Seymour v. Collins , 2015 IL 118432 ( 2015 )

2015 IL 118432IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 118432)
TERRY L. SEYMOUR et al., Appellants, v. BRADLEY A. COLLINS et al.,
Appellees.
Opinion filed September 24, 2015.
JUSTICE KARMEIER delivered the judgment of the court, with opinion.
Chief Justice Garman and Justices Freeman, Thomas, Kilbride, Burke, and
Theis concurred in the judgment and opinion.
OPINION
¶1 The overarching issue presented in this appeal is whether the circuit court erred
in granting defendants summary judgment, dismissing plaintiffs’ personal injury
action, pursuant to the court’s application of the doctrine of judicial estoppel. A
divided panel of the appellate court affirmed the judgment of the circuit court. 2014
IL App (2d) 140100, ¶ 50. We granted plaintiffs’ petition for leave to appeal (Ill. S.
Ct. R. 315 (eff. July 1, 2013)), and now reverse the judgments of the appellate court
and circuit court.
¶2 BACKGROUND
¶3 Plaintiffs, Terry L. Seymour and Monica Seymour, filed this personal injury
action in the circuit court of Winnebago County on May 20, 2011, alleging
negligence and loss of consortium, and seeking money damages, initially from two
defendants, Bradley A. Collins and Rockford Country Club (Rockford). Terry’s
alleged injuries were said to have been sustained in a June 3, 2010, automobile
accident. Plaintiffs alleged, on that date, Terry was being transported in an
ambulance owned by ATS Medical Services, Inc. (ATS), and driven by Shaun P.
Branney—and in which Terry was attended by Leo Verzani—when the ambulance
collided with a vehicle driven by Bradley A. Collins, who was allegedly operating
his vehicle within the scope of his employment with Rockford. Plaintiffs
subsequently amended their complaint to claim that defendants, ATS, Branney, and
Verzani were also legally responsible for Terry’s alleged injuries.
¶4 Also pertinent to the issue before us is the bankruptcy proceeding the Seymours
had previously commenced on April 24, 2008, with the filing of a petition for
Chapter 13 bankruptcy (11 U.S.C. § 1301 (2006)) in the United States District
Court for the Northern District of Illinois. The record indicates that a Chapter 13
plan was confirmed on September 19, 2008, though the plan itself does not appear
in this record. Docket entries from the bankruptcy proceeding were submitted as
evidence in this case and show multiple motions filed by the Seymours to modify
the plan. The motions have not been made a part of the record.
¶5 The first motion was filed on January 7, 2009. A docket entry indicates that the
motion was granted on January 30, 2009. On that same date, an entry evinces an
“Order Withdrawing Motion to Dismiss Case for Failure to Make Plan Payments.”
On August 8, 2009, another motion was filed to modify the plan. That motion was
accompanied by the Seymours’ filing of amended bankruptcy schedules. An order
was entered on August 28, 2009, granting the motion to modify.
¶6 The third motion to modify was filed on February 25, 2010. Docket entries
indicate that a response was filed on March 3, 2010, on behalf of the Chapter 13
trustee, Lydia Myer, and the motion to modify was granted on March 19, 2010. In
their brief before this court, plaintiffs state: “The March 19, 2010 plan modification
entailed a reduction in the monthly payment amount as TERRY L. SEYMOUR had
sustained an unrelated work injury in May, 2009, and was only receiving temporary
total disability benefits.” Plaintiffs’ brief cites to an affidavit subsequently filed in
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this case by their bankruptcy attorney. That affidavit does not specifically link the
March 2010 modification to the alleged injury and reduction in income; however, it
does reference a May 2009 injury and a related workers’ compensation claim
“subsequent to the date of filing of [the] Chapter 13 proceeding.” Moreover, an
affidavit filed in this case by Myer references a motion to modify wherein it is
stated “that the Debtor was injured at work and unable to work and receiving only
worker’s compensation benefits since May of 2009.” In any event, the parties
apparently do not dispute that the Seymours sought modification via the February
25 motion, alleging that Terry was unable to work and was only receiving workers’
compensation payments, and the bankruptcy plan was modified on March 19,
2010. 1
¶7 Apparently, it is also undisputed that Terry had not advised the bankruptcy
court that he was again working when, on June 3, 2010, he was allegedly injured,
twice. The first injury was said to have occurred while he was working for a new
employer. As a result of that injury, he was being transported by ambulance when
the ambulance collided with a vehicle driven by Collins, allegedly resulting in
additional injuries to Terry, and this lawsuit against the various defendants.
