Court Opinion

ID: 3212887
Source: CourtListenerOpinion
Date Created: 2016-06-14 15:03:25.812517+00
Date Added: 2024-06-11T14:04:04.971817
License: Public Domain

NOTICE: NOT FOR OFFICIAL PUBLICATION.
  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                  AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE

       MARK REZAIK aka JALIL R. KHIABANLOU, a single man,
                Plaintiff/Appellee/Cross-Appellant,

                                         v.

     FARMERS INSURANCE COMPANY OF ARIZONA, an Arizona
           corporation, Defendant/Appellant/Cross-Appellee.

                              No. 1 CA-CV 14-0697
                                FILED 6-14-2016

            Appeal from the Superior Court in Maricopa County
                           No. CV2012-008267
                 The Honorable Michael J. Herrod, Judge

                                   AFFIRMED

                                    COUNSEL

Raymond, Greer & Sassaman, P.C., Phoenix
By Randy L. Sassaman
Counsel for Plaintiff/Appellee/Cross-Appellant

Jones, Skelton & Hochuli, P.L.C., Phoenix
By Donald L. Myles, Jr., Ashley V. Halvorson, Jennifer B. Anderson
Counsel for Defendant/Appellant/Cross-Appellee
                          REZAIK v. FARMERS
                          Decision of the Court

                      MEMORANDUM DECISION

Presiding Judge Jon W. Thompson delivered the decision of the Court, in
which Judge Maurice Portley joined and Judge Patricia K. Norris specially
concurred.

T H O M P S O N, Presiding Judge:

¶1            Farmers Insurance Company of Arizona (Farmers) appeals
from the trial court’s denial of its motions for judgment as a matter of law
and for a new trial after a jury awarded Mark Rezaik (Rezaik) damages on
his claims for breach of contract and bad faith after Farmers denied his
insurance claim. Rezaik cross-appeals, arguing that the trial court erred in
granting partial summary judgment to Farmers on his claim for punitive
damages. For the following reasons, we affirm the decision of the trial
court.

              FACTUAL AND PROCEDURAL HISTORY

¶2           Rezaik was insured by a Farmers homeowner’s insurance
policy in August 2011 when his home in Scottsdale was burglarized. The
policy provided personal property coverage in the amount of $271,500.
Rezaik submitted claims totaling approximately $160,000 to Farmers for
damage to his residence caused by forced entry and for loss of his personal
property. Farmers denied the claim for loss of personal property, alleging
that Rezaik had made material misrepresentations concerning that claim.

¶3            Rezaik filed a complaint and amended complaint in superior
court asserting claims for breach of contract and bad faith. He sought
compensatory damages, punitive damages, and attorneys’ fees. Farmers
moved for summary judgment, arguing that Rezaik should be judicially
estopped from asserting claims on values of his personal property
significantly higher than values he had previously listed in bankruptcy
schedules filed with the United States Bankruptcy Court in 2007 and 2010.1
The trial court denied the motion for summary judgment. Farmers
subsequently filed a renewed motion for summary judgment as to the

1 In his 2007 bankruptcy, Rezaik disclosed $4220 in personal property,
besides vehicles. In his 2010 bankruptcy, which was dismissed, he
disclosed $4500 in personal property.

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issues of bad faith and punitive damages. The trial court denied the
renewed motion for summary judgment as to bad faith, but granted the
motion as to punitive damages. The case proceeded to a jury trial.

¶4            After both sides presented their cases to the jury2, Farmers
moved for judgment as a matter of law on both counts based on judicial
estoppel. The trial court denied the motion. On December 6, 2013, the jury
found in Rezaik’s favor on the breach of contract claim and awarded him
$171,450.00. The jury further found in his favor on the bad faith claim and
awarded him $100,000.00 on that claim. On December 18, 2013, the trial
court entered findings of fact and conclusions of law on the issue of judicial
estoppel, finding that Rezaik was not judicially estopped from recovering
benefits under the insurance contract.3 The trial court entered judgment for
Rezaik in March 2014.

