Duvall v. Bumbray

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
JEANNE A. DUVALL, )
)
Appellant, )
)
v. ) Civil Action No. 07-223 (RWR)
)
KEVIN BUMBRAY et al., )
)
Appellees. )
______________________________)

MEMORANDUM OPINION

Debtor Jeanne Duvall appeals the bankruptcy court’s decision

to overrule her objections to two claims in the amount of

$39,756.74, filed against her bankruptcy estate by appellees

Kevin Bumbray and Sharon Bumbray Watts. Jeanne1 argues that the

bankruptcy court committed error by ruling that her objections to

the appellees’ claims were barred by res judicata, the appellees’

intended third party beneficiary rights were not rescinded, and

it was inequitable for Jeanne to assert the right of recession as

a defense in the bankruptcy proceedings. Because Jeanne has not

shown that the bankruptcy court decision was erroneous, the

bankruptcy court’s judgment overruling the debtor's objections

will be affirmed.

1
First names will be used for ease of identification among
persons sharing a common surname.
 -2-

BACKGROUND

In 1982, Jeanne’s mother Henrietta Duvall was awarded a

$1,200 monthly annuity from the Maryland Workers’ Compensation

Commission (WCC) as a result of the death of her husband, Edward

Bumbray. (Appellant's Br. at 4.) Henrietta died in 1990 with

only one heir, Jeanne, who was appointed as the personal

representative of Henrietta’s estate. (Id.; Ex. 1, Tr. of Bankr.

Hr'g on Objection to Claims 1 and 2 (“Hr’g Tr.”) at 115.)) The

payor of the annuity (Hartford) informed Jeanne that nothing more

was payable on the annuity after Henrietta died. (Appellant’s

Br. at 5.) Edward’s son Elmer Bumbray told Jeanne that he

thought that Henrietta’s estate was entitled to continue

receiving annuity payments. Elmer asked Jeanne if he could try

to pursue a claim against Hartford as a child of Edward Bumbray.

(Id.) Elmer and Jeanne met with Elmer’s lawyer, Barry Chasen,

who asked Jeanne to resign as the personal representative of

Henrietta’s estate, to be replaced by Elmer who would then file a

claim against Hartford on behalf of the estate before the WCC.

Jeanne claims that she refused to do so because she didn’t

understand what was going on. (Id.)

In March 1997, Jeanne again met with Elmer and Chasen. At

that meeting, Elmer made an offer that if Jeanne successfully

pursued the WCC claim against Hartford as the personal

representative of Henrietta’s estate, Jeanne would receive
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16 percent of the proceeds, while Elmer and the other siblings

would receive 84 percent. (Appellant’s Br. at 5.) Jeanne

agreed, and retained Chasen to represent the estate before the

WCC. (Id. at 5-6.) The WCC held a hearing, and the claim on

behalf of Henrietta’s estate was successful. (Id. at 6.)

Subsequently, Chasen asked Jeanne to sign checks for the workers

compensation proceeds in arrears, in order for Chasen to deposit

them. Jeanne hired an attorney of her own, who told her not to

sign the checks because the proceeds belonged to the estate, not

to Elmer. (Id.) Jeanne’s attorney demanded that Chasen provide

to him the proceeds from the WCC proceeding to be deposited into

Henrietta’s estate account. Chasen did not comply, and Jeanne’s

attorney wrote to Hartford’s counsel and demanded that all of the

proceeds from the WCC proceeding be sent to him, to be deposited

in Henrietta’s estate account. The WCC proceeds that Chasen held

were delivered to Jeanne’s attorney shortly thereafter. (Id.)

In 1999, Elmer sued Jeanne in the Superior Court of the

District of Columbia for breach of contract, claiming that he was

entitled to the entire amount of the proceeds of the WCC case.

(Appellant’s Br. at 7; see also Bumbray v. Duvall, Civil Action

No. 99-2434 (D.C. Sup. Ct. 1999).) Elmer alleged that under the

1997 agreement (“Agreement”) reached between Jeanne and Elmer,

Elmer would receive 84 percent of the proceeds generated by the

WCC claim (approximately $192,578.40), and Jeanne would receive
 -4-

only 16 percent of the proceeds. (Appellant’s Br. at 7.) Jeanne

defended the case by arguing that her agreement with Elmer called

for proceeds of the WCC claim to be provided to Elmer and his

five siblings to the extent that they were legally entitled to

the WCC proceeds, not to Elmer alone. (Id. at 8.)

