Filed Washington State Court of Appeals Division Two
December 18, 2018
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II YEN-VY VAN, No. 50426-0-II
Appellant,
v.
ASSOCIATED ENVIRONMENTAL GROUP UNPUBLISHED OPINION LLC; MICHAEL CHUN,
Respondents.
JOHANSON, J. — Yen-Vy Van sued Associated Environmental Group LLC (AEG) and
Michael Chun alleging that they failed to compensate her for her ownership interest when she
resigned from AEG. AEG and Chun obtained summary judgment dismissal of her claims. Yen-
Vy Van appeals and argues that summary judgment was not appropriate because judicial estoppel
does not apply and because she has standing to bring her claims. Because we agree with Yen-Vy
Van, we reverse and remand.
FACTS
I. BACKGROUND
Chun was the owner of AEG, an environmental consulting firm. Yen-Vy Van worked for
AEG from 2006 until her resignation in 2013. Yen-Vy Van later alleged that Chun had recruited
her to AEG by promising an ownership interest. She claimed that in 2007, Chun promised that No. 50426-0-II
Yen-Vy Van would accrue an annual pledged ownership interest that would vest only if she left
AEG or AEG sold or wound up.
In 2008, Chun presented Yen-Vy Van with a “Unit Grant and Sale Agreement” (UGSA)
and LLC agreement memorializing the ownership interest percentage and that Chun would have
to either buy Yen-Vy Van’s interest out or dissolve AEG when Yen-Vy Van left the company.
The LLC agreement included that upon a member’s bankruptcy, AEG deemed the member to have
given notice of retirement. And upon a member giving notice of retirement, AEG’s remaining
members had to elect between liquidating the member’s interest or dissolving AEG.
In 2009, Yen-Vy Van filed a chapter 13 bankruptcy petition, and the bankruptcy court
confirmed her plan. Yen-Vy Van’s chapter 13 bankruptcy schedules asserted that she had no
interest in any business, partnership, or joint venture. In 2014, the bankruptcy court discharged
the debtor.
II. YEN-VY VAN’S LAWSUIT
In 2016, Yen-Vy Van sued AEG and Chun in superior court. Yen-Vy Van alleged that
when she resigned in 2013, despite Chun’s promises, he refused to recognize her then roughly 25
percent ownership interest in AEG. Based on these allegations, Yen-Vy Van brought claims for
breach of contract, misrepresentation, wage theft, breach of the duty of good faith and fair dealing,
and securities fraud.
III. AEG AND CHUN’S SUMMARY JUDGMENT MOTION AND YEN-VY VAN’S MOTION TO REOPEN BANKRUPTCY
In December 2016, AEG and Chun moved for summary judgment dismissal of all of Yen-
Vy Van’s claims, arguing that Yen-Vy Van’s failure to list her alleged ownership interest in her
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2009 bankruptcy schedules judicially estopped her lawsuit. They also argued that Yen-Vy Van
lacked standing to assert her claims because her claims belonged to the bankruptcy estate.
After AEG and Chun filed their summary judgment motion, Yen-Vy Van stipulated to stay
the superior court proceedings and moved to reopen the bankruptcy case for the purpose of
amending her schedules. The bankruptcy court granted Yen-Vy Van’s motion to reopen the
bankruptcy, but then AEG and Chun filed a motion to vacate the reopening. AEG and Chun argued
that Yen-Vy Van’s reopening was “a sham to manipulate the state court proceedings” and that
judicial estoppel barred reopening the bankruptcy proceeding. Clerk’s Papers (CP) at 349.
In 2017, the bankruptcy court closed the reopened bankruptcy case. Yen-Vy Van, AEG,
and Chun then stipulated to lifting the superior court stay.
IV. AEG AND CHUN’S SUPPLEMENTAL SUMMARY JUDGMENT MOTION
After the superior court lifted the stay, AEG and Chun filed a supplemental brief in support
of the summary judgment motion incorporating by reference their summary judgment motion filed
in December 2016. AEG and Chun argued that even assuming Yen-Vy Van had an ownership
interest, judicial estoppel and lack of standing barred Yen-Vy Van’s claims. In support of their
summary judgment motion, AEG and Chun provided Yen-Vy Van’s deposition testimony that in
2009, when she filed her bankruptcy petition, she considered that she owned a valuable property
interest in AEG in the form of ownership interest units. Yen-Vy Van claimed that she had
informed her bankruptcy attorney of her ownership interest but then acknowledged that her interest
was not listed in her bankruptcy schedule.1
1 Yen-Vy Van’s deposition testimony includes at one point what appears to be an assertion that she informed the bankruptcy court of her ownership interest. But read in context, she is asserting that her disclosure to her attorney was sufficient to disclose the interest to the bankruptcy court. 3 No. 50426-0-II
AEG and Chun also provided Yen-Vy Van’s bankruptcy schedules, disclaiming any
interest in any business, partnership, or joint venture. Yen-Vy Van’s 2009 confirmation plan
required her to disclose to the trustee “any changes in circumstances.” CP at 409.