¶5            In April 2014, Farmers filed a renewed motion for judgment
as a matter of law based on judicial estoppel pursuant to Arizona Rule of
Civil Procedure 50(b) (Rule 50(b)). Farmers also filed, in the alternative, an
amended renewed motion for judgment as a matter of law regarding
judicial estoppel and joint motion for a new trial under Arizona Rule of

2At trial, Farmers cross-examined Rezaik about his Chapter 7 and Chapter
13 bankruptcy petition schedules.

3 The court noted that its ruling did not preclude action in bankruptcy court
concerning irregularities in Rezaik’s bankruptcy schedules or notice to the
bankruptcy trustee concerning unlisted and undervalued personal
property items. On April 1, 2015, Rezaik filed a motion for judicial notice
in this court asking us to take judicial notice of orders from the United States
Bankruptcy Court filed on January 15 and January 22, 2015. The January 15
order is an order reopening Rezaik’s Chapter 7 bankruptcy proceedings
because “the Trustee believes there may be further assets to be
administered.” The January 22, 2015 order orders Rezaik to present to the
bankruptcy court the “[c]omplete file on the insurance claim at issue in the
case pending in the Maricopa County Superior Court Case No. CV2012-
008267 (this case),” and to submit to an oral examination. Farmers objected
to the April 2015 motion for judicial notice, arguing that the orders are
irrelevant. Rezaik filed a second motion for judicial notice on March 18,
2016, asking us to take judicial notice of a third bankruptcy order
authorizing the trustee in the bankruptcy case to employ Rezaik’s attorney
as special counsel. Although not material to our analysis, we take judicial
notice of the bankruptcy orders.

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                            REZAIK v. FARMERS
                            Decision of the Court

Civil Procedure 59(a) (Rule 59(a)). The trial court treated the renewed
motion for judgment as a matter of law regarding judicial estoppel as a joint
motion for new trial under Rule 59(a) and denied both motions. Farmers
timely appealed and Rezaik timely cross-appealed.4 We have jurisdiction
pursuant to Arizona Revised Statutes (A.R.S.) § 12-2101(A)(1), (2), and (5)(a)
(2016).

                               DISCUSSION

    A. The Trial Court Did Not Abuse its Discretion By Declining to
       Apply Judicial Estoppel

¶6             Farmers raises one issue on appeal: whether the trial court
erred by failing to apply judicial estoppel to bar Rezaik’s claims. We review
a trial court’s decision whether to apply judicial estoppel for an abuse of
discretion. See State v. Brown, 212 Ariz. 225, 228, ¶ 13, 129 P.3d 947, 950
(2006) (because judicial estoppel is an equitable concept, its application is
within the court’s discretion and court may exercise its discretion not to
apply the doctrine) (citation omitted); Flood Control Dist. of Maricopa Cty. v.
Paloma Inv. Ltd. P’ship, 230 Ariz. 29, 41, ¶ 34, 279 P.3d 1191, 1203 (App. 2012)
(“Judicial estoppel is a discretionary doctrine which the court may decline
to apply for equitable or policy considerations.”). See also New Hampshire v.
Maine, 532 U.S. 742, 749 (2001) (“Because [judicial estoppel] is intended to
prevent ‘improper use of judicial machinery,’ judicial estoppel ‘is an
equitable doctrine invoked by a court at its discretion.’”) (citation omitted).

¶7             Arizona has long recognized the doctrine of judicial estoppel.
State Farm Auto. Ins. Co. v. Civil Serv. Emp. Ins. Co., 19 Ariz. App. 594, 599,
509 P.2d 725, 730 (1973). The purpose of the doctrine is to protect the
integrity of the judicial process by preventing litigants from using the courts
to gain an unfair advantage. Flood Control, 230 Ariz. at 41, ¶ 34, 279 P.3d at
1203 (citing State v. Brown, 212 Ariz. at 228, ¶ 13, 129 P.3d at 950). “Three
requirements must exist before the court can apply judicial estoppel: (1) the
parties must be the same, (2) the question involved must be the same, and
(3) the party asserting the inconsistent position must have been successful
in the prior judicial proceeding.” State v. Towery, 186 Ariz. 168, 182, 920
P.2d 290, 304 (1996); Flood Control, 230 Ariz. at 41, ¶ 35, 279 P.3d at 1203
(same). See also 28 Am. Jur. 2d Estoppel and Waiver § 118 (2016) (“The
doctrine of estoppel by record or judicial estoppel generally only applies in

