Bruce P. Golden v. David Barenborg and Salomon Brothers, Inc.
Docket: 94-3625
Court: Court of Appeals for the Seventh Circuit; June 29, 1995; Federal Appellate Court
Bruce P. Golden filed an appeal against David Barenborg and Salomon Brothers, Inc. regarding a district court ruling that found the defendants not vicariously liable for Coldwell Banker’s actions in the sale of Barenborg's home to Golden. Initially, Golden sued Coldwell for misrepresenting material facts about the home's condition, alleging fraud, negligent misrepresentation, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act. After settling with Coldwell, he pursued a new lawsuit against Barenborg and Salomon, asserting they were vicariously liable for Coldwell's actions, including a breach of contract and warranty. The Magistrate Judge ruled the claims were barred by res judicata, but the district court found res judicata inapplicable due to the absence of a dismissal stipulation. Nonetheless, it affirmed the Magistrate Judge's decision, stating that under Illinois law, the appellees were not vicariously liable for Coldwell's actions. The case background included Barenborg's employment with Salomon, the sale of his home through Coldwell, and Golden's subsequent discovery of latent defects after purchasing the property for $280,000.
Golden accused Coldwell of making intentional misrepresentations about the home's condition to persuade him to purchase it. He specifically alleged that Coldwell falsely claimed Barenborg was unreachable, that remodeling plans were unavailable, and that Coldwell had provided all relevant inspection reports. Golden contended that Coldwell had a legal obligation to disclose critical facts under the Illinois Real Estate License Act, including the absence of a concrete basement floor, extensive termite damage, and a previously commissioned inspection report revealing significant defects. He argued that these issues were not evident through reasonable diligence due to concealment behind renovations. Golden claimed he would not have bought the home had he known its true condition.
In his complaint, Golden sought over $80,000 in actual damages, but settled for $60,000 before trial, executing a Mutual Release to dismiss his complaint with prejudice against Coldwell. Yet, the stipulated dismissal was not filed with the court.
Subsequently, Golden sued Salomon Brothers and Barenborg, asserting similar claims against them, including common law fraud, negligent misrepresentation, and violations of the Consumer Fraud Act. He also claimed Coldwell breached a contract addendum requiring them to address defects reported within 14 days. Golden alleged that Coldwell acted as an agent for Salomon and Barenborg, thus making them vicariously liable for Coldwell's actions and for breach of contract. Additionally, he claimed Barenborg breached a warranty concerning the absence of termite damage, asserting he was a third-party beneficiary of that warranty.
The appellees moved to dismiss Golden's complaint, which the Magistrate Judge granted, determining the claims were barred by res judicata. Golden appealed, but the district court ruled that since there was no filed stipulation of dismissal, res judicata was irrelevant. It concluded that vicarious liability could not be established under Illinois law and that Golden was not a third-party beneficiary.
Golden argues that the ongoing stay of discovery by the Magistrate Judge prevented him from establishing that the appellees acted unlawfully independent of Coldwell, which he claims could have influenced the case's outcome. However, he is barred from pursuing this action against the appellees due to res judicata principles. The district court referenced the case McCall-Bey v. Franzen, emphasizing that a stipulation of dismissal with prejudice must be filed for it to be effective, although exceptions exist to prevent injustice. In this scenario, the prior suit against Coldwell was dismissed with prejudice, as confirmed by the "Mutual Release" agreement and statements made by Judge Duff during proceedings, indicating that all parties understood the dismissal's finality without formal filing being necessary.
For res judicata to apply, three criteria must be met: (1) an identity of causes of action; (2) an identity of parties or their privies; and (3) a final judgment on the merits. Golden's complaints in his current suit against the appellees arise from the same operative facts as his previous claims against Coldwell, which involved allegations of fraud and misrepresentation related to the sale of Barenborg's home. As such, the core facts underlying both lawsuits are identical, supporting the application of res judicata in this case.
Golden's additional claims against the appellees do not provide him with relief. In Count IV, he alleges that Coldwell breached a fourteen-day addendum related to his home purchase, while Count V accuses Barenborg of breaching a warranty, arguing he was an intended third-party beneficiary of the Coldwell-Barenborg contract. Golden contends the district court erred by not considering the Seller's Statement, which he claims contains misrepresentations by Barenborg. However, the principle of res judicata prevents further litigation on these matters, including issues that could have been raised previously. Golden should have been aware of Coldwell's breach at the time of his initial lawsuit, and because he had the opportunity to include this claim, it is barred now. Additionally, Golden is not recognized as a third-party beneficiary under Illinois law, which requires that the benefit be intended and explicitly stated in the contract. The contract between Coldwell and Barenborg specifically denies rights to non-parties, meaning Golden's assertion that Barenborg intended for him to benefit is insufficient for him to pursue a breach of warranty claim.
Golden's breach of warranty claim is unsuccessful even when considering the Seller's Statement alongside the Coldwell-Barenborg sales contract. He contends that the district court mistakenly excluded the Seller's Statement, which he claims contained a misrepresentation by Barenborg. However, Golden fails to demonstrate that he saw or relied on the Seller's Statement. Despite his claims of insufficient discovery, there is no evidence from his affidavit indicating reliance on the Statement, leading to the conclusion that his complaint under Count V cannot proceed. Res judicata applies here because Golden cannot circumvent this doctrine by rephrasing his cause of action from previous litigation, as Counts IV and V arise from the same transaction as earlier claims and are therefore barred.
The requirement of identity of parties is also satisfied, as the Mutual Release did not specifically mention Salomon Brothers or Barenborg, but the court recognized Coldwell as an agent for both. Even without determining the exact nature of the agency relationship, the court concluded that Barenborg and Salomon are treated as the same parties for res judicata purposes. Coldwell acted on behalf of both Salomon and Barenborg in selling Barenborg's home, and thus, the release of Coldwell from liability also extends to the principals. Under Illinois law, a settlement with an agent extinguishes the principal's vicarious liability, meaning Golden's claims against the appellees fail.
Finally, the third requirement of res judicata—final judgment on the merits—is met, as the dismissal was acknowledged to be with prejudice when Golden signed the Mutual Release. Consequently, Golden's attempt to pursue the same cause of action against the appellees is barred. The court affirmed the ruling, confirming that all conditions for res judicata are fulfilled.
The Mutual Release executed in October 1991 by Bruce P. Golden and Jody (Rosenbaum) Golden (the "Releasors") releases Coldwell Banker Residential Real Estate (Inc.) (CBRE), its associates, and Ethel Rocki Devoy and Robin L. Lemer (the "Released Parties") from liability. Judge Duff presided over the initial suit involving Coldwell and Golden, wherein a breach of warranty claim was dismissed as Golden was not an intended beneficiary of the related sale contract. Following the settlement and dismissal, Coldwell sought to enforce the agreement due to Golden's subsequent lawsuit; however, Judge Duff determined the new case should be addressed separately since it was unrelated to the prior suit.
Additionally, a Seller's Statement, required by the Residential Property Disclosure Act, outlines the seller's knowledge of property conditions. This requirement does not apply when property is transferred from an entity under a relocation agreement, provided the entity shares the seller's disclosure with prospective buyers. The legal principles apply uniformly under both federal and Illinois law, negating the need to choose between them. Finally, under Federal Rules of Civil Procedure Rule 41(a)(1)(ii), a plaintiff can voluntarily dismiss an action via a stipulation signed by all parties, which is deemed without prejudice unless stated otherwise.
