Fina Oil and Chemical Company et al v. Howard

Filing 31

Memorandum Opinion and Order re 1 Bankruptcy Appeal. It is, therefore, ORDERED AND ADJUDGED that the February 6, 2015, Order of the U.S. Bankruptcy Court for the Southern District of Mississippi, denying Debtor relief from the October 27, 2014, Order granting summary judgment to Plaintiffs-Appellees, should be and hereby is Affirmed. This appeal is hereby Dismissed. Signed by District Judge Halil S. Ozerden on 1/13/16 (PKS)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
STEPHANIE HOWARD
v.

APPELLANT
Civil No. 1:15-cv-48-HSO-JCG

FINA OIL AND CHEMICAL CO., et al.

APPELLEES

FINA OIL AND CHEMICAL CO., et al.

PLAINTIFFS

v.

Adversary Pro. No. 14-05009-NPO

STEPHANIE HOWARD
IN RE: STACY HOWARD AND
STEPHANIE HOWARD

DEFENDANT
CHAPTER 13 DEBTORS
Bankruptcy Case No. 1:00-bk-51897

MEMORANDUM OPINION AND ORDER AFFIRMING THE JUDGMENT
OF THE UNITED STATES BANKRUPTCY COURT
AND DISMISSING APPEAL
THIS MATTER COMES BEFORE THE COURT as an appeal taken by
Stephanie Howard (“Debtor” or “Appellant”) from the February 6, 2015, Order of
the United States Bankruptcy Court for the Southern District of Mississippi.
Appellant’s Brief [20], at 2; Order, R. [3], at 42.1 The Appellees here, Fina Oil and
Chemical Company, Murphy Oil U.S.A., Inc., Vintage Petroleum, Inc., Champlin
Petroleum Company, Exxon Corporation, Kerr-McGee Oil & Gas Corporation, TXO
Production, Placid Oil Company, Amoco Production Co., Union Oil Company of

1

For purposes of consistency, the Court’s citations use ECF pagination
throughout rather than the “Record on Appeal” pagination, present only in the
footer to documents in ECF Docs. 3 and 16.

California, Phillips Petroleum Company, Conoco, Inc., Bass Enterprises Production
Company, Arco Oil and Gas Company, Mobil Oil Exploration & Producing
Southeast, Inc., Inexco Oil Company, Oxy USA, Inc., Conquest Exploration
Company, Chevron U.S.A. Inc., Chevron Corporation, Texaco Inc., Four Star Oil &
Gas Company, Shell Western E&P, Inc., and Moon-Hines-Tigrett Operating
Company, Inc. (collectively, “Plaintiffs-Appellees”), were plaintiffs in the Adversary
proceeding below. A group of Plaintiffs-Appellees represented by attorney Jeffrey P.
Reynolds (the “Reynolds Plaintiffs”) have filed a brief in response [26], in which
other Plaintiffs-Appellees have joined [27–29], and Debtor-Appellant has filed a
Reply [30].
This Court has jurisdiction to hear an appeal of a bankruptcy court order as
provided by 28 U.S.C. § 158. Having reviewed the briefs of counsel, relevant legal
authorities, and the record of the Bankruptcy Court, including the February 6,
2015, Order denying Debtor’s three post-judgment motions, the Court finds that the
Bankruptcy Court’s February 6, 2015, Order should be affirmed and this appeal
dismissed.
I. BACKGROUND
A.