In 2013, while the bankruptcy case was still open, Yen-Vy Van resigned from AEG and
she retained a different attorney than her bankruptcy attorney. On June 3, this attorney demanded
that AEG buy out Yen-Vy Van’s alleged ownership interest. AEG and Chun’s attorney responded
to Yen-Vy Van’s demands, denying that she had any ownership interest. The attorney also pointed
out that if she were an AEG “[m]ember,” when she filed for bankruptcy she would have had to
allow AEG to repurchase her ownership interest. CP at 414.
AEG and Chun also relied on Chun’s declaration, which included his statement that had
Yen-Vy Van had an ownership interest in AEG, there would have been serious consequences to
AEG and Chun when Yen-Vy Van filed for bankruptcy. Chun attached AEG’s LLC agreement,
providing for a member’s bankruptcy to result in AEG’s other members having to elect between
liquidating the member’s interest or dissolving AEG.
V. YEN-VY VAN’S SUMMARY JUDGMENT RESPONSE
Yen-Vy Van opposed AEG and Chun’s motion for summary judgment dismissal by
arguing that her omission of the alleged ownership interest was inadvertent and that she had made
a good faith effort to rectify the omission by moving to reopen the bankruptcy proceedings in 2016.
She says she informed the bankruptcy court “[i]n Tacoma at my attorney’s office,” then clarifies that she means she disclosed her interest to her “attorney,” who is “out of Tacoma.” CP at 208, 210.
4 No. 50426-0-II
She also argued that “the existence or nonexistence of the arrangement [for back end
compensation] is inherently a genuine issue of material fact.” CP at 559.
In support of her arguments, she relied on her deposition testimony that she had disclosed
her AEG ownership interest to her former bankruptcy attorney. She also provided her declaration
that when she filed her bankruptcy petition, she knew she was accruing a five percent ownership
interest in the LLC that would not vest until sometime in the future and had no monetary value
assigned to it. In addition, her second bankruptcy attorney submitted his declaration that on the
date that Yen-Vy Van filed her bankruptcy petition, her alleged ownership interest had not vested
and had no realistic market value.
In further support of her summary judgment response, Yen-Vy Van provided the hearing
transcript from AEG and Chun’s motion to vacate the bankruptcy reopening. At that hearing, AEG
and Chun had argued that Yen-Vy Van’s creditors had no interest in reopening the proceeding
because there would be no benefit to them. The bankruptcy court agreed, stating that in a chapter
13 bankruptcy, creditors could not stand to benefit from any potential value following completion
of the bankruptcy case.
VI. ORDER GRANTING SUMMARY JUDGMENT
The superior court granted AEG and Chun’s summary judgment motion and dismissed
Yen-Vy Van’s complaint with prejudice. Yen-Vy Van appeals.
ANALYSIS
I. STANDING
Yen-Vy Van argues that AEG and Chun are not entitled to summary judgment on the basis
that Yen-Vy Van lacks standing to vindicate her alleged ownership interest. AEG and Chun argue
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that Yen-Vy Van’s alleged ownership interest became her bankruptcy estate’s property when she
filed for bankruptcy, so that she lacks standing. We hold that Yen-Vy Van has standing.
Standing is a legal question, which we review de novo. City of Snoqualmie v. King County
Exec. Constantine, 187 Wn.2d 289, 296, 386 P.3d 279 (2016). “[A]ll legal or equitable interests
of the debtor in property as of the commencement of the [bankruptcy] case” comprise the
bankruptcy estate. 11 U.S.C. § 541(a)(1). However, under 11 U.S.C. § 1327, “the property of the
estate revests in the debtor upon plan confirmation, unless the debtor elects otherwise in the plan.”
In re Jones, 657 F.3d 921, 928 (9th Cir. 2011).
Here, Yen-Vy Van’s alleged ownership interest was a contingent interest at the time she
filed her bankruptcy petition and accordingly became a part of her bankruptcy estate. See 11
U.S.C. § 541(a)(1). But when the bankruptcy court confirmed her plan, all estate property revested
in Van, unless she elected otherwise in the plan. See Jones, 657 F.3d at 928; 11 U.S.C § 1327.
