podmajersky or plaintiff, as Podmajersky’s subrogee, may not have been able to
       flesh out its cause of action through adequate discovery. Kasny, 395 Ill. App. 3d at 875. If
       plaintiff could not have pursued its cause of action in the tenant lawsuit and defendant argues
       that plaintiff could have, there is a question of fact that should have precluded summary
       judgment. Williams, 228 Ill. 2d at 417; Kasny, 395 Ill. App. 3d at 876.
¶ 37        Defendant argues that plaintiff had sufficient information during the pendency of the
       tenant lawsuit to be able to adequately pursue a counterclaim against defendant. Defendant
       points to a settlement agreement entered into between plaintiff and Podmajersky to settle a
       lawsuit concerning a “controversy” concerning the amount plaintiff owed to Podmajersky
       under the insurance policy. The settlement agreement, dated April 23, 2010, states that plaintiff
       paid Podmajersky for the “actual cash value of the [subject property] repairs in the amount of
       $130,843.08,” and that, after Podmajersky filed the lawsuit against plaintiff in 2009, they
       agreed that plaintiff would pay an additional $82,500. Defendant argues that although the
       settlement agreement does not disclose when the initial payment of $130,843.08 was made, “it
       is reasonable to assume that payment would have occurred shortly after the engineers reported
       the nature and extent of the structural damage to [Shaw] in 2007, and certainly well before final
       judgment was entered in the Tenant Lawsuit in October 2008.”
¶ 38        We do not find this argument persuasive. Defendant provides no explanation as to why “it
       is reasonable to assume” when payment occurred. Neither engineering report provides even an
       estimate of the cost of repair, nor does the Shaw letter. Furthermore, Podmajersky filed the
       lawsuit against plaintiff after the trial court entered judgment in the tenant lawsuit, indicating
       that the damage amount had not been settled at the time the tenant lawsuit concluded. Even if
       plaintiff and Podmajersky knew the cost of the repairs to the subject property during the

                                                   -9-
       pendency of the tenant lawsuit, we cannot say that Podmajersky was unreasonable in not
       pursuing the cause of action in small claims court when over $80,000 in damages had yet to be
       finalized.
¶ 39       Finally, defendant has the burden of proving that res judicata applies. Hernandez v.
       Pritikin, 2012 IL 113054, ¶ 41. This burden includes the “duty to clarify the record so as to
       clearly demonstrate [its] entitlement to the doctrine’s application.” (Emphasis in original.)
       Hernandez, 2012 IL 113054, ¶ 52. Defendant has not obtained a report of proceedings or a
       bystander’s report from the tenant lawsuit and, thus, the record is far from clear as to what
       occurred in the tenant lawsuit. We do not know whether the trial court would have allowed
       discovery or under what circumstances the trial court entered judgment in defendant’s favor.
       The trial court may have found that defendant caused the damage but that defendant did not
       owe a duty to the tenants, or that the tenants did not prove their damages, which are very
       different from the damages claimed by plaintiff. Therefore, we cannot find that defendants
       have carried their burden in proving that the causes of action were identical.

¶ 40                                C. Identity of Parties or Their Privies
¶ 41        The third requirement of res judicata is an identity of parties, or their privies. For purposes
       of res judicata, “[p]rivity is said to exist between ‘ “parties who adequately represent the same
       legal interests.” ’ ” People ex rel. Burris v. Progressive Land Developers, Inc., 151 Ill. 2d 285,
       296 (1992) (quoting Hartke v. Chicago Board of Election Commissioners, 651 F. Supp. 86, 90
       (N.D. Ill. 1986), quoting Donovan v. Estate of Fitzsimmons, 778 F.2d 298, 301 (7th Cir.
       1985)). “It is the identity of interest that controls in determining privity, not the nominal
       identity of the parties [citation].” Burris, 151 Ill. 2d at 296.
¶ 42        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. Defendant does not dispute this point. Plaintiff, as Podmajersky’s
       subrogee, has “stepped into Podmajersky’s shoes” and has no greater rights than Podmajersky.
       Reich v. Tharp, 167 Ill. App. 3d 496, 501 (1987). As a result, plaintiff cannot claim that its lack
       of knowledge of the tenants’ lawsuit shields it from res judicata, because doing so would
       afford plaintiff greater rights than Podmajersky.
¶ 43        Defendant argues that the relevant issue is whether the tenants are in privity with
       Podmajersky because, if they are, plaintiff, as Podmajersky’s subrogee, would also be in
       privity with the tenants. Defendant relies on Agolf, 409 Ill. App. 3d 211, to argue that the
       tenants are in privity with Podmajersky. In Agolf, the plaintiff purchased a shopping center and
       it negotiated leases to various entities for space within the shopping center, including a lease to
       a third party entity that operated a health club out of the leased space. Agolf, 409 Ill. App. 3d at
       212. The third party’s lease commenced in 1997 and included options to renew until August
       2016. Agolf, 409 Ill. App. 3d at 212. In 2002, the defendant, a municipal corporation,
       announced that it would be implementing a tax increment financing (TIF) district as part of a
       redevelopment project. Agolf, 409 Ill. App. 3d at 212. This plan targeted specific property in
       Arlington Heights, which included the property on which the shopping center sat. Agolf, 409
       Ill. App. 3d at 212. The defendant designated and implemented the TIF district via ordinance.
       Agolf, 409 Ill. App. 3d at 212.