The Related Proceedings
Debtor’s late father, Gerald Donald (“Mr. Donald”), acquired a certain piece

of real property in Wayne County, Mississippi (the “Property”), in 1991. Quitclaim
Deed [5-1], at 48. In 1996, Mr. Donald filed a State court lawsuit, now styled
Stephanie Howard, Executrix of the Estate of Gerald Donald v. Amoco Production
2

Co. et al., No. 5-97-55, in the Circuit Court of Wayne County, Mississippi,2 and in
1998, he filed a federal suit, now styled Stephanie Howard, Executrix of the Estate
of Gerald Donald v. Marvin Lewis Davis et al., No. 2:98-CV-15-KS-MTP, in the
United States District Court for the Southern District of Mississippi, Hattiesburg
Division. State Court Compl. [5-1], at 29; Federal Court Compl. [5-1], at 49. Both
suits sought damages and declaratory or injunctive relief for alleged contamination
of the Property by Plaintiffs-Appellees and other named defendants due to disposal
of radioactive materials and other hazardous substances.
Debtor and her then-husband, Stacy Howard,3 filed a Chapter 13 bankruptcy
petition on May 5, 2000. Pet. [16], at 97–98. They filed statements and schedules
in the bankruptcy proceedings on August 7, 2000. Schedules [16], at 99–125. The
Bankruptcy Court entered an Order confirming Debtor’s Chapter 13 plan on
November 6, 2000. Order Confirming Plan [16], at 126.
Mr. Donald passed away on January 15, 2001, leaving Debtor as his sole heir
and beneficiary in his will. Pet. for Probate [16], at 131; Will [16], at 134. On
February 1, 2001, Debtor opened Mr. Donald’s probate estate. Pet. for Probate [16],
at 131. On March 29, 2001, Debtor filed a motion to substitute plaintiffs in the
State court suit. State Court Motion to Substitute [5-1], at 82. The State court

2

The State court lawsuit was originally filed in Hinds County, Mississippi,
and transferred to Wayne County, Mississippi. See Feb. 6, 2015, Order [3], at 46
n.7.
3

Stacy Howard is now deceased.
3

granted the motion on April 6, 2001, substituting Debtor in her capacity as
executrix of Mr. Donald’s estate as the plaintiff in the State court proceedings.
Order Substituting Parties [16], at 140. Debtor also filed a Motion to enforce a
$380,000.00 settlement agreement in the State court proceedings on August 21,
2002. Mot. to Enforce [5-5], at 115–30. Debtor’s position in that motion was
rejected by the circuit court and ultimately by the Mississippi Supreme Court on
March 3, 2005. Howard v. TotalFina E & P USA, Inc., 899 So. 2d 882, 889–90
(Miss. 2005).
In May 2004, Debtor filed a motion to substitute plaintiffs in the federal court
suit which was granted on February 16, 2005. Order Granting Mot. Substitute [51], at 100. Thus, Debtor was actively pursuing both lawsuits or claims regarding
the Property in State and federal court during the pendency of her bankruptcy
proceedings. It is undisputed that Debtor did not disclose either claim during the
bankruptcy proceedings.
On August 15, 2005, the Bankruptcy Court entered a discharge of Debtor and
closed the bankruptcy proceedings. Discharge [5], at 171; Closing Order [5], 173.
Debtor obtained this discharge having never disclosed her potential interest in her
late father’s probate estate, the Property, or her involvement in the State and
federal court lawsuits, though after Mr. Donald’s death Debtor’s Chapter 13 plan
was amended twice on February 6, 2001, and September 4, 2001, to increase her
payments. Amended Orders [5], at 96, 128.
On December 12, 2005, the State court directed Debtor to exhaust her
4

administrative clean-up remedies with the Mississippi Commission on
Environmental Quality (“MCEQ”), or to proceed without seeking damages in the
State court suit. See Oct. 27, 2014, Order [5-5], at 158. Debtor filed a Petition and
Request for Hearing with the MCEQ on January 9, 2006. Id. Plaintiffs-Appellees
were added as defendants in the administrative proceedings on March 24, 2011. Id.
On December 8, 2011, Mr. Donald’s estate was finally closed and its assets
were distributed. Order Closing Estate [5-1], at 94.
Plaintiffs-Appellees discovered the existence of Debtor’s bankruptcy case in
July 2013 and raised the defense of judicial estoppel in the State court, federal
court, and State administrative proceedings (the “Related Proceedings”). Oct. 27,
2014, Order [5-5], at 159. All of the Related Proceedings were and have remained
stayed as of the close of briefing on this appeal.4 Id. On September 24, 2013,
Debtor filed a Motion to Reopen her bankruptcy case in order to amend her
schedules to disclose “potential assets,” namely the “previously undisclosed property
damages lawsuits in which [Debtor] is the named Plaintiff as the executrix of the
estate of her deceased father . . . .” Mot. to Vacate [5], at 183–84. On November 25,
2013, the Court vacated the final decree and re-opened the bankruptcy proceeding.
Feb. 6, 2015, Order [3], at 49. However, Debtor did not file any amended schedules
until January 29, 2015. Id. at 50.

