IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-20202
Summary Calendar
HUNTSVILLE CHRYSLER PRODUCTS INC; HUNTSVILLE
CHEVROLET-NISSAN INC; BRYAN AUTOMOTIVE PRODUCTS INC.,
Plaintiffs-Counter Defendants-Appellants-Cross-Appellees,
versus
GENERAL ELECTRIC CAPITAL CORPORATION,
Defendant-Counter Plaintiff-Third Party Plaintiff-Appellee-Cross Appellant,
versus
JACKIE PETERS; LER INC.; DAVID PETERS; D-JAC
MANAGEMENT CO.; CLAIR R. PETERS; ELLEN M. PETERS,
Third Party Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Texas
(H-98-CV-1837)
January 11, 2000
Before HIGGINBOTHAM, DeMOSS, and STEWART, Circuit Judges
PER CURIAM:*
Plaintiffs, Huntsville Chrysler Products, Inc., Huntsville Chevrolet-Nissan, Inc., and Bryan
Automotive Products, Inc. (“appellants” or “dealerships”), appeal the district court’s final judgment.
The district court dismissed the appellants’ complaint with prejudice on the basis that their claims
against General Electric Capital Corporation (“GECC”) were barred by res judicata. GECC appeals
the district court’s final judgment because the judgment dismissed the entire case with prejudice,
including GECC’s counterclaims and third party claims for attorneys’ fees. For the following reasons
we affirm in part, and reverse in part.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
FACTUAL AND PROCEDURAL BACKGROUND
In September 1996, the dealerships and GECC entered into a floor plan financing
agreement in which GECC would provide $10.4 million dollars to assist the dealerships in
purchasing inventory. The dealerships defaulted in their repayment and in October 1997 GECC
filed a sequestration suit in federal district court. The dealerships immediately filed for Chapter 11
bankruptcy protection. The bankruptcy court entered several orders in the consolidated
bankruptcy proceedings. The bankruptcy court entered an order finding that GECC’s claims
against the dealerships were undisputed debts. The dealerships filed an adversarial proceeding
against GECC requesting that the bankruptcy court enter an injunction to prevent GECC from
foreclosing on their collateral. The dealership requested the injunction on the basis that the
dealerships were progressing rapidly in their repayment of GECC, and for the equitable reason
that GECC was receiving repayment at the expense of the dealerships’ other creditors. In
February 1998, the dealerships and GECC entered into an agreement for repayment of the debt.
In April 1998, after the debt was repaid the bankruptcy court granted the dealerships’ motion to
dismiss the bankruptcy proceedings.
In June 1998, the dealerships filed the present case in district court. The dealerships’ put
forth six causes of action against GECC including negligent misrepresentation, fraud, breach of
contract, tortious interference with prospective contracts, and violation of the Texas Deceptive
Trade Practices Act. The dealerships claimed that GECC misled them as to the terms of the loan
agreements, attempted wrongful foreclosure on their assets, and wrongfully forced the dealerships
into bankruptcy. GECC counterclaimed and brought third party claims against the guarantors of
the dealership loan: Jackie Peters, LER, Inc., David Peters, D-Jac Management, Clair Peters, and
Ellen Peters (“third party defendants”), for attorneys’ fees and costs.
In January 1999, the district court issued an order of dismissal stating that the dealerships’
claims were barred by res judicata. Although the district court’s order did not mention GECC’s
counterclaims and third party claims the final judgment dismissed the entire case with prejudice.
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DISCUSSION
I. Standard of Review
We will uphold a FED. R. CIV. P. 12(b)(6) dismissal if it appears that no relief could be
granted under any set of facts that could be proved consistent with the allegations. Kansa
Reinsurance Company v. Congressional Mortgage Corporation of Texas, 20 F.3d 1362, 1366 (5th
Cir. 1994). The decision to dismiss a claim as barred by res judicata is a conclusion of law.
Conclusions of law are subject to de novo review. Criswell v. Hensley, 102 F.3d 1411, 1414 (5th
Cir. 1997).
II. Dismissal of Dealerships’ Claims
This Court has recognized the importance of the finality of judgments entered by a
bankruptcy court. Baudoin v. Bank of Lafayette, 981 F.2d 736, 739 (5th Cir. 1993) (citations
omitted). A decision by a bankruptcy court has the effect of a judgment entered by a district
court. Id. An attempt by a party to relitigate matters that were raised or could have been raised
during the bankruptcy proceedings is barred under the doctrine of res judicata. Id. (citations
omitted). A bankruptcy judgment bars a subsequent suit if: 1) both cases involve the same
parties; 2) the prior judgment was rendered by a court of competent jurisdiction; 3) the prior
decision was a final judgment on the merits; and 4) the same cause of action is at issue in both
cases. Id. at 740 (citing Latham v. Wells Fargo Bank, N.A., 896 F.2d 979, 983 (5th Cir. 1990)).
In the present case appellants do not dispute that the parties to this suit are identical to the
parties in the bankruptcy case. The appellants also do not dispute that there was a final judgment
entered in the bankruptcy proceeding. Instead the appellants major point of contention is that the
bankruptcy court did not have jurisdiction to hear the appellants lender liability claims.. The
appellants contend that a bankruptcy court has jurisdiction only to hear all cases under title 11 and
all core proceedings arising under title 11. See 28 U.S.C. § 157(b)(1). The appellants claim that
their lender liability claims against GECC do not qualify as core proceedings under title 11
because their claims are not: 1) matters concerning the administration of an estate, 2)
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counterclaims by the estate against persons filing claims against the estate, or 3) claims that affect
the liquidation of assets of the estate. See 28 U.S.C. § 157(a)(2).