4On March 17, 2016 Rezaik filed a supplemental citation of legal authority.
Farmers filed a response dated March 22, 2016. Because the response
contains argument, we strike the response. See ARCAP 17(b).

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                            REZAIK v. FARMERS
                            Decision of the Court

suits between the same parties to the judicial action and their privies though
there is contrary authority.”). Judicial estoppel should be applied
cautiously. Bank of Am. Nat’l Trust & Sav. Ass’n v. Maricopa Cty., 196 Ariz.
173, 175, ¶ 8, 993 P.2d 1137, 1139 (App. 1999) (citation omitted).

¶8            Here, the trial court declined to apply judicial estoppel to bar
Rezaik’s insurance claims. Citing the Towery requirements, the court noted
that, because Farmers was not a party to either bankruptcy proceeding, the
parties were not the same and judicial estoppel did not apply. The court
further found that it was precluded from applying judicial estoppel because
Rezaik’s insurance claim was not an asset during either bankruptcy.

¶9              Farmers argues that we should reject the same party rule set
out in Towery and numerous opinions of the Arizona Supreme Court as well
as this court as dicta. See State v. Tucker, 205 Ariz. 157, 164, ¶ 37, 68 P.3d
110, 117 (2003); In re: Estate of Cohen, 105 Ariz. 337, 340-41, 464 P.2d 620, 623-
24 (1970); Adams v. Bear, 87 Ariz. 288, 294, 350 P.2d 751, 755 (1960); Martin
v. Wood, 71 Ariz. 457, 459, 229 P.2d 710, 711-12 (1951); Rossi v. Hammons, 34
Ariz. 95, 102, 268 P. 181, 184 (1928); In re Marriage of Thorn, 235 Ariz. 216,
222, ¶ 27, 330 P.3d 973, 979 (App. 2014), review denied (Jan. 6, 2015); Flood
Control, 230 Ariz. at 41, ¶ 35, 279 P.3d at 1203; Bank of Am. Nat’l Trust, 196
Ariz. at 175, ¶ 7, 993 P.2d at 1139; Otis Elevator Co. v. Valley Nat’l Bank, 8
Ariz. App. 497, 498, 447 P.2d 879, 880 (1968); DeAlfy Properties v. Pima Cty.,
195 Ariz. 37, 41, ¶ 10, 985 P.2d 522, 526 (App. 1998) (appellants not parties
in prior litigation involving appellee so judicial estoppel did not apply). But
see Mecham v. City of Glendale, 15 Ariz. App. 402, 404, 489 P.2d 65, 67 (1971)
(Div. II of this court affirmed trial court’s application of judicial estoppel
where parties were not the same in the prior litigation). This court is not in
a position to reject a rule expressly set out by the Arizona Supreme Court
and we decline to do so even though there is a split of authority in other
jurisdictions.

¶10           Farmers next argues that the trial court erred in declining to
apply judicial estoppel in this case because the court erroneously focused
on the fact that the insurance claim was not an asset during either of
Rezaik’s bankruptcies. Given our rejection of Farmers’ judicial estoppel
argument based on the same party requirement we do not need to address
this argument.

B. The Trial Court Did Not Err in Granting Summary Judgment to
Farmers on Punitive Damages

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                           REZAIK v. FARMERS
                           Decision of the Court

¶11           In his cross-appeal, Rezaik argues that the trial court erred in
granting summary judgment to Farmers on his claim for punitive damages.
In reviewing an order on a motion for summary judgment, we determine
de novo whether any genuine issues of material fact exist and whether the
trial court properly applied the law. Eller Media Co. v. City of Tucson, 198
Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App. 2000). We view the facts and the
inferences to be drawn from those facts in the light most favorable to the
party against whom judgment was entered. Angus Med. Co. v. Digital Equip.
Corp., 173 Ariz. 159, 162, 840 P.2d 1024, 1027 (App. 1992).