The jury that heard the contract dispute between Elmer and

Jeanne was instructed to determine whether Elmer brought the WCC

case on his own behalf or on behalf of himself and his siblings.

(Id. at 9.) The instruction read:

A party to a contract made in part for the benefit of
other parties not named in the lawsuit may sue in that
person’s own name without joining the parties for whose
benefit the action is brought. If you find that Elmer
Bumbray brought this action on behalf of some or all of
his siblings, you should award him the amount of
damages, if any, that you find to have been rightfully
due to either [Elmer] or to his siblings. The fact
that the action was brought solely by [Elmer] standing
alone is not a proper basis for reducing the amount of
money awarded him. If you find that Elmer Bumbray
brought this action on his own behalf to use at his
sole discretion, you may use that fact as a basis for
reducing the amount of money awarded to [Elmer].

* * *

The measure of damages for a breach of contract is that
amount of money necessary to place the injured party in
the same economic position [he] would have been in if
the contract had not been breached. To calculate the
damages, determine the amount of money [Elmer] would
have received had the contract not been breached.
[Elmer] has the burden of proving all elements of
damages by a preponderance of the evidence. You are to
award [Elmer] damages to fully compensate him for the
defendant’s breach. You must not award [Elmer] damages
for present or future harm which are speculative or
remote, or which are based on guesswork or conjecture.
 -5-

(Appellant’s Br. Ex. 9 Claimant’s Ex. 5.) The verdict form asked

the jury two questions: 1) to find in favor of either Elmer or

Jeanne on Elmer’s breach of contract claim, and 2) to answer “on

whose behalf did plaintiff Elmer Bumbray bring this lawsuit?”

(Appellant’s Br. Ex 11, Claimant’s Ex. 7.) The jury returned a

verdict in favor of Elmer on question one, and they found that

Elmer brought the lawsuit on his behalf, not on the behalf of his

siblings. The jury awarded Elmer $26,960.98. (Appellant’s Br.

at 9.)

In 2003, appellees Kevin Bumbray and Watts, Elmer’s

siblings, filed a complaint alleging breach of contract against

Jeanne in the Superior Court of the District of Columbia, seeking

portions of the WCC proceeds. (Appellant’s Br. at 10.) Jeanne

stayed that case by filing a voluntary petition for bankruptcy

under Chapter 7. (Id.) In 2005, Kevin filed in the Bankruptcy

Court claim #1 against Jeanne in the amount of $46,973.10, and

Watts filed claim #2 against Jeanne in the amount of $46,973.10.

(Id. at 3.) Jeanne objected to both claims, arguing that the

claims were prohibited by the statute of limitations, and that

the outcome of Bumbray v. Duvall did not justify the claimants’

claims, because the appellees were not intended beneficiaries of

the Agreement between Elmer and Jeanne. (Id.)

The Bankruptcy Court held a hearing regarding the claims

made by Kevin and Watts. (Appellant’s Br. at 3.) At that
 -6-

hearing, the bankruptcy court overruled Jeanne’s objections and

determined that the claimants were entitled to enforce the oral

agreement between Kevin and Jeanne, under which Jeanne agreed

that she would be entitled to 16 percent of all proceeds of the

WCC enforcement recoveries that she inherited, with the remainder

of the proceeds to be divided equally among the other five

siblings -- fourteen percent per sibling. (Hr’g Tr. at 114-120;

see also In re. Duvall, No. 04-1519 (MT), 2006 WL 3590153 at *1-2

(Bankr. D.D.C. Dec. 6, 2006).) First, the bankruptcy court ruled

that the discovery rule applied to preclude the statute of

limitations from barring the appellees’ claims because they

brought their initial action within three years of learning of

the existence of the agreement between Jeanne and Elmer. (Hr’g

Tr. at 116-117.) The bankruptcy court next determined that the

appellees were intended third-party beneficiaries of the contract

between Jeanne and Elmer:

I credit [Jeanne’s] testimony that the agreement was --
the 84 percent was to be divided equally amongst the
six siblings, and that’s how the division came about.
Six into 84 percent is 14 percent. There remains
another 16 percent for [Jeanne]. Obviously, the
parties agreed upon a share for [Jeanne] that would
eliminate fractional percentages for the other
siblings. The fact that Elmer Bumbray might have
believed that or have asserted that 84 percent was
wholly for him is irrelevant because I find that the
parties had reached an agreement for 84 percent to be
divided six ways amongst the six siblings. And that
there was indeed a third-party beneficiary contract.
 -7-

(Id. at 117.) The court then determined that the claimants’

third party beneficiary status was not revoked, because the

parties to the Agreement did nothing to revoke the claimants’

third-party beneficiary status:

[Jeanne] seeks to have the best of all worlds to limit
Elmer [] to only 14 percent and for the other parties
not to receive anything, the other siblings not to
receive anything, and even though the agreement clearly
was for her to receive only 16 percent . . . . That’s
just not fair and it wasn’t the intention of the
parties to revoke any third-party agreement that
existed. You can’t infer that from the fact that
[Jeanne] now says that there is no such agreement that
is enforceable, and that [Elmer] took the position that
it was all for him. You can’t infer from that that the
two parties, Elmer [] and [Jeanne], reached an
agreement that they would revoke the third-party
beneficiary aspects of the contract. And indeed, what
happened in the Superior Court was [Jeanne] took the
position that Elmer was only entitled to 14 percent, he
wasn’t entitled to the full amount and was suing only
in his own right, not on behalf of the third-party
beneficiaries, and therefore he ought to be limited to
14 percent and that’s what the jury concluded. It
would certainly be a miscarriage of justice for
[Jeanne] now to turn around and say that her position
in the Superior Court should be disregarded and she
should be treated as having revoked the third-party
beneficiary status along with Elmer [], who took a
position that the third-party beneficiary contract
didn’t exist. That’s just not an equitable argument.
It’s distasteful and repugnant to the Court’s sense of
equity.

(Id. at 118-119.) Finally, finding no privity between Elmer and

the claimants in the Superior court litigation, the bankruptcy

court rejected Jeanne’s assertion that the appellees’ third-party

beneficiary claims were barred by res judicata.

But Elmer Bumbray was taking a position adverse to the
third party beneficiaries who had a right to sue in
 -8-

their own interest and were not aware of their right to
sue. And I don’t think that there is privity in those
circumstances. Elmer was entitled to sue on his own
rights. He was not obligated to sue in a
representative capacity. And these siblings are
entitled to sue in their own right in enforcement of
the third-party beneficiary contract.

(Id. at 119-120.)

Jeanne has appealed the bankruptcy court’s decision to

overrule her objections. Kevin and Watts oppose Jeanne’s appeal,

and urge affirmance of the bankruptcy court’s decision.

DISCUSSION

A party that is dissatisfied with a bankruptcy court's

ultimate decision can appeal to the district court for the

judicial district in which the bankruptcy judge is serving.

Celotex Corp. v. Edwards, 514 U.S. 300, 313 (1995) (citing 28

U.S.C. § 158(a)). A district court “may affirm, modify, or

reverse a bankruptcy judge’s judgment, order, or decree or remand

with instructions for further proceedings.” Fed. R. Bankr. P.

8013; In re WPG, Inc., 282 B.R. 66, 68 (D.D.C. 2002). Issues of

law are reviewed de novo. McGuirl v. White 86 F.3d 1232, 1234,

(D.C. Cir. 1996); Miles v. I.R.S., Civ. Action No. 06-1275 (CKK),

2007 WL 809789, at *3 (D.D.C. Mar. 15, 2007); In re Johnson, 236

B.R. 510, 518 (D.D.C. 1999). Conclusions of fact are reviewed

for clear error. Bierbower v. McCarthy, 334 B.R. 478, 480

(D.D.C. 2005)
 -9-

I. RES JUDICATA

Jeanne argues that the bankruptcy court erred by failing to

rule that the doctrine of res judicata barred the appellees’

claims because the jury in the Superior Court considered and

rejected the notion that the appellees were entitled to third

party beneficiary claims. (Appellant’s Br. at 10-16.) The

appellees disagree, arguing that the doctrine of res judicata did

not preclude their claims because they were not parties to the

Superior Court action, because Elmer was not in privity of

interest with them when he participated in the Superior Court

action, and because the jury in the Superior Court action did not

resolve the issue of their third-party beneficiary status in

Jeanne’s favor.