Despite the appellants contentions this court has previously held that lender liability suits
are core proceedings. In Baudoin, a corporation filed for bankruptcy protection after it had
defaulted on loans made by a local bank. See Baudoin, 981 F.2d at 737. The automatic stay in
the bankruptcy proceeding was lifted allowing the bank to seek collection from the corporation.
See id. at 738. During the bankruptcy proceeding the corporation filed suit against the bank in
state court alleging breach of the loan agreement and other related tort claims. Id. We held that
the lender liability claims made by the corporation in state court were core proceedings for which
the bankruptcy court had jurisdiction. See id. at 741. The corporation contended that the bank
had breached the loan agreements which formed the basis of the bank’s claims against the estate.
Id. We found that the subsequent lender liability suit could have been filed as part of the
bankruptcy proceedings as a counterclaim to the bank’s filing of a proof of claim against the
estate. Id.
The facts of the present case are virtually indistinguishable from those in Baudoin. In the
present case the dealerships claim that GECC breached the loan agreements which created the
debts which were in question in the bankruptcy proceedings. Therefore, if the dealerships
believed that these debts were invalid due to a breach of the loan agreement by GECC they could
have filed a counterclaim in the bankruptcy court. The dealerships did file adversary proceedings
during the bankruptcy case, but failed to contest the validity of the loans. Therefore, because the
dealerships lender liability claims were challenges to a claim made against the estate during the
bankruptcy proceeding, these lender liability claims were core proceedings for which the
bankruptcy court did have jurisdiction.
Appellants argue in the alternative, that even if the bankruptcy court did have jurisdiction
to enter a final judgment as to its lender liability claims the test for res judicata fails because its
claims in the present case are different from the matters which were at issue in the bankruptcy
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proceedings. To determine whether the same claim is involved in two separate actions we apply
the transactional test which is set forth in Restatement (Second) of Torts § 24. Eubanks v. FDIC,
977 F.2d 166 (5th Cir. 1992) (citing Ocean Drilling & Exploration Co. v. Mont Boat Rental
Servs., Inc., 799 F.2d 213, 217 (5th Cir. 1986). Under the transactional test we ask whether the
two actions are based on the same nucleus of operative facts. Id. We look to the factual
predicate of the claims asserted, not the legal theories presented. Id.
In the present case the factual predicate for the bankruptcy proceeding and the current
lender liability claims are identical. Both proceedings concern the floorplan financing agreement
between the dealerships and GECC, the circumstances surrounding the attempted refinancing of
that debt, and the eventual repayment of the debt by the dealerships. The only difference between
the bankruptcy proceedings and the current lender liability suit is that the dealerships have put
forth a different legal theory in the present case from the one which they presented in the prior
bankruptcy proceedings. Our case law clearly indicates that this shift in legal theory will not
inhibit the application of the res judicata doctrine. See e.g. Howe v. Vaughn, 913 F.2d 1138,
1144-45 (5th Cir. 1990) (finding that the debtors allegations in a suit subsequent to the bankruptcy
proceedings merely asserted new theories based on the same nucleus of operative facts, and
therefore constituted the came claim for res judicata purposes). Because the appellants’ lender
liability claims were core proceedings for which the bankruptcy court did have jurisdiction, and
their claims were based on the same nucleus of operative facts as those at issue in the bankruptcy
proceedings we find that the appellants’ claims were barred by res judicata.
III. Dismissal of GECC’s Counterclaim and Third Party Claim
GECC filed a counterclaim and third party claim against the guarantors of the loan for
attorneys’ fees and costs. GECC argues that the Loan and Security agreement entered into
between GECC and the dealerships in September 1996 provided that if at any time GECC
employed legal counsel for any litigation relating to the agreement the dealerships and its
guarantors would pay those attorneys’ fees and costs. The district court did not discuss the
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counterclaims in its order for dismissal, which was the basis of the final judgment the court
entered which dismissed the entire case. GECC argues that this dismissal of the counterclaim and
third party claim was not requested by either party, and appears to be an inadvertent mistake on
behalf of the district court. The dealerships argue that GECC waived its right to appeal this ruling
by failing to file post-trial motions requesting a new trial, and failing to make a motion to alter and
amend the judgment. The dealerships also argue that the district court’s dismissal of the
counterclaim and third party claim was not inadvertent because the court did not make an express
declaration that it intended to separate the counterclaims from the final judgment, and therefore it
must be assumed that the final judgment intended to dismiss all claims with prejudice.
Assuming arguendo that the district court did intend to dismiss the counterclaim and third
party claim, as a conclusion of law we review this dismissal de novo. See Criswell, 102 F.3d at
1414. GECC was not required to file post-trial motions for to amend the judgment in order to
properly preserve this issue for appeal. See generally, Colonial Penn Insurance v. Market
Planners Insurance Agency, 157 F.3d 1032, 1036 (5th Cir. 1998). GECC properly preserved the
issue for appeal by filing a timely notice of appeal for this issue. The district court offered no
explanation for the dismissal and on appeal the dealerships offer no independent justification for
the dismissal. Our review of the pleadings has revealed that GECC has stated a claim for
attorneys’ fees upon which they could be granted relief. Therefore, we reverse the dismissal of
the counterclaim and third party clam. We remand to the district court for further consideration
of these claims.
AFFIRMED in part, REVERSED in part.
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