Cawley v. Celeste (In re Athens/Alpha Gas Corp.)
- Citation:
- Cawley v. Celeste (In re Athens/Alpha Gas Corp.), No. 12-1555 (8th Cir. May 9, 2013)
- Tag(s):
-
- Ruling:
- Because the judgment of the Supreme Court of North Dakota, holding that the appellant's claims were barred, satisfied the elements of North Dakota's res judicata doctrine, the full faith and credit statute (28 U.S.C. § 1738) required the Eight Circuit to accord that decision the same preclusive effect it would be given under North Dakota law.
- Procedural context:
- The BAP affirmed the bankruptcy court because of the Rooker-Feldman doctrine. Instead of affirming on this ground, the Eight Circuit affirmed the bankruptcy court on the alternate ground of res judicata.
- Facts:
- Thomas Cawley ("creditor" or "appellant") made a serious of loans to Athens/Alpha Gas Corp. ("debtor"). When the debtor filed for bankruptcy, it listed appellant as a secured creditor with a claim of $26,000. Appellant contended that his security interest included a five percent working interest in one of the debtor's well, but he did not record his security interest or file a timely proof of claim prior to the debtor's confirmed plan of reorganization. After a group of creditors ("appellees") objected to appellant's listing as a secured creditor, the bankruptcy court reclassified the claim as unsecured. The confirmed plan of reorganization did not account for the appellant's unsecured claim and all of the debtor's assets were transferred free and clear of all liens and claims. Thereafter, the appellant filed a motion with the bankruptcy court seeking payment of administrative expenses, at which point appellees' commenced an action in North Dakota state court to quiet title on the wells. The North Dakota state court found that the appellant's claimed interest in the wells was barred by res judicata because it could have, and should have been brought during the bankruptcy case. The North Dakota Supreme Court affirmed the lower court after concluding that the state court had concurrent jurisdiction with the bankruptcy court under 28 U.S.C. § 1334(b). After moving to reopen the bankruptcy case, the appellant's motion to determine his claim was denied. Thereafter, the Eighth Circuit BAP affirmed the bankruptcy court pursuant to Rooker-Feldman. Relying instead on Sanders Confectionary Products, Inc. v. Heller Financial Inc., 973 F.2d 474, 480 (6th Cir. 1992) and its 4-part test for res judicata, the Eight Circuit held that the North Dakota Supreme Court finally decided, after full and fair litigation, that it had jurisdiction and issued a final decision on the merits. Thus, the Eight Circuit held that 28 U.S.C. § 1738 (full faith and credit) barred appellant's action to determine his claim.
- Judge(s):
- RILEY, COLLOTON, GRUENDER. Opinion by COLLOTON.
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