Appeal from the Circuit Court of Du Page County. No. 98-L-1271 Honorable Hollis L. Webster, Judge, Presiding
The opinion of the court was delivered by: Justice Grometer
Plaintiffs, James Cabrera, United Building Maintenance (UBM), Inc., and J.C. United Building Maintenance (JC-UBM), Inc., appeal the order of the circuit court of Du Page County dismissing their seven-count second amended complaint against defendants, First National Bank of Wheaton (FNB), Florian Barbie, Theodore J. Ansani, Nelson Carlo, Edward Diamond, Jord C. Hauge, Chris A. Hould, and Somboon Sriaroon. The trial court held res judicata precluded plaintiffs from asserting the present action. Plaintiffs also appeal the trial court's award of attorney fees to FNB. For the reasons that follow, we affirm.
Before turning to the merits of this appeal, we must address several motions brought by the parties. Both parties have made motions to supplement the record on appeal. Those motions are granted. Additionally, plaintiffs have moved to strike portions of FNB's reply filed in the trial court in support of its motion for attorney fees and also to strike one of the exhibits attached to the reply. This motion is denied. Finally, plaintiffs have moved to strike defendants' briefs. Plaintiff contends that FNB, by using a smaller typeface, was able to exceed the page limitation imposed by Supreme Court Rule 341(a). 177 Ill. 2d R. 341(a). Plaintiffs also complain that the individual defendants' briefs used a small typeface, but concede that these briefs were probably not excessively long. 177 Ill. 2d R. 341(a). According to plaintiffs, the smaller typeface allowed FNB to compress 40% more material into its 41-page brief, resulting in the brief being effectively 56 pages long. However, the page limit for a brief that is not printed is 75 pages (177 Ill. 2d R. 341(a)), and FNB's brief appears to be generated by computer rather than by a printing process. Thus, even accepting plaintiffs' allegations and calculations as true, FNB did not violate this page limitation and plaintiff suffered no prejudice. Therefore, plaintiffs' motion to strike defendants' briefs is denied.
On February 26, 1996, Cabrera entered into an agreement with FNB establishing a $700,000 line of credit. UBM and JC-UBM guaranteed the loan. The loan agreement stated that the loan was to mature on August 24, 1996. The agreement also provided that the loan was to be evidenced by a note and that payments were to be made in accordance with the terms of the note. The note's maturity date was July 31, 1996. On August 9, 1996, plaintiffs received a letter from FNB's attorney stating that they were in default because the note had not yet been paid. On the same day, FNB set off approximately $430,000 from an account maintained by UBM.
UBM filed a bankruptcy petition seeking reorganization under chapter 11 of the Bankruptcy Code (11 U.S.C. §1101 et seq. (1994)) on August 12, 1996, in the United States Bankruptcy Court for the Northern District of Illinois. On August 14, 1996, UBM filed a motion seeking the authority to use cash collateral in which FNB held a security interest. Paragraph three of the motion stated the following:
"On August 9, 1996, First National Bank of Wheaton, without notice and in contradiction of ongoing workout negotiations, set off approximately $400,000 of Debtor's deposits and applied it toward the outstanding balance owed the Bank."
The bankruptcy court granted the motion and also provided FNB with a replacement lien in UBM's assets.
On September 13, 1996, UBM filed its bankruptcy schedules. In one schedule, where a debtor's personal property must be listed, UBM set forth "[c]laims against First National Bank of Wheaton and ComEd" as contingent and unliquidated claims. Another schedule listed FNB as a secured creditor.
On October 28, 1996, UBM filed a motion in which it sought the authority to obtain secured credit, grant priority liens, and modify the automatic stay. This motion contained a paragraph stating that UBM commenced the bankruptcy action due to FNB's seizure of UBM's deposits. Another paragraph stated that "[t]here is currently due and owing as of October 25, 1996 First National Bank of Wheaton under the loan and security agreement $93,828.18, plus attorneys fees and costs of approximately $10,500, or an approximate total of $104,500." The purpose of this motion was to secure financing from the Gibraltar Financial Corporation (Gibraltar) to allow UBM to meet its operating expenses. The agreement negotiated between UBM and Gibraltar required that Gibraltar have a first-priority security interest in UBM's assets. The bankruptcy court entered an interim order approving UBM's motion on November 12, 1996. This order contained a finding that UBM was indebted to FNB in the amount of $93,828 plus $11,700 for attorney fees. On December 17, 1996, the bankruptcy court entered a final order approving UBM's motion. This order included a finding that UBM was indebted to FNB in the amount of $69,107. The order also mandated that FNB's claim be paid from the initial advance of funds made by Gibraltar. As a result of these orders, FNB was no longer involved in the bankruptcy proceeding. Instead of releasing its security interest in UBM's assets, FNB assigned the rights it acquired in the loan transaction to UBM and JC-UBM.
On September 23, 1997, UBM also filed a disclosure statement which contained the following statement:
"UBM is in the process of evaluating its rights with regard to the conduct of First National Bank of Wheaton. Although UBM believes that legal action against [FNB] may have merit, such a potential claim is not material to UBM's ability to satisfy its Chapter 11 plan obligations."
The statement also provided that, upon confirmation of the reorganization plan, all property of the estate not otherwise provided for shall vest in UBM free and clear of any liens, claims, and encumbrances. The bankruptcy court subsequently approved UBM's reorganization on December 18, 1997, and the action was terminated on June 13, 1998.
Plaintiffs filed their complaint in the present action on December 8, 1998, in the circuit court of Du Page County. Defendants filed a motion in the bankruptcy court seeking to bar plaintiffs' state court action. The bankruptcy court found that it lacked jurisdiction to rule on the motion.
Thereafter, the trial court granted defendants' motion to dismiss, holding that plaintiffs' claims were barred by res judicata. The court noted that UBM had acknowledged that it was indebted to FNB in the bankruptcy proceeding and that the bankruptcy court had confirmed this debt in its orders. The court reasoned that plaintiffs could not now come to state court and contest the same debt. The court found that Cabrera and JC-UBM were privies of UBM and that the individual defendants were privies of FNB. ...