4

The parties have not advised the Court of any developments in the
proceedings below that might alter this Court’s analysis of the issues on appeal.
5

B.

The Adversary Proceeding
On February 12, 2014, the Reynolds Plaintiffs initiated an Adversary

Proceeding in the Bankruptcy Court, seeking “a Declaratory Judgment in their
favor and against the Debtor, Ms. Stephanie Howard, declaring that the doctrine of
judicial estoppel prohibits the Debtor from prosecuting all of her claims in her three
Related Proceedings.” Compl. [5-3], at 27. Plaintiffs Conquest, Moon-Hines-Tigrett
and Chevron/Shell intervened in the Adversary Proceeding and joined the Reynolds
Plaintiffs in seeking summary judgment. Pls.’ Mot. Summ. J. [5-4], at 16; Joinders
[5-5], at 23–28. Debtor also moved the Bankruptcy Court for summary judgment.
Debtor’s Mot. Summ. J. [16], at 46.
Following a hearing held on September 3, 2014, the Bankruptcy Court
granted Plaintiffs-Appellees’ Motion for Summary Judgment, denied Debtor’s
Motion for Summary Judgment, and held that (1) Debtor was judicially estopped
from pursuing her claims in the Related Proceedings, (2) the Trustee was not
estopped from pursuing said claims for the benefit of Debtor’s creditors, and (3) any
money damages left over after any creditors were paid should revert to PlaintiffsAppellees. Oct. 27, 2014, Order [5-5] at 175.
On November 10, 2014, Debtor filed a Motion to Alter or Amend the
Judgment ([16], at 207), a Motion to Stay the Judgment ([16], at 225), and a Motion
to Extend the Deadline to File Amended Schedules ([16], at 234). The Bankruptcy
Court denied all three Motions in its February 6, 2015, Order, and this appeal
followed. Feb. 6, 2015, Order [3], at 62.
6

Debtor designated the following two issues for review on appeal:
A. Did the Bankruptcy Court err on the grounds that the scope of the
relief granted by the Bankruptcy Court’s Order is overly broad to the
extent that it judicially estopped Appellant Debtor from pursuing claims
related to contamination on her property in which she seeks declaratory
and/or injunctive relief that would not result in monetary reward to the
Appellant Debtor and, in turn, benefit her creditors?
B. Did the Bankruptcy Court err on the grounds that its Order applied
judicial estoppel to the Appellant Debtor’s claims in general, considering:
(a) United States Supreme Court precedent precludes the imposition of
a presumption of advertence upon the Appellant Debtor
(b) no valid authority exists to support the contention that claims relating
bequeathed real property [sic] pass to a beneficiary along with real
property, and
(c) several factors establish the Appellant Debtor’s failure to disclose was
a result of pure inadvertence?
Desig. R. Statement Issues Appeal [16-1], at 3 (emphasis in original). The foregoing
issues were raised in Debtor’s Rule 59 Motion to Alter or Amend the Court’s
October 27, 2014, Judgment based on the need to correct clear error or prevent
manifest injustice, and were the subject of the February 6, 2015, Bankruptcy Court
Order which is the subject of the present appeal. Feb. 6, 2015, Order [3], at 51.
II. DISCUSSION
A.

