United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 96-2752

___________

In re: Anderberg-Lund Printing *

Co., also known as Lane *

Envelope, also known as Great *

Way Publications, *

*

Debtor. *

*

_______________________ *

*

W.A. Lang Co., *

* Appeal from the United States

Appellant, * District Court for the

* District of Minnesota.

v. *

*

Anderberg-Lund Printing *

Co., also known as Lane *

Envelope, also known as Great *

Way Publications, *

*

Appellee. *

___________

 Submitted: February 10, 1997

 Filed: April 7, 1997

___________

Before MAGILL, BEAM, and LOKEN, Circuit Judges.

___________

BEAM, Circuit Judge.
The Honorable David S. Doty, United States District Judge for 1

the District of Minnesota.

The Honorable Nancy C. Dreher, United States Bankruptcy Judge 2

for the District of Minnesota.

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W.A. Lang Co. (“Lang”) appeals from the district court's1

affirmance of the bankruptcy court’s denial of Lang’s claim for

2

administrative expenses pursuant to 11 U.S.C. § 503(b). We affirm.

I. BACKGROUND

Lang is a general insurance agency whose business includes the

sale of worker’s compensation insurance. Lang is a licensed agent

of General Insurance Company of America (GICA). Under the agency

agreement between Lang and GICA, Lang is allowed to chose between

two types of billing for the GICA policies it sells. Under “direct

billing,” insureds are billed by and pay premiums directly to

GICA’s parent company. Under “agency billing,” Lang pays to GICA

the premiums due, and in turn collects the premium amount and

commissions from the insured. The Lang-GICA agency agreement

obligates Lang to pay premiums due under “agency billing” policies

whether or not Lang is paid by the insured.

In 1993, Lang sold a GICA worker's compensation policy to

Anderberg-Lund Printing Company. Lang elected agency billing for

this policy, which was to run for the term of July 1, 1993, to July

1, 1994. Later in 1993, Anderberg-Lund experienced financial

difficulties, and failed to make payments to Lang. As it was

obliged to under the agency agreement, Lang continued to make

payments on the policy to GICA. As a result of Anderberg-Lund's

delinquencies, GICA issued at Lang’s request a notice of

cancellation for the policy on December 14, 1993.
Section 503(b) allows recovery from the bankruptcy estate of 3

"the actual, necessary costs and expenses of preserving the estate

. . . rendered after the commencement" of the bankruptcy case.

Administrative expense claims under section 503(b) are first

priority claims against the bankruptcy estate. 11 U.S.C. §

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The next day, Anderberg-Lund filed for Chapter 11 bankruptcy,

and continued to operate the business as a debtor-in-possession.

Pursuant to 11 U.S.C. § 108(b), cancellation of the GICA policy was

deferred for sixty days. At the end of this period, Anderberg-Lund

was able to secure a replacement policy. After the filing of the

bankruptcy petition, but before Anderberg-Lund obtained the new

policy, Lang made two more premium payments to GICA. These two

payments totaled $22,364.68.

Based upon a post-cancellation audit, GICA determined that it

had been entitled to an earned premium of $67,928.20 for the period

the Anderberg-Lund policy had been in effect. GICA had, however,

received payments based on the estimated premium totaling

$89,995.44. The difference, $22,067.24, was “unearned premium”

that the policy required GICA to refund. When both Anderberg-Lund

and Lang made demands for the unearned premium, GICA filed an

interpleader complaint as an adversary proceeding in AnderbergLund’s bankruptcy case.

In separate answers to GICA’s complaint, both Anderberg-Lund

and Lang laid claim to the unearned premium. Anderberg-Lund also

asserted a cross-claim against Lang for damages under section

362(h) of the bankruptcy code, based on Lang's alleged violations

of the automatic stay. Most significant to this appeal, Lang

alleged as a cross-claim against Anderberg-Lund that the two postpetition premium payments it had made to GICA on behalf of

Anderberg-Lund were an administrative expense under 11 U.S.C. §

503(b). Lang claims that, deducting for that portion of the 3
507(a)(1).

We will assume for purposes of this appeal that the $18,830

4

figure Lang puts forth correctly represents the post-petition

premium payments, less the amount of the unearned premium allocable

to those payments.