Under 28 U.S.C. § 1738, “federal courts must give state

court judgments the same preclusive effect as would be given by

the courts of the state where the judgments emerged.” Smith v.

District of Columbia, 629 F. Supp. 2d 53, 57 (D.D.C. 2009)

(citing Migra v. Warren City Sch. Dist., 465 U.S. 75, 81 (1984)).

In the District of Columbia, the doctrine of res judicata

precludes the relitigation, between the same parties, of a claim

that has previously been adjudicated on the merits. Walden v.

Dist. of Columbia Dep’t of Employment Servs., 759 A.2d 186, 189

(D.C. 2000); see also Capitol Hill Group v. Pillsbury, Winthrop,

Shaw, Pittman, LLC, 569 F.3d 485, 490 (D.C. Cir. 2009). “A final
 -10-

judgment on the merits of a claim bars [litigation] in a

subsequent proceeding of . . . claims arising out of the same

transaction which could have been raised[.]” Patton v. Klein,

746 A.2d 866, 869-70 (D.C. 1999).

Jeanne argues that, while the appellees were not parties in

the Superior Court case, they should still be bound by the jury’s

determination because they were in privity of interest with

Elmer. “A nonparty may be considered in privity with a party to

the prior action if the nonparty's interests are 'adequately

represented by a party to the original action.’” Lewandowski v.

Prop. Clerk, 209 F. Supp. 2d 19, 21-22 (D.D.C. 2002) (quoting Am.

Forest Res. Council v. Shea, 172 F. Supp. 2d 24, 31 (D.D.C.

2001)). However, the bankruptcy court determined that Elmer was

not in privity with the appellees, and Jeanne provides no

evidence that the bankruptcy court was incorrect in that

determination. Nor does Elmer’s claim in the Superior Court

action that he was entitled to 84 percent or more of the proceeds

to the exclusion of his siblings begin to approach adequately

representing the appellees’ interests in that action. In

addition, Jeanne misreads the implication of the jury’s verdict

in that action. Jeanne asserts that the jury “considered and

rejected [the appellees’] claims,” because the jury found that

Elmer brought the case on his own behalf, not on behalf of the

appellees. (Appellant’s Br. at 11.) However, that determination
 -11-

by the jury merely meant that Elmer could not collect the entire

amount that Jeanne owed from the Agreement, not that the jury

believed that the appellees were not third-party beneficiaries of

the Agreement. The jury was not finding against the appellees;

it was finding against Elmer in his attempt to recover more than

just the portion of the proceeds to which he was individually

entitled under the Agreement. In other words, the jury

determined Elmer’s rights, not the appellees’ rights.

II. RESCISSION

Jeanne argues that the bankruptcy court erred in determining

that the appellees’ rights in the Agreement were not revoked or

rescinded by Elmer and Jeanne. According to Jeanne, the

appellees only learned of their rights in the Agreement after the

beginning of the Superior Court litigation, during which, Jeanne

argues, the parties took positions inconsistent with the

appellees’ position as third-party beneficiaries in the

Agreement, thus destroying their rights. (Appellant’s Br. at 16-

18.) Jeanne also argues that she terminated the appellees’ third

party beneficiary rights by seeking the WCC proceeds.

“A third party to a contract ‘may sue to enforce its

provisions if the contracting parties intend the third party to

benefit directly thereunder.’” Fields v. Tillerson, 726 A.2d

670, 672 (D.C. 1999) (quoting Johnson v. Atlantic Masonry Co.,

693 A.2d 1117, 1122 (D.C. 1997)). “Whether the parties so
 -12-

intended in this case is a factual issue [to be resolved] by the

trial court.” Fields, 726 A.2d at 672. “The parties to a

contract entered into for the benefit of a third person may

rescind, vary, or abrogate the contract as they see fit, without

the assent of the third person, at any time before the contract

is accepted, adopted, or acted upon by him, and such rescission

deprives the third person of any rights under or because of such

contract.” Id. at 672-73 (quoting 17A Am. Jur. 2d Contracts

§ 461). Contracting parties are free to modify their original

contract, but such modification requires mutual consent. Chang

v. Louis & Alexander, Inc., 645 A.2d 1110, 1114 (D.C. 1994)

(citing Hershon v. Hellman Co., 565 A.2d 282, 284 (D.C. 1989)).