Standard Of Review
When a district court sits as an appellate court in review of a bankruptcy

court’s decision, the bankruptcy court’s conclusions of law are reviewed de novo and
findings of fact are reviewed for clear error. In re Chesnut, 422 F.3d 298, 301 (5th
Cir. 2005). Judicial estoppel is an equitable doctrine falling within the exercise of a
bankruptcy court’s discretion, and the bankruptcy court’s decision to invoke judicial
7

estoppel is reviewed for abuse of such discretion. In re Coastal Plains, Inc., 179
F.3d 197, 205 (5th Cir. 1999); see also Jethroe v. Omnova Solutions, Inc., 412 F.3d
598, 599 (5th Cir. 2005). “A court abuses its discretion when it bases its decision on
an incorrect view of the law or a clearly erroneous assessment of the evidence.” In
re Oparaji, 698 F.3d 231, 235 (5th Cir. 2012) (internal citation omitted).
B.

Judicial Estoppel
The doctrine of judicial estoppel prevents a party from asserting a position in

one proceeding that is inconsistent with a position taken by that party in a previous
proceeding.5 New Hampshire v. Maine, 532 U.S. 742, 749 (2001). Judicial estoppel
is applied to protect the integrity of the judicial process by preventing parties from
“playing fast and loose with the courts” to gain an advantage and lessening the risk
of inconsistent or inequitable court determinations. See id.; In re Superior
Crewboats, Inc., 374 F.3d 330, 334 (5th Cir. 2004).
In assessing whether judicial estoppel should operate to bar a party from
asserting an inconsistent position in subsequent litigation, the Fifth Circuit has
directed courts to examine whether the following elements are present: “(1) the
party against whom judicial estoppel is sought has asserted a legal position which is
plainly inconsistent with a prior position; (2) a court accepted the prior position; and

5

Judicial estoppel is “a discrete doctrine” from claim and issue preclusion,
which bear on the preclusive effects of a prior judgment in later litigation. New
Hampshire, 532 U.S. at 749. Judicial estoppel has sometimes been referred to as
“the doctrine of preclusion of inconsistent positions.” Russell v. Rolfs, 893 F.2d 1033,
1037 (9th Cir. 1990).
8

(3) the party did not act inadvertently.” Reed v. City of Arlington, 650 F.3d 571, 574
(5th Cir. 2011).
A party can take an inconsistent legal position by making a contradictory
statement or by omitting relevant information that the party had a duty to disclose.
In re Superior Crewboats, Inc., 374 F.3d at 335 (“[O]mission of [a] personal injury
claim from . . . mandatory bankruptcy filings is tantamount to a representation that
no such claim existed.”). A debtor in a Chapter 13 bankruptcy, for example, has a
duty to disclose any potential unliquidated claims or causes of action to the
bankruptcy court. Love v. Tyson Foods, Inc., 677 F.3d 258, 261 (5th Cir. 2012); In re
Castillo, 508 B.R. 1, 7–8 (Bankr. W.D. Tex. 2014) (“[A] Chapter 13 debtor has a
continuing duty to disclose even a post-petition cause of action because debtors have
an express, affirmative duty to disclose all assets even if there is uncertainty about
if those assets are property of the estate.”). Chapter 13 debtors have a duty to
disclose post-confirmation assets notwithstanding uncertainty as to whether the
asset may be ultimately adjudged to be property of the bankruptcy estate or vested
in the debtor. In re Flugence, 738 F.3d 126, 129–30 (5th Cir. 2013); see also Allen v.
C & H Distributors, L.L.C., No. 15-30330, slip op. at 5–6, 2015 WL 9461591, at *2
(5th Cir. Dec. 23, 2015). This disclosure requirement allows the bankruptcy court to
determine whether or not the asset should be available to satisfy creditors as part of
the orderly bankruptcy process. In re Flugence, 738 F.3d at 130.
If a party has taken an inconsistent legal position, that position must also
have been accepted by a court and the party must not have acted inadvertently for
9

judicial estoppel to apply. Reed, 650 F.3d at 574. In cases involving the pursuit of
claims that were undisclosed in a bankruptcy proceeding, a party has acted
inadvertently “only when, in general, the debtor either lacks knowledge of the
undisclosed claims or has no motive for their concealment.” In re Coastal Plains,
179 F.3d at 210.
D.

