Court Opinion

ID: 2962626
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:00:00.536813+00
Date Added: 2024-06-11T11:42:32.174866
License: Public Domain

USCA1 Opinion

	

        May 27, 1994            [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                                                      ____________________        No. 93-1891                                   MARLENE BROOKS,                                Plaintiff, Appellant,                                          v.                               JOHN J. BEATTY, ET AL.,                                Defendants, Appellees.                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Edward F. Harrington, U.S. District Judge]                                               ___________________                                                                                      ____________________                                        Before                              Torruella, Cyr and Boudin,                                   Circuit Judges.                                   ______________                                                                                      ____________________             Francis  C. Newton, Jr., with  whom John R.  Dunnell and Russell,             _______________________             ________________     ________        Plummer & Rutherford, P.C. were on brief for appellant.        __________________________             Peter  J. Kajko, with whom  Sidney Gorovitz and Dropkin, Perlman,             _______________             _______________     _________________        Leavitt & Rubin were on brief for appellee Resolution Trust.        _______________             Jay L.  Seibert, with whom Hart and Lamond, P.C. was on brief for             _______________            _____________________        appellee Neil Tobin.             George  W. Mykulak, with whom Mark A. Berthiaume, Janice O. Fahey             __________________            __________________  _______________        and Goldstein & Manello, P.C. were on brief for appellees Anderson and            _________________________        March.                                                                                      ____________________                                                                                      ____________________                    CYR, Circuit  Judge.  The present  appeal requires that                    CYR, Circuit  Judge                         ______________          we  revisit the doctrine of  judicial estoppel, this  time in the          context  of an  action by  a former  chapter 7  debtor who  later          failed to disclose the cause of action as an asset in her chapter          7 proceeding.   We conclude  that the  court below  improvidently          granted summary  judgment  for defendants-appellees  on  judicial          estoppel grounds but that  plaintiff-appellant in any event lacks          standing  to maintain the action.   We therefore  vacate the dis-          trict court judgment and remand for further proceedings.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    On  September  10,  1991,  plaintiff-appellant  Marlene          Brooks brought this action for declaratory relief and compensato-          ry damages against ComFed Mortgage Company ("ComFed") and various          individual defendants.  The Resolution Trust Corporation ("RTC"),          successor to  ComFed, was  substituted as  a  party defendant  on          November 6, 1991.  The thrust of the claim in  the present action          is  that the  former Brooks  residence was  wrongfully foreclosed          upon  as a  result  of the  fraudulent  or negligent  conduct  of          defendants-appellees.                      On  May 6,  1992, Brooks  filed a  voluntary chapter  7          petition.  Although she promptly informed defendants-appellees of          her chapter 7 petition,  Brooks failed to list the  present cause          of action  (hereinafter  "the ComFed  action") on  her chapter  7          schedule of assets.   On June 19, 1992, RTC  notified Brooks that          the  failure to  schedule the ComFed  action as  an asset  of the          chapter 7 estate  was improper,  and that the  ComFed action  was          property of the chapter 7 estate subject to the exclusive control          of the chapter 7 trustee.  On August 27, 1992, before the chapter          7 trustee became aware of the ComFed action, Brooks was granted a          discharge in bankruptcy.                    RTC  moved for  summary judgment  in the  ComFed action          based on  Brooks' failure to schedule  the action as an  asset in          her chapter 7 case.  The motion was denied by the district court.          Shortly thereafter, Brooks moved to reopen the chapter 7 proceed-          ing to amend her schedule of assets to reflect the ComFed action.          The bankruptcy court summarily denied the motion, on the  inappo-          site authority of  In re Thibodeau, 136  B.R. 7 (Bankr.  D. Mass.                             _______________          1992) (holding that a chapter 7 debtor  is not entitled to reopen          a no-asset  case to  list a creditor;  stating that  if and  when                                      ________          assets become available, the bankruptcy case can be reopened, the          claim  listed, and  the  estate administered).    Brooks did  not          appeal the bankruptcy court decision.                     Thereafter,  in light  of Payless  Wholesale Distribs.,                                              _____________________________          Inc.  v. Alberto  Culver, Inc.,  989 F.2d  570 (1st  Cir.), cert.          ____     _____________________                              _____          denied, 114 S. Ct.  344 (1993), RTC moved for  reconsideration of          ______          its  motion for summary judgment.   In a  brief memorandum order,          unaccompanied  by findings of fact, the  district court held that          Payless  controlled, and  concluded  that  Brooks was  judicially          _______                                          3          estopped from  prosecuting the  ComFed action.   