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Direct Auto Insurance Co. v. Bahena

Court of Appeals of Illinois, First District, Fourth Division

June 13, 2019

DIRECT AUTO INSURANCE COMPANY, Plaintiff-Appellant,
v.
ERICA BAHENA, JESSICA BAHENA, and NOEL HERNANDEZ, Defendants-Appellees.

          Appeal from the Circuit Court of Cook County. No. 14 CH 14413 The Honorable Kathleen M. Pantle, Judge, presiding.

          JUSTICE GORDON delivered the judgment of the court, with opinion. Presiding Justice McBride and Justice Reyes concurred in the judgment and opinion.

          OPINION

          GORDON JUSTICE

         ¶ 1 Plaintiff, Direct Auto Insurance Company (Direct Auto), [1] raises two issues in its brief to this court: (1) whether the trial court erred in entering a default judgment against it and (2) whether, prior to entry of the default judgment, the trial court erred in denying its motion to dismiss defendant Noel Hernandez's countercomplaint. For the following reasons, we find no error and affirm.

         ¶ 2 BACKGROUND

         ¶ 3 This appeal concerns two actions: a prior action (12-CH-4515) filed by Direct Auto on December 26, 2012, and this current action (14-CH-14413), filed by Direct Auto on September 5, 2014, in which Direct Auto seeks to give preclusive effect to the judgment in the prior case.

         ¶ 4 Both actions arise out of a single auto accident and concern the coverage of a single insurance policy. Direct Auto issued a policy to Erica Bahena that insured a 2008 Chevy Malibu owned by her and that specifically listed Jessica Bahena as an additional driver. On April 1, 2012, Jessica Bahena was driving the Chevy Malibu in Chicago when it collided with a vehicle driven by Ahmed Kishta, in which Noel and Ariel Hernandez[2] were passengers.

         ¶ 5 On December 26, 2012, Direct Auto filed the first action which asked the circuit court of Cook County to declare that there was no coverage under its policy because of Erica Bahena's alleged failure to disclose all the residents in her household over the age of 15. This prior action (12-CH-4515) by Direct Auto named as defendants Jessica and Erica Bahena; Sana Kishta, as next friend of Ahmed Kishta, deceased; Ariel Hernandez; and Ean Services, LLC, d/b/a Enterprise Rent A Car, but it did not name Noel Hernandez. Ahmed Kishta was driving a 2011 Nissan Altima owned by Enterprise in which Ariel and Noel Hernandez were passengers. Jessica Bahena was driving the vehicle that is the subject of the Direct Auto policy and that is owned by Erica Bahena.

         ¶ 6 On January 24, 2014, Erica Bahena filed for Chapter 7 bankruptcy.

         ¶ 7 As a result of the accident, Noel Hernandez filed suit in Cook County against both Jessica and Erica Bahena on March 21, 2014. On July 9, 2014, Noel Hernandez filed a motion, in the bankruptcy action, to lift the automatic stay that had been entered by the federal bankruptcy court. He moved the court to lift the stay on the sole ground that he sought "to prosecute his lawsuit against the Debtor only to the extent of the Debtor's insurance coverage" and that he would not "seek any monetary recovery from the Debtor or Debtor's estate." He represented to the bankruptcy court "that any amount of said claim shall not exceed the amount of available insurance."[3]

         ¶ 8 On August 20, 2014, five months after Noel Hernandez filed suit for his injuries, the circuit court granted summary judgment in the first action (No. 12-CH-4515). The order states that "the matter" came "to be heard" on both Direct Auto's motion, as well as "Bahena's motion to withdraw." The order does not specify whether the motion to withdraw was by Jessica or Erica Bahena or both. The order stated that the trial court granted judgment in favor of Direct Auto and "against Defendants," finding that "there is no duty to defend or indemnify imposed upon Direct Auto Insurance and that no Defendant is entitled to any money from Direct Auto." This short, one-paragraph handwritten order does not provide the basis or reasons for its finding.