The Bankruptcy Court Did Not Abuse its Discretion in Applying Judicial
Estoppel to Debtor’s Undisclosed Claims Seeking Declaratory and/or
Injunctive Relief
For her first issue on appeal, Debtor claims that judicial estoppel should not

have been applied to her claims for declaratory and/or injunctive relief. Debtor’s
Motion to Alter or Amend the Bankruptcy Court’s October 27, 2014, Judgment was
the first time she argued that her claims for declaratory and/or injunctive relief in
the Related Proceedings should not be barred by judicial estoppel because they
“would not result in monetary reward to the Appellant Debtor and, in turn, benefit
her creditors.” Mem. Supp. Mot. Alter or Amend [16], at 212. The Bankruptcy
Court found that this argument could have been raised but was not before it
entered its Order and was, therefore, not a proper argument under Federal Rule of
Civil Procedure 59. Feb. 6, 2015, Order [3], at 55. This finding was accurate, and
was not an abuse of discretion.
The Bankruptcy Court also noted that this argument “would likely fail on the
merits” because at the January 30, 2015, hearing, Debtor’s counsel conceded that
her declaratory and injunctive claims, if successful, would add value to the
Property. Id. at 56 n.11. The Court has reviewed the transcript of that hearing and
10

finds that Debtor’s counsel did concede that if Debtor were successful in her
declaratory and injunctive claims, the Property would increase in value to the
benefit of Debtor and the bankruptcy estate. Transcript [5-6], at 25.
Moreover, the “declaratory” claims in the Related Proceedings request that
Defendants be declared liable for the costs of cleanup and remediation of the
Property. See Debtor’s Mem. Supp. Mot. Alter or Amend [16], at 214. It is difficult
to see a significant equitable distinction within the context of this case between a
direct claim for money damages and a “declaratory” claim for liability for clean-up
costs, which could increase the value of the Property to Debtor’s benefit. It was not
an abuse of discretion for the Bankruptcy Court to apply judicial estoppel to
Debtor’s claims for declaratory relief.
The Court further finds that the fact that Debtor’s declaratory and injunctive
claims would not result in a “monetary reward” does not undermine the Bankruptcy
Court’s conclusion that Debtor was motivated to conceal the claims. As the record
reveals, claims for declaratory and injunctive relief can be settled for a monetary
sum just as easily as claims for damages. During the pendency of her bankruptcy
proceedings, Debtor was also seeking to enforce a $380,000.00 settlement
agreement related to the undisclosed claims in State court. Mot. to Enforce [5-5], at
115–30. By actively concealing her interest in the Property, Debtor shielded this
asset and any potential settlement proceeds from her creditors. The Bankruptcy
Court did not abuse its discretion in determining that judicial estoppel should be
applied to Debtor’s declaratory and injunctive claims in the Related Proceedings.
11

C.

The Bankruptcy Court Did Not Abuse its Discretion in Applying Judicial
Estoppel to Bar Debtor from Pursuing her Undisclosed Claims
To establish that the Bankruptcy Court’s February 6, 2015, Order applying

judicial estoppel constituted an abuse of discretion, Debtor must show that the
Bankruptcy Court “base[d] its decision on an incorrect view of the law or a clearly
erroneous assessment of the evidence.” In re Oparaji, 698 F.3d at 235. In Debtor’s
second issue on appeal, Debtor makes three arguments why the Bankruptcy Court
abused its discretion in applying judicial estoppel: (1) United States Supreme Court
precedent precludes the imposition of a presumption of advertence; (2) no valid
authority exists to support the contention that claims relating to bequeathed real
property pass to a beneficiary along with real property; and (3) several factors
establish Debtor’s failure to disclose was a result of pure inadvertence. Having
carefully considered the parties’ positions and other relevant materials, the Court
finds that each of these arguments is unsupported by the record.
1. The Bankruptcy Court Did Not Presume Advertence
Debtor argues that the Bankruptcy Court abused its discretion by imposing a
presumption of advertence in violation of Supreme Court precedent. The record
reflects, however, that the Bankruptcy Court did not apply a presumption of
advertence to Debtor; rather, the Bankruptcy Court appropriately applied the
burden-shifting framework discussed by the Fifth Circuit in Love, 677 F.3d at 262.
First, it is undisputed that Debtor did not disclose the relevant claims. Second,
Plaintiffs-Appellees presented evidence of Debtor’s motivation to conceal the claims

