Opinion ID: 547618
Heading Depth: 2
Heading Rank: 1

Heading: Was It the Same Claim?

Text: 28 The Nilsen court adopted for the Fifth Circuit the transactional test of the Restatement (Second) of Judgments for determining whether two suits involve the same claim for res judicata purposes. 9 Under this approach, the critical issue is not the relief requested or the theory asserted but whether plaintiff bases the two actions on the same nucleus of operative facts. 10 The rule is that res judicata bars all claims that were or could have been advanced in support of the cause of action on the occasion of its former adjudication, ... not merely those that were adjudicated. 11 29 The seminal case in this circuit on the res judicata affect of a confirmation order is Southmark Properties v. Charles House Corp. 12 In Southmark, we held that a district court's order confirming a trustee's sale of Southmark's property barred the debtor's later claim that the creditor engaged in fraudulent and extortionate activities leading to that sale. 13 Southmark claimed that the creditor's improper activities concerning its construction loan caused it to default and led to the creditor's foreclosure action. The foreclosure action, in turn, led to Southmark's bankruptcy filing and, finally, to the trustee's sale of the property. 14 The court noted that a common nucleus of operative facts informed the district court's order approving the reorganization sale and the debtor's subsequent claim that the creditor's activities caused that sale. The central transaction in both instances, the court reasoned, was the passing of title to the property in exchange for the cancellation of the mortgage debt. 15 30 The Howes argue that, unlike the debtor in Southmark, their action does not meet the transactional test because [t]he only right and duty resolved in the bankruptcy proceeding was the obligation of the Howes to make payments to the Bank [Premier] and Vaughan pursuant to the obligations incurred by them; there was no consideration of an obligation from the Bank [Premier], Vaughan or Loyd to the Howes. We do not agree. 31 The loan transaction at the heart of the present litigation was also the source of Premier's claim against the estate. The Howes vigorously contested the validity of Premier's lien in adversary proceedings in the bankruptcy court and contended that Premier's loan was usurious. Premier's loan was the only major claim against the estate and was the subject of extensive negotiations prior to confirmation of the plan of reorganization. We cannot escape the conclusion that the Howes' present allegations merely assert new theories based on the same nucleus of operative facts that informed their earlier bankruptcy proceedings. The two actions, therefore, constitute the same claim or cause of action for res judicata purposes. 32