Pelletier et al v. U.S. Bank National Association, Trustee et al

Filing 28

///MEMORANDUM ORDER: The Bankruptcy Court's order is AFFIRMED. The clerk shall enter judgment accordingly and close the case. So Ordered by Chief Judge Joseph N. Laplante.(jb)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Randall D. and Dawn M.
Pelletier
v.

Civil No. 13-cv-69-JL
Opinion No. 2013 DNH 162

U.S. Bank National
Association et al.
MEMORANDUM ORDER
This appeal from the Bankruptcy Court presents a question
about the application of judicial estoppel.

Randall and Dawn

Pelletier have appealed an order of that court granting summary
judgment against them in their adversary proceeding against U.S.
Bank National Association (“the Bank”).

The Pelletiers alleged

that, while the Bank filed a proof of claim in their bankruptcy
based on a note secured by a mortgage against their property, the
Bank had failed to establish that it was the holder of the note.1
But the Bankruptcy Court found that, before the Pelletiers
commenced the adversary proceeding, they had executed--and the

1

The adversary proceeding also named Select Portfolio
Servicing, Inc. (“SPS”) and Mortgage Electronic Systems, Inc.
(“MERS”). Neither of those entities, however, filed any proof of
claim against the Pelletiers; only the Bank did. The Bankruptcy
Court, then, did not rule on the validity of any claim by SPS or
MERS and, moreover, neither party addresses any such claim on
appeal. Thus, while SPS and MERS have been named as respondents
on this appeal, this court has not considered any claim against
either of them.

court had approved--a stipulation in their bankruptcy case
“agreeing, among other things, that [the] Bank is the holder of
the note and mortgage.”

Pelletier v. U.S. Bank Nat’l Ass’n (In

re Pelletier), Adv. No. 11-1135 (Bkrtcy. D.N.H. Dec. 21, 2012),
slip op. at 3 (Kornriech, B.J.).
Ruling that “[j]udicial estoppel bars [the Pelletiers] from
taking a contrary position” in support of their adversary
proceeding, the Bankruptcy Court granted summary judgment in
favor of the Bank, and against the Pelletiers.

Id.

The

Pelletiers have appealed that order to this court, which has
jurisdiction under 28 U.S.C. § 158(a)(1) (appeals from “final
judgments, orders and decrees” of the Bankruptcy Court in core
proceedings).

As fully explained below, this court affirms the

ruling of the Bankruptcy Court, because it did not abuse its
discretion in applying judicial estoppel to grant summary
judgment against the Pelletiers.
I.

Background
In March 2011, the Pelletiers filed a voluntary petition for

bankruptcy protection with the Bankruptcy Court for the District
of New Hampshire.
Mar. 14, 2011).

In re Pelletier, No. 11-10938 (Bnkrtcy. D.N.H.
In their subsequent statement of financial

affairs, the Pelletiers listed, as the sole item of real property

2

in which they had any interest, a single-family home in Groveton,
New Hampshire.

Two weeks prior to the Pelletiers’ bankruptcy

filing, however, the Bank had foreclosed on that property, and
gone on to purchase the property at the foreclosure sale.

But

the Bank had yet to record the foreclosure deed by the time the
Pelletiers filed for bankruptcy protection.2
In late March 2011, the Pelletiers filed their proposed plan
of reorganization with the Bankruptcy Court.

Arguing that this

plan failed to adequately protect the Bank’s interest in the
property, and that the property was not essential to any
reorganization, the Bank filed a motion for relief from the
automatic stay.

See 11 U.S.C. § 362.

Through this motion, the

Bank sought to “foreclose the mortgage and for it or a third
party purchaser to . . . evict any persons residing in the
property” (capitalization and parenthetical omitted).

2

New Hampshire law treats the recording of the foreclosure
deed as necessary to the passage of title. N.H. Rev. Stat. Ann.
§ 479:26, III. New Hampshire law also prevents a mortgagor from
judicially challenging the validity of a foreclosure for the
first time after the fact, at least “based on facts which the
mortgagor knew or should have known soon enough to permit the
filing of a petition [to enjoin the foreclosure] prior to the
sale.” Murphy v. Fin. Dev. Corp., 126 N.H. 536, 540 (1985).
While the court has applied this rule to prevent a mortgagor from
challenging a mortgagee’s right to foreclose for the first time
after the foreclosure sale has already taken place, Calef v.
Citibank, N.A., 2013 DNH 023, 8-11, this court need not consider
the rule here, since the Bank did not raise it, either in the
Bankruptcy Court or to this court on appeal.
3

