In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 06-2687

IN RE:

DOLLIE’s PLAYHOUSE, INC.

Debtor,

DOLLIE’S PLAYHOUSE, INC.

Plaintiff-Appellant,

v.

NABLE EXCAVATING, INC.,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Southern District of Illinois.

No. 05 C 385—William D. Stiehl, Judge.

____________

ARGUED FEBRUARY 20, 2007—DECIDED APRIL 9, 2007

____________

Before MANION, KANNE, and WOOD, Circuit Judges.

KANNE, Circuit Judge. Dollie’s Playhouse, Inc., filed

an adversary complaint against Nable Excavating, Inc. The

bankruptcy court held that res judicata barred Dollie’s

complaint and the district court affirmed this judgment.

We affirm.
2 No. 06-2687

I. HISTORY

Dollie’s was an adult entertainment nightclub in Washington Park, Illinois owned by Stephen Masters and

Nathan Eggemeyer. The relationship between Masters

and Eggemeyer soured. Eggemeyer murdered Masters

and buried Masters’ body on property owned by Eggemeyer. Eggemeyer was convicted of murdering Masters

and was sentenced to life imprisonment. State v.

Eggemeyer, 9 S.W.3d 640 (Mo. Ct. App. 1999) (affirming

the conviction on direct appeal); Eggemeyer v. Roper,

No. 402CV01486CEJAGF, 2006 WL 355258 (E.D. Mo. Feb.

15, 2006) (denying a petition for a writ of habeas corpus).

Eggemeyer also had a financial interest in Nable.

Dollie’s and Nable entered into an agreement before

Masters’ death. Dollie’s alleges that the agreement was

a contract for the sale of property while Nable counters

that the agreement was merely a lease without any

transfer of ownership in the property. To settle the

disagreement, Dollie’s brought a suit against the title

company and Nable for declaratory judgment in the Circuit Court in St. Clair County Illinois. Dollie’s Playhouse

v. Chicago Title & Tr. Co. & Nable Excavating, Inc., 99-

MR-144. Nable counterclaimed alleging that Dollie’s had

breached the lease agreement and owed it money. The

Circuit Court found for Nable and held that Dollie’s owed

Nable $105,000 in past rent and $120,000 on an unpaid

loan. The Appellate Court of Illinois, Fifth District,

affirmed the Circuit Court’s judgment on August 27, 2004.

Dollie’s Playhouse v. Chicago Title & Tr. Co. & Nable

Excavating, Inc., No. 5-02-0503 (Ill. App. Ct. Aug. 27,

2004).

Dollie’s filed a Chapter 11 bankruptcy petition in

September 2004. Dollie’s also brought an adversary

complaint against Nable seeking to recover damages for

Eggemeyer’s alleged breach of fiduciary duties and conver-
No. 06-2687 3

sion of Dollie’s corporate funds. Dollie’s argues that

Eggemeyer stole money from Dollie’s and funneled it to

himself and Nable. According to Dollie’s, Eggemeyer

murdered Masters as part of this plan and therefore this

money should be returned by Nable to Dollie’s and Dollie’s

rightful owner Masters’ widow. The bankruptcy court

and the district court rejected this argument, holding that

the claims were barred by res judicata. Both courts

concluded that Dollie’s was trying to reargue who rightfully controlled the land and money at dispute, an issue

already determined by the Illinois state courts.

II. ANALYSIS

“Essentially, our review is the same as that performed by

the district court.” In re Salem, 465 F.3d 767, 773 (7th Cir.

2006) (citing In re Midway Airlines, Inc., 383 F.3d 663, 668

(7th Cir. 2004)). “Factual findings are reviewed for clear

error; legal conclusions are reviewed de novo.” In re

Doctors Hosp. of Hyde Park, Inc., 474 F.3d 421, 426 (7th

Cir. 2007).

