In re Galerie Des Monnaies of Geneva, Ltd.
| Decision Date | 22 November 1985 |
| Docket Number | Bankruptcy No. 82 B 11088,85-5745A. |
| Citation | 55 BR 253 |
| Parties | In re GALERIE DES MONNAIES OF GENEVA, LTD., Debtor. GALERIE DES MONNAIES OF GENEVA, LTD., Plaintiff, v. DEUTSCHE BANK, A.G., NEW YORK BRANCH, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
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Zalkin, Rodin & Goodman, New York City, by Andrew D. Gottfried, of counsel, for Deutsche Bank A.G., New York Branch.
Gantz, Hollinger & Towe, New York City by David L. Gantz, of counsel, for Galerie Des Monnaies of Geneva, Ltd.
DECISION AND ORDER
Galerie Des Monnaies of Geneva, Ltd. (the "Debtor") commenced this suit against Deutsche Bank, A.G., New York Branch (the "Bank") to recover under § 547 of the Bankruptcy Code, 11 U.S.C. § 547 (1984) (the "Code"), a series of allegedly preferential transfers in the amount of $105,635.26. The Bank moved to dismiss the complaint, to which the Debtor responded with a motion for summary judgment.
From the papers before us, it appears that the Bank made a loan to the Debtor on May 8, 1981 in the amount of $1,500,000.00, payment of which was collateralized by security agreements dated November 28, 1979 and May 27, 1981 creating a lien on all of Debtor's inventory and accounts receivable, and was perfected by the filing of a UCC-1 financing statement.
An involuntary petition under Chapter 7 of the Code was filed against the Debtor on June 10, 1982 (the "filing date"). The Debtor converted the case to one under Chapter 11 of the Code on or about July 10, 1982 and an order for relief was entered. The Debtor continued in operation of its business and in possession of its property as a debtor-in-possession.
On the filing date, the Bank had in its possession approximately $500,000.00 in coins constituting inventory of the Debtor, which had previously been turned over to the Bank after the Debtor had defaulted on the loan. In addition, the Bank had in its possession cash collateral in the amount of $1,496.00 representing the proceeds of accounts receivable of the Debtor paid to the Bank by account debtors of the Debtor.
On July 26, 1982, the Bank sold and assigned to Cosmonor S.A. ("Cosmonor") its loan to the Debtor, and the related security documents and interest in the collateral. Because of the automatic stay in effect since the filing date pursuant to § 362 of the Code, the Bank did not turn over to Cosmonor the collateral of the Debtor that it was holding but agreed to do so upon order of this Court.
On November 5, 1982, Cosmonor, as assignee of the Bank, began an adversary proceeding (the "Cosmonor adversary proceeding") against the Debtor, the Bank, and the Committee of Unsecured Creditors of the Debtor ("Creditors Committee"), seeking an order modifying the automatic stay by permitting the Bank to turn over to Cosmonor the collateral it held and for relief from the automatic stay against enforcement of the lien against the collateral. Cosmonor alleged that it had not been paid any of the loan amount, that its secured claim was not adequately protected, and that the Debtor had no equity in the collateral held by the Bank. It further alleged that, since the Debtor had ceased business operations, it had no need for the collateral either to continue business or for a successful reorganization.
The Bank answered by interposing an interpleader, alleging that it was in possession of Debtor's collateral as bailee for Cosmonor and that it had received conflicting demands with respect to the disposition of such collateral.
The answer of the Creditors' Committee contained cross-claims which alleged that the Bank had received voidable preferences.
On September 27, 1983, this Court entered an order, on consent of Cosmonor, directing the Bank to turn over to the Debtor the inventory and collateral in its possession to sell, and hold the proceeds in escrow pending this Court's determination as to the proper party entitled to them. The Bank did so.
A plan of reorganization (the "Plan") was subsequently filed by the Debtor and its Disclosure Statement was approved by this Court on December 13, 1984 as containing adequate information pursuant to § 1125(b) of the Code. The Disclosure Statement indicated that the Debtor's management did not believe that preferences or fraudulent transfers had occurred, a position taken after discussions with its counsel and accountants. It also provided that when the order confirming the Plan became a final order, the adversary proceeding of Cosmonor against the Debtor, the Bank, and the Creditors' Committee would be ". . . discontinued by Cosmonor with prejudice and all counterclaims and cross-claims contained therein and asserted by the Official Creditors Committee . . . discontinued with prejudice but without costs for or against either party."
