Connie Cross v. Earl Burhans Do ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
CONNIE CROSS, UNPUBLISHED
December 13, 2016
Plaintiff-Appellee,
v No. 328019
Kalamazoo Circuit Court
EARL BURHANS, D.O., and WESTSIDE LC No. 2012-000610-NO
FAMILY MEDICAL CENTER, PC,
Defendants-Appellants.
CONNIE CROSS,
Plaintiff-Appellee,
v No. 328598
Kalamazoo Circuit Court
EARL BURHANS, D.O., LC No. 2012-000610-NO
Defendant,
and
WESTSIDE FAMILY MEDICAL CENTER, PC,
Defendant-Appellant.
Before: SHAPIRO, P.J., and HOEKSTRA and SERVITTO, JJ.
PER CURIAM.
In Docket No. 328019, defendants, Earl Burhans, D.O., and Westside Family Medical
Center, PC (Westside), appeal by leave granted the June 2, 2015 orders of the trial court that
denied Dr. Burhans’s motions for summary disposition based on the statute of limitations and
judicial estoppel. In Docket No. 328598, Westside appeals by leave granted the orders denying
its motions concurring in Dr. Burhans’s motions for summary disposition. We affirm and
remand for further proceedings consistent with this opinion.
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This case involves an alleged “wrongful/inappropriate” relationship between Dr. Burhans
and plaintiff. Plaintiff suffers from migraines. Dr. Burhans, who was employed by Westside,
became plaintiff’s primary care physician in 2004. Plaintiff testified that Dr. Burhans first
“overstepped the boundary” in April 2007 when he groped and kissed her. Plaintiff and Dr.
Burhans first had sexual intercourse at Westside in April or May 2008 and, thereafter, they had
sexual intercourse each time that plaintiff came to Westside with a migraine. They also had
sexual intercourse almost every Thursday and Sunday at plaintiff’s parents’ house, where
plaintiff resided. Plaintiff testified that she never enjoyed the sexual relationship with Dr.
Burhans but that she kept Dr. Burhans as her primary care physician because she did not believe
that another physician would give her the prescriptions for pain medication that she received
from Dr. Burhans. According to plaintiff, she received the prescriptions that she needed from
Dr. Burhans, but she paid for them with sex.
In March 2009, plaintiff filed a petition for Chapter 7 bankruptcy. In July 2009, the
bankruptcy court granted plaintiff a discharge, and it subsequently closed the bankruptcy case.
Plaintiff acknowledged that she did not disclose any causes of action against defendant in the
bankruptcy proceedings prior to discharge. Plaintiff averred that she “truly believed that if [she]
were to have told the Bankruptcy Trustee about [her] potential claim against Dr. Burhans, and
Dr. Burhans found out about it, then Dr. Burhans [and the other physicians at Westside] would
refuse to provide [her] with health care and pain medication.”
In December 2012, plaintiff sued defendants. Following plaintiff’s deposition, Dr.
Burhans moved for summary disposition, arguing that plaintiff lacked standing and that
plaintiff’s claims were barred by judicial estoppel, as well as other legal doctrines. The basis for
the summary disposition motion, with which Westside concurred, was that plaintiff failed to
disclose her claims against defendants in the bankruptcy proceedings. Thereafter, plaintiff
moved the bankruptcy court to reopen the bankruptcy case. The bankruptcy court granted the
motion, and in March 2015, the bankruptcy trustee abandoned the property known as the
Kalamazoo County case. Dr. Burhans thereafter renewed his motion for summary disposition,
contending that plaintiff’s claims were barred by the statute of limitations because the trustee did
not abandon the claims until after the applicable limitations periods expired and additionally
argued that judicial estoppel precluded plaintiff’s claims. Westside again concurred in the
motion and the trial court again denied summary disposition to defendants.