The Pelletiers filed an objection, arguing, among other
things, that the Bank had “failed to establish it is both the
holder of the note and mortgage securing the note” and thus
“failed to even articulate the necessary elements for the court
to grant a motion for relief from stay” (capitalization omitted).
The Bankruptcy Court then issued an order directing the parties
to “submit a stipulation for adequate protection, separate
proposals for adequate protection or a proposed scheduling order
with an evidentiary hearing to determine adequate protection.”
In re Pelletier, No. 11-10938 (Bnkrtcy. D.N.H. May 27, 2011).
In the meantime, the Bank filed a proof of claim stating
that the Pelletiers owed it more than $140,000 based on a
“mortgage note” secured by the Pelletiers’ property.

Attached to

this filing were a copy of (1) a mortgage on the property in
favor of Aegis Lending Corporation, bearing the signatures of the
Pelletiers and the date of July 26, 2006, and reciting that it
secured a loan evinced by a note signed by the Pelletiers that
same date, (2) an adjustable rate note payable to Aegis in the
amount of $112,800, also bearing the signatures of the Pelletiers
and the date of July 26, 2006, and (3) an “allonge to promissory
note” referring to a note of that date in the amount of $112,800,
naming Pelletier as the borrower, and identifying the property
with the address of the mortgaged premises.
4

This allonge bore an

indorsement in blank by Residential Funding Company, LLC, which
was the transferee of the note by way of a chain of indorsements
made on the face of the note itself.
Through counsel, the parties later executed a document
entitled “Stipulation Regarding Motion for Relief from the
Automatic Stay,” which was filed with the Bankruptcy Court.

This

document stated that the Bank and the Pelletiers, “by and through
their attorneys, stipulate” to a number of facts, including, in
relevant part, that the “Bank is the current holder of the
mortgage granted by the [Pelletiers] . . . with respect to [their
property] . . . which secures a note in the amount of $112,800 of
even date (‘Mortgage Loan’).”

In the stipulation, the Pelletiers

agreed, among other things, to “timely remit post-petition
payments under the Mortgage Loan” to SPS, which the stipulation
identified “as the present servicer for the Mortgage Loan.”

The

stipulation further provided that it was “conditioned on the
approval by the Bankruptcy Court” and that, once approved, its
terms would “continue for the pendency of this [bankruptcy] case
or further agreement between the Parties with regard to the
amounts due under the Mortgage Loan as approved by the Court”
(parenthetical omitted).
Importantly, the stipulation contains nothing purporting to
reserve the Pelletiers’ right to challenge the Bank’s interest
5

in, or entitlement to payments under, the “Mortgage Loan.”

Of

course, the Pelletiers had first mounted that challenge in their
objection to the Bank’s motion for relief from the automatic
stay--the very motion that the stipulation explicitly addressed.
The day after the stipulation was filed, the Bankruptcy
Court approved it by endorsing the proposed order submitted with
the stipulation.

In re Pelletier, No. 11-10938 (July 1, 2011).

Nearly two months later, the Pelletiers filed an objection to the
Bank’s proof of claim, asserting, among other things, that the
Bank was not, in fact, the holder of the note and mortgage.

The

Pelletiers then commenced an adversary proceeding against the
Bank, alleging that the Bank’s proof of claim failed to establish
that it was the holder of the note and mortgage.

Pelletier v.

U.S. Bank Nat’l Ass’n (In re Pelletier), Adv. No. 11-1135
(Bkrtcy. D.N.H. Oct. 26, 2011).

To resolve this dispute, the

parties filed cross-motions for summary judgment.
Following a hearing, the Bankruptcy Court issued a written
order denying the Pelletiers’ motion, and granting the Bank’s.
The Bankruptcy Court observed that, “[i]n resolution of a motion
for relief from stay filed by [the] Bank in the main [bankruptcy]
case, the [Pelletiers] and [the] Bank

executed a stipulation

agreeing, among other things, that [the] Bank is the holder of
the note and mortgage.”

In re Pelletier, slip op. at 3.
6

Thus,

the Bankruptcy Court ruled, “[j]udicial estoppel bars [the
Pelletiers] from asserting a contrary position.”

Id. (citing

Patriot Cinemas, Inc. v. Gen. Cinemas Corp., 834 F.2d 208, 212
(1st Cir. 1987)).
II.

