Opinion ID: 2215629
Heading Depth: 2
Heading Rank: 1

Heading: Rescission Counts

Text: On appeal to this court, plaintiffs first contend that the appellate court erred in concluding that the rescission counts in Rein II were barred by res judicata because plaintiffs could have raised the principle of equitable estoppel in Rein I. Plaintiffs argue that they did raise the issue of equitable estoppel in response to defendants' statute of limitations defense before the trial judge in Rein I, as evidenced by their motions to reconsider and for leave to amend. Thus, plaintiffs contend that the appellate court's reasoning in affirming the trial judge's dismissal of the rescission counts is untenable. Plaintiffs also argue that res judicata could not bar the rescission counts because the dismissal of these counts pursuant to section 2-619 in Rein I was not an adjudication on the merits and therefore does not constitute a final judgment on the merits for purposes of res judicata. 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. People ex rel. Burris v. Progressive Land Developers, Inc., 151 Ill.2d 285, 294, 176 Ill.Dec. 874, 602 N.E.2d 820 (1992); Kinzer v. City of Chicago, 128 Ill.2d 437, 446, 132 Ill.Dec. 410, 539 N.E.2d 1216 (1989). The doctrine extends not only to what was actually decided in the original action, but also to matters which could have been decided in that suit. Progressive Land, 151 Ill.2d at 294, 176 Ill.Dec. 874, 602 N.E.2d 820; see also Elliott v. LRSL Enterprises, Inc., 226 Ill.App.3d 724, 728, 168 Ill.Dec. 674, 589 N.E.2d 1074 (1992). 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 cause of action; and (3) there was an identity of parties or their privies. Downing v. Chicago Transit Authority, 162 Ill.2d 70, 73-74, 204 Ill.Dec. 755, 642 N.E.2d 456 (1994). The second and third requirements for res judicata are met with respect to the rescission counts, and their existence is not challenged here by plaintiffs. There is certainly an identity of causes of action since plaintiffs are suing defendants for rescission of their securities purchases in the present action based on the same facts that gave rise to the rescission counts in the 1990 complaints. Moreover, the parties in both actions are identical. Therefore, the second and third elements of res judicata are met. Whether the first requirement for res judicata is met depends on whether the dismissal of the rescission counts in Rein I was a final judgment on the merits. The trial judge in Rein I dismissed the rescission counts with prejudice, pursuant to section 2-619(a)(5) of the Code, as being barred by the statute of limitations in section 13(D) of the Act. Supreme Court Rule 273 provides that, [u]nless the order of dismissal or a statute of this State otherwise specifies, an involuntary dismissal of an action, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join an indispensable party, operates as an adjudication upon the merits. 134 Ill.2d R. 273. As this court has previously stated, Rule 273 applies only to an involuntary dismissal of an action, such as that which occurs when a motion to dismiss under section 2-615 or 2-619 of the Code is granted. Downing, 162 Ill.2d at 74-75, 204 Ill.Dec. 755, 642 N.E.2d 456. Therefore, under Rule 273, the trial judge's decision to grant defendants' motion to dismiss the rescission counts in Rein I based on the applicable statute of limitations is a final adjudication on the merits and operates as a final judgment on the merits for purposes of res judicata. See Downing, 162 Ill.2d at 74-75, 204 Ill.Dec. 755, 642 N.E.2d 456. Having met the requirements for res judicata, the final judgment in Rein I bars subsequent actions involving the same claims or demands by the same parties or their privies. The doctrine prohibits not only those matters which were actually litigated and resolved in the prior suit, but also any matter which might have been raised in that suit to defeat or sustain the claim or demand. Housing Authority for La Salle County v. Young Men's Christian Ass'n, 101 Ill.2d 246, 251-52, 78 Ill.Dec. 125, 461 N.E.2d 959, (1984); see also Barry v. Commonwealth Edison Co., 374 Ill. 473, 478, 29 N.E.2d 1014 (1940); Elliott, 226 Ill.App.3d at 728, 168 Ill.Dec. 674, 589 N.E.2d 1074; Thorleif Larsen & Son, Inc. v. PPG Industries, Inc., 177 Ill.App.3d 656, 659, 126 Ill.Dec. 738, 532 N.E.2d 423 (1988). While the record supports plaintiffs' argument that they did raise the issue of equitable estoppel before the trial judge in Rein I, as evidenced by their motions for reconsideration and for leave to amend, such an argument does not provide plaintiffs with any relief here. In denying plaintiffs' motion for reconsideration and for leave to amend, the trial judge in Rein I specifically rejected plaintiffs' argument that equitable estoppel overrides the statute of limitations defense. The trial judge's ruling on this particular issue was not appealed to the appellate court in Rein I. The issue of equitable estoppel was therefore raised and decided in Rein I, and under principles of res judicata, plaintiffs were prohibited from raising the same issue in Rein II. Consequently, the rescission counts were properly dismissed.