On appeal, defendants argue that the trial court erred in denying them summary
disposition on the basis of the statute of limitations and judicial estoppel. Summary disposition
is proper under MCR 2.116(C)(7) if the plaintiff’s claims are barred by the statute of limitations
or judicial estoppel. We review de novo a trial court’s decision on a motion for summary
disposition. Moser v Detroit, 284 Mich App 536, 538; 772 NW2d 823 (2009). In reviewing a
motion for summary disposition under MCR 2.116(C)(7), a court must consider any affidavits,
depositions, admissions, or other documentary evidence submitted by the parties. Maiden v
Rozwood, 461 Mich 109, 119; 597 NW2d 817 (1999). If no facts are in dispute, and if
reasonable minds could not differ regarding the legal effect of those facts, the question whether
the claim is barred is an issue of law for the court. Dextrom v Wexford Co, 287 Mich App 406,
431; 789 NW2d 211 (2010). But, if a question of fact exists so that factual development could
provide a basis for recovery, then dismissal without further factual development is inappropriate.
Id.-2-
Judicial estoppel is an equitable doctrine. Szyszlo v Akowitz, 296 Mich App 40, 46; 818
NW2d 424 (2012). The application of legal doctrines, including judicial estoppel, is reviewed de
novo. Estes v Titus, 481 Mich 573, 578-579; 751 NW2d 493 (2008); Szyszlo, 296 Mich App at
46.1
In response, plaintiff first argues that defendants waived the affirmative defenses of lack
of standing and judicial estoppel.2 “Affirmative defenses must be stated in a party’s responsive
pleading, either as originally filed or as amended in accordance with MCR 2.118.” MCR
2.111(F)(3). The failure to do so constitutes a waiver of the defense. Stanke v State Farm Mut
Auto Ins Co, 200 Mich App 307, 311-312; 503 NW2d 758 (1993). In a pleading, a party “must
state the facts” constituting an affirmative defense. MCR 2.111(F)(3)(a); see also Tyra v Organ
Procurement Agency of Mich, 302 Mich App 208, 214; 850 NW2d 667 (2013), rev’d on other
grounds 498 Mich 68 (2015) (“[A] statement of an affirmative defense must contain facts setting
forth why and how the party asserting it believes the affirmative defense is applicable.”). We
agree with plaintiff that defendants did not adequately plead the relevant affirmative defenses.
Defendants did not set forth “why and how” they believed that the defenses were applicable.
Tyra, 302 Mich App at 214. Rather, defendants simply stated that the claims alleged “are barred
by the running of the applicable statutes of limitation,” and, potentially interpretable as a judicial
estoppel defense, the claim “is barred by the fraudulent acts of the Plaintiff.”
“[A] defendant may move to amend their affirmative defenses to add any that become
apparent at any time[.]” Id. at 213. After plaintiff argued in response to Dr. Burhans’s motion
for summary disposition that defendants waived the defenses of lack of standing and judicial
estoppel, Dr. Burhans, in a reply to plaintiff’s response, requested leave to amend defendants’
affirmative defenses. Had the trial court addressed the request for leave to amend, its decision
would have been reviewed for an abuse of discretion. Weymers v Khera, 454 Mich 639, 654;
563 NW2d 647 (1997). Leave to amend “shall be freely given when justice so requires.” MCR
2.118(A)(2). Amendment is generally a matter of right rather than of grace. In re Kostin Estate,
278 Mich App 47, 51; 748 NW2d 583 (2008). Leave to amend should be denied only for
“particularized reasons,” such as undue delay, bad faith or dilatory motive, repeated failures to
cure by amendments previously allowed, undue prejudice to the opposing party, or futility. Id.;
Ostroth v Warren Regency, GP, LLC, 263 Mich App 1, 5; 687 NW2d 309 (2004).
1
We reject plaintiff’s argument that the trial court’s decision regarding equitable estoppel should
be reviewed for an abuse of discretion or clear error. We are required to follow published
decisions from this Court, MCR 7.215(J)(1), and in previous decisions, this Court has applied the
de novo standard to a trial court’s decision regarding judicial estoppel, see Spohn v Van Dyke
Pub Sch, 296 Mich App 470, 479; 822 NW2d 239 (2012); Szyszlo, 296 Mich App at 46.
2
Plaintiff’s argument regarding waiver is limited to the defenses of lack of standing and judicial
estoppel. Nonetheless, defendants’ argument that plaintiff’s claims are barred by the statute of
limitations is predicated on the fact that plaintiff lacked standing in December 2012, when the
complaint was filed. Thus, if defendants waived the defense that plaintiff lacked standing when
the complaint was filed, then defendants cannot succeed on their argument that plaintiff’s claims
are barred by the statute of limitations.
