Opinion
No. 2009-IA-00809-SCT.
September 30, 2010.
TRIAL JUDGE: HON. LAMAR PICKARD, DATE OF JUDGMENT: 04/15/2009
COURT FROM WHICH APPEALED: COPIAH COUNTY CIRCUIT COURT
DISPOSITION: AFFIRMED AND REMANDED
ATTORNEYS FOR APPELLANT: JOSEPH W. GILL, REBECCA B. COWAN
ATTORNEY FOR APPELLEE: CURT CROWLEY
BEFORE WALLER, C.J., LAMAR AND PIERCE, JJ.
¶ 1. Nancy Oliver sued Copiah County for injuries she sustained when she fell down the steps of the Copiah County courthouse. The circuit court denied Copiah County's motion for summary judgment based on judicial estoppel, even though Oliver did not amend her Chapter 13 bankruptcy schedule of assets to reflect the existence of her post-confirmation claim. The county brought this interlocutory appeal. Based on the unique facts of this case, and due to the previously unsettled nature of the law regarding that duty, we decline to apply judicial estoppel against her. So we affirm.
FACTS AND PROCEDURAL HISTORY
¶ 2. On October 15, 2005, Nancy Oliver filed a voluntary petition pursuant to Chapter 7 of the United States Bankruptcy Code, and a case was commenced in the United States Bankruptcy Court for the Southern District of Mississippi. Upon Oliver's motion, the Chapter 7 proceeding was converted to a Chapter 13 case on December 15, 2005. Oliver filed her proposed Chapter 13 plan with the bankruptcy court on December 20, 2005. The bankruptcy court entered an order confirming the plan on February 14, 2006.
The bankruptcy action is styled In Re: Nancy Jean Roberts ; No. 05-07095-ee.
The plan required Oliver to make biweekly payments of $113.00 for thirty-six months, or until her debts under the plan were paid, but not to exceed sixty months.
¶ 3. On March 27, 2006, Oliver tripped on a piece of loose carpet on the front steps of the Copiah County courthouse, and was injured as a result of her fall. On July 26, 2007, Oliver filed a complaint against Copiah County in the Circuit Court of Copiah County, alleging that the county was negligent for failing to correct a known, unreasonably dangerous condition on its premises, and that she had suffered injuries as a result of its negligence. Later, in response to interrogatories posed by Copiah County, Oliver disclosed that she previously had commenced the Chapter 13 bankruptcy proceeding, and was in the process of paying on her Chapter 13 plan. She also disclosed to the County the existence of her bankruptcy during her deposition.
¶ 4. On July 11, 2008, Copiah County filed a motion for summary judgment, asserting that Oliver should be judicially estopped from pursuing her personal-injury claim because she had never amended her bankruptcy schedule of assets to reflect the existence of her claim against the county. On March 30, 2009, the circuit court held a hearing on Copiah County's motion. During the hearing, Oliver's counsel admitted that Oliver had not amended her bankruptcy schedule of assets to reflect her cause of action. Rather, Oliver's counsel argued that Oliver is not required to amend her schedule of assets until her lawsuit against Copiah County is concluded, either by judgment or settlement.
¶ 5. On April 30, 2009, the circuit court denied Copiah County's summary-judgment motion, finding that the motion should be addressed first in the United States Bankruptcy Court in which Oliver's bankruptcy is pending. Thereafter, Copiah County filed a petition for interlocutory appeal, which this Court granted on June 24, 2009.
DISCUSSION AND ANALYSIS OF LAW
¶ 6. This Court reviews a trial court's grant or denial of a motion for summary judgment or a motion to dismiss under a de novo standard. Monsanto v. Hall , 912 So. 2d 134, 136 (Miss. 2005). A trial court's decision regarding judicial estoppel is subject to review under an abuse-of-discretion standard. Kirk v. Pope , 973 So. 2d 981, 986 (Miss. 2007) (citing Superior Crewboats, Inc. v. Primary PI Underwriters , 374 F.3d 330, 334 (5th Cir. 2004)). But "[a]n abuse of discretion standard does not mean a mistake of law is beyond appellate correction," because a court abuses its discretion when it makes an error of law. Id. (quoting Browning Mfg. v. Mims , 179 F.3d 197, 205 (5th Cir. 1999)).