         ¶ 9 On September 5, 2014, just two weeks after the grant of summary judgment in the first action, Direct Auto filed the current complaint for declaratory judgment. This time, Direct Auto named Noel Hernandez as a defendant, as well as Erica and Jessica Bahena. In the current complaint (14-CH-14413), Direct Auto seeks a declaratory judgment that, because of summary judgment in the prior suit, Noel Hernandez is not entitled to receive money under the policy and that neither Jessica nor Erica Bahena is entitled to indemnification or defense with respect to his suit. The current complaint alleges that, on December 26, 2012, when the prior declaratory action (No. 12-CH-4515) was filed, Noel Hernandez had not yet made a claim or filed suit, and that was the reason that Direct Auto failed to name him as a defendant. However, Direct Auto does not allege that it was unaware that he was a passenger and does not allege that it sought to amend its complaint once he did file suit on March 21, 2014.

         ¶ 10 On November 3, 2014, the trial court entered an order in the current action defaulting Erica and Jessica Bahena for failing to appear and answer, and on May 5, 2015, Noel Hernandez filed an answer.

         ¶ 11 On May 19, 2015, Direct Auto moved for summary judgment, reiterating the same facts and claims set forth in its complaint. Direct Auto argued:

"A court of competent jurisdiction has already found that Erica [Bahena] made a material misrepresentation that entitled [Direct Auto] to rescind the policy. This is the law of the case. The rule of the 'law of the case' provides that where an issue has been litigated and decided, a court's unreversed decision on a question of law or facts settles the question for all subsequent stages of the suit."

         ¶ 12 On June 30, 2015, Noel Hernandez filed a motion for relief pursuant to Illinois Supreme Court Rule 191(b) (eff. Jan. 4, 2013), seeking leave to pursue discovery

"regarding the process or criteria used to determine an applicant's eligibility for a Direct Auto Insurance policy: the soliciting, screening and processing of Defendant Erica Bahena's application; what, if any, information [Direct Auto] has indicating there were undisclosed residents in [her] household at the time of the application process; when the information was obtained by [Direct Auto]; the agents and/or employees of [Direct Auto] who obtained the information; the agents and/or employees of [Direct Auto] who determined the omission was material; the agents and/or employees of [Direct Auto] who determined the policy was invalid due to the material misrepresentation; [and] the rules, policies and guidelines of Direct Auto Insurance Company on which the rescission of Defendant Erica Bahena's insurance policy was based."

         ¶ 13 In support of his motion, Noel Hernandez observed that Direct Auto had not attached affidavits, sworn testimony, or other evidence concerning the alleged material misrepresentation made by Erica Bahena or regarding the decision by Direct Auto to rescind the policy as a result of the alleged misrepresentation.

         ¶ 14 In its response to Noel Hernandez's Rule 191(b) motion, Direct Auto acknowledged that its motion for summary judgment is "based solely upon th[e] prior judgment." Direct Auto conceded that, "[i]f this Court believes that [Direct Auto] is required to prove the matters that [Noel Hernandez] now seeks to develop in discovery, then [Direct Auto's] motion [for summary judgment] will and must be denied because [Direct Auto] offered no such argument or proof." (Emphasis added.)

         ¶ 15 In his response to Direct Auto's summary judgment motion, Noel Hernandez argued that "the 'law of the case' doctrine only applies to a single case, not two different cases." Hernandez argued that, since this is a different case, the doctrine does not apply.

         ¶ 16 In reply, Direct Auto argued that Noel Hernandez was bound by the prior judgment because his interests were so closely aligned with the defendants in the prior case that they were his virtual representatives. Direct Auto argued that its summary judgment in the prior case was opposed by Erica Bahena and "one of the other claimants," but Direct Auto did not name which claimant.

         ¶ 17 On November 12, 2015, the trial court entered a one-line order denying Direct Auto's motion for summary judgment. There is no report of proceedings or bystander's report in the appellate record for this day.

