Cawley v. Celeste (In re Athens/Alpha Gas Corp.)

No. 11-6061 (B.A.P. 8th Cir. Feb. 1, 2012)
The Eighth Circuit affirmed the decision of the bankruptcy court denying a creditor's motion to determine his claim, on the grounds that the bankruptcy court lacked subject matter jurisdiction to hear the motion based on the Rooker-Feldman doctrine.
Procedural context:
Objection to a creditor's claim was sustained in the bankruptcy case. A chapter 11 plan was confirmed that did not provide for payment to the creditor based on the sustained objection. The creditor also asserted a working interest in Debtor's post petition income. State court litigation ensued to quiet title, and summary judgment was entered against the creditor, on the grounds that the confirmed plan was res judicata as to his claims. The creditor then filed a motion before the bankruptcy court seeking to have that court determine his claims; the bankruptcy court denied the motion based on res judicata. The creditor appeals from that order.
Athens/Alpha Gas Corporation ("Debtor") filed for chapter 11 relief on October 28, 2002, listing Thomas P. Cawley ("Cawley") as a secured creditor with a noncontingent, liquidated, undisputed claim totaling $26,000. Debtor proposed a plan, and a competing plan was also filed. The competing plan proponents filed an objection to Cawley's claim, to which Cawley did not respond. The bankruptcy court sustained the objection and disallowed Cawley's claim in its entirety. The bankruptcy court subsequently denied confirmation of Debtor's plan, and confirmed the competing plan. Under the confirmed plan, Debtor's assets were transferred to "NEWCO" free and clear of any claims, liens and interests, in exchange for that company's assuming the obligation to pay allowed claims provided in the plan. No party appealed the order confirming the plan. Prior to confirmation, Cawley filed an application for payment of an administrative expense, based on an asserted "working interest" in Debtor's post-petition profits. He subsequently withdrew the application, but the competing plan proponents instituted a quiet title action in state court to determine whether Cawley had a working interest. Cawley filed a counter-claim seeking $26,000 that he asserted he was owed under the confirmed plan. The state court granted summary judgment against Cawley based on res judicata arising from the confirmed chapter 11 plan, which determined his claims, and was affirmed on appeal. While the state court action was pending, Cawley filed a motion to determine that he was owed $26,000 due to his now unsecured claim, that he owned a working interest, and that based on his working interest he was entitled to a $64,000 administrative claim. The bankruptcy agreed with the state court that Cawley's claims were barred by res judicata.
Venters, Saladino, Nail

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