¶12           “[P]unitive damages may not be awarded in a bad faith tort
case unless the evidence reflects ‘something more’ than the conduct
necessary to establish the tort.” Rawlings v. Apodaca, 151 Ariz. 149, 161, 726
P.2d 565, 577 (1986) (citations omitted).      The availability of punitive
damages in a bad faith case is restricted to “those cases in which the
defendant’s wrongful conduct was guided by evil motives . . . and . . . when
the facts establish that defendant’s conduct was aggravated, outrageous,
malicious or fraudulent.” Id. at 162, 726 P.2d at 578 (citations omitted).

¶13           Rezaik alleged that 1) Farmers’s claims representatives
misrepresented to him that everything was fine and he would be paid as
soon as their pricing was complete, 2) Farmers’s special investigator tried
to trick him into believing she was unaware of the bankruptcies when she
took his recorded statement, 3) Farmers misrepresented to him that it
needed a an authorization from him to establish coverage and then used
the authorization to try to discover evidence to deny coverage, 4) Farmers
repeatedly ignored his attorney’s requests for information, and 5) Farmers
misrepresented to him why his claim was being denied. The trial court
found that even if Rezaik’s allegations were true, he could not meet his
burden of proving by clear and convincing evidence “that [Farmers] acted
with an evil mind with conscious disregard that exposed [him] to serious
harm.” We agree. None of Rezaik’s allegations rise to the level of the type
of outrageous, malicious conduct required to warrant punitive damages.

C. Attorneys’ Fees

¶14           Both sides request their attorneys’ fees on appeal pursuant to
A.R.S. § 12-341.01(A). In our discretion, we decline to award attorneys’ fees.

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                           REZAIK v. FARMERS
                           Decision of the Court

                              CONCLUSION

¶15           For the foregoing reasons, we affirm the decision of the trial
court.5

N O R R I S, Judge, specially concurring:

¶16             In its opening brief, Farmers argued the superior court should
have judicially estopped Rezaik from suing it for breach of contract and bad
faith denial of insurance coverage (“insurance claims”). In my view, we do
not need to decide whether the superior court should have judicially
estopped Rezaik from pursuing these claims. After Farmers filed its
opening brief, the bankruptcy court reopened Rezaik’s 2007 Chapter 7
bankruptcy case to allow the bankruptcy Trustee to administer additional
assets belonging to the bankruptcy estate. These additional assets include
the insurance claims and the judgment against Farmers. Given this turn of
events, and, as discussed below, even if, as Farmers argues, Arizona law
allows judicial estoppel to be “invoked” by a party who is a stranger to the
“first litigation” involving his or her adversary, Arizona courts must apply
judicial estoppel in a manner consistent with other governing law, which in
this case is the federal Bankruptcy Code and well established principles of
equity. Under the Bankruptcy Code and equitable principles, Rezaik’s
bankruptcy Trustee is not judicially estopped from pursuing the insurance
claims and collecting the judgment against Farmers.

¶17            On September 9, 2007, Rezaik petitioned for relief under
Chapter 7 of the Bankruptcy Code. When he petitioned for bankruptcy
relief, Rezaik owned most of the personal property assets (“the insurance
assets”) that formed the basis of the insurance claims against Farmers. Yet,
he failed to list or otherwise disclose the insurance assets in his under oath
bankruptcy schedules and associated filings. Thus, although Rezaik owned
valuable art, jewelry, collectibles, and rugs when he petitioned for
bankruptcy relief, he claimed to own only $4200 in personal property, and
denied owning any “art objects, antiques . . . and other collections or
collectibles.” In due course, the bankruptcy court entered an order
discharging Rezaik from $882,541 in unsecured debt, and closed his
Chapter 7 bankruptcy case in June 2010.