We agree with the district court in its affirmance of the

decision of the bankruptcy court, that Dollie’s adversary

complaint is barred under res judicata. The Full Faith and

Credit Act requires that we apply Illinois law and recognize the preclusive effect of the previous Illinois state

judgment in this proceeding, Sornberger v. City of Knoxville, Illinois, 434 F.3d 1006, 1020 n.9 (7th Cir. 2006)

(citing 28 U.S.C. § 1738; Rekhi v. Wildwood Indus., 61 F.3d

1313, 1317 (7th Cir. 1995)); accord Crop-Maker Soil Servs.,

Inc. v. Fairmount State Bank, 881 F.2d 436, 439 (7th Cir.

1989) (“The doctrine of res judicata applies in the bankruptcy context.”) (citing Brown v. Felsen, 442 U.S. 127, 132

(1979)); see also In re Heckert, 272 F.3d 253, 258 (4th Cir.

2001), as long as the previous Illinois proceeding met the

minimum requirements of due process. Licari v. City of
4 No. 06-2687

Chicago, 298 F.3d 664, 666-67 (7th Cir. 2002) (citing Pliska

v. City of Stevens Point, Wisconsin, 823 F.3d 1168, 1172

(7th Cir. 1987)). “Under Illinois law, a final judgment on

the merits rendered by a court of competent jurisdiction

acts as a bar to a subsequent suit between the parties

involving the same cause of action.” Hicks v. Midwest

Transit, Inc., ___ F.3d ___, No. 06-2579, 2007 WL 609925,

at *2 (7th Cir. Mar. 1, 2007) (citing River Park, Inc. v. City

of Highland Park, 703 N.E.2d 883, 889 (Ill. 1998); Rein v.

David A. Noyes & Co., 665 N.E.2d 1199, 1204 (Ill. 1996);

Rodgers v. St. Mary’s Hosp., 597 N.E.2d 616, 620-21 (Ill.

1992) (internal quotations omitted)). “Res judicata applies where: (1) a final judgment on the merits was

rendered by a court of competent jurisdiction; (2) there is

an identity of causes of action; and (3) there is an identity

of parties or their privies.” Licari, 298 F.3d at 666 (citing

Nowak v. St. Rita High Sch., 757 N.E.2d 471, 477 (Ill.

2001)).

Dollie’s recognizes that there was a final judgment on

the merits and there is an identity of parties. However, it

argues that it brings different claims in the present case—

breach of fiduciary duties and conversion of corporate

assets—because it brought a breach of contract claim in

the Illinois state court proceeding. However, Illinois

applies the “transactional” test, “which provides that the

assertion of different kinds of theories of relief constitutes

a single cause of action for purposes of res judicata if a

single group of operative facts gives rise to the assertion

of relief,” when evaluating identity of causes of action.

Id. at 667 (citing River Park, Inc., 703 N.E.2d at 893).

Dollie’s present adversarial complaint arises from the

same underlying business and personal disputes and

involves the same issue of what money and property

is owed between Dollie’s and Nable. As Nable’s counsel

properly noted at oral argument, litigating Dollie’s adversarial complaint would require a re-litigation of the
No. 06-2687 5

state court proceeding by requiring the bringing of the

same evidence and arguments. Altering the characterization of its case from a breach of contract claim into a

breach of fiduciary and conversion claims cannot save

Dollie’s case.

Dollie’s also invokes equity to defeat the operation of res

judicata. Res judicata is an equitable doctrine that is

not applied when it is “fundamentally unfair to do so.”

Nowak, 757 N.E.2d at 477. Dollie’s argues that Nable’s

assertion of res judicata benefits Eggemeyer’s criminal

conduct of murdering Masters and allegedly stealing

money from Dollie’s because Eggemeyer is the true owner

of Nable. However, the Appellate Court of Illinois, the

final state court to consider this case, was aware of and

rejected any consideration of these equitable issues.

Dollie’s Playhouse v. Chicago Title & Tr. Co. & Nable

Excavating, Inc., No. 5-02-0503, at pg. 4 (Ill. App. Ct. Aug.

27, 2004) (“Masters was murdered . . . Eggemyer was

charged with his murder [and] was convicted.”). Although

we are not unsympathetic to the equities of the situation,

pursuant to 28 U.S.C. § 1738, we are bound to honor the

preclusive effect of the valid Illinois state court judgment.

III. CONCLUSION

The judgment of the district court is AFFIRMED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—4-9-07