¶ 7. The only question presented in this appeal is whether Oliver should be judicially estopped from pursuing her personal-injury claim against Copiah County because she failed to amend her schedule of assets in the bankruptcy court to show the existence of the cause of action, even though the claim arose post-petition and post-confirmation. a. Judicial estoppel and the duty to disclose a claim
¶ 8. This Court explained in Kirk v. Pope , 973 So. 2d 981 (Miss. 2007), that the doctrine of judicial estoppel should be applied to prevent a party from achieving unfair advantage by taking inconsistent positions in litigation. Specifically, we explained that:
Judicial estoppel is designed to protect the judicial system and applies where "intentional self-contradiction is being used as a means of obtaining unfair advantage in a forum provided for suitors seeking justice." In order to protect the integrity of the judiciary, judicial estoppel "must be invoked in the Court in which the apparent self-serving contradiction occurred and in which the defense is first asserted."
[There are] three requirements for judicial estoppel: "(1) the party is judicially estopped only if its position is clearly inconsistent with the previous one; (2) the court must have accepted the previous position; and (3) the non-disclosure must not have been inadvertent."
Kirk v. Pope , 973 So. 2d at 991 (internal citations omitted).
¶ 9. In Kirk , Plaintiff Mark Kirk filed a breach-of-contract action against several defendants in the circuit court on February 5, 1996. Kirk filed a Chapter 7 bankruptcy petition in the federal bankruptcy court on August 27, 1998, while his breach-of-contract action was pending. Kirk did not disclose the existence of the breach-of-contract action to the bankruptcy court. Kirk's bankruptcy case was closed, and Kirk was discharged on December 30, 1998. Kirk , 973 So. 2d at 984. Four years later, Kirk's breach-of-contract lawsuit finally went to trial, and on October 28, 2002, the jury awarded Kirk $700,000 in damages. The parties engaged in extensive post-trial legal wrangling for three years, until the trial court vacated the judgment on October 17, 2005, finding that Kirk's failure to disclose the breach-of-contract action to the bankruptcy court effectively stripped Kirk of standing to pursue his breach-of-contract claims. Id. at 984-86. This Court affirmed. Id. at 992.
¶ 10. The situation in this case is clearly distinguishable from that in Kirk v. Pope . First, this case involves Chapter 13 of the bankruptcy code, whereas Kirk v. Pope involved Chapter 7. As will be discussed below, the two bankruptcy mechanisms each have unique provisions regarding the status of the estate's property and the duty to report. But most significantly, it is undisputed that Oliver's personal-injury claim, unlike Kirk's breach-of-contract action, accrued and arose after she had filed her bankruptcy petition and after her Chapter 13 repayment plan was approved by the bankruptcy court, and she had begun making payments on the plan. At any rate, to decide if judicial estoppel applies to Oliver's suit against Copiah County, we must decide whether she had a duty to disclose to the bankruptcy court this post-petition, post-confirmation claim.
¶ 11. We look first to the federal bankruptcy statutes to answer this question. When a debtor files a bankruptcy petition, a bankruptcy "case" is commenced, and an estate is created. 11 U.S.C. § 541 (2006). "Such estate is comprised of . . . all legal or equitable interests of the debtor in property as of the commencement of the case[,]" 11 U.S.C. § 541(a)(1) (2006), and "[a]ny interest in property that the estate acquires after the commencement of the case." 11 U.S.C. § 541(a)(7) (2006) (emphasis added). If the bankruptcy is filed under Chapter 13, the property of the estate includes all property of the kind specified in [ Section 541] that the debtor acquires, and earnings from services performed by the debtor, after the commencement of the case but before the bankruptcy case is closed, dismissed, or converted to a case under another chapter, whichever occurs first. 11 U.S.C. § 1306(a)(1)-(2) (2006) (emphasis added). The debtor remains in possession of all property of the estate under Chapter 13. 11 U.S.C. § 1306(b) (2006).
