Jack W. McClain v. Gilbert Apodaca, Kent Rogers, Coronado Financial Corporation and Audio Security, Inc., Edward M. Link and Carl F. Agren

The bankruptcy court dismissed an action brought by Jack W. McClain on the ground of res judicata. McClain appealed to the district court, which denied him relief. McClain now appeals the district court’s order.

On February 3, 1981, McClain contracted to sell to Coronado Financial Corporation (Coronado) his stock in Audio Alarm Systems, Inc., and his interest in the real property on which that business was located. Audio Alarm System was the subject of a Chapter 11 proceeding in bankruptcy court at the time. The parties amended the agreement on February 5, 1981, to include the transfer of additional equipment and an aircraft. The amendment contained a buyback clause which provided that “[i]n the event Purchaser decides not to further pursue the growth of the company, Seller may purchase back his entire interest in the company, for all out-of-pocket costs including all attorney’s fees incurred thus far.”

In May 1981, McClain filed a complaint in bankruptcy court to rescind his agreement with Coronado and for appointment of a receiver. The complaint contained an allegation that “defendants have breached said contract in that they have failed to make the payments due to the various…