Court Opinion

ID: 61575
Source: CourtListenerOpinion
Date Created: 2010-04-26 04:08:14+00
Date Added: 2024-06-11T08:50:41.153626
License: Public Domain

[DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS
                                                                FILED
                     FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                       ________________________ ELEVENTH CIRCUIT
                                                            April 4, 2008
                             No. 07-15615                 THOMAS K. KAHN
                         Non-Argument Calendar                CLERK
                       ________________________

                  D. C. Docket No. 06-00095-CV-LGW-3

MATTHEWS, WILSON & MATTHEWS, INC.,
SAMANTHA D. WATKINS,

                                                         Plaintiffs-Appellants,

                                  versus

CAPITAL CITY BANK,

                                                          Defendant-Appellee.

                       ________________________

                Appeal from the United States District Court
                   for the Southern District of Georgia
                     _________________________

                              (April 4, 2008)

Before BIRCH, DUBINA and HULL, Circuit Judges.

PER CURIAM:
       Plaintiffs appeal the district court’s order granting summary judgment to the

defendants on their state law claims of fraud, conversion, money had and received,

breach of fiduciary duty and for an accounting.1 After review, we affirm.

                                     I. BACKGROUND

       This diversity action arises out of a series of loans by defendant Capital City

Bank (“the bank”)2 to plaintiff Matthews, Wilson & Matthews, Inc. (“MWM”) that

were secured with a piece of MWM’s property in Conyers, Georgia (“Conyers

property”). Plaintiff Samantha Watkins is the chief executive officer and sole

shareholder of MWM.

       MWM had trouble making loan payments, and ultimately filed for Chapter 7

bankruptcy. The bankruptcy trustee sought approval from the bankruptcy court to

sell the Conyers property and use the sale proceeds to satisfy the bank’s lien. On

behalf of MWM, Watkins filed an objection to the sale in which she argued that the

bank had engaged in fraud, misappropriated funds and failed to give an accounting.

The factual allegations in Watkins’s bankruptcy objection are also included in

plaintiffs’ claims in this case. After a hearing, the bankruptcy court overruled

Watkins’s objection and approved the sale of the Conyers property and the use of

       1
       On appeal, plaintiffs do not challenge the district court’s conclusion that plaintiffs
abandoned a Truth In Lending Act claim. Thus, we do not address this claim.
       2
       Capital City Bank is the successor in interest to Farmers and Merchants Bank, which
made the loans.

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the sale proceeds to apply to the bank’s lien. Thus, the bankruptcy court

effectively decided plaintiffs’ claims adversely to the plaintiffs.

      Over a year after the bankruptcy court’s order approving the sale, MWM

amended its schedule of personal property to include state law claims of fraud,

conversion and misapplication of funds against the bank in connection with the

loans secured by the Conyers property. In response, the bankruptcy trustee filed a

formal abandonment of this property, pursuant to 11 U.S.C. § 554(a). Section

554(a) provides that “[t]he trustee may abandon any property of the estate that is

burdensome to the estate or that is of inconsequential value and benefit to the

estate.” 11 U.S.C. § 554(a).

      Plaintiffs then filed this civil action against the bank asserting the state law

claims. The district court granted the bank’s motion for summary judgment. The

district court concluded, among other things, that the bankruptcy court’s order

approving the sale of the Conyers property precluded the plaintiffs’ state law

claims because the plaintiffs had already raised these same claims in the

bankruptcy objection to the sale, and the bankruptcy court had overruled the

objection. Plaintiffs filed this appeal.

                                   II. DISCUSSION

      On appeal, plaintiffs argue that the district court erred in giving preculsive

                                            3
effect to the bankruptcy court’s order approving the sale.3

       In a diversity case, we apply the law of the state in which the district court

sits to determine whether the doctrine of res judicata applies. Wesch v. Folsom, 6

F.3d 1465, 1471 (11th Cir. 1993). Under Georgia law, the doctrine of res judicata,

or claim preclusion, will bar a subsequent action when there is: “‘(1) identity of the

cause of action, (2) identity of the parties or their privies, and (3) previous

adjudication on the merits by a court of competent jurisdiction.’” Gunby v. Simon,

277 Ga. 698, 699 (2004) (quoting Waldroup v. Greene County Hosp. Auth., 265

Ga. 864, 866 (1995) and citing O.C.G.A. § 9-12-40).

       Plaintiffs argue only that the bankruptcy court was not a court of competent

jurisdiction over the state law claims. Plaintiffs contend that “the abandoned tort

action would be treated as if it were never a part of the estate, leaving the

bankruptcy court without jurisdiction to issue orders which have a preclusive

effect.” Thus, according to plaintiffs, the bankruptcy trustee’s formal

abandonment of their state law claims retroactively divested the bankruptcy court

of jurisdiction over those claims and restored the claims to them in their pre-

petition status.

       This argument is foreclosed by In re Martin, 490 F.3d 1272 (11th Cir. 2007).

       3
        We review de novo a district court’s application of the doctrine of res judicata. Kizzire
v. Baptist Health Sys., Inc., 441 F.3d 1306, 1308 (11th Cir. 2006).

                                                4
In In re Martin, the appellant argued that a bankruptcy trustee’s abandonment of an

interest in a state court action “divested the bankruptcy court of jurisdiction and

restored his ability [to] proceed in that litigation.” 490 F.3d at 1276. This Court

concluded that a bankruptcy trustee’s “abandonment [is] a ministerial act pursuant

to the Bankruptcy Code which divested the Trustee, and [the debtor’s] estate, of

any remaining interest . . . . and does not re-vest [the debtor] with the ability to re-

litigate” issues already decided. Id.

      Here, as the district court found (and plaintiffs do not dispute), the claims

plaintiffs now assert are the claims they raised in their bankruptcy objection to the

trustee’s motion to sell the property and the bankruptcy court overruled their

objection. Over a year later, and only after MWM amended its bankruptcy petition

to list the claims, did the bankruptcy trustee formally abandon the claims pursuant

to § 554(a).

      As in Martin, the bankruptcy trustee’s abandonment of plaintiffs’ claims was

a ministerial act performed only after the claims had already been rejected by the

bankruptcy court and were of inconsequential value. Under Martin, what reverted

back to MWM after the trustee’s abandonment was “any remaining interest” in the

claims after the bankruptcy court had approved the Conyers property sale. The

trustee’s abandonment did not “re-vest” the plaintiffs with the ability to relitigate

                                            5
the claims overruled by the bankruptcy court.

       For these reasons, the district court did not err in applying the doctrine of res

judicata.4

       AFFIRMED.

       4
         We also find no error in the district court’s alternative conclusions that some of
plaintiffs’ claims are barred by the applicable statutes of limitation and that there is no genuine
issue of material fact as to the remaining timely claims.

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