                                                    - 10 -
¶ 44        In 2002, the third party filed a lawsuit against the defendant seeking an injunction and
       declaratory judgment prohibiting the defendant from condemning the shopping center property
       pursuant to the Tax Increment Allocation Redevelopment Act (65 ILCS 5/11-74.4-1 et seq.
       (West 2002)), a declaration that the designation of the redevelopment area was invalid, a
       declaration that the shopping center should not be included in the redevelopment project, and
       damages. Agolf, 409 Ill. App. 3d at 212-13. The third party filed two amended complaints,
       additionally alleging that the redevelopment area did not meet the requirements of a TIF plan,
       that the defendant failed to demonstrate that the project area was not subject to growth, and that
       the defendant’s plan was improper. Agolf, 409 Ill. App. 3d at 213. The lawsuit proceeded to
       trial in 2006, and the trial court determined that the third party failed to meet its burden and that
       the TIF ordinance was proper. Agolf, 409 Ill. App. 3d at 213. The third party appealed, and this
       court affirmed. Agolf, 409 Ill. App. 3d at 214. The third party then petitioned our Illinois
       Supreme Court for review of the lawsuit, but the supreme court denied the request for leave to
       appeal. Agolf, 409 Ill. App. 3d at 214.
¶ 45        In 2006, while the third party’s lawsuit was pending, the plaintiff filed a lawsuit, seeking an
       injunction against the defendant to prevent it from implementing the TIF district and a
       declaratory judgment that the defendant’s plan violated the Tax Increment Allocation
       Redevelopment Act (65 ILCS 5/11-74.4-1 et seq. (West 2002)). Agolf, 409 Ill. App. 3d at 215.
       The trial court stayed the plaintiff’s litigation as a result of the pendency of the third party’s
       lawsuit against the defendant. Agolf, 409 Ill. App. 3d at 215. Following the resolution of the
       third party’s lawsuit, which found that the TIF district was valid, the defendant filed a motion
       for summary judgment on the ground of res judicata, and the trial court granted the motion.
       Agolf, 409 Ill. App. 3d at 215.
¶ 46        On appeal, the plaintiff conceded that the first two elements of res judicata had been met,
       but argued that there was no identity of parties because it was the third party’s landlord, and,
       therefore, the third party’s interests in the TIF litigation was not the same as the plaintiff’s
       interests. Agolf, 409 Ill. App. 3d at 219-20. This court found that privity existed between the
       landlord plaintiff and the tenant third party. Agolf, 409 Ill. App. 3d at 220-21. Both the plaintiff
       and the third party sought the same relief in their lawsuits against the defendant–injunctive
       relief and a declaratory judgment preventing the defendant from incorporating the shopping
       center in its redevelopment plan. Agolf, 409 Ill. App. 3d at 221. We next found that the third
       party adequately represented the plaintiff’s interest because the third party filed its lawsuit
       “immediately after [the] defendant enacted the ordinance establishing the TIF district in July
       2002,” and because the third party pursued the litigation to a trial, at which 14 witnesses
       testified, to an appeal before this court, and, finally, to our Illinois Supreme Court, “thereby
       exhausting its judicial options–all in an effort to save [the] plaintiff’s [shopping center].”
       Agolf, 409 Ill. App. 3d at 221. Furthermore, the plaintiff “undoubtedly” knew about the third
       party’s lawsuit from its inception and “knew the contents of its legal assertions against [the]
       defendant.” Agolf, 409 Ill. App. 3d at 221. The plaintiff’s president and manager testified at the
       third party’s trial against the defendant. Agolf, 409 Ill. App. 3d at 221. Her testimony included
       a statement that the plaintiff’s lawsuit, “just as [the third party’s] suit against [the] defendant,
       sought to declare the TIF district invalid.” Agolf, 409 Ill. App. 3d at 221. We therefore found
       that the plaintiff and the third party shared the same legal interest regarding the shopping center
       “and its fate under [the] defendant’s TIF redevelopment project,” and that the third party