Summary judgment          was entered for all defendants, and Brooks brought this appeal.          A.   Judicial Estoppel          A.   Judicial Estoppel               _________________                    We review  a grant of summary judgment de novo, employ-                                                           __ ____          ing  the same criteria incumbent  upon the district  court in the          first instance.  Pedraza v.  Shell Oil Co., 942 F.2d 48,  50 (1st                           _______     _____________          Cir. 1991),  cert. denied, 112 S. Ct.  993 (1992).  Summary judg-                       _____ ______          ment  is appropriate where the  record, viewed in  the light most          favorable to the nonmoving party, reveals no trialworthy issue as          to any material  fact, and the moving party  is entitled to judg-          ment as a matter of law.  See Fed. R. Civ. P. 56(c); Vanhaaren v.                                    ___                        _________          State  Farm Mut. Auto  Ins. Co., 989  F.2d 1, 3  (1st Cir. 1993);          _______________________________          Mesnick  v. General Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991),          _______     _________________          cert. denied, 112 S. Ct. 2965 (1992).          _____ ______                    We held  in Payless that judicial  estoppel precluded a                                _______          former chapter 11 debtor from  maintaining a prepetition cause of          action not disclosed in its earlier chapter 11 proceeding:                    Even  a  cursory  examination  of  the claims                    shows  that defendants should have figured in                    both aspects  of Chapter 11  proceedings, and                    that  Payless could  not have  thought other-                    wise.                                        * * *                    The basic  principle of bankruptcy is  to ob-                    tain  a discharge  from  one's  creditors  in                    return  for all  one's  assets, except  those                    exempt, as  a result  of which creditors  re-                    lease  their own claims  and the bankrupt can                    start fresh.   Assuming there is  validity in                    Payless's present suit, it has a better plan.                    Conceal your  claims; get rid of  your credi-                                          4                    tors  on the  cheap,  and start  over with  a                    bundle of  rights.  This is  a palpable fraud                    that the court will  not tolerate, even  pas-                    sively.    Payless, having  obtained judicial                    relief on  the representation that  no claims                    existed, can  not now resurrect  them and ob-                    tain relief on the opposite basis.          Payless, 989 F.2d at 571  (footnotes & citations omitted) (citing          _______          Patriot  Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208 (1st          ______________________    ____________________          Cir. 1987) (plaintiff in federal action estopped from contradict-          ing statement in related state  court action against same  defen-          dant);  and Oneida Motor Freight, Inc. v. United Jersey Bank, 848                      __________________________    __________________          F.2d 414 (3d  Cir.), cert.  denied, 488 U.S.  967 (1988)  (former                               _____  ______          chapter 11  debtor equitably  estopped from  pursuing prepetition          claims against defendant-creditor where causes of action were not          disclosed in chapter 11 proceeding).                    Brooks contends that the district court applied Payless                                                                    _______          with  too  broad a  brush, and  protests that  she engaged  in no          willful  or iniquitous  conduct  but  instead  attempted  without          success  to amend her chapter 7 schedules.   She asserts that she          will attempt  to  do so  again  if and  when the  present  action          against ComFed proves  fruitful.   In essence,  although she  now          concedes "negligence" in failing to schedule the ComFed action as          an  asset,  Brooks insists  that she  was  not playing  "fast and          loose," and that the judicial estoppel ruling constituted revers-          ible  error.   We  agree that  summary  judgment on  the judicial          estoppel claim was inappropriate.                                          5                    Nothing in its decision suggests that the Payless court                                                              _______          wrenched the  prudential doctrine  of judicial estoppel  from its          traditional moorings.  In  Patriot Cinemas this court emphasized,                                     _______________          as  a "guiding  principle," that  "[j]udicial estoppel  should be                 _______  _________          employed  when a  litigant is  'playing fast  and loose  with the          courts,'  and when 'intentional  self-contradiction is being used          as a means of obtaining unfair advantage in  a forum provided for          suitors seeking  justice.'"   Patriot  Cinemas, 834  F.2d at  212                                        ________________          (quoting Scarano  v. Central R. Co.,  203 F.2d 510, 513  (3d Cir.                   _______     ______________          1953));  accord  Payless,  989  F.2d at  571  (applying  judicial                   ______  _______          estoppel only after  concluding that appellants had engaged  in a          "palpable fraud that  the court will not  tolerate, even passive-           ________ _____          ly.") (emphasis added).  Judicial estoppel is an equitable device          which does not lend itself to reflexive application.                    