12

by showing the potential value of the claims and referring the Bankruptcy Court to
earlier settlement negotiations valuing the State court claims at $380,000.00. See
Pls.’ Supp. Mot. Summ. J. [5-5], at 109–12. Next, it was Debtor’s burden to show
that her failure to disclose was inadvertent. The Bankruptcy Court found that
Debtor did not meet this burden:
the Court applied the burden-shifting analysis articulated by the Fifth
Circuit Court of Appeals in Love and held that because the Plaintiffs
presented a motive to conceal (the prospect of keeping any potential
recovery for herself at the expense of her creditors), the burden of proof
shifted to the Debtor to show that her failure to disclose was inadvertent.
The Court then held that the third element of judicial estoppel was
satisfied because the Debtor failed either to set forth any viable argument
or to otherwise create a fact issue whether she acted inadvertently.
See Feb. 6, 2015, Order [3], at 53 (internal citations omitted). Based on a thorough
review of the record on appeal, the Bankruptcy Court did not abuse its discretion by
applying a presumption of advertence, because no such presumption was applied.
2. Whether Claims Related to Inherited Property Pass to a Beneficiary Along
with the Property
Debtor next argues that the Bankruptcy Court abused its discretion in
applying judicial estoppel to her undisclosed claims because no clear authority
establishes that those claims passed to her along with ownership of the Property.
Debtor argues that the case cited by the Bankruptcy Court for this proposition,
Stanley v. Cromwell (Estate of Wright), 829 So. 2d 1274, 1277–78 (Miss. Ct. App.
2002), involves more complicated issues of testamentary intent and does not
directly state that claims relating to real property pass immediately along with the
real property at the testator’s death. Appellant’s Brief [20], at 30–32 (emphasis
13

added). The Court has reviewed Stanley and finds that although the case discusses
whom among several beneficiaries in a will contest is entitled to proceeds of a
lawsuit concerning real property, it does not settle the question of precisely when
those claims vest, whether before or after probate. See Stanley, 829 So. 2d at
1277–78 .
As Plaintiffs-Appellees point out, however, Debtor’s argument on this issue is
purely academic under the facts of this case. Appellees’ Brief [26], at 44. Debtor
not only failed to disclose the existence of the claims at any time, she failed to
disclose the existence or her inheritance of the Property itself. Debtor was her
father’s sole beneficiary, so there could be no dispute that she would and did inherit
the Property. Mississippi law is abundantly clear that ownership of real property
vests immediately at death. In re Estate of McRight, 766 So. 2d 48, 49 (Miss. Ct.
App. 2000) (“[W]hether by intestate death and succession or by last will and
testament, a deceased’s real property vests immediately at death in his heirs or
devisees.”). By not disclosing her inheritance of the Property, Debtor was able to
shield the Property and any potential value or revenue from the claims related
thereto from her creditors.
While Stanley may not firmly establish when the claims related to the
Property vested in Debtor personally rather than as executrix of her father’s estate,
Stanley does clearly establish that those claims would eventually pass to Debtor as
owner of the Property under Mississippi law. Stanley, 829 So. 2d at 1277–78. The
record reveals that Debtor was aware of the potential monetary benefit that she
14