                                                    - 11 -
       “adequately represented that shared interest in its suit against [the] defendant.” Agolf, 409 Ill.
       App. 3d at 221.
¶ 47        We find that Agolf is factually distinguishable from the case at bar. In Agolf, we found that
       the tenant third party was in privity with the landlord plaintiff because both parties filed a
       lawsuit against the defendant seeking the exact same relief, injunctive relief and a declaratory
       judgment preventing the defendant from incorporating the shopping center in its
       redevelopment plan, concerning the exact same property, the shopping center. Agolf, 409 Ill.
       App. 3d at 220-21. The third party pursued its litigation over the course of seven years, all the
       way to a petition for leave to appeal before the Illinois Supreme Court. Agolf, 409 Ill. App. 3d
       at 221. These facts are not present in the case at bar. Although both the tenants’ lawsuit and
       plaintiff’s lawsuit concern damage to the subject property, the parties sought very different
       relief. The tenants filed a pro se complaint in a small claims court to recover $9,912.38
       resulting from their “losses and damages.” Parties do not engage in discovery proceedings in
       small claims cases unless the trial court gives leave to do so. Ill. S. Ct. R. 287(a) (eff. Aug. 1,
       1992). The tenants named Podmajersky, plaintiff’s subrogor, as a defendant in their pro se
       lawsuit, indicating that the tenants believed that Podmajersky was liable to them. Conversely,
       plaintiff, as subrogee of Podmajersky, filed its lawsuit in the law division of the circuit court of
       Cook County to recover $218,343.08, resulting from damage to the subject property and lost
       rent. Plaintiff was represented by counsel and engaged in discovery proceedings. Unlike in
       Agolf, the parties engaged in very different types of actions and sought different relief. In fact,
       the tenants initially sought relief from Podmajersky, thus indicating that the tenants were not
       representing Podmajersky’s interests. See Burris, 151 Ill. 2d at 296 (“[i]t is the identity of
       interest that controls in determining privity, not the nominal identity of the parties”).
¶ 48        Our case law indicates that defendant gives too broad a definition to privity when it argues
       that the tenants are in privity with Podmajersky as a result of the landlord-tenant relationship.
       In Mount Mansfield Insurance Group, Inc. v. American International Group, Inc., 372 Ill.
       App. 3d 388 (2007), this court examined the identity of parties requirement of res judicata. In
       Mount Mansfield, the plaintiff was a wholly owned subsidiary of a holding company, and it
       was established “to create a captive insurance company for workers’ compensation claims.”
       Mount Mansfield, 372 Ill. App. 3d at 389. The defendant was responsible for issuing insurance
       policies to the holding company’s shareholder companies and providing them with claims
       handling services. Mount Mansfield, 372 Ill. App. 3d at 389. As the “ ‘captive insurer,’ ” the
       plaintiff provided reinsurance to the defendant to reimburse it for losses. Mount Mansfield, 372
       Ill. App. 3d at 390. In 1997, the holding company and its shareholders filed a lawsuit against
       the defendant, alleging that the defendant’s wrongful conduct “caused an increase in their
       insurance premiums, a need to reimburse [the plaintiff] for its losses, and an increase in the
       cost of future workers’ compensation insurance.” Mount Mansfield, 372 Ill. App. 3d at 390.
       The plaintiff was not a party to this lawsuit because it was in rehabilitation and its board of
       directors was allegedly enjoined from transacting business, including authorizing lawsuits
       filed in its name. Mount Mansfield, 372 Ill. App. 3d at 390. In 2005, after the holding
       company’s lawsuit had been dismissed, the plaintiff filed a lawsuit against the defendant,
       alleging that the defendant improperly handled workers’ compensation claims, inflated the
       value assigned to its reserve requirements, and forced it to defend itself in an unnecessary
       rehabilitation. Mount Mansfield, 372 Ill. App. 3d at 391. The defendant filed a motion to
       dismiss pursuant to section 2-619 of the Code of Civil Procedure, arguing that the plaintiff’s