5Our concurring colleague reaches the same result by way of consideration
of bankruptcy law. While we do not reach the issues raised in the
concurrence we certainly agree the bankruptcy trustee is not estopped from
seeking to enforce the judgment on behalf of the bankruptcy estate.

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                            REZAIK v. FARMERS
                            Decision of the Court

¶18             When Rezaik petitioned for Chapter 7 relief, all of the
property he then owned—including the insurance assets he had failed to
disclose—became property of his bankruptcy estate, and subject to
administration by the bankruptcy Trustee. 11 U.S.C. § 541(a)(1) (property
of the estate includes “all legal or equitable interests of the debtor in
property as of the commencement of the case”); id. at § 323(a), (b) (trustee
is representative of the estate with capacity to sue and be sued); id. at §
704(a)(1) (trustee required to “collect and reduce to money the property of
the estate for which such trustee serves”). Property of the bankruptcy estate
remains property of the estate until it is either administered or abandoned
pursuant to the Bankruptcy Code. 11 U.S.C. § 554. Further, property of the
estate that is not disclosed or otherwise administered when the bankruptcy
case is closed remains property of the estate forever. 11 U.S.C. § 554(c), (d);
Jeffrey v. Desmond, 70 F.3d 183, 186 n.3 (1st Cir. 1995) (“any asset not
properly scheduled remains property of the bankrupt estate, and the debtor
loses all rights to enforce it in his own name”). And, the Bankruptcy Code
expressly authorizes a bankruptcy court to reopen a closed case to
administer undisclosed assets. 11 U.S.C. § 350(b). “All of these provisions
reflect Congress’s clear preference for the preservation of the bankruptcy
estate and for its equitable distribution to creditors through the bankruptcy
process.” Reed v. City of Arlington, 650 F.3d 571, 575 (5th Cir. 2011).

¶19            Not only does the bankruptcy estate include all property of
the debtor as of the commencement of the case, but it includes proceeds of
or from property of the estate. 11 U.S.C. § 541(a)(6). “Proceeds is ‘intended
to be a broad term to encompass all proceeds of property of the estate. The
conversion in form of property of the estate does not change its character as
property of the estate.’” Bradt v. Woodlawn Auto Workers F.C.U., 757 F.2d 512,
515 (2d Cir. 1985) (quoting H.R. Rep. No. 595, 95th Cong., 1st Sess. 368 (1977),
reprinted in 1978 U.S. Code Cong. & Admin. News 5963, 6324). Thus, when
insured property belonging to a bankruptcy estate is damaged or stolen,
any payment made by the insurance carrier for that damage or theft
becomes proceeds of property of the estate, and thus, property of the estate.
Bradt, 757 F.2d at 515 (proceeds of an insurance check for post-petition
accident repairs made to an automobile that belonged to the debtor at the
commencement of his Chapter 7 case constituted property of the
bankruptcy estate; “insurance payment for repairs to an automobile
[damaged post-petition] that is property of the estate unquestionably is also
property of the estate”); In re Scott Wetzel Servs., Inc., 243 B.R. 802, 804-05
(Bankr. M.D. Fla. 1999) (“[C]asualty, fire, or theft insurance proceeds have
been held to be property of the estate because the debtor directly receives
the proceeds as merely a change in form of estate property.”); In re Asay,
184 B.R. 265, 266 (Bankr. N.D. Tex. 1995) (“insurance proceeds are a change

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                           REZAIK v. FARMERS
                           Decision of the Court

in form of estate property”); In re Jones, 179 B.R. 450, 454 (Bankr. E.D. Pa.
1995) (insurance proceeds for post-petition damage to debtor’s home that
debtor owned at commencement of the case constituted property of the
estate). Accordingly, when, as here, an insurance carrier does not honor its
obligations to indemnify for the theft of property belonging to the
bankruptcy estate, claims against the carrier arising out of its failure to
honor its indemnity obligations and any judgment on those claims are
proceeds of property of the estate, and thus, property of the estate.