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unearned premium allocable to the post-petition payments, it is

entitled to an administrative expense of $18,830, the earned

premium portion of the $22,364.68 it actually paid for postpetition coverage. The adversary proceeding thus concerned two

sums of money: (1) the unearned premium of $22,067.24 that GICA had

been overpaid over the course of the policy; and (2) the postpetition earned premium of $18,830 that Lang paid GICA after

Anderberg-Lund filed for bankruptcy.4

The bankruptcy court heard testimony and accepted evidence in

the adversary proceeding, and issued its findings, conclusions, and

order on December 9, 1994. The bankruptcy court’s order had three

components: (1) it determined that the policy required that the

unearned premium amount interpleaded by GICA be refunded to the

insured, Anderberg-Lund; (2) it denied Anderberg-Lund’s crossclaims for damages; and (3) it ordered that “[t]he claims made by

[Lang] are DISMISSED with prejudice on the merits.” No. 4-93-6995,

Adv. 4-94-398, slip op. at 14 (D. Minn. Dec. 9, 1994).

Lang did not appeal from this order. On January 16, 1995,

however, Lang disregarding the adversary proceeding, filed a motion

in the core proceeding seeking 503(b) administrative expenses based

on its claim to the post-petition earned premiums. On January 26,

the bankruptcy court summarily denied Lang’s motion. Lang appealed

this denial to the district court, which concluded that the

bankruptcy court had denied the 503(b) claim in its prior order in
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the adversary proceeding, and that res judicata prevented Lang from

relitigating the claim by motion. Lang appeals.

II. DISCUSSION

The binding effect of a former adjudication, often generically

termed res judicata, can take one of two forms. Claim preclusion

(traditionally termed res judicata or "merger and bar") “‘bars

relitigation of the same claim between parties or their privies

where a final judgment has been rendered upon the merits by a court

of competent jurisdiction.’” Plough v. West Des Moines Community

Sch. Dist., 70 F.3d 512, 517 (8th Cir. 1995) (quoting Smith v.

Updegraff, 744 F.2d 1354, 1362 (8th Cir. 1984)). Issue preclusion

(or "collateral estoppel") applies to legal or factual issues

"actually and necessarily determined," with such a determination

becoming "conclusive in subsequent suits based on a different cause

of action involving a party to the prior litigation." Montana v.

United States, 440 U.S. 147, 153 (1979). The principles of res

judicata generally apply to bankruptcy proceedings. Katchen v.

Landy, 382 U.S. 323, 334 (1966). 

In this case the question is one of claim preclusion since the

administrative expense claim Lang brought by motion was identical

to Lang's cross-claim in the prior adversary proceeding. Claim

preclusion will bar a subsequent suit when: "(1) the first suit

resulted in a final judgment on the merits; (2) the first suit was

based on proper jurisdiction; (3) both suits involved the same

cause of action; and (4) both suits involved the same parties or

their privies." Lovell v. Mixon, 719 F.2d 1373, 1376 (8th Cir.

1983). Furthermore, the party against whom res judicata is

asserted must have had a full and fair opportunity to litigate the
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matter in the proceeding that is to be given preclusive effect.

Plough, 70 F.3d at 517. 

There is no dispute that the two proceedings at issue in this

case involved the same parties and the same cause of action.

Therefore, we need only determine: (1) whether the bankruptcy court

had jurisdiction to decide the administrative expense claim in the

adversary proceeding; (2) whether the bankruptcy court's order in

the adversary proceeding was a final judgment on the merits; and

(3) whether Lang had a full and fair opportunity to litigate the

administrative expense claim in the adversary proceeding.

A. The Bankruptcy Court's Jurisdiction

A claim for an administrative expense pursuant to section

503(b) is a core proceeding for which the bankruptcy court has

jurisdiction under 28 U.S.C. § 157(b)(2). Even when contested,

however, a 503(b) claim is not properly brought in an adversary

proceeding. See Fed. R. Bankr. P. 7001. Such claims are

appropriately brought by motion in the bankruptcy case, and relief

is typically granted in contested claims only upon notice and

hearing. Fed. R. Bankr. P. 9013, 9014; Minn. Bankr. Local Rule

1201. See also Colandrea v. Union Home Loan Corp. (In re

Colandrea), 17 B.R. 568, 583 (Bankr. D. Md. 1982) (dismissing

503(b) claim brought as a counterclaim in an adversary proceeding).