Arp v. Riley provides support for Yen-Vy Van’s argument. 192 Wn. App. 85, 366 P.3d
946 (2015), review denied, 185 Wn.2d 1031 (2016). In that case, the debtor was involved in an
accident between confirmation of his chapter 13 plan and discharge of his bankruptcy case. Arp,
192 Wn. App. at 89-90. Division One of this court held that the claim arising from the accident
belonged to the debtor, not to the bankruptcy estate. Arp, 192 Wn. App. at 95. This was so because
under 11 U.S.C. § 1327 and Jones, the confirmation order vested claims that arose
postconfirmation in the debtor. Arp, 192 Wn. App. at 95. Even if the claim were the estate’s
property, estate property revested “in the debtor upon plan confirmation.” Arp, 192 Wn. App. at
95.
6 No. 50426-0-II
Although Yen-Vy Van’s interest existed when she filed her petition, unlike the
postconfirmation claim in Arp, Arp’s holding that estate property revests in a chapter 13 debtor
upon plan confirmation applies here. Under Jones, Yen-Vy Van is correct that she has standing
because a chapter 13 bankruptcy estate’s property revests in the debtor following plan
confirmation. 657 F.3d at 928.
AEG and Chun cite to First National Bank v. Lasater and 11 U.S.C. § 554(d), setting forth
a rule that unscheduled property—property not disclosed in bankruptcy schedules—forever
remains the estate’s property (the unscheduled property rule). 196 U.S. 115, 119, 25 S. Ct. 206,
49 L. Ed. 408 (1905) (cited by Resp’t’s Br. at 17). They argue that based on the unscheduled
property rule, Yen-Vy Van lacked standing because the estate held her unscheduled interest even
after confirmation of her chapter 13 plan.
This is not the rule in chapter 13 bankruptcies, however. In In re JZ L.L.C., the bankruptcy
appellate panel for the Ninth Circuit addressed the relationship between the unscheduled property
rule and 11 U.S.C. § 1327. 371 B.R. 412, 419-20 (B.A.P. 9th Cir. 2007). The bankruptcy appellate
panel explained that in chapter 13 plans, under 11 U.S.C. § 1327, all property of the bankruptcy
estate—even prepetition claims not disclosed in the debtor’s bankruptcy schedules—revest in the
debtor upon plan confirmation unless the plan or order confirming the plan states otherwise. 371
B.R. at 414, 418-20. Thus, although Yen-Vy Van did not disclose her interest, she nevertheless
has standing.
II. JUDICIAL ESTOPPEL
Yen-Vy Van raises several arguments that AEG and Chun’s motion for summary judgment
on the basis of judicial estoppel should have been denied. Because the superior court had no
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tenable grounds to rule that AEG and Chun established the third core judicial estoppel factor, we
reverse.
A. STANDARD OF REVIEW
To obtain summary judgment, the moving party must show that there is no genuine issue
as to any material fact and that the party is entitled to judgment as a matter of law. CR 56(c). We
review summary judgment de novo, engaging in the same inquiry as the superior court. Arkison
v. Ethan Allen, Inc., 160 Wn.2d 535, 538, 160 P.3d 13 (2007). However, we review the superior
court’s decision to apply judicial estoppel for an abuse of discretion. Arkison, 160 Wn.2d at 538.
Where a defendant moves for summary judgment on the basis of judicial estoppel, then the
nonmoving party may defeat summary judgment through either of two showings. See CR 56(c).
“To defeat summary judgment, the nonmoving party must present evidence raising an issue of fact
about one of the factors guiding a court’s application of judicial estoppel or show that the trial
court abused its discretion when applying the doctrine.” Urbick v. Spencer Law Firm, LLC, 192
Wn. App. 483, 489, 367 P.3d 1103 (2016). “‘A trial court abuses its discretion when it bases its
decision on untenable or unreasonable grounds.’” Arp, 192 Wn. App. at 91 (quoting Harris v.
Fortin, 183 Wn. App. 522, 527, 333 P.3d 556 (2014)).
B. NO GENUINE ISSUE OF MATERIAL FACT
Yen-Vy Van argues that there is a genuine issue of material fact over whether she was
entitled to “‘back end compensation’” barring summary judgment. Opening Br. of Appellant at
33. But AEG and Chun agree that for the purpose of summary judgment, we should “construe the
facts and reasonable inferences therefrom in [Yen-Vy] Van’s favor.” Resp’t’s Br. at 29. Because
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the material facts are undisputed, we review whether, based on those facts, the superior court
abused its discretion when it ruled that judicial estoppel applied.
