Manolian v. Lytle ( 2021 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Jill Christina Manolian, No. CV-20-00365-PHX-DJH 10 Plaintiff, ORDER 11 v. 12 Don Ray Lytle, et al., 13 Defendants. 14 15 This matter is before the Court on Defendants’ Motion for Summary Judgment 16 (Doc. 23). Plaintiff filed a Response (Doc. 25) and Defendants filed a Reply (Doc. 29). 17 Defendants seek an order dismissing this case and barring Plaintiff from litigating her 18 personal injury claims on the basis of judicial estoppel, arguing that Plaintiff failed to report 19 the potential of this lawsuit to the Chapter 13 Bankruptcy Trustee prior to her discharge in 20 bankruptcy. Plaintiff argues that her failure to report the potential lawsuit as an asset of 21 her bankruptcy estate was a mistake, and thus that the Court should not bar her claims. 22 I. Background 23 Plaintiff and her husband (the “Manolians”), through their attorney, filed a 24 Voluntary Petition under Chapter 13 of the Bankruptcy Code on October 1, 2015. (Doc. 25 23-2). Included with the Petition, the Manolians were required to disclose all of their assets 26 and property on several “Schedules,” which are filed along with the Petition. (Doc. 23-3). 27 In “Schedule B” the Manolians were required to list all personal property, which included 28 such items as cash, checking and savings accounts, and household goods, but also required 1 the Manolians to disclose “contingent and unliquidated claims of every nature.” (Doc. 23- 2 2 at 8). 3 The Manolians’ Chapter 13 Plan (the “Plan”) was confirmed by the bankruptcy 4 court on April 27, 2016 and their Plan term was to span 43 months. (Doc. 23-5). On 5 November 7, 2017, during the pendency of the Plan, Plaintiff was involved in an accident 6 that gave rise to the current personal injury action. (Doc. 1). Plaintiff seeks general 7 damages, loss of wages, special damages, and other monetary relief arising from severe 8 injuries that cause “pain, suffering, distress, mental and emotional anguish and anxiety, 9 loss of consortium and a general decrease in quality of life.” (Doc. 1-3). On August 29, 10 2019, Chapter 13 Trustee Russell Brown filed a notice informing the bankruptcy court that 11 the Manolians had completed their financial and other requirements under the Plan. (Doc. 12 23-7). Weeks later, on October 4, 2019, Plaintiff filed the present personal injury action in 13 Maricopa County Superior Court. (Doc. 1). The Manolians’ were formally discharged 14 from bankruptcy and were entitled to discharge over $450,000.00 in debt. (Doc. 23-8). 15 Although they filed amendments to their Schedule I (income) and Schedule J 16 (expenses) during the Plan term, the Manolians did not file any additions, revisions, or 17 other changes to their Schedule B (assets) to account for the potential personal injury 18 action. 19 II. Legal Standards 20 In addition to the requirement for debtors proceeding under Chapter 13 of the 21 Bankruptcy Code to file schedules of assets and potential assets, debtors are required to 22 file amended schedules if at any point during the pending of the bankruptcy there are 23 changes to those assets. See generally Fed. R. Bankr. P. 1007(b)(1) and 1009(a); see also 24 Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 784 (9th Cir. 2001). “Among other 25 things, the debtor must disclose any litigation likely to arise in a nonbankruptcy context.” 26 Hay v. First Interstate Bank of Kalispell, N.A., 978 F.2d 555, 557 (9th Cir. 1992) (internal 27 citations omitted). Moreover, “when the debtor has knowledge of enough facts to know 28 that a potential cause of action exists during the pendency of the bankruptcy, but fails to 1 amend his schedules or disclosure statements to identify the cause of action as a contingent 2 asset,” the debtor is in violation of the principles of the bankruptcy process. Hamilton, 270 3 F.3d at 784. 