Hammer v. State Auto Property & Casualty Insurance Company
Filing
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MEMORANDUM OPINION AND ORDER by Chief Judge Greg N. Stivers on 8/2/2019 - For the reasons stated in the Memorandum, Opinion, and Order, Defendant's Motion for Summary Judgment (DN 27 ) is DENIED. cc: Counsel of Record (KD)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CIVIL ACTION NO. 1:18-CV-00008-GNS
RUSSELL HAMMER
PLAINTIFF
v.
STATE AUTO PROPERTY &
CASUALTY INSURANCE COMPANY
DEFENDANT
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendant’s Motion for Summary Judgment (DN 27).
The motion is ripe for adjudication. For the reasons outlined below, the motion is DENIED.
I.
STATEMENT OF FACTS AND CLAIMS
This is an insurance coverage dispute. On February 23, 2016, a fire caused a total loss of
the home of Plaintiff Russell Hammer (“Plaintiff”). (Compl. ¶¶ 1-3, 5, 12, DN 1). At the time,
State Auto Property & Casualty Insurance Co. (“Defendant”) provided property insurance
coverage for Plaintiff’s home. (Compl. ¶ 5; Compl. Ex. 1, DN 1-3). Plaintiff alleges he filed a
claim with Defendant, but that Defendant has neither paid the claim nor offered a reason for its
inaction. (Compl. ¶ 18).
Defendant’s motion seeks summary judgment on a discrete issue that requires the Court to
consider not the events surrounding the fire but rather the effect of a bankruptcy filed and dismissed
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in 2009. At that time, Plaintiff, acting pro se, filed for bankruptcy under Chapter 13. See Case
No. 09-10846-JAL (Bankr. W.D. Ky. 2009). In his initial petition, Plaintiff listed the value of the
subject residence at $300,000. (Def.’s Mot. Sum. J. Ex. 8, at 1, DN 27-10). Plaintiff valued his
personal property at the time at $22,500. (Def.’s Mot. Summ. J. Ex. 8, at 4). The Bankruptcy
Court ordered Plaintiff to pay the filing fee of $274 in installments. (Def.’s Mot. Summ. J. Ex. 9,
at 1, DN 27-11).
Plaintiff subsequently converted the bankruptcy to a Chapter 11 with assistance of counsel
and declared the value of his residence to be $110,000 and the value of his personal property to be
$24,051. (Def.’s Mot. Summ. J. Ex. 13, at 13-16, DN 27-15). The Bankruptcy Court ordered
Plaintiff to attend the Section 341 meeting of creditors. (Def.’s Mot. Summ. J. Ex. 24, at 1, DN
27-26).
Following the Section 341 meeting, however, the U.S. Trustee moved to dismiss
Plaintiff’s bankruptcy. (Def.’s Mot. Summ. J. Ex. 15, at 1-3, DN 27-17 [hereinafter Trustee’s
Mot.]). The Trustee stated Plaintiff failed to amend his bankruptcy schedules with respect to a
number of assets. (Trustee’s Mot. 2). Additionally, Plaintiff allegedly failed to provide the Trustee
with required financial documents despite repeated requests. (Trustee’s Mot. 1-2). After a hearing,
the Bankruptcy Court granted the Trustee’s motion and dismissed Plaintiff’s case on December
18, 2009. (Def.’s Mot. Summ. J. Ex. 17, at 1, DN 27-19).
II.
JURISDICTION
This Court has diversity jurisdiction over this matter because the parties are citizens of
different states, and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a)(1).
III.
STANDARD OF REVIEW
In ruling on a motion for summary judgment, the Court must determine whether there is
any genuine issue of material fact that would preclude entry of judgment for the moving party as
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a matter of law. See Fed. R. Civ. P. 56(a). The moving party bears the initial burden of stating
the basis for the motion and identifying evidence in the record that demonstrates an absence of a
genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the
moving party satisfies its burden, the non-moving party must then produce specific evidence
proving the existence of a genuine dispute of fact for trial. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986).
While the Court must view the evidence in the light most favorable to the non-moving
party, the non-moving party must do more than merely show the existence of some “metaphysical
doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
586 (1986) (citation omitted). Rather, the non-moving party must present specific facts proving
that a genuine factual dispute exists by “citing to particular parts of the materials in the record” or
by “showing that the materials cited do not establish the absence . . . of a genuine dispute . . . .”
Fed. R. Civ. P. 56(c)(1). “The mere existence of a scintilla of evidence in support of the [nonmoving party’s] position will be insufficient” to overcome summary judgment. Anderson, 477
U.S. at 252.
IV.
DISCUSSION
Defendant seeks summary judgment on the grounds of judicial estoppel, arguing Plaintiff
is bound by the representations he made to the Bankruptcy Court with respect to the value of his
residence and personalty. (Def.’s Mem. Supp. Mot. Summ. J. 6, DN 27-1 [hereinafter Def.’s
Mot.]). Specifically, Defendant notes that Plaintiff represented to the Bankruptcy Court that the
value of his residence was $110,000 yet claimed a loss of $397,281.76 for the same residence after
the fire. (Def.’s Mot. 12). Likewise, Plaintiff valued his personalty at the time of his Chapter 11
filing in 2009 at $24,051 yet represented after the fire that his personal property loss was $399,605.