The Plan was confirmed by this Court on April 25, 1985. On that same date, the Debtor initiated this adversary proceeding against the Bank, seeking recovery of allegedly voidable preferences, in the approximate amount of $22,500.00 made in April or May of 1982.1
The Bank promptly filed a motion to dismiss the complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("F.R.C.P."), for failure to state a claim upon which relief can be granted on the ground of res judicata or, in the alternative, on grounds of laches and inequitable conduct on the Debtor's part, and judicial estoppel.
In addition to responding with a motion pursuant to Rule 56 of the F.R.C.P. for summary judgment, the Debtor amended its complaint to include additional sums, for a total of $105,635.26, allegedly transferred to the Bank in a manner constituting a preference. The parties agree that the motion is deemed to have been made as to the amended complaint.
Under res judicata, or "claim preclusion", a final judgment on the merits of an action precludes the parties or their privies from relitigating claims that were or could have been raised in that action. Kremer v. Chemical Contr. Corp., 456 U.S. 461, 467 n. 6, 102 S.Ct. 1883, 1890, 72 L.Ed.2d 262 (1982); see generally 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure §§ 4401-4405 (1981). It treats a judgment, once rendered, as the full measure of relief to be accorded between the same parties on the same "claim" or "cause of action." Under the rules of claim preclusion, the effect of a judgment extends to the litigation of all issues relevant to the same claim between the same parties and those in privity with them, whether or not raised at trial. Murphy v. Gallagher, 761 F.2d 878, 879 (2d Cir.1985); Kaspar Wire Works, Inc. v. Leco Engineering & Machine, Inc., 575 F.2d 530, 535-36 (5th Cir.1978). The policy behind res judicata is to relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources and, by preventing inconsistent decisions, encourage reliance on adjudication. Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414-15, 66 L.Ed.2d 308 (1980); Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 649, 58 L.Ed.2d 552 (1979); Brown v. Felsen, 442 U.S. 127, 131, 99 S.Ct. 2205, 2209, 60 L.Ed.2d 767 (1979).
The doctrine of res judicata applies with respect to all matters embraced by a plan of reorganization confirmed by final order of the bankruptcy court. Stoll v. Gottlieb, 305 U.S. 165, 170, 59 S.Ct. 134, 83 L.Ed. 104 (1938). Such an order was entered by this Court on April 25, 1985. It is therefore necessary to determine whether the claim alleged in the Debtor's complaint is the same as the cross-claim of the Creditor's Committee in the Cosmonor adversary proceeding which was "discontinued" pursuant to the Debtor's Plan.
For res judicata to apply, there must be both an identity of parties or those in privity with them and an identity of issues between the prior and subsequent suits. Expert Electric, Inc. v. Levine, 554 F.2d 1227, 1233 (2d Cir.), cert. denied, 434 U.S. 903, 98 S.Ct. 300, 54 L.Ed.2d 190 (1977). Whether such identity of parties is present is a factual determination of substance, not mere form. Ibid. It is clear that both the Debtor and the Bank were involved in the Cosmonor adversary proceeding and are the parties in this present adversary proceeding, so their due process rights of notice and an opportunity to be heard, were guaranteed. The cross-claims by the Creditors' Committee was brought on behalf of the Debtor. See In re Toledo Equipment Co., Inc., 35 B.R. 315, 318-19, 11 B.C.D. 832 (Bankr.N.D.Ohio 1983); Matter of Joyanna Holitogs, Inc., 21 B.R. 323, 326 (Bankr.S.D.N.Y.1982); The Liberal Market, Inc. v. Malone & Hyde, Inc., 14 B.R. 685, 690 (Bankr.S.D.Ohio 1981); Matter of Mansour Medical Center, 5 B.R. 715, 719, 6 B.C.D. 886, 2 C.B.C.2d 1363 (Bankr.W.D.Pa.1980). The Debtor thus makes no contention that there is not an identity of parties.
Once identity of parties is established, it must further be found that the claims raised in the two adversary proceedings, and the "nucleus of facts" which underlay them, are identical. Expert Electric, 554 F.2d at 1234. The crucial element underlying this requirement is the factual predicate of the two claims asserted, for it is the facts surrounding the claim which operate to constitute the cause of action, not the legal theory upon which a litigant relies. Ibid.
The Bank has claimed that the present adversary proceeding is identical to the discontinued Cosmonor adversary proceeding because both alleged voidable preferences received by the Bank and therefore, the same elements of a preference under § 547 of the Code would have to be proved. The Debtor counters this by drawing a distinction between the Cosmonor adversary proceeding, in which the preference challenge brought on by the Creditors' Committee concerned the transfer of collateral to the Bank, and the instant claim for the payment of a cash preference, which arises out of a series of transactions in...
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