4 III. Analysis 5 Defendants argue that judicial estoppel is proper here and the Court should invoke 6 it to dismiss this action with prejudice. Plaintiff appears to agree with all of the legal 7 standards cited by Defendants, and also does not disagree that she now realizes that this 8 personal injury action should have been disclosed to the bankruptcy court. However, 9 Plaintiff contends that the failure to disclose the potential lawsuit was a simple mistake, 10 and therefore argues that judicial estoppel is not warranted at this time. 11 In her Affidavit submitted with her Response, Plaintiff states that she doesn’t “recall 12 discussing with Mr. Karandreas (her bankruptcy attorney) any potential lawsuits or the 13 requirement to list those on our bankruptcy petition.” (Doc. 25-1 at 2). She further states 14 “I recall signing the forms prepared by Mr. Karandreas’ office. I also recall them telling 15 me that if any of the information changed, we should let them know,” but that she wasn’t 16 aware that “potential lawsuits had to be listed or added to a bankruptcy petition.” (Id.) Her 17 Affidavit concludes by stating: 18 Now that I am aware that the lawsuit should have been disclosed to the 19 bankruptcy court, I am willing to take any steps requested by the Court to advise the trustee of this lawsuit. I am willing to request to reopen the 20 bankruptcy proceedings to provide all relevant information to the court and 21 trustee as it was not my intention to withhold this information or mislead the bankruptcy court in any way. 22 (Id. at 3). 23 The Court appreciates Plaintiff’s candor, but also points out that she does not need 24 an Order from this Court to advise the Trustee of the lawsuit or seek to reopen the 25 bankruptcy proceedings to correct her error. Nonetheless, the Court will order that she do 26 so in the interests of justice. Based on Plaintiff’s own representations that the failure to 27 disclose the potential lawsuit was a mistake, and in fairness to the Manolian’s creditors, 28 she should have the chance to correct that mistake. Rather than determine whether to apply 1 judicial estoppel at this time, the Court will, in its discretion, give Plaintiff the opportunity 2 to report this matter to the Bankruptcy Court and Trustee and seek to reopen the bankruptcy 3 estate, if appropriate. 4 Therefore, the Court will deny the Motion for Summary Judgment, without 5 prejudice, and will stay this case. Plaintiff shall provide notice to the Chapter 13 Trustee 6 and the Bankruptcy Court: (1) of the existence of her claims in this lawsuit; (2) that the 7 accident giving rise to her claims occurred during the pendency of the bankruptcy case; 8 and (3) she shall submit to them a copy of this Order. Plaintiff shall provide Notice to the 9 Court on the docket of these items being transmitted to the Trustee and Bankruptcy Court. 10 Plaintiff shall then provide the Court with notice of any decision or action as it relates to 11 the bankruptcy case and keep the Court and Defendants apprised of the status of the case. 12 Accordingly, 13 IT IS HEREBY ORDERED that Defendants’ Motion to for Summary Judgment 14 (Doc. 23) is denied, without prejudice. 15 IT IS FURTHER ORDERED that within 14 days of this Order, Plaintiff shall 16 provide notice to the Chapter 13 Trustee and Bankruptcy Court of the existence of her 17 claims in this lawsuit, and shall identify that the accident giving rise to her claims occurred 18 during the pendency of the bankruptcy case. Plaintiff shall also provide the Trustee and 19 Bankruptcy Court with a copy of this Order. 20 IT IS FURTHER ORDERED that Plaintiff shall file a Notice on this docket 21 certifying the submission of the above information within 5 days of providing the Notice 22 to the Trustee and Bankruptcy Court. 23 … 24 … 25 … 26 … 27 … 28 … 1 IT IS FURTHER ORDERED that this matter is stayed. Plaintiff shall file a status 2|| report on the docket every 60 days keeping the Court and Defendants apprised of any || changes to the status of the case. Plaintiff shall provide Notice to the Court and Defendants 4|| as to any decision or action as it relates to the bankruptcy matter within 5 days of receiving 5 || such information. 6 Dated this 4th day of March, 2021. 7 8 ( . fe □□ ? norable'Diang/4. Hurmetewa 10 United States District Fudge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 _5-