C. JUDICIAL ESTOPPEL DOES NOT APPLY
1. JUDICIAL ESTOPPEL AND BANKRUPTCY LEGAL PRINCIPLES
“‘Judicial estoppel is an equitable doctrine that precludes a party from asserting one
position in a court proceeding and later seeking an advantage by taking a clearly inconsistent
position.’” Arkison, 160 Wn.2d at 538 (quoting Bartley-Williams v. Kendall, 134 Wn. App. 95,
98, 138 P.3d 1103 (2006)). The doctrine seeks to preserve respect for judicial proceedings and to
avoid inconsistency, duplicity, and waste of time. Arkison, 160 Wn.2d at 538.
Three “core factors” guide a superior court’s determination to apply judicial estoppel:
(1) whether “a party’s later position” is “clearly inconsistent with its earlier position”; (2) whether “judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled”; and (3) “whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”
Arkison, 160 Wn.2d at 538-39 (internal quotation marks omitted) (quoting New Hampshire v.
Maine, 532 U.S. 742, 750-51, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001)).
In a chapter 13 bankruptcy, a debtor retains her property and obtains court confirmation of
a plan to repay her debts over a three- to five-year period. Harris v. Viegelahn, ___ U.S. ___, 135
S. Ct. 1829, 1835, 191 L. Ed. 2d 783 (2015).2 Thus, the chapter 13 bankruptcy estate includes
both the debtor’s property at the time of her petition and after-acquired wages and property.
2 In contrast, in chapter 7 bankruptcy, a debtor forfeits nearly all of her prepetition property and makes a “‘fresh start,’” shielding her postpetition acquisitions from creditors. Harris, 135 S. Ct. at 1835.
9 No. 50426-0-II
Harris, 135 S. Ct. at 1835. “Under the right circumstances, Chapter 13 of the bankruptcy code
may present a strong case for the application of judicial estoppel.” Johnson v. Si-Cor, Inc., 107
Wn. App. 902, 909, 28 P.3d 832 (2001).
2. THIRD CORE FACTOR: UNFAIR ADVANTAGE
Even if we presume the first two factors are established, Yen-Vy Van’s argument still fails.
Thus, we address those factors no further. The third core factor is whether Yen-Vy Van would
derive an unfair advantage or impose an unfair detriment on AEG and Chun if not estopped.
Arkison, 160 Wn.2d at 539. Yen-Vy Van argues that AEG and Chun have shown no unfair
detriment to them and indeed benefitted from her mistaken omission. AEG and Chun respond that
unless estopped, Yen-Vy Van obtains the unfair advantage of defrauding her creditors and they
face the unfair detriment of having to buy Yen-Vy Van’s interest out. We agree with Yen-Vy Van
and hold that there were no tenable grounds or reasons for the superior court to rule that AEG and
Chun established this factor.
“By confirming the debtor’s Chapter 13 plan, the court implicitly accepts the debtor’s
Chapter 7 liquidation analysis”—that the creditors are doing at least as well under the chapter 13
plan as they would if the case were converted for liquidation under chapter 7. Johnson, 107 Wn.
App. at 909-10. “In such a case, if the debtor wrongfully failed to disclose [an] asset that would
have affected the liquidation analysis, judicial estoppel should preclude the debtor from
subsequently litigating” the related claim.3 Johnson, 107 Wn. App. at 910. But without evidence
3 AEG and Chun argue that Johnson, in which the appellate court reversed a decision that judicial estoppel applied and held that the second and third core factors had not been satisfied, is inapposite. AEG and Chun are correct that Johnson is factually distinct: the reasons the second and third core factors had not been satisfied in that case—the debtor’s postpetition claim was not something he had to disclose and the debtor was clearly entitled to keep the funds from the claim—do not exist 10 No. 50426-0-II
that disclosure would have affected the decision to accept a chapter 13 plan, there is no unfair
advantage. Arp, 192 Wn. App. at 100-01; Haslett v. Planck, 140 Wn. App. 660, 669, 166 P.3d
866 (2007).
Here, although Yen-Vy Van wrongfully failed to disclose an asset and there are tenable
grounds to conclude that the bankruptcy court accepted her position that she did not have that asset,
there is no evidence that disclosing the asset would have affected the decision whether to accept
Yen-Vy Van’s chapter 13 plan. Arp and Haslett are instructive.