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According to plaintiff, defendants wrongfully delayed in asserting the affirmative
defenses. “Delay, alone, does not warrant denial of a motion to amend.” Weymers, 454 Mich at
659. However, a trial court may deny a motion to amend if the delay was in bad faith or if the
opposing party suffered actual prejudice. Id. “ ‘[P]rejudice’ exists if the amendment would
prevent the opposing party from receiving a fair trial, if for example, the opposing party would
not be able to properly contest the matter raised in the amendment because important witnesses
have died or necessary evidence has been destroyed or lost.” Id.Plaintiff claims that defendants, early on in discovery, could have learned that she had
filed for bankruptcy. Defendants were given plaintiff’s social security number in discovery, and
defendants only asked plaintiff if she had been involved in any other legal action as “a plaintiff
or a defendant.” The term “bad faith” is generally defined as “[d]ishonesty of belief, purpose, or
motive.” Black’s Law Dictionary (10th ed). Defendants’ failure to use plaintiff’s social security
number to discover that she had filed for bankruptcy and their failure to specifically inquire
whether plaintiff had been a “debtor” in a bankruptcy case do not evidence a dishonest purpose
or motive by defendants in attempting to ascertain whether plaintiff had previously filed for
bankruptcy.
Plaintiff also claims that defendants should have known that she filed for bankruptcy in
2009. In an affidavit, plaintiff averred that she had informed Dr. Burhans about her bankruptcy
because she had kept asking Dr. Burhans and other physicians at Westside for sample
prescriptions because she did not have the money to pay for prescriptions. Dr. Burhans’s reply
to plaintiff’s argument that the affirmative defenses were waived indicates that defendants’
attorneys were not aware that plaintiff had filed for bankruptcy until plaintiff was deposed, and
nothing in the record indicates that defendants’ attorneys were aware of the bankruptcy case at
any time before plaintiff’s deposition. Additionally, there is no indication in the record that Dr.
Burhans, even if he remembered that plaintiff had filed for bankruptcy in 2009, failed to tell this
fact to his attorney because of a dishonest purpose or motive. Any delay by defendants in
asserting the affirmative defenses of lack of standing and judicial estoppel was not done in bad
faith. Weymers, 454 Mich at 659.
The only prejudice that plaintiff claims that she suffered from defendants’ delay in
asserting the affirmative defenses is that her attorney expended a significant number of hours on
the case and that her deposition, which covered two days, took a toll on her health. This claimed
prejudice is not sufficient to deny leave to amend. See id. Plaintiff sets forth no argument to
conclude that amendment of the affirmative defenses would prevent her from receiving a fair
trial. Id.We conclude that the affirmative defenses were not waived. Although defendants did not
adequately plead the affirmative defenses in their responsive pleadings, they moved for leave to
amend. Because there was no “particularized reason[]” for denying leave to amend, the trial
court, had it addressed the issue, would have abused its discretion in denying leave. Weymers,
454 Mich at 639; In re Kostin Estate, 278 Mich App at 51.
We thus turn to defendants’ claims that summary disposition was warranted in their favor
due to plaintiff’s purported lack of standing or because she was judicially estopped from
pursuing her claims. When a debtor files for bankruptcy, he or she must list all of his or her
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assets on a schedule of assets and liabilities under 11 USC 521(a)(1)(b)(i). Young v Independent
Bank, 294 Mich App 141, 143; 818 NW2d 406 (2011). A potential cause of action constitutes an
asset that must be included in the schedule of assets and liabilities. Spohn v Van Dyke Public
Schools, 296 Mich App 470, 481-482; 822 NW2d 239 (2012); Young, 294 Mich App at 144.