This appeal followed.

Standard of review
As noted at the outset, the Pelletiers argue that the

Bankruptcy Court erred in ruling that they were judicially
estopped from taking the position that the Bank is not the holder
of the note and mortgage.3

The Court of Appeals has explained

that “the abuse of discretion standard is appropriate . . . when
reviewing a judicial estoppel ruling on a motion for summary
judgment.”

Guay v. Burack, 677 F.3d 10, 15 (1st Cir. 2012).

So,

in reviewing the Bankruptcy Court’s conclusion that the
stipulation judicially estopped the Pelletiers from arguing that
the Bank was not the holder of the note and mortgage, this court
“will not lightly substitute [its] judgment for that of the”
Bankruptcy Court, and can disturb the ruling only upon reaching

3

The Pelletiers further argue that the Bank failed to come
forward with prima facie evidence that it is the holder of the
note and mortgage. The Bank disagrees, and urges this court to
affirm the Bankruptcy Court’s summary judgment decision on the
alternative ground that there was, in fact, no genuine dispute
that it held the note and mortgage. This court need not reach
that issue, since it affirms the Bankruptcy Court’s decision
based on its application of judicial estoppel.
7

“a definite and firm conviction that the [Bankruptcy Court]
committed a clear error of judgment.”
omitted).

Id. at 16 (quotation marks

As explained fully below, this court discerns no such

error in the Bankruptcy Court’s application of judicial estoppel
against the Pelletiers.
III. Analysis
“The equitable doctrine of judicial estoppel is ordinarily
applied to prevent a litigant from pressing a claim that is
inconsistent with a position taken by that litigant either in a
prior legal proceeding in an earlier phase of the same
proceeding.”

Id. at 16.

The two prerequisites to applying the

doctrine are that “[f]irst, the estopping position and the
estopped position must be directly inconsistent, that is mutually
exclusive,” and “[s]econd, the responsible party must have
succeeded in persuading a court to accept its prior position.”
Id. (quotation marks omitted).

The Bankruptcy Court acted well

within its discretion in finding that both of those conditions
were satisfied here.
First, the Pelletiers’ stipulation that the “Bank is the
current holder of the mortgage granted by [them] . . . with
respect to [their property] . . . which secures a note in the
amount of $112,800 of even date” is directly inconsistent with

8

their contention, in support of their adversary proceeding, that
the Bank was not in fact the holder of the note and mortgage.
The Pelletiers do not argue to the contrary.4

Second, when the

Bankruptcy Court approved the stipulation by endorsing the
proposed order to that effect, the Pelletiers succeeded in
convincing the Bankruptcy Court to accept their position that the
Bank held the mortgage secured by the note.

Again, the

Pelletiers do not argue to the contrary.
Rather than articulating how the Bankruptcy Court erred in
finding that the elements of judicial estoppel were satisfied,
the Pelletiers make several arguments premised on a fundamental

4

At oral argument before this court, the Pelletiers argued
that the stipulation addressed only the Bank’s ownership of the
mortgage--leaving them free to contest the Bank’s ownership of
the note. This argument is forfeited, however, because the
Pelletiers did not make it in their brief on appeal to this
court, nor, more importantly, to the Bankruptcy Court. See
Redondo Constr. Corp. v. P.R. Highway & Transp. Auth. (In re
Redondo Constr. Corp.), 678 F.3d 115, 121 (1st Cir. 2012). To
the contrary, in the Pelletiers’ objection to the Bank’s summary
judgment motion in the adversary proceeding, they described the
stipulation as a “non-litigation recitation[] that [the] Bank
held their Promissory Note”--while contesting, of course, that
such a “recitation” prevented them from arguing to the contrary
(emphasis added). So the Pelletiers cannot reverse course yet
again and claim, for the first time at oral argument before this
court, that the stipulation was limited to the Bank’s ownership
of the mortgage. For what it is worth, this court disagrees with
that reading anyway, since, as discussed at oral argument, the
stipulation treats the mortgage and note as a single interest
defined as “the Mortgage Loan” and requires the Pelletiers to
submit payments “under the Mortgage Loan.”
9

misunderstanding of the doctrine.

First, they say that the

Bank’s interest in the note and mortgage was not--and could not
have been--adjudicated by a ruling on its motion for relief from
the automatic stay because “[a] hearing on a motion for relief
from stay is a summary proceeding.”

