Judicial Estoppel Alabama
The doctrine of judicial estoppel "applies to preclude a party from assuming a position in a legal proceeding inconsistent with one previously asserted.
Judicial estoppel looks to the connection between the litigant and the judicial system, while equitable estoppel focuses on the relationship between the parties to the prior litigation." Selma Foundry & Supply Co. v. Peoples Bank & Trust Co., 598 So. 2d 844, 846 (Ala. 1992) (quoting Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414 (3d Cir.), cert. denied, 488 U.S. 967, 102 L. Ed. 2d 532, 109 S. Ct. 495 (1988)).
The doctrine is applied to uphold the integrity of the judicial system. Chandler v. Samford University, 35 F. Supp. 2d 861 (N.D. Ala. 1999).
However, this Court has recognized a number of limitations upon the rule against asserting inconsistent positions in judicial proceedings.
"'The following have been enumerated as essentials to the establishment of an estoppel under the rule that a position taken in an earlier action estops the one taking such position from assuming an inconsistent position in a later action:
(1) the inconsistent position first asserted must have been successfully maintained;
(2) a judgment must have been rendered;
(3) the positions must be clearly inconsistent;
(4) the parties and questions must be the same;
(5) the party claiming estoppel must have been misled and have changed his position;
(6) it must appear unjust to one party to permit the other to change.'"
28 Am.Jur.2d 70 Estoppel and Waiver (1966) (as quoted with approval in Porter v. Jolly, 564 So. 2d 434, 437 (Ala. 1990)).
Thus, a party may not claim the benefit of the doctrine of judicial estoppel unless the party can demonstrate that the party against whom the estoppel is sought procured a judgment in its favor as a result of the inconsistent position taken in the prior proceeding.
Moreover, the party claiming the estoppel must have been misled by the conduct of the party against whom the estoppel is sought, and consequently changed its position to its prejudice. Id.
The purpose of the doctrine of judicial estoppel will not be accomplished, but, rather, will be frustrated if defendants are allowed to use this doctrine to their advantage at the expense of plaintiffs with valid claims.
In re Griner. We find her order to be well reasoned and instructive:
"Defendants also contend that the doctrine of judicial estoppel bars Sidney Griner from prosecuting or continuing the state court action. This doctrine precludes a party from assuming a position in a legal proceeding inconsistent with a position previously asserted. Luna v. Dominion Bank of Middle Tennessee, Inc., 631 So. 2d 917, 918 (Ala. 1993).
"In Luna, the Supreme Court of Alabama stated that, 'judicial estoppel applies, where a debtor in bankruptcy proceedings fails to disclose any claim that may be presented in a nonbankruptcy context, to estop the debtor from presenting the claim.' Id.
at 919. Luna was precluded from pursuing his state court suit because it arose prepetition and he failed to disclose it in his bankruptcy proceedings.
Travelers contends that the Luna decision governs this case. the Court finds Luna distinguishable for the following reasons:
"First, Luna brought claims against a creditor of his and related entities.
Luna's claims were related to a prepetition claim held by the creditor which was discharged in Luna's bankruptcy case prior to his filing suit in state court.
If the creditor knew about Luna's claim against it, the creditor may have been able to offset the claims or take some other action in Luna's bankruptcy case that was not available because it was unaware that the bankruptcy estate included a claim against it.
Travelers is not a creditor in the Griners' bankruptcy case.
Travelers and all of the defendants in Sidney Griner's state court suit are not prejudiced by Griner's failure to list the suit against them as an asset. See, Donato v. Metropolitan Life Ins. Co., 230 B.R. 418 (N.D. Cal. 1999) (judicial estoppel found not to bar debtor's lawsuit because defendant was not a creditor in debtor's case and debtor would not benefit by omission of suit from her schedules).
"Second, the bankruptcy court relied on Luna's schedules in granting him a discharge. Prior to granting the discharge, the court was never made aware of Luna's claim against the creditor.
Thus, the court's integrity was impinged by Luna's failure to list the suit as a prepetition asset. Consolidated Stores, Inc. v. Gargis, 686 So. 2d 268, 274 (Ala. Civ. App. 1996) (judicial estoppel serves to protect the integrity of the judicial proceedings). In this case, the Griners have not yet received a discharge and they amended their bankruptcy papers to include the state court suit.