When filing for bankruptcy, the debtor loses all rights to his or her property and this property
becomes part of the bankruptcy estate. 11 USC 541(a); Spohn, 296 Mich App at 485. Because
potential causes of action belong to the bankruptcy estate, the bankruptcy trustee, and not the
debtor, becomes responsible for the claims. The debtor loses standing to pursue such claims and
the right to pursue the causes of action passes to the trustee for the benefit of the estate. Young,
294 Mich App at 144. Absent permission of the bankruptcy court or the abandonment of the
potential cause of action by the trustee, the debtor may not commence suit on a potential cause of
action that existed before or during the life of the bankruptcy proceedings. Young, 294 Mich
App at 144; Kuriakuz v Community Nat’l Bank of Pontiac, 107 Mich App 72, 75; 308 NW2d 658
(1981).
Defendants sought summary disposition on the ground that plaintiff lacked standing to
file the instant action because plaintiff’s causes of action were assets of the bankruptcy estate
under the control of the trustee when the suit was filed in light of plaintiff’s knowing and
intentional failure to disclosure the potential causes of action in her assets schedule. The trial
court denied the motion, opining that plaintiff’s standing was “provisional” at the time she filed
the lawsuit against defendants and that she and the trustee had a somewhat joint standing for
purposes of prosecuting the action, to the extent that any potential damages in the lawsuit would
exceed plaintiff’s outstanding obligation to her creditors. Defendant challenges the rationale
employed by the trial court, but even if that rationale was in error, the trial court nonetheless
reached the right result in refusing to grant summary disposition to defendants based upon a lack
of standing.
Immediately after defendants filed their initial motion seeking summary disposition based
on a lack of standing, plaintiff successfully petitioned for the reopening of the bankruptcy estate
and for the amending of the asset schedules to include as an asset the underlying causes of action
against defendants. Eventually, the trustee abandoned the underlying claims. This abandonment
restored to plaintiff her standing to pursue her claims. Young, 294 Mich App at 144.
Defendants assert that the reversion of plaintiff’s interest in the potential claims against them
triggered by the trustee’s abandonment of the claims does not “relate back” to the date the
underlying suit was commenced against them. However, the relation-back doctrine applies to
amended complaints. See, e.g., Smith v Henry Ford Hosp, 219 Mich App 555, 558; 557 NW2d
154 (1996)(“The doctrine of relation back was invented by the courts to associate the amended
matter with the original pleading so that it would not be barred by the statute of limitation”).
Plaintiff is not seeking to amend her complaint. Thus, defendants’ reliance on the relation-back
doctrine and related authority is misplaced.
Instead, in the context of bankruptcy proceedings, “[t]he ordinary rule is that, when a
trustee abandons property of the bankrupt, title reverts to the bankrupt, nunc pro tunc, so that he
is treated as having owned it continuously.” Barletta v Tedeschi, 121 BR 669, 673 (DC NY,
1990), quoting Wallace v Lawrence Warehouse Co, 338 F2d 392, 394 n 1 (CA 9, 1964); See
also, Maheras v Awan, 9 NYS 3d 1; 127 AD 3d 426, 428 (2015); In re Dewsnup, 87 BR 676,
680-681 (Utah, 1988). The phrase “nunc pro tunc” is “applied to acts allowed to be done after
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the time when they should be done, with a retroactive effect, i.e., with the same effect as if
regularly done.” Black’s Law Dictionary (5th ed), p 964. Several courts have applied the
“ordinary rule” referenced above to cure an initial lack of standing by ruling that the reversion of
title permits a plaintiff, who prematurely filed a complaint, to continue to maintain his or her
action even though the plaintiff did not have standing to sue at the time he or she commenced
suit, even where the statute of limitations has expired before the reversion occurred. Maheras,
127 AD 3d at 428; Bartletta, 121 BR at 674-675. This rule of reversion is a legal fiction
invented by courts to aid the courts in achieving a just result. Bartletta, 121 BR at 674; Wallace,
338 F2d at 394 n 1. Consequently, the rule is not “to be blindly followed to a result that is
unjust.” Wallace, supra.
Here, plaintiff’s initial failure to disclose her potential lawsuit did not place defendants in
jeopardy; it placed her creditors in jeopardy. Moreover, the trial court was not insulted or
thwarted by her failure to disclose in the federal bankruptcy court which has its own mechanisms
to address such failures. Under such circumstances, an application of the reversion rule in this
case does not produce an unjust result and the trial court reached the right result in refusing to
grant summary disposition on the issue of standing, albeit for the wrong reason. We will not
reverse a trial court's order when the right result was reached for the wrong reason. Taylor v
Laban, 241 Mich App 449, 458; 616 NW2d 229 (2000).