This argument confuses the

doctrines of judicial estoppel and collateral estoppel.
The doctrine of collateral estoppel prevents a party from
relitigating an issue that has already been adjudicated by a
final judgment against him.
91, 101 (1st Cir. 2004).

See, e.g., Mihos v. Swift, 358 F.3d

The doctrine of judicial estoppel, in

contrast, “do[es] not draw directly from the fact of
adjudication.

Instead, [it] focus[es] on the fact of

inconsistency itself.”

18A Charles Alan Wright et al., Federal

Practice & Procedure § 4477, at 552 (2d ed. 2002).

Thus, while a

party cannot be judicially estopped unless it previously
convinced a court to accept its contradictory position, see,
e.g., Guay, 677 F.3d at 16, that “acceptance” need not have taken
the form of a final adjudication on the merits, see 13 Wright,
supra, § 4477, at 551 (stating that, although judicial estoppel
can “require[] reliance by a court on a prior inconsistent
position,” it “has little to do with preclusion by judgment”).
As just noted, the Pelletiers do not dispute that, by approving
the stipulation, the Bankruptcy Court “accepted” their position
10

that the Bank held the note and mortgage.

So, while the

Pelletiers are correct that a ruling on the Bank’s motion for
relief from stay would not have collaterally estopped them from
litigating the Bank’s rights in the note and mortgage, see Grella
v. Salem Five Cent Sav. Bank, 42 F.3d 26, 33 (1st Cir. 1994),
that is beside the point here.

The Bankruptcy Court relied on

judicial, not collateral, estoppel in granting summary judgment.
Second, the Pelletiers argue that “whether [the] Bank holds
the note and mortgage is a legal conclusion to be reached by the
court and parties cannot stipulate to legal conclusions.”

It is

true that courts need not “accept, as controlling, stipulations
as to questions of law.”

TI Fed. Credit Union v. DelBonis, 72

F.3d 921, 929 (1st Cir. 1995).

It does not follow, of course,

that courts cannot accept the parties’ stipulations as to
questions of law (which, in this court’s experience, is routine),
nor that a party’s interest in an instrument like a note or
mortgage is the sort of “question of law” as to which a court
would likely disregard the litigants’ stipulation.

See 83 C.J.S.

Stipulations § 26, at 34 (2000) (explaining that, subject to
exceptions that do not apply here, “[a]ny matter that involves
the individual rights or obligations of the parties . . . may

11

properly be made the subject of a stipulation between them”)
(footnote omitted).5
Here, though, what matters is not the controlling effect of
the stipulation qua stipulation, but the judicial estoppel effect
of the stipulation.

“Judicial estoppel applies to a party’s

stated position whether it is an expression of intention, a
statement of fact, or a legal assertion.”

Alternative Sys.

Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 34 (1st Cir. 2004)
(quotation marks omitted).

So the fact that the Pelletiers

stated their position that the Bank held the mortgage secured by
the note in a stipulation (as opposed to a representation by
counsel at a hearing, an argument in a brief, or any of the other
myriad ways that litigants give information to a court) is
immaterial to the judicial estoppel analysis--as is whether, in
the absence of its ruling endorsing the stipulation, the
Bankruptcy Court could have properly treated the stipulation as
binding.

The facts, again, are that (1) through the stipulation,

the Pelletiers stated their position that the Bank was the holder
of the mortgage secured by the note and (2) through its ruling
approving the stipulation, the Bankruptcy Court accepted that

5

In deciding the effect of
it, the Supreme Court relied on
Secundum, calling it a “leading
Legal Soc’y v. Martinez, 130 S.

a stipulation in a case before
this volume of the Corpus Juridis
legal reference.” Christian
Ct. 2971, 2893 (2010).
12

position.

No more was necessary for the Bankruptcy Court to

conclude that the Pelletiers were judicially estopped from
arguing that the Bank did not hold the note and mortgage.6
Third, the Pelletiers protest that, when they entered the
stipulation to resolve the Bank’s motion for relief from the
automatic stay, they were not “playing fast and loose with the
court[]” nor engaged in “intentional self-contradiction . . . as
a means of obtaining unfair advantage,” which, as the Court of
Appeals has recognized, are the hallmarks of a scenario calling
for the application of judicial estoppel.
F.2d at 212.

Patriot Cinemas, 834

But these hallmarks, of course, do not appear when

a party first stakes out its position--they appear when, after
having convinced a court to accept that position, the party
adopts a contradictory stance.

