Peddy v. Warwick Construction Inc

Filing 55

MEMORANDUM RULING re 44 MOTION for Summary Judgment filed by Hallmark Specialty Insurance Co, Jorge Navarro, Warwick Construction Inc, 46 MOTION for Summary Judgment filed by Amerisure Insurance Co. Both Motions are GRANTED. Signed by Magistrate Judge C Michael Hill on 5/21/2012. (crt,Davenport, M)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
HARMONY V. PEDDY

*

CIVIL ACTION NO. 10-00873

VS.

*

MAGISTRATE JUDGE HILL

WARWICK CONSTRUCTION, INC. *

BY CONSENT OF THE PARTIES

RULING ON MOTIONS FOR SUMMARY JUDGMENT
Pending before the Court are the Motion for Summary Judgment filed by
defendants, Warwick Construction, Inc., Jorge Navarro d/b/a Everest Construction
Services, and Hallmark Specialty Insurance Company, on February 27, 2012 [rec. doc.
44], and the Motion for Summary Judgment filed by defendant, Amerisure Insurance
Company, on March 12, 2012. [rec. doc. 46]. No opposition has been filed, and the
deadline for filing opposition has expired.1
For the following reasons, the Motions are GRANTED.
Background
Plaintiff, Harmony V. Peddy (“Peddy”), alleges that she was injured on or about
June 5, 2009, when a six-foot metal beam fell from the top of a refrigerator and crushed
her head. The beam was part of construction debris/trash which had been placed and left
on top of the refrigerator by Warwick Construction, Inc. (“Warwick”), which had been

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Local Rule 7.5 provides that opposition shall be filed 21 days after service of the motion.
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sub-contracted by plaintiff’s employer, Aaron Rents, Inc. (“Aaron Rents”), to do a
renovation of a store display area.
On June 1, 2010, Peddy filed a Complaint for Damages in this Court against
Warwick on the basis of diversity jurisdiction. On July 27, 2010, Peddy filed a
Voluntary Chapter 7 Bankruptcy Petition in the United States Bankruptcy Court, Southern
District of Mississippi. In her bankruptcy schedules, Peddy failed to identify this
previously filed lawsuit. The bankruptcy trustee, Kimberly Lentz (“Lentz”) confirmed
that the claim had not been abandoned back to Peddy.
On February 27, 2012, Warwick filed a Motion for Summary Judgment on the
grounds that no genuine issues of material fact existed regarding Peddy’s lack of standing
to pursue this claim and/or due to judicial estoppel. [rec. doc. 44]. Defendant, Amerisure
Insurance Company (“Amerisure”), filed a Motion for Summary Judgment on May 12,
2012, based on the same grounds. [rec. doc. 46]. By letter dated April 26, 2012, Lentz
advised that she did not intend to pursue the claims as to Peddy, and notified the
bankruptcy court of her intention to abandon the claims.
Summary Judgment Standard
Fed. R. Civ. Proc. 56(a) provides that the court shall grant summary judgment if
the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law. The standard for granting summary judgment
remains unchanged after the 2010 amendments. Advisory Committee Notes to
Subdivision (a).

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Analysis
Defendants argue that they are entitled to summary judgment for two reasons: (1)
Peddy filed for Chapter 7 bankruptcy after initiating this lawsuit, thus she lost her
standing to purse these claims any further, and (2) alternately, when she failed to disclose
this lawsuit in her bankruptcy schedules, she became judicially estopped from seeking any
recovery thereafter.
Section 541 of the Bankruptcy Code provides that virtually all of a debtor’s
existing assets, including causes of action belonging to the debtor at the commencement
of the bankruptcy case, vest in the bankruptcy estate upon the filing of a bankruptcy
petition. Kane v. National Union Fire Ins. Co., 535 F.3d 380, 385 (5 th Cir. 2008) (citing
11 U.S.C. § 541(a)(1)). The Bankruptcy Code and Rules impose upon bankruptcy
debtors an express, affirmative duty to disclose all assets, including contingent and
unliquidated claims. (emphasis in original). In re Coastal Plains, Inc., 179 F.3d 197, 208
(5 th Cir. 1999). The duty of disclosure in a bankruptcy proceeding is a continuing one,
and a debtor is required to disclose all potential causes of action. Id.
The debtor need not know all of the facts or even the legal basis for the cause of
action; rather, if the debtor has enough information . . . prior to confirmation to suggest
that it may have a possible cause of action, then that is a “known” cause of action such
that it must be disclosed. Id. Any claim with potential must be disclosed, even if it is
contingent, dependent, or conditional. Id.