                                                    - 12 -
       lawsuit was barred by res judicata, and the trial court dismissed the lawsuit with prejudice.
       Mount Mansfield, 372 Ill. App. 3d at 392.
¶ 49       On appeal, the plaintiff argued that it was not in privity with the holding company during
       the holding company’s lawsuit against the defendant. Mount Mansfield, 372 Ill. App. 3d at
       393. The defendant argued that the plaintiff was in privity with the holding company as a result
       of the fact that the plaintiff was a wholly owned subsidiary of the holding company. Mount
       Mansfield, 372 Ill. App. 3d at 393. We found that “[t]his argument oversimplifies and ‘glosses
       over’ the layers of corporate structure here.” Mount Mansfield, 372 Ill. App. 3d at 393. For
       example, “a shareholder of a corporation has no personal or individual right to pursue an action
       against third parties for damages resulting indirectly to the shareholder because of an injury to
       the corporation.” Mount Mansfield, 372 Ill. App. 3d at 393. Shareholders may file a derivative
       action on behalf of the corporation, but they must allege and prove an equitable basis for such
       intervention. Mount Mansfield, 372 Ill. App. 3d at 393. Therefore, in Mount Mansfield, we
       found that the holding company, as the plaintiff’s sole shareholder, “had no right to represent
       the interests of its subsidiary unless it was able to pursue a derivative action on its behalf.”
       Mount Mansfield, 372 Ill. App. 3d at 393. We found that the holding company “pursued
       individual rather than derivative rights” and therefore did not adequately represent the interests
       of the plaintiff in the original lawsuit. Mount Mansfield, 372 Ill. App. 3d at 394.
¶ 50       Although the holding company and the plaintiff had a corporate relationship and both
       lawsuits arose from the defendant’s handling of workers’ compensation claims, we found that
       res judicata did not apply because the parties were not in privity with one another. Mount
       Mansfield, 372 Ill. App. 3d at 395. We find Mount Mansfield’s analysis of privity relevant to
       determining the relationship of the parties in the case at bar. Both the tenants’ lawsuit and
       plaintiff’s lawsuit arise from the damage caused to the subject property by defendant.
       Although the tenants have a legal relationship with Podmajersky, that of landlord-tenant, to
       state that such relationship is enough to establish privity oversimplifies the relationship. Like
       in Mount Mansfield, the rights pursued by the tenants in their lawsuit were distinct and
       different from the rights that plaintiff is pursuing in its cause of action.
¶ 51       This court’s decision in Oshana v. FCL Builders, Inc., 2013 IL App (1st) 120851, is also
       instructive. In Oshana, an ironworker filed a negligence lawsuit against a general contractor
       and a subcontractor. Oshana, 2013 IL App (1st) 120851, ¶ 4. The ironworker was employed by
       an ironworking company that had been subcontracted by another subcontractor to perform
       steel erection for a construction project. Oshana, 2013 IL App (1st) 120851, ¶ 4. The general
       contractor filed a third-party complaint for contribution against the ironworker’s employer and
       a counterclaim for contribution against the subcontractor. Oshana, 2013 IL App (1st) 120851,
       ¶ 4. The general contractor’s contract with the subcontractor included a requirement that the
       subcontractor obtain a certain amount of general liability insurance, which would cover the
       subcontractor, the subcontractor’s employees, and the general contractor. Oshana, 2013 IL
       App (1st) 120851, ¶ 5. Any subcontractors hired by the subcontractor were also required to
       maintain the same level of insurance and include the general contractor in the policy as an
       additional insured. Oshana, 2013 IL App (1st) 120851, ¶ 5. The general contractor requested
       that the insurer who provided general liability insurance to the iron worker’s employer provide
       it with a defense and indemnification in the negligence lawsuit. Oshana, 2013 IL App (1st)
       120851, ¶ 5. The insurer declined, stating that the general contractor was not covered by the
       employer’s policy. Oshana, 2013 IL App (1st) 120851, ¶ 5. The insurer filed a declaratory