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(Def.’s Mot. 11). Defendant argues Plaintiff made a representation to the Bankruptcy Court, the
position was adopted by the Bankruptcy Court, and Plaintiff must be bound by that representation
to prevent his gaming the system. (Def.’s Mot. 15-16).
Plaintiff responds that when he reported his assets for purposes of the 2009 bankruptcy, he
listed prices consistent with garage sale or liquidation values. (Pl.’s Resp. Def.’s Mot. Summ. J.
11-13, DN 33 [hereinafter Pl.’s Resp.]). On the other hand, Plaintiff contends he calculated the
replacement value of lost property—consistent with his insurance policy—when submitting his
claim. (Pl.’s Resp. 12-13). Additionally, Plaintiff argues Defendant has failed to recognize the
possibility that Plaintiff acquired additional personal property in the seven years between filing
bankruptcy and the fire. (Pl.’s Resp. 13-14). With respect to the residence, Plaintiff argues he
seeks the policy limit because the home was a complete loss, and as a result, it is premature to
apply judicial estoppel to the value of the home. (Pl.’s Resp. 14).
Next, Plaintiff argues judicial estoppel is inapplicable because the Bankruptcy Court never
adopted Plaintiff’s position as to the value of his property. Instead, the Court dismissed the case,
offering no opinion as to Plaintiff’s claimed property values. (Pl.’s Resp. 15-17). Finally, Plaintiff
argues that ordering a meeting between a debtor and creditors is not judicial acceptance of a
bankruptcy petitioner’s position, and further action that affects the rights of others or impacts the
Bankruptcy Court is required before a plaintiff’s representations have been judicially accepted.
(Pl.’s Resp. 18-21).
“The doctrine of judicial estoppel ‘generally prevents a party from prevailing in one phase
of a case on an argument and then relying on a contradictory argument to prevail in another
phase.’” White v. Wyndham Vacation Ownership, Inc., 617 F.3d 472, 476 (6th Cir. 2010) (quoting
New Hampshire v. Maine, 532 U.S. 742, 749 (2001)). Principally, the doctrine aims to preserve
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“the integrity of the courts by preventing a party from abusing the judicial process through cynical
gamesmanship . . . .” Teledyne Indus., Inc. v. NLRB, 911 F.2d 1214, 1218 (6th Cir. 1990) (citation
omitted). “Judicial estoppel, however, should be applied with caution to ‘avoid impinging on the
truth-seeking function of the court, because the doctrine precludes a contradictory position without
examining the truth of either statement.’” Eubanks v. CBSK Fin. Grp., Inc., 385 F.3d 894, 897
(6th Cir. 2004) (citation omitted). In the bankruptcy context, “judicial estoppel bars (1) asserting
a position that is contrary to one that the party has asserted under oath in a prior proceeding, where
(2) the prior court adopted the contrary position ‘either as a preliminary matter or as part of a final
disposition.’” Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002) (quoting Teledyne, 911 F.2d
at 1218).
Here, the first prong is satisfied. Plaintiff asserted a position under oath to the Bankruptcy
Court respecting the value of his property, a point Plaintiff candidly does not dispute. (Pl.’s Resp.
10).
The next issue is whether the Bankruptcy Court adopted Plaintiff’s assertion. There is no
bright line rule defining the point at which a party’s factual assertion is adopted by a judicial body.
The Sixth Circuit held that “when a bankruptcy court—which must protect the interests of all
creditors—approves a payment from the bankruptcy estate on the basis of a party’s assertion of a
given position, that, in our view, is sufficient ‘judicial acceptance’ to estop the party from later
advancing an inconsistent position.” Reynolds v. Comm’r, 861 F.2d 469, 473 (6th Cir. 1988).
Reynolds concerned a challenged to a finding of the Commissioner of Internal Revenue.
Specifically, in 1983, the Commissioner found that sale proceeds from mineral rights in a coal
mine that had been nominally attributed to the petitioner’s wife were actually attributable to the
petitioner for tax purposes. Id. at 470. However, in a prior bankruptcy proceeding involving
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petitioner’s wife, the Commissioner had attributed the same proceeds to her. Id. The court
concluded that judicial estoppel barred the Commissioner from asserting an inconsistent position
in the subsequent proceeding and bound the Commissioner to its determination that the sale
proceeds were attributable to petitioner’s wife. Id. at 473.
The Sixth Circuit rested its reasoning on the fact that “[i]n bankruptcy proceedings, as
distinguished from ordinary civil cases, any compromise between the debtor and his creditors must
be approved by the court as fair and equitable.” Id. (citations omitted). As a result, a bankruptcy
court has an “affirmative obligation to apprise itself of the underlying facts and to make an
independent judgment as to whether the compromise is fair and equitable.” Id. (citation omitted).
