USCA1 Opinion
May 27, 1994 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-1891
MARLENE BROOKS,
Plaintiff, Appellant,
v.
JOHN J. BEATTY, ET AL.,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge]
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Before
Torruella, Cyr and Boudin,
Circuit Judges.
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Francis C. Newton, Jr., with whom John R. Dunnell and Russell,
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Plummer & Rutherford, P.C. were on brief for appellant.
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Peter J. Kajko, with whom Sidney Gorovitz and Dropkin, Perlman,
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Leavitt & Rubin were on brief for appellee Resolution Trust.
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Jay L. Seibert, with whom Hart and Lamond, P.C. was on brief for
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appellee Neil Tobin.
George W. Mykulak, with whom Mark A. Berthiaume, Janice O. Fahey
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and Goldstein & Manello, P.C. were on brief for appellees Anderson and
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March.
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CYR, Circuit Judge. The present appeal requires that
CYR, Circuit Judge
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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.
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I
BACKGROUND
BACKGROUND
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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.
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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
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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.,
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Inc. v. Alberto Culver, Inc., 989 F.2d 570 (1st Cir.), cert.
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denied, 114 S. Ct. 344 (1993), RTC moved for reconsideration of
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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
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estopped from prosecuting the ComFed action. Summary judgment
was entered for all defendants, and Brooks brought this appeal.
A. Judicial Estoppel
A. Judicial Estoppel
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We review a grant of summary judgment de novo, employ-
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ing the same criteria incumbent upon the district court in the
first instance. Pedraza v. Shell Oil Co., 942 F.2d 48, 50 (1st
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Cir. 1991), cert. denied, 112 S. Ct. 993 (1992). Summary judg-
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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.
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State Farm Mut. Auto Ins. Co., 989 F.2d 1, 3 (1st Cir. 1993);
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Mesnick v. General Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991),
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cert. denied, 112 S. Ct. 2965 (1992).
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We held in Payless that judicial estoppel precluded a
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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-
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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
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Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208 (1st
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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
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F.2d 414 (3d Cir.), cert. denied, 488 U.S. 967 (1988) (former
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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
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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.
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Nothing in its decision suggests that the Payless court
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wrenched the prudential doctrine of judicial estoppel from its
traditional moorings. In Patriot Cinemas this court emphasized,
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as a "guiding principle," that "[j]udicial estoppel should be
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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
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(quoting Scarano v. Central R. Co., 203 F.2d 510, 513 (3d Cir.
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1953)); accord Payless, 989 F.2d at 571 (applying judicial
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estoppel only after concluding that appellants had engaged in a
"palpable fraud that the court will not tolerate, even passive-
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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
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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
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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
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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
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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
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ComFed action became property of the chapter 7 estate. Carlock
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v. Pillsbury Co., 719 F. Supp. 791, 856 (D. Minn. 1989) ("A cause
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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);
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United States v. Grant, 971 F.2d 799, 803 n.4 (1st Cir. 1992) (en
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banc) (holding that abandonment by trustee "does not relinquish
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an undisclosed interest in property") (emphasis in original,
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citing Dushane v. Beall, 161 U.S. 513, 516 (1896)); see also
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Krank v. Utica Mutual Ins. Co., 109 B.R. 668 (E.D. Pa.), aff'd,
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908 F.2d 962 (3d Cir. 1990). Thus, Brooks lacks standing to
prosecute the present action.
III
III
CONCLUSION
CONCLUSION
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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,
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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
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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
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remanded for further proceedings consistent with this opinion;
remanded for further proceedings consistent with this opinion;
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costs to plaintiff-appellant.
costs to plaintiff-appellant.
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