         ¶ 18 On January 8, 2016, Direct Auto filed a "renewed" motion for summary judgment. In this motion, Direct Auto "concede[d] that [the] law of the case doctrine is not quite the right fit for this second filed action" but argued that res judicata required summary judgment in its favor. Direct Auto explained that, by the time Noel Hernandez filed suit, the first action was "nearing resolution" and, thus, "to quiet the coverage matter with respect to him," it filed "the instant Declaratory action" instead.

         ¶ 19 On March 21, 2016, the trial court denied Direct Auto's renewed motion for summary judgment in a one-line order and ordered Direct Auto "to answer outstanding discovery by April 1." There is also no report of proceedings or bystander's report in the appellate record for this day. In its subsequent response to Noel Hernandez's discovery requests, Direct Auto objected to all 16 document requests and to 11 out of 15 interrogatories.

         ¶ 20 On April 8, 2016, Direct Auto filed a motion for a Rule 308 finding to certify the issue for immediate appeal to the appellate court. In response, Noel Hernandez moved the court to order the contested discovery before requiring briefing on Direct Auto's Rule 308 motion. In response to Noel Hernandez's motion to compel discovery, Direct Auto argued that "[a]nything that occurred after the application" by Erica Bahena for the insurance policy "is not relevant to any issues." On June 8, 2016, the trial court denied Noel Hernandez's motion to compel without prejudice and ordered him to respond to Direct Auto's motion for a Rule 308 finding. On August 3, 2016, the trial court denied Direct Auto's motion for a Rule 308 finding. The order does not provide the trial court's findings or reasons, and the record does not contain a bystander's report or report of proceedings for this day.

         ¶ 21 On September 6, 2018, Noel Hernandez moved to compel discovery. On December 13, 2016, the trial court granted his motion and ordered Direct Auto to answer and produce discovery by January 17, 2017. On May 8, 2017, Noel Hernandez filed a notice to depose Rosa Miranda, a Direct Auto employee.

         ¶ 22 On May 17, 2017 Direct Auto filed a motion for leave to voluntarily "non-suit this matter without prejudice." However, on June 1, 2017, the trial court entered an order observing that this motion was withdrawn. On June 7, 2017, Noel Hernandez moved for leave to file a counterclaim for declaratory judgment, arguing that, "at this late date," it would be unjust to allow Direct Auto to voluntarily dismiss the action. On June 12, 2017, the trial court entered an order granting Direct Auto's motion to non-suit and granting Noel Hernandez's motion for leave to file a counterclaim. On June 27, 2017, Noel Hernandez filed his countercomplaint for declaratory judgment.

         ¶ 23 On July 7, 2017, Noel Hernandez noticed the depositions of Mike Torrello and Rosa Mirandez, employees of Direct Auto. On July 24, 2017, Direct Auto moved to dismiss Noel Hernandez's countercomplaint pursuant to sections 2-615 and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West 2016)). On July 31, 2017, Noel Hernandez moved to compel the depositions of Mike Torrello and Rosa Mirandez. In its reply in support of its motion to dismiss, Direct Auto observed that Erica and Jessica Bahena were being defended by Direct Auto's retained counsel and, thus, there was "no dispute regarding [Direct Auto's] duty to defend." Direct Auto argued that, "because there is no judgment entered against [Erica or Jessica Bahena], this Court is not permitted to issue an advisory opinion as to whether [Direct Auto] would be required to indemnify if a judgment is entered sometime in the future." On September 28, 2017, the trial court entered an order denying Direct Auto's motion to dismiss and granting Noel Hernandez's motion to compel discovery.

         ¶ 24 On November 7, 2017, the trial court entered an order defaulting Direct Auto. Since this order is one of the orders at issues on this appeal, we provide the order in full:

"This matter coming before the Court on the continued motion of the Defendant/Counter Plaintiff Noel Hernandez, to compel Direct Auto to answer written discovery and produce witnesses Mike Torello and Rosa Mira[ndez] for deposition; the Court being advised and the parties, being represented by counsel[:]
IT IS ORDERED that the motion to compel is withdrawn. Direct Auto Ins. Company is defaulted for the reasons stated on the record. Judgment is entered in favor of Noel Hernandez and against Direct Auto. The Court finds that Direct Auto Ins. Co. ...

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