Court Opinion

ID: 3000422
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:04:44.265639+00
Date Added: 2024-06-11T13:39:48.877761
License: Public Domain

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 Wash-
ington 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 Egge-
meyer. 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 Cir-
cuit 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 right-
fully 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 recog-
nize the preclusive effect of the previous Illinois state
judgment in this proceeding, Sornberger v. City of Knox-
ville, 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 bank-
ruptcy 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 ap-
plies 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 ad-
versarial 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 characteriza-
tion 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