Again, that happened when the

Pelletiers, after successfully asking the Bankruptcy Court to
endorse their stipulation that the Bank held the mortgage secured
by the note, filed an adversary proceeding alleging that the Bank
did not hold the mortgage or the note.

It was this about-face

that “raise[d] the specter of inconsistent determinations and
endanger[ed] the integrity of the judicial process” so as to

6

The foregoing discussion also disposes of the Pelletiers’
Orwellian argument that the stipulation was not a “binding
litigation stipulation” but a “non-litigation recitation.”
13

justify the Bankruptcy Court’s use of judicial estoppel.
Alternative Sys. Concepts, 374 F.3d at 33.
Contrary to the Pelletiers’ suggestion, it was not necessary
for the Bankruptcy Court to find that, at the time they executed
the stipulation, they harbored the intention to later reverse
course in the hope of surprising or otherwise prejudicing the
Bank.

“A party is not automatically excused from judicial

estoppel if the earlier statement was made in good faith.”
677 F.3d at 16 (bracketing and quotation marks omitted).

Guay,
Indeed,

it was not even necessary to find that prejudice to the Bank was
the effect (intended or not) of the Pelletiers’ shift in
position, since “unfair advantage is not a formal element of a
claim of judicial estoppel.”7

Id. (quotation marks omitted).

Fourth, and finally, the Pelletiers complain that the
Bankruptcy Court’s application of judicial estoppel cost them
“the option to reach a stipulated resolution in a summary
proceeding,” i.e., the hearing on the Bank’s motion for relief

7

It is worth noting, however, that the Pelletiers did obtain
an advantage from entering into the stipulation to resolve the
Bank’s motion for relief from stay. Had that motion been
granted, the Bank would have been free to carry through with
recording the foreclosure deed and evicting the Pelletiers from
the property--a considerably worse deal for them than the one
they struck through the stipulation, in which they agreed to
“remit post-petition payments under the Mortgage Loan” to SPS for
the benefit of the Bank.
14

from the automatic stay, “without waiving substantive claims.”
The Pelletiers decry such a result as “contrary to bankruptcy’s
statutory and procedural schemes, legislative history, case law,
and local practice.”

Putting aside the fact that the Pelletiers

do not identify any statutes, rules, legislative history, or case
law in support of this argument, it is nevertheless unavailing.
Had the Pelletiers wished to preserve their ability to challenge
the Bank’s interest in the note and mortgage, they simply could
have reserved their right to do so in the stipulation itself.

As

the Bankruptcy Court pointed out--and counsel for the Pelletiers
conceded--at the summary judgment hearing, they did not do so.
Moreover, at the time the Pelletiers executed the
stipulation, they had already raised a challenge to the Bank’s
interest in the note (by way of their objection to the motion to
stay) and been provided copies of the note and allonge (by way of
exhibits to the Bank’s proof of claim).

In light of this

chronology, the Bankruptcy Court acted well within its discretion
in finding that the stipulation, once approved by the Bankruptcy
Court, judicially estopped the Pelletiers from arguing that the
Bank did not hold the note and mortgage.

Indeed, since the

Pelletiers entered into the stipulation to resolve a motion they
had previously opposed on the ground that the Bank had not shown
its rights in the note and mortgage--by acknowledging that the
15

Bank was the holder of the mortgage secured by the note and
agreeing to make post-petition mortgage payments to the Bank’s
servicer--the Bankruptcy Court cannot be blamed for viewing the
stipulation as, effectively, an abandonment of the Pelletiers’
challenge to the Bank’s claim.

Of course, “holding a litigant to

his stated intention not to pursue certain claims” is one of the
recognized functions of the judicial estoppel doctrine.

Patriot

Cinemas, 834 F.2d at 214.
IV.

Conclusion
For the foregoing reasons, the Bankruptcy Court’s order in

the Pelletiers’ adversary proceeding granting summary judgment
against them, and in favor of the Bank, is AFFIRMED.

The clerk

shall enter judgment here accordingly and close this case.
SO ORDERED.

____________________________
Joseph N. Laplante
United States District Judge
Dated:
cc:

November 26, 2013

Krista E. Atwater, Esq.
Mary F. Stewart, Esq.
Megan O’Keefe Manzo, Esq.
Walter H. Porr, Jr., Esq.
Lawrence P. Sumski, Esq.
Geraldine L. Karonis, Esq.

16