¶20            Putting aside whether Rezaik was the proper party to pursue
the insurance claims against Farmers (given that the insurance assets
belonged to the bankruptcy estate even though he had failed to disclose
them in his bankruptcy filings), under the foregoing authorities, the
insurance assets and all proceeds from them, including the insurance claims
and the judgment against Farmers on those claims, constituted property of
the bankruptcy estate. Further, as discussed above, the bankruptcy court
was authorized to reopen Rezaik’s Chapter 7 case to allow the Trustee to
administer the insurance assets and their proceeds. And indeed, in January
2015, after the superior court entered judgment in this matter, the
bankruptcy court granted the Trustee’s motion to reopen Rezaik’s Chapter
7 case to do just that.

¶21           As the majority points out, a party may be judicially estopped
when that party successfully asserted an inconsistent position in a prior
judicial proceeding. Here, Rezaik represented to the bankruptcy court in
his Chapter 7 filings that he had next to no assets. Although at trial, Rezaik
attempted to explain his non-disclosure of the insurance assets by asserting
he had relied on his lawyer’s advice to value them as if they were being sold
at a garage sale, the superior court rejected that excuse. Based on more than
ample evidence, the superior court found that “the vast difference between
the $3000.00 - $4000.00 in personal property claimed in the two
bankruptcies,[6] and the $160,000.00 insurance claim, is too great to be

6Rezaik also petitioned for relief under Chapter 13 of the Bankruptcy Code
in October 2010. Rezaik did not list the insurance assets in his under oath
bankruptcy schedules and associated filings when he petitioned for
Chapter 13 relief. Instead, in his bankruptcy schedules, he claimed to own
only $4505 in personal property. He also denied owning any art objects,
books, antiques, collections or collectibles, sport or photographic
equipment, and jewelry. Yet, the insurance claim he submitted to Farmers
in 2011 included $160,000 in personal property including non-exempt
clothing, jewelry, rugs, art objects, books, antiques, collections, and

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                            REZAIK v. FARMERS
                            Decision of the Court

reconciled with any valuation method.” Rezaik’s failure to disclose the
insurance assets was material. As the superior court also found, Rezaik was
successful in his Chapter 7 bankruptcy—his “debts were discharged,
including over $800,000.00 in unsecured debt,” and he “avoided the
liquidation of his assets by the trustee.”

¶22            But the successful and inconsistent positions taken by Rezaik
will not bar the bankruptcy Trustee, on behalf of the bankruptcy estate,
from pursuing the insurance claims and collecting the judgment against
Farmers. The elements giving rise to judicial estoppel—even assuming
mutuality of parties is not required—occurred when Rezaik (not the
bankruptcy Trustee) represented to the bankruptcy court that he had next
to no assets for distribution, and then when Rezaik (not the bankruptcy
Trustee) represented to the superior court that he owned the insurance
assets at the time of the theft. The wrongdoer here was Rezaik, not the
bankruptcy Trustee. Yet, to bar the Trustee from pursuing the insurance
claims and collecting the judgment against Farmers would “thwart one of
the core goals of the bankruptcy system—obtaining a maximum and
equitable distribution for creditors—by unnecessarily ‘vaporizing’ the
assets effectively belonging to innocent creditors.” Reed, 650 F.3d at 576
(citing Biesek v. Soo Line R.R. Co., 440 F.3d 410, 413 (7th Cir. 2006)).

