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April 25, 1994

BRUCE P. GOLDEN, Appellant,


The opinion of the court was delivered by: JAMES H. ALESIA

Plaintiff-appellant Bruce P. Golden ("Golden") filed a complaint against defendants-appellees David Barenborg ("Barenborg") and Salomon Brothers, Inc. ("Salomon Brothers") (collectively, "appellees"), alleging fraud (Count I), negligent misrepresentation (Count II), consumer fraud pursuant to the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 to 505/12 (formerly ILL. REV. STAT. 1991, ch. 121 1/2, PP 261-272) (Count III), and breach of contract (Count IV) against both appellees, and breach of warranty (Count V) against Barenborg. Appellees filed a joint motion to dismiss under Federal Rule of Civil Procedure 12(b). The Magistrate Judge hearing the case treated the motion as one for summary judgment, finding that the parties had gone beyond the pleadings in support of their arguments. The Magistrate Judge granted appellees' motion, finding that Golden's complaint was barred by res judicata. Golden appealed to this court, which has jurisdiction to hear the appeal under Rule 73(d) of the Federal Rules of Civil Procedure and 28 U.S.C. § 636(c)(4). For the reasons set forth below, the court affirms.


 Barenborg was employed by Salomon Brothers. When Barenborg was transferred by Salomon Brothers from Illinois to New York, Salomon Brothers engaged Coldwell Banker to sell Barenborg's home for Barenborg. Pursuant to an ongoing agreement, Coldwell Banker Relocation Management Services, Inc., would purchase residences of relocated Salomon Brothers employees at fair market value (subject to additional payment if a residence was resold at a higher price). Coldwell Banker Real Estate, Inc., then would remarket the residences. Under this agreement, Salomon Brothers would pay Coldwell Banker Relocation Management Service fees on a per-relocation basis and would reimburse it for losses resulting from any resale. (Coldwell Banker's relocation management and real estate divisions will be referred to as Coldwell Banker.) Coldwell Banker purchased Barenborg's home for $ 330,000 by warranty deed, but left blank the portion of the deed naming the grantee. The contract of sale between Barenborg and Coldwell Banker provided that legal title would pass directly from Barenborg to the ultimate buyer. Title was to remain with Barenborg until the home was resold, and neither passed through nor was recorded by Coldwell Banker.

 On April 1, 1991, Golden purchased Barenborg's single-family home from Coldwell Banker's real estate division for $ 280,000. Soon after buying the home, Golden discovered that the home had several latent defects in structure and condition. In June 1991, Golden sued Coldwell Banker, alleging that Coldwell Banker had committed common law fraud (Count I), negligent misrepresentation (Count II), and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Count III).

 Golden claimed that Coldwell Banker had represented that Barenborg was employed by AT&T and was not reachable; that plans and specifications for prior remodeling work on the home were not available; and that Coldwell Banker had no inspection reports or other documents that it had not already provided to Golden. Golden alleged that these statements were false when made, and that Coldwell Banker made them knowingly to induce Golden to buy the home. Golden also alleged that Coldwell Banker knowingly failed to disclose that the home had no concrete floor in the basement and no concrete foundation; that the home had extensive termite damage; that Coldwell Banker had commissioned an inspection when it bought the home from appellees, and that the inspection disclosed most of the defects as well as several City of Chicago building code violations; that the inspection report strongly recommended that a structural analysis of the foundation be conducted; and that the inspection report noted roof defects and faulty plumbing and drainage systems. Golden claimed that new flooring, exterior siding, and interior walls hid the defects from view, and therefore that he could not have learned of the home's true condition through reasonable diligence. Golden claimed that he relied on Coldwell Banker's misstatements in his decision to buy the home, and that he would not have bought it had its true condition been disclosed to him.

 On the eve of trial, Coldwell Banker and Golden settled that case for $ 60,000. In exchange, Golden executed a release, agreeing to dismiss his complaint with prejudice and to release Coldwell Banker from any future liability that might arise from the marketing and sale of Barenborg's home. The parties informed the court that they were settling the case, and the court issued an order ending the trial. Apparently, however, neither Golden nor Coldwell Banker ever filed with the court the stipulated dismissal with prejudice.

 Approximately one month after Golden and Coldwell Banker settled, Golden sued appellees Barenborg and Salomon Brothers. Golden alleged that appellees, through Coldwell Banker, had committed common law fraud (Count I), negligent misrepresentation (Count II), and a violation of the Consumer Fraud Act (Count III). Golden claimed that Coldwell Banker, acting as an agent of appellees, knowingly failed to disclose the information about the physical condition of the home, which it was under an affirmative duty to disclose. Golden alleged that the basement had no concrete floor; that the foundation had extensive termite damage; that the walls and ceilings leaked; and that the plumbing and drainage systems were defective. Golden also alleged that before buying the home, he requested certain information about Barenborg and the remodeling work that had been done on the home, but that Coldwell Banker knowingly made false statements about its knowledge of this information. Golden claimed that Coldwell Banker had commissioned the inspection report, which disclosed some, if not all, of the home's defects to Coldwell Banker and appellees. Golden alleged that appellees were aware of these defects, but deliberately failed to disclose them.

 Golden also alleged that Coldwell Banker breached an addendum to its real estate contract with Golden (Count IV). The addendum provided that if Golden notified Coldwell Banker of unacceptable defects within 14 days after signing the contract, Coldwell Banker would either repurchase the home or reimburse Golden for any resulting repair costs. Golden claimed that within 14 days he notified Coldwell Banker in writing of certain defects, but that Coldwell Banker did not repurchase the home or reimburse him for repair costs, as required by the addendum. Golden claims that Coldwell Banker thus breached the contract, and that appellees are vicariously liable for the breach. The crux of these four counts is that Coldwell Banker acted as an agent of appellees, and that appellees, therefore are vicariously liable for the acts of Coldwell Banker.

 Golden added a fifth claim against only Barenborg for breach of warranty (Count V). Golden alleged that pursuant to the agreement between Salomon Brothers and Coldwell Banker to remarket Barenborg's home, Barenborg warranted that the home was free of damage from or infestation of termites. Golden claims that Barenborg is liable for the breach to Golden, a third party beneficiary of the warranty, because Barenborg knew that the intended and direct beneficiary of the agreement was the ultimate purchaser of the home.

 Appellees filed a joint motion to dismiss Golden's complaint pursuant to Rule 12(b)(6). The Magistrate Judge granted appellees' motion, which she treated as one for summary judgment. Golden filed a motion for reconsideration of the order and a motion to vacate the order, both of which the Magistrate Judge denied. Golden then appealed to this court.


 A. Summary Judgment Standard

 This court, acting as an appellate court, reviews de novo the Magistrate Judge's grant of appellees' motion for summary judgment. Summary judgment in this case is proper only if appellees, as movants, have established that no genuine issue as to any material fact exists, and that they are entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986); FED. R. CIV. P. 56(c). In determining whether any genuine issues of material fact exist, the court must draw all reasonable inferences in the light most favorable to Golden, as non-movant in this case. Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991). Golden cannot rest on the allegations in the pleadings, however, but must set forth specific facts supporting his claim and showing that a genuine issue for trial exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 256, 106 S. Ct. 2505, 2510, 2514, 91 L. Ed. 2d 202 (1986).

 The substantive law governing the lawsuit identifies which facts are material. Anderson, 477 U.S. at 248, 106 S. Ct. at 2510. "Only disputes over facts that might affect the outcome of the suit tinder the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. Or, as the Seventh Circuit frames it: "When it is plain that a trial could have but one outcome, summary judgment is properly granted to spare the parties and the court the time, the ...

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