Even Though it Resulted in Windfall for Undeserving Defendant, Court Applied Judicial Estoppel Against Debtor who Failed to Amend Bankruptcy Schedules to Disclose the Existence of Litigation

Even Though it Resulted in Windfall for Undeserving Defendant, Court Applied Judicial Estoppel Against Debtor who Failed to Amend Bankruptcy Schedules to Disclose the Existence of Litigation

     By his complaint in the above-captioned adversary proceeding, plaintiff and chapter 13 debtor Douglas  (“Douglas”) asserts, in count I, an objection to a proof of claim filed in his case by his mother, defendant Janis  (“Janis”)—a nonpriority unsecured claim in the amount of $154,690.84—and, in Count II, a declaration that Janis has no life estate or other interest in certain real property that he owns. The adversary proceeding is before the Court on a motion by Douglas for judgment on the pleadings, which, pursuant to Fed. R. Civ. P. 12(d), the court has converted to a motion for summary judgment, and on a cross-motion by Janis for summary judgment.

At all relevant times, Douglas has owned and resided at 131 Spruce Street (the “Middleboro Property”). In or around May 2011, Janis contends, she paid for certain improvements to the Middleboro Property. On August 9, 2012, Janis filed a petition for relief under chapter 13 of the Bankruptcy Code. This Court confirmed Janis’s first amended chapter 13 plan on May 31, 2013. Janis did not list any interest in the Middleboro Property or any claim against Douglas in the schedules, statements, or chapter 13 plan that she filed in her bankruptcy case.

On July 8, 2016, Janis brought a complaint against Douglas in the State Court in which she sought recognition of a life estate interest in the Middleboro Property or, alternatively, the imposition of a constructive trust. Janis alleged that, in May 2011, she and Douglas had entered into a contract agreeing that Janis would finance improvements to the Middleboro Property inconsideration for which Janis would receive what amounted to a life estate interest in a designated “in-law” apartment in a specific portion of the Middleboro Property, with the right to reside at the Middleboro Property and have sole possession of the in-law apartment. Douglas subsequently moved to dismiss the Land Court action, which motion the Land Court denied, stating that Janis had plead sufficient facts to state a plausible entitlement to the relief she sought. Douglas then moved for reconsideration of the State Court’s order denying the motion to dismiss on the basis that Janis was judicially estopped from bringing the State Court action because she had not listed any interest in the Middleboro Property on her schedules and statements in her bankruptcy case. Janis responded that, having no title interest in the Middleboro Property, her failure to recognize and include her agreement with Douglas as an interest in real property on her bankruptcy schedules was a good faith, inadvertent omission. The Land Court denied Douglas’s motion for reconsideration in August 2016, finding that, on the limited record before it, Janis was not estopped from bringing the Land Court action.

On October 24, 2016, Douglas filed his own petition under chapter 13 of the Bankruptcy Code, commencing the present bankruptcy case and staying the State Court action. On March 6, 2017, Janis timely filed a proof of claim in Douglas’s bankruptcy case in the amount of $154,690.84 for money loaned. In a supplement to the proof of claim form, Janis stated that while her claim was presently unsecured, she believed that the State Court action would ultimately determine the status of her claimed security interest in the Middleboro Property.

On February 17, 2017, Janis moved for entry of discharge in her own chapter 13 case, having completed all payments under her chapter 13 plan. The Court entered her discharge on March 20, 2017. To date, Janis has not amended her schedules to include any interest in the Middleboro Property or any cause of action against Douglas.

On March 22, 2017, Douglas filed the complaint commencing the present adversary proceeding. In it he objected to Janis’s proof of claim and sought a declaratory judgment that Janis has no interest in the Middleboro Property. After Janis filed her answer, Douglas filed the instant motion for judgment on the pleadings, following which Janis filed her opposition and cross-motion for summary judgment.

Log In to READ MORE

Please note, in order to view NACBA Member Content, you must sign in and then visit NEWS. If you are not a NACBA member, you may Become a NACBA Member 

No Comments

Post a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.