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In this case, the instant lawsuit was filed less than two months prior to the time that
Peddy filed bankruptcy. Thus, Peddy was required to disclose this claim in the
Bankruptcy proceeding.
Once an asset becomes part of the bankruptcy estate, all rights held by the debtor
in the asset are extinguished unless the asset is abandoned by the trustee to the debtor
pursuant to § 554. Kane, 535 F.3d at 835. Thus, a trustee, as the representative of the
bankruptcy estate, is the real party in interest, and is the only party with standing to
prosecute causes of action belonging to the estate once the bankruptcy petition has been
filed. Id. (citing 11 U.S.C. §§ 323, 541(a)(1)). At the close of the bankruptcy case,
property of the estate that is not abandoned under § 554 and that is not administered in the
bankruptcy proceedings remains the property of the estate. Id.; Parker v. Wendy’s
Intern., Inc., 365 F.3d 1269, 1272 (11 th Cir. 2004). Failure to list an interest on a
bankruptcy schedule leaves that interest in the bankruptcy case.
In this case, Peddy’s personal injury claim became an asset of the bankruptcy
estate when she filed her complaint. Lentz, as trustee, then became the real party in
interest in Peddy’s damages suit at that time.
However, by letter dated April 24, 2012, Lenz informed this Court that she did not
intend to pursue the claims in this case. [rec. doc. 52]. She indicated that she had notified
the bankruptcy court of her intention to abandon the claims on March 8, 2012.

On May 1, 2012, the Court issued the following Order:
“IT IS HEREBY ORDERED that plaintiff, Harmony V. Peddy, show cause on
May 15, 2012 at 2:00 p.m. in Courtroom 6 why the Motion for Summary
Judgment filed by defendants, Warwick Construction, Inc., Jorge Navarro d/b/a
Everest Construction Services, and Hallmark Specialty Insurance Company [rec.
doc. 44], and the Motion for Summary Judgment filed by defendant, Amerisure
Insurance Company [rec. doc. 46], should not be granted.”
On May 15, 2012, Peddy failed to appear for the hearing. Thus, the motions
became unopposed at that point.
Although the trustee is no longer the real party in interest, defendants alternatively
argue that Peddy is judicially estopped from recovery. Judicial estoppel is a common law
doctrine that prevents a party from assuming inconsistent positions in litigation. Kane,
535 F.3d at 385 (citing In re Superior Crewboats, Inc., 374 F.3d 330, 334 (5 th Cir. 2004)).
The purpose of the doctrine is to protect the integrity of the judicial process by preventing
parties from playing fast and loose with the courts to suit the exigencies of self interest.
Id. As an equitable doctrine, generally, judicial estoppel is invoked where “intentional
self-contradiction” is being used as a means of obtaining unfair advantage in a forum
provided for suitors seeking justice. Id.
The Fifth Circuit has recognized three particular requirements that must be met in
order for judicial estoppel to operate: (1) the party is judicially estopped only if its
position is clearly inconsistent with the previous one; (2) the court must have accepted the
previous position, and (3) the non-disclosure must not have been inadvertent. Id. In the
context of judicial estoppel, “inadvertence” requires either that the debtor lacks
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knowledge of the undisclosed claim or has no motive for its concealment. In the Fifth
Circuit, the court has applied judicial estoppel to bar an unscheduled claim when others,
the debtors or other insiders, would benefit to the detriment of creditors if the claim were
permitted to proceed. Id.
As to the first factor, Peddy’s positions in the bankruptcy court and personal injury
litigation were internally inconsistent. The Bankruptcy Court and Rules impose upon
bankruptcy debtors a duty to disclose all assets, including contingent and unliquidated
claims. Superior Crewboats, Inc., 374 F.3d at 335 (citing Coastal Plains, Inc., 179 F.3d
at 208). The duty to disclose is continuous. Id. Thus, under Coastal Plains, Peddy’s
omission of the personal injury claim from her mandatory bankruptcy filings is
tantamount to a representation that no such claim existed. Id.
Second, the bankruptcy court accepted Peddy’s previous position. Adoption does
not require a formal judgment; rather, it only requires that the first court has adopted the
position urged by the party, either as a preliminary matter or as part of a final disposition.
Superior Crewboats, 374 F.3d at 335. Here, as in Superior Crewboats, the bankruptcy
trustee formally abandoned the claim, and the bankruptcy court rendered a discharge of
Peddy’s debts, thereby adopting Peddy’s position.
Finally, Peddy’s non-disclosure of a viable personal injury claim was not
inadvertent. The debtor’s failure to satisfy its statutory disclosure duty is “inadvertent”
only when, in general, the debtor either lacks knowledge of the undisclosed claims or has

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no has no motive for their concealment. Superior Crewboats, 374 F.3d at 335.
Neither consideration exculpates Peddy here. She certainly had knowledge of the
undisclosed claim, initiating suit less than two months prior to filing bankruptcy. She was
aware of the facts underlying her claim and her continuing obligation to disclose its
existence to the court. Thus, the Court finds that judicial estoppel bars Peddy from
pursing her personal injury claim.
Conclusion
Based on the foregoing reasons, the Motions for Summary Judgment are
GRANTED, and all claims filed by plaintiff are DISMISSED WITH PREJUDICE.
Signed May 21, 2012, at Lafayette, Louisiana.

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