We similarly find that the trial court properly denied summary disposition on judicial
estoppel grounds. Judicial estoppel, sometimes described as “the doctrine against the assertion
of inconsistent positions,” is “widely viewed as a tool to be used by the courts in impeding those
litigants who would otherwise play ‘fast and loose’ with the legal system.” Paschke v Retool,
Indus, 445 Mich 502, 509; 519 NW2d 441 (1994). If a plaintiff has filed for bankruptcy, the
plaintiff will be judicially estopped from asserting a cause of action if (1) the plaintiff assumes a
position that was contrary to the one the plaintiff asserted under oath in the bankruptcy
proceedings, (2) the bankruptcy court adopted the contrary position either as a preliminary matter
or as part of a final disposition, and (3) the plaintiff’s omission did not result from mistake or
inadvertence. Spohn, 296 Mich App at 480-481; White v Wyndham Vacation Ownership, Inc,
617 F3d 472, 478 (CA 6, 2010). In determining whether the plaintiff’s omission resulted from
mistake or inadvertence, courts consider whether the plaintiff lacked knowledge of the factual
basis of the undisclosed claim, whether the plaintiff had a motive for concealment, and whether
the evidence indicates an absence of bad faith. Spohn, 296 Mich App at 481.
It is undisputed, and the trial court found, that plaintiff did not disclose any causes of
action against defendants in the initial bankruptcy proceedings. When a debtor files for
bankruptcy, the debtor shall file a schedule of assets and liabilities, Id., citing 11 USC
521(a)(1)(B), and it is well established that the assets of a debtor include potential causes of
action, Spohn, 296 Mich App at 481. However, unlike in Spohn, plaintiff in this case
successfully moved to reopen her bankruptcy case and amend her petition to include the action
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against defendants. Thus, plaintiff ultimately fulfilled her duty to disclose by amending her
bankruptcy petition and the first element of judicial estoppel has not been met.3
The trial court also found that the second element of judicial estoppel, that the bankruptcy
court adopted the contrary position either as a preliminary matter or as part of a final disposition,
had been established. See In re Johnson, 345 BR 816, 822 (Bankr WD Mich, 2006). The trial
court found, however, that there was a question of material fact as to whether plaintiff’s omission
occurred due to bad faith, i.e., whether there was mistake or inadvertence.
Plaintiff averred that she did not tell the bankruptcy trustee about any causes of action
against Dr. Burhans because she was afraid that Dr. Burhans and the other physicians at
Westside, if they learned that she told the trustee about Dr. Burhans’s conduct, would refuse to
provide her with health care and pain medication. Plaintiff also testified that a few months after
Dr. Burhans started to come over to her parents’ house, which was in the summer of 2008, she
told her mother that Dr. Burhans had control over her and that their relationship was
inappropriate. The trial court noted that the issue of bad faith was a question of fact given “the
information provided by Doctor Liepman.” Dr. Liepman is plaintiff’s treating psychiatrist and
the information provided relates to plaintiff’s alleged fragile mental state at the time of her
bankruptcy proceedings and defendant doctor’s role in creating and maintaining that mental
state. Such testimony is relevant to the questions of plaintiff’s motive for concealment and of
whether plaintiff acted in bad faith. The granting of summary disposition is discouraged where
motive and intent are at issue and where a determination of the issues of motive and intent
depend on the credibility of deponents. Vanguard Ins Co v Bolt, 204 Mich App 271, 276; 514
NW2d 525 (1994). The trial court thus properly denied summary disposition on judicial estoppel
grounds.
Affirmed. This matter is remanded to the trial court for further proceedings. We do not
retain jurisdiction.
/s/ Douglas B. Shapiro
/s/ Joel P. Hoekstra
/s/ Deborah A. Servitto
3
In addition, after plaintiff amended her petition, the bankruptcy court, which was the affected
judicial body, did not impose any sanctions or modify its prior orders.
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