could derive from both the Property and the lawsuits during the pendency of her
bankruptcy proceedings. See TotalFina E & P USA, Inc., 899 So. 2d at 889–90
(discussing Debtor’s efforts to enforce a proposed $380,000.00 settlement).
Under the particular circumstances of this case, Debtor was under an
obligation to disclose the Property and the claims related to it as an asset when
ownership of the Property passed to her: upon her father’s death in January 2001,
and certainly no later than when she was substituted as a party-plaintiff in both
cases, all of which occurred before the Bankruptcy Court granted Debtor a
discharge on August 15, 2005. See State Court Motion to Substitute [5-1], at 82–83
(requesting that the State court “substitute [Debtor] in lieu of and in the stead of
her deceased father, Gerald Donald as the party plaintiff in this matter” on March
29, 2001). Moreover, after Debtor moved to reopen the bankruptcy for the specific
purpose of amending her schedules on September 24, 2013, and after the
Bankruptcy Court granted Debtor’s request and reopened the bankruptcy on
November 25, 2013, for that purpose, Debtor still did not amend the schedules to
disclose her claims or interest in the Property until after the Bankruptcy Court
granted summary judgment on October 27, 2014, and applied judicial estoppel.
Because Debtor failed to disclose not only the claims related to the Property,
but her ownership of the Property itself, the Bankruptcy Court did not abuse its
discretion by estopping Debtor from pursuing her existing claims arising from her
ownership of the undisclosed Property.

15

3. The Bankruptcy Court Properly Considered and Rejected Debtor’s
Assertion of Inadvertence
Debtor’s third and final argument that the Bankruptcy Court abused its
discretion in applying judicial estoppel is that “several factors establish the
Appellant Debtor’s failure to disclose was a result of pure inadvertence.” Debtor
argues that she has “advanced several argument beyond that she was simply
unaware of her duty to disclose.” Appellant’s Brief [20], at 34. The Court has
reviewed Debtor’s briefing and finds only renewed arguments from the proceedings
below that the state of the law regarding disclosure of post-confirmation, predischarge assets for Chapter 13 debtors was unsettled at the time and, thus, Debtor
did not realize that she had a duty to disclose. Id. at 34–39.6
Applying Fifth Circuit precedent, the Bankruptcy Court considered and
rejected this position, and the Court finds that its decision to apply judicial estoppel
was not an abuse of discretion. Oct. 27, 2014, Order [5-5], at 168–71. While
Debtor’s briefing centers on the unsettled state of the law regarding a Chapter 13

6

On summary judgment in the Adversary Proceeding below, Debtor argued
that she did not have a duty to disclose, but that even if she did, a finding of
inadvertence was warranted because:
(a) the law on disclosure at the time she allegedly breached her duty was
unsettled at best,
(b) because she was only connected to the subject property as the
executrix of her father's estate (that remained open until six years after
she was discharged) and not as an individual, she did not believe this
connection necessitated disclosure, and
(c) her confirmation order defined what was to comprise her bankruptcy
estate and she believed her connection to the property and proceedings
did not necessitate disclosure.
Debtor’s Reply Mot. Summ. J. [16], at 192.
16

Debtor’s duty to disclose claims that arise post-confirmation, Debtor glosses over
the uncontested fact that she not only failed to disclose the claims in the Related
Proceedings, but failed to disclose any inheritance from her father including the
Property itself. Debtor does not argue that there was unsettled law regarding her
duty to disclose the inheritance of the Property.
Debtor cannot hide behind her status as “executrix of her father’s estate” to
claim that she was unaware of her ownership interest in the Property where it is
undisputed that she was the sole heir and beneficiary in her father’s will. The
Bankruptcy Court did not abuse its discretion in finding that Debtor had played
fast and loose with the courts by availing herself of the benefits of a Chapter 13
discharge while simultaneously (and unknown to her creditors) pursuing potentially
valuable claims in other forums based on an undisclosed inheritance.
As Plaintiffs-Appellees have argued (Appellees’ Brief [26], at 48),
“inadvertence” is a term of art used within the context of judicial estoppel that can
be proven by establishing (1) that the Debtor did not know of the facts giving rise to
the inconsistent positions or (2) that she had no motive to conceal those facts from
the Court. In re Flugence, 738 F.3d at 131 (“That [Debtor] did not know that
bankruptcy law required disclosure—even if true—is, according to [Fifth Circuit]
precedents, irrelevant.”).
Considering the record before the Bankruptcy Court, this Court cannot say it
was an abuse of discretion to find that Debtor’s omission was not inadvertent.
Debtor had motive to conceal her potentially valuable inheritance and the claims
17

