McFarling v. Evaneski

171 P.3d 497, 141 Wash. App. 400
Court of Appeals of Washington·Decided September 11, 2007·No. No. 25445-3-III·Published·Cited by 9 cases

Opinion

Sweeney, C.J.

¶1 Judicial estoppel prohibits a party from taking one position in a court proceeding and then a contrary position in a later proceeding for his own advantage. So a debtor who fails to disclose a claim for personal injuries in a bankruptcy proceeding cannot later assert that claim in a different court. And this is what the plaintiff did here. The trial judge then dismissed his complaint based on judicial estoppel. We conclude that this was a proper application of the doctrine and affirm the dismissal.

FACTS

¶2 Crystal Evaneski drove her car into the rear of James McFarling’s car on August 27, 2004. Mr. McFarling was injured.

¶3 Mr. McFarling filed a chapter 7 bankruptcy petition on October 27, 2004. He did not list the personal injury claim in the bankruptcy proceeding. The bankruptcy court concluded Mr. McFarling had no assets and discharged his debts on January 26, 2005.

¶4 Mr. McFarling’s chiropractor had treated him 31 times by the date of the discharge.

¶5 Mr. McFarling brought this suit for personal injuries on October 26, 2005. Ms. Evaneski moved to dismiss the suit based on judicial estoppel because Mr. McFarling failed [403] to list his personal injury claim as an asset of the bankruptcy estate. The court agreed and summarily dismissed the suit.

DISCUSSION

¶6 We review a summary judgment order de novo. Aba Sheikh v. Choe, 156 Wn.2d 441, 447, 128 P.3d 574 (2006). Summary judgment is proper when the only question before the court is one of law. Better Fin. Solutions, Inc. v. Transtech Elec., Inc., 112 Wn. App. 697, 702-03, 51 P.3d 108 (2002). We review a trial judge’s application of the doctrine of judicial estoppel to the facts of a case for abuse of discretion. Arkison v. Ethan Allen, Inc., 160 Wn.2d 535, 538, 160 P.3d 13 (2007).

Judicial Estoppel Following Bankruptcy

¶7 Judicial estoppel is an equitable doctrine. It precludes a party from asserting one position in a court proceeding and later seeking an advantage by taking an inconsistent position in another court. Id. “ ‘The purposes of the doctrine are to preserve respect for judicial proceedings without the necessity of resort to the perjury statutes . . . and to avoid inconsistency, duplicity, and . . . waste of time.’ ” Cunningham, v. Reliable Concrete Pumping, Inc., 126 Wn. App. 222, 225, 108 P.3d 147 (2005) (second alteration in original) (internal quotation marks omitted) (quoting Johnson v. Si-Cor, Inc., 107 Wn. App. 902, 906, 28 P.3d 832 (2001)), quoted in Arkison, 160 Wn.2d at 538. It is particularly well suited to protect the integrity of the bankruptcy process:

“[T]he integrity of the bankruptcy system depends on full and honest disclosure by debtors of all of their assets. The courts will not permit a debtor to obtain relief from the bankruptcy court by representing that no claims exist and then subsequently to assert those claims for his own benefit in a separate proceeding. The interests of both the creditors, who plan their actions in the bankruptcy proceeding on the basis of informa[404] tion supplied in the disclosure statements, and the bankruptcy court, which must decide whether to approve the plan of reorganization on the same basis, are impaired when the disclosure provided by the debtor is incomplete.”

Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 785 (9th Cir. 2001) (emphasis omitted) (quoting In re Coastal Plains, 179 F.3d 197, 208 (5th Cir. 1999)).

¶8 So a debtor’s failure to disclose a personal injury claim in a bankruptcy proceeding generally precludes a later lawsuit on the same claim under the doctrine of judicial estoppel. Arkison, 160 Wn.2d at 539.

¶9 Mr. McFarling does not argue that judicial estoppel does not apply in the circumstances here. He instead urges us to change the law. Appellant’s Br. at 3.

¶10 Whether the trial judge shall apply judicial estoppel turns on three core factors: (1) inconsistent positions (2) that misled a court and (3) resulted in an unfair advantage or detriment to the opposing party. Arkison, 160 Wn.2d at 538-39.

¶11 Each of these factors is met here. And there is no serious argument to the contrary. “Courts may generally apply judicial estoppel to debtors who fail to list a potential legal claim among their assets during bankruptcy proceedings and then later ‘pursue the claims after the bankruptcy discharge.’ ” Id. at 539 (quoting Bartley-Williams v. Kendall, 134 Wn. App. 95, 98, 138 P.3d 1103 (2006)). And that is precisely what happened here. Mr. McFarling’s position here is inconsistent with the position he took in the bankruptcy. It misled the bankruptcy court as to his assets. Cunningham, 126 Wn. App. at 233-34. And finally, he gained a benefit at the expense of his creditors when he received a “no asset” discharge of his debts. Id. at 231, 233.

¶12 Mr. McFarling insists that his failure to disclose his claim in his bankruptcy schedules was inadvertent and urges us to require the defendant to show that the information was purposely withheld. But that is not required. While inadvertence is a relevant consideration, [405] see Arkison, 160 Wn.2d at 539, failure to list an asset is “ ‘ “inadvertent” only when, in general, the debtor either lacks knowledge of the undisclosed claims or has no motive for their concealment.’ ” Cunningham, 126 Wn. App. at 234 (internal quotation marks omitted) (quoting Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1287 (11th Cir. 2002)). Mr. McFarling admits he knew of his claim. Clerk’s Papers at 62. Moreover, we agree with the court in Cunningham that application of judicial estoppel does not require proof of deliberate intent to mislead. Cunningham, 126 Wn. App. at 233-34.

Segregating Claims

¶13 Mr. McFarling next invites us to segregate those losses he incurred after the bankruptcy, and allow his claim to go forward for only those damages he sustained after he declared bankruptcy. We decline the invitation.

¶14 Mr. McFarling relies on Johnson, but that case distinguishes between prepetition and postpetition claims, not between prepetition and postpetition damages.

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McFarling v. Evaneski, 171 P.3d 497, 141 Wash. App. 400 (Wash. Ct. App. 2007).

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McFarling v. Evaneski
171 P.3d 497 (Court of Appeals of Washington, 2007)