¶23            As the majority notes, judicial estoppel is an equitable
doctrine. The doctrine must be applied flexibly to achieve substantial
justice. The victims here are Rezaik’s creditors. Estopping the Trustee from
pursuing the insurance claims and collecting the judgment would provide
Farmers with a windfall. The purpose of judicial estoppel is to protect the
integrity of the judicial system by preventing litigants from playing fast and
loose with the courts. See Mecham v. City of Glendale, 15 Ariz. App. 402, 404,
489 P.2d 65, 67 (1971). Judicial estoppel should not be used to punish

collectibles. Eventually, without receiving a discharge and at his request,
the bankruptcy court dismissed Rezaik’s Chapter 13 proceeding on March
26, 2012. Because the bankruptcy court dismissed his Chapter 13
proceeding, I question whether Rezaik successfully asserted an inconsistent
positon in that proceeding as judicial estoppel requires. Compare Ware v.
U.S. Bank Nat. Ass’n, 131 F. Supp. 573, 576 (S.D. Miss. 2015) (judicial estoppel
inapplicable when bankruptcy court dismissed debtors’ Chapter 13
bankruptcy case), with HPG Corp. v. Aurora Loan Servs., LLC, 436 B.R. 569,
578 (Bankr. E.D. Cal. 2010) (judicial estoppel applicable even though
debtors’ bankruptcy case dismissed without a discharge because they
“enjoyed” benefits from bankruptcy automatic stay). For purposes of this
appeal, I do not have to resolve this question.

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                            REZAIK v. FARMERS
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innocent third parties, such as the Trustee and the creditors of Rezaik’s
bankruptcy estate. And, it bears emphasizing that Rezaik’s misconduct in
not disclosing the insurance assets to the bankruptcy court when he
petitioned for Chapter 7 bankruptcy relief has not given the Trustee and the
bankruptcy estate an unfair advantage over Farmers.

¶24           In Reed, the court held that judicial estoppel would not bar a
blameless bankruptcy Trustee from pursuing a judgment the debtor had
obtained pre-petition against a third-party but then concealed during his
Chapter 7 bankruptcy case. 650 F.3d at 572. Although the court agreed the
debtor should be judicially estopped from profiting from the judgment
because of his dishonesty, the court held that the debtor’s post-petition
misconduct did not “adhere” to the Trustee. Id. at 574-75. Emphasizing the
judgment constituted an asset of the bankruptcy estate, and, but for the
debtor’s dishonesty, would have been administered by the Trustee and
used by the Trustee to pay unsecured creditors, the court held that applying
judicial estoppel to bar the Trustee from collecting the judgment would be
inequitable. The court explained:

              [The debtor’s] nondisclosure in bankruptcy
              harmed his creditors by hiding assets from
              them. Using this same nondisclosure to wipe
              out his [tort] claim would complete the job by
              denying creditors even the right to seek some
              share of the recovery. Yet the creditors have not
              contradicted themselves in court. They were not
              aware of what [the debtor] has been doing
              behind their backs. Creditors gypped by [the
              debtor’s] maneuver are hurt a second time by
              the [district court’s decision to apply judicial
              estoppel]. Judicial estoppel is an equitable doctrine,
              and using it to land another blow on the victims of
              bankruptcy fraud is not an equitable application.

Id. at 576 (quoting Biesek, 440 F.3d at 413) (emphasis in original).

¶25           The same is true here. Even assuming, as Farmers has argued,
the superior court should have judicially estopped Rezaik from prosecuting
the insurance claims against Farmers, Rezaik nevertheless prosecuted those
claims and obtained a judgment against Farmers. But Farmers is not
entitled to use judicial estoppel to bar the Trustee from pursuing the
insurance claims and collecting the judgment—all of which are assets of the
bankruptcy estate—as allowing Farmers to do so would simply “land

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                           REZAIK v. FARMERS
                           Decision of the Court

another blow on the victims” of Rezaik’s bankruptcy fraud. Accordingly,
we do not need to decide whether the superior court should have judicially
estopped Rezaik from pursuing the insurance claims. The insurance claims
and the judgment against Farmers are assets of the bankruptcy estate and
subject to the Trustee’s administration, free from Farmers’ claim of judicial
estoppel.

¶26           Accordingly, for the foregoing reasons, I agree with the
majority’s affirmance of the judgment against Farmers. I also agree with
the majority that Farmers was entitled to summary judgment on Rezaik’s
punitive damages claim and its denial of the parties’ competing requests
for fees on appeal.

                                  :AA

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