Hansler, Matter of, 92-7243

• Decision Date: 14 April 1993
• Docket Number: No. 92-7243,92-7243
• Citation: 988 F.2d 35
• Parties: In the Matter of Joseph A. HANSLER, Debtor. Joseph A. HANSLER, Appellee, v. Tony MAINKA, and AM Vending Company, Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 35

988 F.2d 35

In the Matter of Joseph A. HANSLER, Debtor.

Joseph A. HANSLER, Appellee, v. Tony MAINKA, and AM Vending Company, Appellants.

No. 92-7243.

United States Court of Appeals, Fifth Circuit.

April 14, 1993.

Robert W. Johnson, Jr., Corpus Christi, TX, for Tony Mainka and AM Vending Co.

Ken Dahlberg, Gregory T. Perkes, Corpus Christi, TX, for Joseph A. Hansler.

Appeal from the United States District Court for the Southern District of Texas.

Before POLITZ, Chief Judge, JOLLY, and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Tony Mainka and AM Vending Company appeal the district court's judgment awarding damages to Joseph A. Hansler for unpaid rent Mainka owed under an equipment lease agreement. Mainka argues that the district court erred in several respects, including the court's failure to give res judicata effect to an earlier state court judgment. We conclude that res judicata bars Hansler's suit, and thus we do not reach Mainka's other arguments.

I.

Hansler, the sole shareholder of Automated Services, Inc., entered into an agreement to lease vending equipment to Mainka and his company, ATM Corporation, doing business as AM Vending (collectively, "Mainka"). The lease agreement provided that Mainka would pay rent in installments equal to the amount of Hansler's debt payments to creditors holding liens on the leased equipment. The lease also required Mainka to return the leased equipment to Hansler upon default or termination of the lease.

In 1985, Hansler entered Chapter 11 bankruptcy. A year later, Mainka sold his business to the local Coca-Cola distributor, American Vending Company ("American"). ¹ Concerned about his equipment and about unpaid rent on the lease, Hansler brought an adversary proceeding against Mainka and American in the bankruptcy court in order to collect past due rent. ² That action is the subject of this appeal. ³

The bankruptcy court held a one-day trial on Hansler's unpaid rent claim in July, 1987. On June 8, 1988, the bankruptcy court issued its findings that Mainka owed Hansler $124,800. plus interest for past due rent. Because the bankruptcy court had "related to" jurisdiction over this non-core proceeding under 28 U.S.C. §§ 157(c)(1) and 1334(b), the bankruptcy court's decision was not a final judgment. The bankruptcy court did not file its Report and Recommendation for Judgment with the district court until 1990, and on October 23, 1991, the district court adopted the bankruptcy court's recommendation and entered judgment for Hansler.

Meanwhile, in August, 1988, Hansler filed a Texas state court action alleging that Mainka converted the leased vending equipment by delivering it to American. The Texas court conducted a bench trial and issued a take-nothing judgment in favor of Mainka on April 4, 1990. The state court held that Hansler's claim was barred by limitations, that the lease was actually a security agreement subject to the provisions of the Texas Business and Commerce Code, and that Hansler had failed to introduce credible evidence of the value of the equipment. A Texas appeals court affirmed the judgment on the limitations issue. Hansler v. Mainka, 807 S.W.2d 3 (Tex.Ct.App.1991).

Mainka now appeals the federal district court's October 23, 1991 judgment. Mainka argues that the district court erred in adopting the recommendations of the bankruptcy court, because (1) the April 4, 1990 state court judgment in Mainka's favor is res judicata to Hansler's federal unpaid rent action; (2) the agreement between Hansler and Mainka was actually a security arrangement, not a lease, and thus was subject to the requirements of Article 9 of the Texas Business and Commerce Code; (3) the bankruptcy court violated Bankruptcy Rule 9017 and Federal Rule of Civil Procedure 43 by considering evidence from a separate adversary proceeding; (4) the district court erred in granting Hansler a judgment in his individual capacity, as opposed to his capacity as representative of the bankruptcy estate; and (5) Hansler was equitably estopped from bringing this suit, because Hansler failed to list the machines "leased" to Mainka as assets of the estate. We find the res judicata issue dispositive.

II.

We first consider whether the Texas state court's take-nothing judgment in Hansler's conversion action precludes Hansler's action in the bankruptcy court for past-due rent. This court must give the Texas state court judgment the same preclusive effect that another Texas court would give it. Hogue v. Royse City, 939 F.2d 1249, 1252 (5th Cir.1991). Under Texas law, an existing final judgment on the merits bars "the relitigation of a claim or cause of action that has been finally adjudicated, as well as related matters that, with the use of diligence, should have been litigated in the prior suit." Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex.1992).

Hansler first contends that the earlier Texas judgment was based solely on the expiration of the limitations period and thus was not on the merits for purposes of res judicata. Unfortunately for Hansler, however, a take-nothing judgment based on limitations is a final judgment on the merits under Texas law. Partee v. Phelps, 840 S.W.2d 512, 515 (Tex.Ct.App.1992) (judgment for defendants based on limitations "is conclusive and binding on the parties and is regarded as a final determination of the question of ... liability"). See also Restatement (Second) of Judgments § 19 cmt. f (1982). Thus, the Texas court's take-nothing judgment based on limitations precludes a later suit on the same claim.

Hansler next argues that his two lawsuits involve separate causes of action and, therefore, the Texas judgment did not preclude his federal rent suit. We disagree. Texas has adopted the transactional approach to res judicata advocated by the Restatement of Judgments, which "provides that a final judgment on...