The court concluded that the Commissioner’s prior representation was essential to the bankruptcy
judge’s approval of the compromise, and the Commissioner was therefore bound by that
representation. Id. at 473-74.
The sole piece of evidence Defendant has offered to suggest that the Bankruptcy Court
accepted Plaintiff’s position is an order compelling Plaintiff to pay the bankruptcy filing fee and
ordering him to attend a meeting with his creditors. Nothing about this order suggests that the
Bankruptcy Court relied on Plaintiff’s representations concerning the value of his personal and
real property. On the contrary, the Trustee expressed concerns with Plaintiff’s disclosures,
prompting a motion to dismiss. In granting the Trustee’s motion and dismissing the case, the
Bankruptcy Court expressly opted not to rely on Plaintiff’s representations at the time. The
Bankruptcy Court fashioned no compromise among Plaintiff and his creditors, instead accepting
the Trustee’s position and dismissing the case because Plaintiff had failed to provide complete
information to the Trustee.
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One of the primary functions of judicial estoppel is to prevent “creat[ing] the perception
that either the first or the second court was misled.” New Hampshire, 532 U.S. at 750. Applying
judicial estoppel in this case would not further this goal. The Bankruptcy Court dismissed
Plaintiff’s case with no payment plan in place and indeed with no comment on the relationship
between Plaintiff and his creditors. The Trustee opined in its motion to dismiss that Plaintiff had
failed to amend his petition with respect to certain assets, but the Bankruptcy Court never made a
determination as to the merits of that issue. Therefore, no risk exists that either the Bankruptcy
Court or this Court will appear misled.
Even if Defendant could show that the Bankruptcy Court accepted Plaintiff’s prior position,
summary judgment is still inappropriate. For judicial estoppel to apply, a party’s position must be
“clearly inconsistent with its earlier position.” Id. at 750 (internal quotation marks omitted)
(citations omitted). As our sister court has noted, evaluations of property for bankruptcy purposes
can be assessed on a liquidation or garage sale basis. Pavelka v. Allstate Prop. & Cas. Ins. Co.,
91 F. Supp. 3d 931, 935 (E.D. Mich. 2015).
In this case, neither party has conclusively
demonstrated what method was used to value Plaintiff’s property during the bankruptcy
proceeding, but it is clear that the policy at issue in this case provides for the replacement value of
covered property. (Compl. Ex. 1, at 24-25). Thus, if Plaintiff provided liquidation numbers for
his property in the bankruptcy proceeding, there would necessarily be a significant discrepancy
between liquidation and replacement cost values.
Additionally, Defendant’s argument fails due to the extensive lapse of time between
Plaintiff’s bankruptcy filings and the fire that sparked this litigation. The Court cannot on such
scant evidence hold that Plaintiff is estopped from claiming different property values nearly seven
years following bankruptcy. See, e.g., White, 617 F.3d at 474 (applying judicial estoppel where
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plaintiff failed to disclose a sexual harassment claim when bankruptcy commenced thirty days
after the EEOC’s issuance of a right to sue letter); Sexton v. State Farm Fire & Cas. Co., No. 3:09CV-535, 2011 U.S. Dist. LEXIS 67668, at *4 (E.D. Tenn. June 23, 2011) (bankruptcy case
dismissed weeks before fire that led to insurance claim).
Personal property is not a fixed asset. Most cases addressing this issue, and indeed the
seminal case on judicial estoppel and bankruptcy in this Circuit, most frequently concern a discrete
legal claim and asked whether the debtor knew of that claim at the time of their bankruptcy.
Browning, 283 F.3d at 775; see also Eubanks, 385 F.3d at 897-99; (involving failure to disclose
legal claim); White, 617 F.3d at 476-84 (same); Lewis v. Weyerhaeuser Co., 141 F. App’x 420,
424-29 (6th Cir. 2005) (same); Kimberlin v. Dollar Gen. Corp., 520 F. App’x 312, 314-16 (6th
Cir. 2013) (same); Harrah v. DSW Inc., 852 F. Supp. 2d 900, 903-08 (N.D. Ohio 2012) (same).
In the present case, Defendant has not established that Plaintiff possessed the exact personal
property in 2016 that he did in 2009. In fact, a clear question of fact exists because Plaintiff
testified that he has acquired additional property since the bankruptcy. (Pl.’s Examination Under
Oath 64-66, 157-59, DN 33-1).
Finally, the Court takes judicial notice of the fact that in 2009, the country was in the throes
of a housing crisis that depressed real estate values nationwide. Even if that were not the case,
however, the real estate market changes over time and there could be numerous reasons why
Plaintiff’s real property value may have increased. Again, the Court will not, on the evidence
before it, bind Plaintiff to a representation he made in 2009.
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V.
CONCLUSION
For the reasons set forth above, IT IS HEREBY ORDERED that Defendant’s Motion for
Summary Judgment (DN 27) is DENIED.
August 2, 2019
cc:
counsel of record
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