¶ 12. The confirmation of the debtor's Chapter 13 repayment plan vests all the property of the estate in the debtor, free and clear of any claim or interest of any creditor provided for by the plan. 11 U.S.C. § 1327(b)-(c) (2006). And the provisions of a confirmed plan bind the debtor and each creditor, regardless of whether the creditor has accepted or rejected the plan. 11 U.S.C. § 1327(a) (2006). But the trustee, the debtor, or any unsecured creditor may request a modification of the plan at any time after confirmation but before the completion of plan payments, to increase or reduce the amount of the payments or to extend or reduce the time for such payments. 11 U.S.C. § 1329 (2006).
¶ 13. A debtor's duty to disclose assets begins with the filing of a petition for protection under the Bankruptcy Code. See 11 U.S.C. § 521 (2006). The duty to disclose is continuous and ongoing. See In re Superior Crewboats, Inc. , 374 F.3d 330, 335 (5th Cir. 2004) (citing In re Coastal Plains, Inc. , 179 F.3d 197, 207-08 (5th Cir. 1999)); Jethroe v. Omnova Solutions, Inc. , 412 F.3d 598, 600 (5th Cir. 2005). But the debtor is required to disclose only those assets that are property of the bankruptcy estate, as defined in Section 541. 11 U.S.C. § 521 (2006), 11 U.S.C. § 541 (2006). So the question we must decide in this case is whether Oliver's post-confirmation cause of action against Copiah County is property of the bankruptcy estate.
b. The claim as property of the bankruptcy estate
¶ 14. There is no dispute that, had Oliver's cause of action arisen prior to her bankruptcy's commencement, she certainly would have been obligated to disclose it for inclusion in the estate. See 11 U.S.C. § 541 (2006). But whether a state-law tort claim arising post-confirmation is property of the estate is far from a clear question. See Woodard v. Taco Bueno Restaurants, Inc. , 2006 WL 3542693, at **5-9 (N.D. Tex. Dec. 8, 2006) (addressing at length substantial split in federal circuit courts regarding the issue). The basis for the split regarding this question comes down to the apparent irreconcilability of Sections 1306 and 1327. As Woodard explains:
Section 1306 seems to indicate that the bankruptcy estate continues in existence until the case is closed, dismissed, or converted, and all assets acquired by a debtor during this time are the property of the estate if those assets are of the kind specified in section 541. On the other hand, section 1327 clearly indicates that all property in the bankruptcy estate at confirmation is vested in the debtor free and clear of any claims.
Woodard , 2006 WL 3542693, at *2. No less than five approaches have been developed by the federal courts to determine the appropriate status for a Chapter 13 debtor's post-confirmatio n claims. Id. at **5-9 (discussing the differences am ong and pros and cons of the "estate-termination," "estate-preservation," "estate-transformation," and "reconciliation" approaches). Neither the United States Court of Appeals for the Fifth Circuit nor this Court has addressed this conflict or adopted one of the approaches. Further, Oliver's disclosure obligations were unclear, as they would have varied depending on the approach applied. Absent clear direction on this unsettled point of bankruptcy law, this Court declines to adopt an approach at this time.
c. The procedural posture of this case
¶ 15. We need not adopt either of the above approaches to decide the question presented. This Court presently is concerned only with the collateral consequences of Oliver's failure to disclose her claim, and especially with whether that failure should result in Oliver being estopped by this Court from continuing her suit against Copiah County on her undisclosed claim. See Woodard , 2006 WL 3542693, at **11-12. And we cannot forget that this case is before this Court on interlocutory appeal from the trial court's denial of Copiah County's motion for summary judgment based on judicial estoppel. Summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Miss. R. Civ. P. 56(c) (emphasis added). So in order to prevail on its summary-judgment motion based on judicial estoppel, Copiah County was required to show that it was entitled to judgment as a matter of law.
¶ 16. The court in Woodard also was faced with a motion for summary judgment based on judicial estoppel. But as the Woodard court stated, "of overriding significance . . . is the law's uncertainty in this circuit [and in this state] as to the status of assets acquired by a debtor after the confirmation of his chapter 13 bankruptcy plan and as to the duty of that debtor to disclose those belatedly acquired assets." Woodard , 2006 WL 3542693, at *2. Woodard explained that:
To impose judicial estoppel against one whose duty is unclear would violate a fundamental principle in our jurisprudence: people are entitled to fair notice of what the law is before being held accountable under it. See U.S. Const. amend. V. Although our jurisprudence does not require actual knowledge of the law in order to be held accountable under it, even a just application of the notion of constructive knowledge relies on the law's being clear and having been published to the public. Here, neither is the case. The law is not clear and because it is not clear, it has not been made known to the public.