The initial omission of the suit did not impinge upon this Court's integrity.
"The fact that Luna, unlike the Griners, never amended his bankruptcy schedules and chapter 13 plan is also an important distinction.
See, Selma Foundry and Supply Co., Inc. v. Peoples Bank and Trust Co., 598 So. 2d 844, 847 (Ala. 1992) (debtor not judicially estopped from asserting a suit which was not included in its original disclosure statement since debtor listed the suit in an amended disclosure statement); Chandler v. Samford University, 35 F. Supp. 2d 861 (N.D. Ala. 1999) (court judicially estopped debtor from pursuing discrimination action in part because she deliberately manipulated the courts when she chose not to amend her schedules to reflect the action as an asset of her bankruptcy estate).
The Griners' amendment corrects their initial mistake and makes any nonexempt amount recovered from the state court suit available for distribution to creditors.
Their election to amend their schedule of exemptions to include an 'unknown' portion of Mr. Griner's state court suit does not change the Court's conclusion.
The Griners have the right to amend their schedule of exemptions 'at any time before the case is closed.' Fed. R. Bankr. P. 1009.
True, such amendments are precluded if the debtors concealed the asset. Doan v. Hudgins (In re Doan), 672 F.2d 831, 833 (11th Cir. 1982).
However, there is no evidence that the Griners attempted to conceal the suit. In fact, they listed it in their initial statement of affairs. Id. (debtors disclosed tax refund in initial filing and they therefore were permitted to amend schedules to claim tax refund as exempt).
"Finally, Luna failed to indicate that he had a cause of action in any of his bankruptcy documents. Luna, 631 So. 2d at 919. the Griners initially listed their suit against Travelers in their statement of affairs.
This supports the conclusion that the Griners mistakenly omitted their suit from their bankruptcy schedules and did not intentionally conceal a possible asset from their creditors.
"Travelers contends that whether the Griners attempted to conceal the lawsuit is irrelevant and the Griners should be judicially estopped merely because they were aware of the cause of action prior to filing bankruptcy and did not include it as an asset in their schedules.
The Court finds that whether Alabama or federal common law governs, mere knowledge or awareness on the part of the debtor is not sufficient to find that judicial estoppel applies.
Judicial estoppel requires an intent that the court accept the truth of the facts alleged coupled with the receipt of an advantage from the assertion, Consolidated Stores, Inc., 686 So. 2d at 274, 275 (Alabama law), or that the debtor obtains a benefit by deliberate manipulation. Chandler v. Samford University, 35 F. Supp. 2d 861, 863 (N.D. Ala. 1999) (federal law);
In re Daniel, 205 B.R. 346, 348 (Bankr. N.D. Ga. 1997) (judicial estoppel found not to preclude debtor's amendment because no evidence was presented that debtor intentionally or fraudulently concealed lawsuit).
For the reasons mentioned above, especially because the Griners initially listed the suit in their statement of affairs, Travelers did not prove that the Griners intended to conceal Mr. Griner's state court suit or received a benefit from their initial omission of the suit.
Consequently, Sidney Griner is not judicially estopped from continuing his state court suit.
"Travelers' position is overly harsh and inequitable as well.
Everyone, except Travelers, loses under its theory. If a debtor fails to include assets on his schedules and later seeks to add them, the Bankruptcy Rules allow it 'as a matter of course at any time before the case is closed.' Fed. R. Bankr. P. 1009(a).
A bankruptcy court has ample powers to punish debtors who wrongfully conceal assets, i.e., sanctions under Fed. R. Bankr. P. 9011, conversion of the case to chapter 7 ( 1307(c)), revocation of discharge ( 1328(e)), referral for criminal charges (18 U.S.C. 152(1), (2), (3), (7)).
Travelers' position punishes the creditors of the nondisclosing debtor, not just the debtor. the better result is to allow the claim to be prosecuted and collected, order the funds paid toward claims filed in the case, and punish the debtor another way."