                                                   - 13 -
       judgment action, requesting a judgment that it was not required to defend and indemnify the
       general contractor in the negligence lawsuit. Oshana, 2013 IL App (1st) 120851, ¶ 6. The
       subcontractor was not a party to the declaratory judgment action. Oshana, 2013 IL App (1st)
       120851, ¶ 6. The trial court found that the general contractor was not insured under the
       employer’s policy and granted summary judgment to the employer. Oshana, 2013 IL App (1st)
       120851, ¶ 6. In the negligence lawsuit, the subcontractor filed a motion for summary
       judgment, arguing that it did not owe a duty to the ironworker. Oshana, 2013 IL App (1st)
       120851, ¶ 7. The trial court granted the subcontractor’s motion. Oshana, 2013 IL App (1st)
       120851, ¶ 7. Subsequently, in the negligence lawsuit, the general contractor amended its
       complaint against the subcontractor. Oshana, 2013 IL App (1st) 120851, ¶ 9. The general
       contractor alleged that the subcontractor failed to require that the employer obtain insurance
       covering the general contractor, as required by the contract between the general contractor and
       the subcontractor. Oshana, 2013 IL App (1st) 120851, ¶ 9. The subcontractor filed a motion to
       dismiss the amended complaint on the ground of res judicata, alleging that both the
       declaratory judgment action by the insurer and the summary judgment in the subcontractor’s
       favor barred recovery for the general contractor’s breach of contract cause of action. Oshana,
       2013 IL App (1st) 120851, ¶ 10. The trial court granted the motion to dismiss, but did not
       specify which judgment, the declaratory judgment in favor of the insurer or the summary
       judgment in favor of the subcontractor, it based its ruling on. Oshana, 2013 IL App (1st)
       120851, ¶ 11.
¶ 52        On appeal, the subcontractor argued that, even though it was not a party to the declaratory
       judgment action, it was in privity with the insurer for that cause of action because the
       subcontractor was an additional insured on the policy between the insurer and the employer,
       and because the insurer had provided a defense and indemnity to the subcontractor. Oshana,
       2013 IL App (1st) 120851, ¶ 22. The subcontractor further argued that the insurer represented
       its interests in the declaratory judgment action, and that it benefited from the general contractor
       not being an insured under the policy, because the subcontractor no longer had to share the
       policy limits with the general contractor. Oshana, 2013 IL App (1st) 120851, ¶ 22. We found
       that although the subcontractor was in privity with the insurer in the negligence lawsuit, as a
       result of the insurer-insured relationship, the subcontractor was not in privity with the insurer
       in the declaratory judgment action because the insurer did not represent its interests. Oshana,
       2013 IL App (1st) 120851, ¶ 26. The insurer had an interest in the declaratory judgment action
       to defeat the general contractor’s claim for defense and indemnification under the employer’s
       policy, and we found that this interest was in conflict with the subcontractor’s interest, because
       the subcontractor was allegedly contractually obligated to require the employer to provide
       insurance coverage to the general contractor. Oshana, 2013 IL App (1st) 120851, ¶ 26. The
       insurer “did not *** undertake to show that [the subcontractor], as [the insurer’s] additional
       insured, was not liable for any failure to procure insurance coverage for [the general
       contractor].” Oshana, 2013 IL App (1st) 120851, ¶ 26.
¶ 53        The lack of aligned interests is even more stark in the case at bar. Defendant argues that
       plaintiff is in privity with the tenants because (1) plaintiff is in privity with Podmajersky
       because of his subrogation argument, and (2) Podmajersky is in privity with the tenants as a
       result of its landlord-tenant relationship. However, in the tenant lawsuit, the tenants named
       Podmajersky as a defendant. Even though the trial court dismissed Podmajersky from the
       tenant lawsuit prior to it proceeding to trial, we cannot find that tenants could represent the

                                                   - 14 -
       interest of a party they believed was liable to them for damages. Therefore, the tenants could
       not adequately have represented plaintiff’s rights in the lawsuit, and the tenants could not be in
       privity with plaintiff. See Burris, 151 Ill. 2d at 296 (identity of interests controls when
       determining privity).

¶ 54                                        CONCLUSION
¶ 55       Plaintiff could not have adequately pursued its cause of action during the pendency of the
       tenant lawsuit in a small claims court, and plaintiff was not in privity with the tenants. Since
       defendants cannot meet the second and third requirements of res judicata, plaintiff’s lawsuit
       must be allowed to proceed.

¶ 56      Reversed and remanded.




                                                   - 15 -