Indeed, Lang's second administrative expense claim for the earned

premium was made by motion in conformance with both the federal and

local bankruptcy rules.

Thus, Lang's initial assertion of its administrative expense

claim as a cross-claim in the adversary proceeding was unusual. We

nonetheless conclude that the claim was properly before the court
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in the adversary adjudication. Section 503(b) allows the

bankruptcy court to grant administrative claims "[a]fter notice and

a hearing." The bankruptcy code defines "after notice and a

hearing" as "after such notice as is appropriate in the particular

circumstances, and such opportunity for a hearing as is appropriate

in the particular circumstances." 11 U.S.C. § 102(1)(A). The

debtor against whom Lang brought its claim, Anderberg-Lund, was a

party to the adversary proceeding and thus had full notice of

Lang's claim. The factual and legal issues presented in the

litigation over the unearned premium were closely related to those

of the earned premium that was the subject of Lang's administrative

expense claim. Given the bankruptcy court's flexibility under

section 102(1)(A) to determine what procedures are appropriate for

particular claims, we conclude that in this instance the bankruptcy

court had jurisdiction to consider the claim in the adversary

proceeding.

B. Final Judgment on the Merits

Lang argues that even though its claim was before the

bankruptcy court in the adversary proceeding, the court's order was

not a final judgment on the merits of that claim. Lang argues that

the bankruptcy court did not mention in its order the

administrative expense claim as an issue to be decided, that the

court's factual findings do not clearly address the claim, and that

the court's order does not expressly refer to the claim in its

disposition. Lang argues that Rule 52 of the Federal Rules of

Civil Procedure (which is incorporated by Bankruptcy Rule 7052)

requires the court to "find the facts specially" with respect to

each claim before it in the adversary proceeding. Thus, Lang,

asserts, the bankruptcy court's order in the adversary proceeding

did not fully adjudicate the administrative expense claim, and was,
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therefore, not an appealable final order under Rule 54(b) of the

Rules of Civil Procedure.

We agree with Lang that it is difficult to find any discussion

of the administrative claim in the bankruptcy court's first order.

We are reluctant, however, to conclude from this that the court did

not consider or decide that question. Lang asserted that it was

entitled to the earned premium as an administrative expense in its

answer and cross-claim, elicited testimony during the adversary

proceeding about the earned premium, and made express reference to

the claim in its proposed findings, conclusions, and order. The

claim was squarely before the bankruptcy court and was actively

litigated, and we cannot conclude that the court simply ignored or

neglected that claim in issuing its order. The bankruptcy court

stated in its order that "[t]he claims made by [Lang] are DISMISSED

with prejudice on the merits," and we can only surmise from this

that the court fully intended that its order terminate the

adversary proceeding in all of its manifestations. To the extent

that the court's findings were ambiguous, Lang could have moved for

an amended order or could have appealed. Whether or not the

court's holdings were as complete as we might have expected, we

find that its disposition was an unambiguous final adjudication on

the merits of all issues before the court at that time.

C. Full and Fair Opportunity to Litigate

Finally, we note that this is not a case in which Lang did not

have a full and fair opportunity to litigate its administrative

expense claim. Not only did Lang have the opportunity, but in fact

fully litigated the issue. As noted, Lang pleaded the 503(b)

claim, presented evidence relevant to the earned premium, and

submitted proposed findings and conclusions with regard to the 
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claim. Lang actively pursued this claim in the adversary

proceeding, and fairness would not be served by allowing it to

relitigate this now settled matter, even though we think the issue

may have been wrongly decided by the bankruptcy court. See Potter

v. CNA Ins. Cos. (In re MEI Diversified, Inc.), 106 F.3d 829, 832

(8th Cir. 1997).

III. CONCLUSION

The district court correctly concluded that res judicata

barred Lang from relitigating the administrative expense claim it

had previously asserted in the adversary proceedings. The judgment

of the district court, affirming the bankruptcy court's denial of

Lang's subsequent motion for a grant of an administrative expense,

is affirmed.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.