In Arp, the record did not support that a chapter 13 debtor who failed to disclose an asset
benefited from the inconsistent claim. 192 Wn. App. at 100. There, when the undisclosed claim
arose, the debtor had already nearly completed his chapter 13 plan payments, with only about
$3,000 left to pay. Arp, 192 Wn. App at 100. The party seeking summary judgment on the basis
of judicial estoppel failed to provide any evidence showing that any creditor would have requested
a plan amendment if the debtor had disclosed his claim or that the bankruptcy court would have
changed the relief it granted. Arp, 192 Wn. App. at 100. Thus, the moving party failed to provide
evidence of an unfair advantage, and summary judgment could not be granted on the basis of
judicial estoppel. Arp, 192 Wn. App. at 101.4
here. 107 Wn. App. at 910-11. But the general rule cited in Johnson, that failure to disclose an asset does not result in judicial estoppel applying in a chapter 13 case unless the disclosure would have affected the chapter 13 plan, also applies here. See 107 Wn. App. at 910. 4 Arp also held that there was no evidence to support that the bankruptcy court accepted any inconsistent claim asserted by the debtor, given that the claim arose after the confirmation order. 192 Wn. App. at 100-01. Thus, there was no evidence to support the second core factor, either.
11 No. 50426-0-II
Although Arp involved a claim that arose after confirmation of the schedule 13 plan, Arp
shows that in a chapter 13 case, the party moving for summary judgment must provide some
evidence that if the debtor had disclosed the asset, it would have affected the chapter 13 plan.5 We
cannot simply presume that had a debtor disclosed an asset, the chapter 13 plan would have
changed.
Haslett, like Arp, held that there could be no unfair advantage absent some showing that
the debtor’s disclosure would have affected the liquidation analysis for creditors. 140 Wn. App.
at 669. Likewise in Gosney v. Fireman’s Fund Insurance Co., Division One of this court stated,
“[E]ven assuming that Vose had something to disclose to the bankruptcy court, Fireman’s failure
to produce any evidence that disclosure would have changed the outcome of the bankruptcy
proceedings precludes application of judicial estoppel.” 3 Wn. App. 2d 828, 884, 419 P.3d 447,
review denied, 191 Wn.2d 1017 (2018). There is no unfair advantage unless there is evidence that
the debtor’s disclosure would have affected the chapter 13 plan.
Here, regarding unfair advantage, AEG and Chun argued in their summary judgment
motion that “[a]llowance of substantial claims to pass through bankruptcy without any
accountability to the bankruptcy court by definition worked a fraud on [Yen-Vy Van’s] creditors,
who presumably agreed to a Chapter 13 plan based upon the sworn financial information they were
given.” CP at 269. But a superior court cannot presume without evidentiary support that disclosure
of a debtor’s alleged membership interest would have affected the chapter 13 plan. See Arp, 192
Wn. App. at 100-01.
5 AEG and Chun are thus incorrect that Arp does not support Yen-Vy Van’s position because it involves a claim arising postpetition. 12 No. 50426-0-II
Without knowledge of the amount of Yen-Vy Van’s debts and disclosed nonexempt assets,
we cannot know whether additional assets would have funded her plan or would have been
superfluous. In fact, at the summary judgment hearing, Yen-Vy Van represented to the superior
court that her bankruptcy-related debts arose from a “very small . . . painting business,” suggesting
that disclosing additional assets would not have made a difference. Verbatim Report of
Proceedings at 22. Neither do we know that Yen-Vy Van’s alleged membership even had any
value: we know only that she alleged her interest was between 5 percent and 25 percent without
knowing the underlying value.
The record also fails to disclose any unfair detriment to AEG and Chun. AEG and Chun
argue that they face an unfair detriment because if Yen-Vy Van had an interest and she had
disclosed that interest, they would have had to buy out Yen-Vy Van’s interest in AEG. This
argument is not persuasive. If Yen-Vy Van does have an ownership interest in AEG, AEG and
Chun would have to liquidate that interest regardless of whether Yen-Vy Van disclosed it during
the bankruptcy proceedings or after the fact. As Yen-Vy Van points out, if anything, AEG and
Chun have benefited from not having to liquidate Yen-Vy Van’s interest.
Thus, the record provides no tenable grounds for the superior court to conclude that Yen-
Vy Van derived an unfair advantage or AEG and Chun suffered an unfair detriment.
5. CONCLUSION
In sum, there are no genuine issues of material fact because AEG and Chun concede the
existence of Yen-Vy Van’s facts for the purpose of summary judgment. We hold that the superior
court had no tenable grounds or reasons to conclude that Yen-Vy Van derived an unfair advantage
or that AEG and Chun suffered an unfair detriment. Accordingly, we hold that the superior court
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abused its discretion when it determined that judicial estoppel applied and granted summary
judgment to AEG and Chun.
We reverse and remand.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
JOHANSON, J. We concur:
WORSWICK, P.J.
MELNICK, J.