related to it, and she was aware of the fact that she inherited the Property and the
status of the claims involving the Property in the Related Proceedings. Debtor was
also aware that a Chapter 13 plan could be modified and the procedure for making
modifications, as evidenced by the two amendments to her Chapter 13 plan on
February 6, 2001, and September 4, 2001, to increase her payments. Amended
Orders [5], at 96, 128. Had her creditors known of her inheritance of the Property
and claims in the Related Proceedings, they might have been able to seek another
modification of Debtor’s Chapter 13 plan. Debtor’s failure to disclose deprived her
creditors of that opportunity.7

7

Debtor claims that the language of her Confirmation Order gave her reason
to believe that any success in her claims would have had no effect on her earnings,
and thus the claims were not property of the bankruptcy estate and could not
benefit her creditors. Appellant’s Reply [30], at 8. This belief did not relieve her of
her duty to disclose the claims and her inheritance. See In re Flugence, 738 F.3d at
129–30 (“[T]he debtor’s duty to disclose assets—even where he has a colorable
theory for why those assets should be shielded from creditors—allows that issue to
be decided as part of the orderly bankruptcy process.”).
For example, in In re Peebles, 500 B.R. 270, 271 (Bankr. S.D. Ga. 2013), the
Chapter 13 Debtor received a post-confirmation inheritance in the amount of
$45,054.37, and promptly disclosed the potential asset to the bankruptcy court. Id.
at 272. The Chapter 13 trustee then had the opportunity to propose a modification
of the Chapter 13 plan. Id. Under the facts of that case, the bankruptcy court
ultimately determined that the inheritance was not property of the bankruptcy
estate and the trustee’s suggested modification was disapproved. Id. at 279; contra
In re Mizula, 525 B.R. 569, 573 (Bankr. D.N.H. 2015) (holding a Chapter 13 debtor’s
post-confirmation inheritance upon his mother's death was property of the
bankruptcy estate and allowing the debtor’s Chapter 13 plan to be modified).
The debtor in In re Peebles also had reason to believe that his inheritance
would not be property of the bankruptcy estate, and he was ultimately correct. But,
by disclosing the asset and allowing the bankruptcy court to make that
determination, he fulfilled his duty to disclose as part of the orderly bankruptcy
process. Debtor’s failure to disclose in this case deprived her creditors of their
opportunity to seek modification.
18

As one bankruptcy court within the Fifth Circuit has stated: “The three most
important words in the bankruptcy system are: disclose, disclose, disclose.” In re
Sanchez, 372 B.R. 289, 305 (Bankr. S.D. Tex. 2007). The Bankruptcy Court did not
abuse its discretion in finding that Debtor’s omission was not inadvertent. Oct. 27,
2014, Order [5-5], at 170–72.
III. CONCLUSION
The Court has considered the parties’ arguments on appeal, and those not
discussed would not have altered the result.
For the forgoing reasons, the Court concludes that the Bankruptcy Court did
not abuse its discretion in applying judicial estoppel or otherwise in denying
Debtor’s Motion to Alter or Amend its October 27, 2014, Judgment.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the February 6,
2015, Order of the United States Bankruptcy Court for the Southern District of
Mississippi, denying Debtor relief from the October 27, 2014, Order granting
summary judgment to Plaintiffs-Appellees, should be and hereby is AFFIRMED.
This appeal is hereby DISMISSED.
SO ORDERED AND ADJUDGED, this the 13th day of January, 2016.

s/ Halil Suleyman Ozerden
HALIL SULEYMAN OZERDEN
UNITED STATES DISTRICT JUDGE

19