- Case Type:
- Case Status:
- 22-50032 (5th Circuit, Aug 18,2022) Not Published
- A consent order allowing a creditor to file an amended proof of claim and setting a deadline for the debtors to object to the amended claim is res judicata as to counterclaims later raised by the debtors against the creditor. The consent order and the counterclaims were between the same parties, the bankruptcy court had the authority to enter the consent order, the consent order was a final judgment on the merits, and the same cause of action (the amount owed by the debtors) was involved in both the consent judgment and the counterclaims.
- Procedural context:
- The debtors' appealed the bankruptcy court's decision that an Agreed Order between the debtors and a creditor was res judicata as to counterclaims the debtors later sought to assert against the creditor.
- Mark Dale Mattlage-Thurmond and Robert Jewell Snowden, the debtors, owned land they wanted to develop. They borrowed money from First Nation Bank of McGregor d/b/a Your Bank for Life to refinance and then develop the property. Each construction loan was secured by a separate deed of trust on the property. Even though the debtors did not complete the planned construction, they opened the venue to the public. The project never met financial forecasts and never earned enough money to make interest-only payments to the bank. The bank accelerated the notes and posted the property for foreclosure. In response, the debtors filed a chapter 11 bankruptcy case. The bank promptly filed a motion seeking relief from the automatic stay. After a settlement conference, the bankruptcy court entered an Agreed Order that stipulated the debt on the petition date, allowed the bank to file an amended proof of claim to include additional amounts, fees, and charges owed by the debtors on the petition date, and allowed the debtors 14 days to object to the bank's amended proof of claim. The bank filed an amended proof of claim, increasing its claim by nearly $300,000. Sometime later, the debtors asserted counterclaims against the bank based on alleged oral agreements to modify the debtors' short-term loans. The debtors then objected to the bank's proof of claim more than a year after the bank filed the amended proof of claim. The bankruptcy court overruled the debtors' objection to the bank's amended proof of claim because it was untimely. The bankruptcy court also denied the debtors' motion for leave to amend their counterclaims against the bank, ruling that res judicata barred the debtors' counterclaims against the bank.
- Stewart, Elrod, and Graves
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