The district  court made  no  findings explicating  its          application of judicial estoppel.  An examination of the evidence          adduced on  summary judgment  below indicates that  Brooks estab-          lished a genuine issue of material fact concerning her bona fides                                                                 ____ _____          in failing  to schedule  the ComFed  action  as an  asset in  her          chapter  7  case.   The record  includes  two relevant  pieces of          evidence:   (1) a letter  from the RTC  advising Brooks  that her          earlier failure to  schedule the  ComFed action as  an asset  had          been  improper; and (2) the  affidavit of John  R. Dunnell, Esq.,          Brooks' counsel  in  the  present  action, stating  that  he  had          contacted Brooks' bankruptcy counsel,  Jay P. Satin, Esq., before                                          6          receiving  the  RTC letter  (and again  afterward), and  had been          assured on both occasions  by Satin that Brooks was  not required          to schedule the ComFed action in her chapter 7 case.  Although it          is troubling that Brooks  waited approximately eight months after          the RTC warning    and until after she had received her chapter 7          discharge      before attempting  to  amend  her asset  schedule,          because  the issue arose on  summary judgment we  must credit the                                       _______ ________          Dunnell affidavit as a plausible basis for layman Brooks' assert-          ed  reliance  on her  bankruptcy  counsel's  misinformation as  a          possible defense against a finding of bad faith.  The conflicting          evidentiary signals simply illustrate  that the judicial estoppel          issue was inappropriate for summary disposition under Rule 56.          B.   Standing          B.   Standing               ________                    Brooks concedes that the cause of action against ComFed          should have been scheduled as an asset in her  chapter 7 proceed-          ing.   See 11 U.S.C.   541(a)(1).   It is equally  clear that the                 ___          ComFed action became property  of the chapter 7 estate.   Carlock                                                                    _______          v. Pillsbury Co., 719 F. Supp. 791, 856 (D. Minn. 1989) ("A cause             _____________          of  action is  a property  right which  passes to the  trustee in          bankruptcy,  even  if such  cause of  action  is not  included in          schedules filed  with the bankruptcy court.").   Further, because          the ComFed action  was not  scheduled as an  asset, it was  never          abandoned  by the  chapter 7  trustee.   See 11  U.S.C.   554(d);                                                   ___          United States v. Grant, 971 F.2d 799, 803 n.4 (1st Cir. 1992) (en          _____________    _____                                         __                                          7          banc) (holding  that abandonment by trustee  "does not relinquish          ____          an  undisclosed  interest  in property")  (emphasis  in original,              ___________          citing  Dushane v.  Beall, 161  U.S. 513,  516 (1896));  see also                  _______     _____                                ___ ____          Krank v. Utica Mutual  Ins. Co., 109 B.R. 668 (E.D.  Pa.), aff'd,          _____    ______________________                            _____          908 F.2d  962 (3d  Cir. 1990).   Thus, Brooks  lacks standing  to          prosecute the present action.                                         III                                         III                                      CONCLUSION                                      CONCLUSION                                      __________                    We  therefore vacate  the  judgment and  remand to  the          district court with instructions  to stay further proceedings for          ninety days to permit plaintiff-appellant to reopen her chapter 7          proceeding and amend her schedule of assets to include the ComFed          action,  and  to permit  the  bankruptcy court  to  afford notice          thereof  to the  former  chapter 7  trustee, any  newly-appointed          chapter 7 trustee, and the United States Trustee for the District          of  Massachusetts, to  sell or  abandon the  ComFed action  or to          intervene in the pending district court action.  In the event the          ComFed action  is abandoned or  acquired by Brooks,  the district          court should resolve  the judicial estoppel  issue on the  merits          following an evidentiary hearing.  See Rivera-Gomez v. de Castro,                                             ___ ____________    _________          900 F.2d 1,  2 (1st Cir. 1990) (advocating Fed.  R. Civ. P. 12(d)          procedure to  conserve  "scarce judicial  resources by  targeting          early  resolution of threshold issues").  In the event the ComFed                                          8          action is duly  transferred to  an entity other  than Brooks,  or          retained by the chapter 7 trustee, and such entity or the chapter          7  trustee intervenes,  the pending  district court  action shall          proceed  on the merits; otherwise, it shall be dismissed for lack          of standing.                    The district court judgment is vacated and the  case is                    The district court judgment is vacated and the  case is                    ___ ________ _____ ________ __ _______ ___ ___  ____ __          remanded for  further proceedings consistent  with this  opinion;          remanded for  further proceedings consistent  with this  opinion;          ________ ___  _______ ___________ __________  ____ ____  _______          costs to plaintiff-appellant.          costs to plaintiff-appellant.          _____ __ ___________________                                          9