The primary purpose of the judicial-estoppel doctrine is to protect the integrity of the judicial process by preventing a party from abusing that process in an effort to gain an unfair advantage in litigation. It was not designed to estop the pure of heart, whose only sin is ignorance of unsettled law, and, at the same time, grant a windfall to a litigant who may very well be liable for wrongful conduct.
Woodard , 2006 WL 3542693, at **11-12.
¶ 17. For the same reasons, we conclude that Oliver's failure to disclose her cause of action against Copiah County in her Chapter 13 bankruptcy proceeding — based on an honest belief that she had no duty to disclose it, supported by the substantial uncertainty in the law regarding that duty — should not bar her claim. Accordingly, we decline, under the factual circumstances of this case, to estop Oliver from pursuing her personal-injury claim against Copiah County. And we hold that the trial court did not abuse its discretion by declining to apply judicial estoppel against Oliver.
CONCLUSION
¶ 18. We find the law regarding whether Oliver's claim against Copiah County is property of her Chapter 13 bankruptcy estate — and hence, whether she had a duty to disclose her claim to the bankruptcy court — is uncertain because of the conflicting provisions in the bankruptcy code, the divergent holdings on the issue by courts throughout the country, and the lack of precedent in this state and in the Fifth Circuit. So we hold that Copiah County is not entitled to judgment as a matter of law on the basis that Oliver should be judicially estopped from pursuing her post-petition, post-confirmation claim against it for failure to disclose the claim to the bankruptcy court. Therefore, we affirm the Copiah County Circuit Court's denial of the county's motion for summary judgment, and we remand this case to that court for further proceedings not inconsistent with this opinion.
¶ 19. AFFIRMED AND REMANDED. CARLSON, P.J., DICKINSON, LAMAR, KITCHENS, CHANDLER AND PIERCE, JJ., CONCUR. GRAVES, P.J., CONCURS IN RESULT ONLY. RANDOLPH, J., DISSENTS WITH SEPARATE WRITTEN OPINION.
¶ 20. Recognizing the risk of inequity in proceeding any further, the circuit court decidedly chose not to address the substantive merits of judicial estoppel. Instead, the "Order Denying Motion for Summary Judgment" stated only that "the issues addressed in the defendant's motion should be addressed first in the United States Bankruptcy Court in which the plaintiff's bankruptcy is pending. As a result, this [c]ourt denies the defendant's motion without prejudice." (Emphasis added.)
¶ 21. The Majority acknowledges that this was the basis for the circuit court's denial of Copiah County's summary judgment motion. (Maj. Op. at ¶ 5). But notwithstanding that prudent decision of the circuit court, the Majority opts to engage in a lengthy (and unnecessary) discussion of federal bankruptcy law and a substantive analysis of judicial estoppel.
¶ 22. I would expressly affirm the circuit court's order for the reasons stated by that court (i.e., these issues should be addressed first by the United States Bankruptcy Court), and would specifically direct the circuit court to stay the proceedings until the Bankruptcy Court performs its function. This course ensures that the action is properly "presented in the name of the real party in interest." Miss. R. Civ. P. 17(a). Furthermore, it prevents "leav[ing] any of the persons already parties[,]" namely, Copiah County, "subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations[,]" i.e., obligations to both Oliver and the bankruptcy trustee. Miss. R. Civ. P. 19(a)(2)(ii). Finally, it operates to promote "efficiency of courts" and "the just, speedy, and inexpensive determination of [this] action[,]" by mandating an initial determination of the proper party to bring the action (Oliver or the bankruptcy trustee). "Order Adopting the Mississippi Rules of Civil Procedure," Miss. R. Civ. P. 1. Once the Bankruptcy Court makes that determination, the circuit court is well-positioned to proceed accordingly.