“In order to be valid, however, the modification must possess the

same elements of consideration as necessary for normal contract

formation.” Herson, 565 A.2d at 283; see also Coulombe v. Total

Renal Care Holdings, Inc., No. C06-504JLR, 2007 WL 1367601,

at * 3 (W.D. Wash. May 4, 2007) (finding that parties intended to

rescind where the defendant provided the plaintiff with a form

relinquishment letter and the plaintiff signed it and returned

it, stating that “[a]n agreement to rescind must itself be a

valid agreement, meaning all parties to the contract must assent

to rescission and there must be a meeting of minds”).

In this matter, Jeanne fails to cite any evidence in the

record that she and Elmer came to any formal agreement or any
 -13-

accord to rescind the appellees’ third party beneficiary rights

under the Agreement. Factually, the circumstances Jeanne cites

either did not reflect an intent to rescind or were one party’s

unilateral actions reflecting no simultaneous meeting of the

minds between Jeanne and Elmer. Jeanne’s claim before the WCC

for all of the proceeds was in keeping with her Agreement with

Elmer, not a rescission of the siblings’ rights. Her demand to

have Chasen turn over the proceeds for deposit into Henrietta’s

estate was also not inconsistent with a later distribution from

the estate to the Bumbray siblings in keeping with the Agreement.

Elmer’s demand in his lawsuit for the proceeds certainly met with

no assent from Jeanne, who insisted that the siblings had rights

to the proceeds. And Jeanne’s reversed position in the

bankruptcy proceeding likewise found no consent from Elmer.

Legally, Jeanne provides no authority supporting her theory

that Elmer rescinded the appellees’ third party beneficiary

rights by arguing, in the Superior Court litigation, that he was

the sole beneficiary of the Agreement, or that she rescinded the

Appellees’ third party beneficiary rights by demanding the WCC

proceedings in 1997. See e.g., Arizona v. Shalala, 121 F. Supp.

2d 40, 46 n.4 (D.D.C. 2000) (refusing to address or countenance

an arguments that were raised “without citing any authority”).
 -14-

III. JUDICIAL ESTOPPEL

Jeanne argues that the bankruptcy court erroneously refused

to hear her argument regarding rescission because the bankruptcy

court found it inequitable for Jeanne to make that argument.

(Appellant’s Br. 19-34.) “Judicial estoppel is an equitable

doctrine that prevents parties from abusing the legal system by

taking a position in one legal proceeding that is inconsistent

with a position taken in a later proceeding.” Kopff v. World

Research Group, LLC, 568 F. Supp. 2d 39 (D.D.C. 2008) (citing New

Hampshire v. Maine, 532 U.S. 742, 749-50 (2001), and Elemary v.

Holzmann A.G., 533 F. Supp. 2d 116, 125 n.6 (D.D.C. 2008)).

Judicial estoppel “protect[s] the integrity of the judicial

process . . . by prohibiting parties from deliberately changing

positions according to the exigencies of the moment.” New

Hampshire v. Maine, 532 U.S. at 749-50.

Here, regardless of whether the bankruptcy court would have

been justified in applying the doctrine of judicial estoppel to

preclude Jeanne’s argument regarding rescission, the fact is that

the bankruptcy court held that rescission did not occur. In

stating that Jeanne’s argument was “distasteful, and repugnant to

the court’s sense of equity,” the bankruptcy court did not state

that it reached its decision to overrule Jeanne’s objection

solely because her argument was inequitable. The bankruptcy

court recited the positions taken by the parties in the Superior
 -15-

Court litigation as support for its factual findings that no

rescission occurred, not to judicially estop Jeanne from arguing

about rescission. In short, Jeanne does not provide evidence of

an incorrect determination of law or a clearly erroneous

determination of fact sufficient to disturb the bankruptcy

court’s decision on this or any other issue.

CONCLUSION

Because the appellant has not demonstrated that the

bankruptcy court committed any error, the judgment of the

bankruptcy court will be affirmed. An appropriate Order

accompanies this Memorandum Opinion.

SIGNED this 24th day of February, 2010.

/s/
RICHARD W. ROBERTS
United States District Judge