¶8 Prior to the notice of completion of the payment plan filed by the bankruptcy
trustee on June 29, 2012, and the order of discharge in bankruptcy granted the
Seymours on July 17, 2012, they filed two change of address forms with the
bankruptcy court. However, it is apparently undisputed that they never apprised the
bankruptcy court that their circumstances had changed subsequent to the March 19,
2010 modification. Specifically, they never informed the bankruptcy court: (1) that
Terry had returned to work for a new employer; (2) that he was injured on June 3,
2010; (3) that Terry had, on June 8, 2010, filed another workers’ compensation
1
As we may take judicial notice of public documents which are included in the records of other
courts (May Department Stores Co. v. Teamsters Union Local No. 743, 64 Ill. 2d 153, 159
(1976))—and the defendants’ subsequently filed motion for summary judgment in this case urged
the circuit court to take judicial notice of the bankruptcy court’s records—we note that the motion in
fact alleged that Terry was injured and had “been unable to work and receiving only workmen’s
compensation benefits since May 2009.” The Seymours stated that they had fallen behind in
payment of their monthly living expenses and they sought to retain the entirety of their tax refunds
for the year 2009. They suggested if that relief were granted, “they would be able to make future
payments to the Trustee and complete their Chapter 13 Plan within the time allowed by law.” An
order, modifying the plan, appears in the bankruptcy court’s records. It is dated March 19, 2010, and
allows only for retention of the 2009 income tax refunds, specifying that “all other provisions of the
Debtors’ Chapter 13 Plan shall remain in full force and effect.” Based on the records we have
reviewed, the discrepancy, and the court’s and parties’ position on this matter, is perplexing.
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claim, this one related to the June 3 injuries; (4) that Terry believed he had viable
personal injury claims against multiple defendants, as a result of the June 3, 2010,
accident; and (5) that he had in fact filed suit in state court against those defendants
on May 20, 2011, asserting his legal claims.
¶9 On July 18, 2013, defendants in this action moved for summary judgment,
contending that plaintiffs should be judicially estopped from proceeding with their
claims because they failed to disclose their personal injury action in the bankruptcy
proceeding.
¶ 10 Plaintiffs responded that judicial estoppel does not apply because they did not
assert, under oath, in the bankruptcy proceeding that they did not have a personal
injury case. They did not intentionally fail to disclose the claims, and they did not
obtain a benefit in the bankruptcy proceeding by reason of the omission. In support
of their response, plaintiffs submitted their own affidavits as well as the affidavits
of Chapter 13 trustee, Lydia Myer, and their bankruptcy attorney, Jeffrey Dahlberg.
¶ 11 In their affidavits, plaintiffs stated, inter alia, that Myer had told them “at the
[section] 341 meeting” that they were “required to report to [their] attorney and to
the Trustee, any lump sum funds received in excess of $2,000.00 during the
pendency of the Chapter 13 bankruptcy proceeding.” Plaintiffs averred that they
did not receive any lump sum funds in excess of $2,000.00 during the pendency of
the Chapter 13 bankruptcy proceeding, as a result of the personal injury action or
otherwise. 2
¶ 12 In her affidavit, Lydia Myer stated that she had been the Chapter 13 trustee of
the District Court of the Northern District of Illinois since 1995. She served in that
capacity in the Seymours’ bankruptcy case. Myer attested that the plan for the
Chapter 13 bankruptcy was confirmed on September 19, 2008, and was modified
multiple times thereafter. She indicated that Terry Seymour had filed a motion to
modify on March 19, 2010, 3 stating that he had been injured at his job and was
unable to work. As a consequence, he had been receiving only workers’
compensation benefits since May of 2009. In a separately numbered paragraph,
without correlative reference, Myer stated that workers’ compensation proceeds,
“pursuant to Illinois Compiled Statutes, are specifically exempt from bankruptcy.”
2
They did receive a tax refund in excess of $2,000, but they reported it and were granted leave
to keep it.
3
The bankruptcy docket entry indicates that the order granting the motion was entered on that
date. The order filed in the bankruptcy court also bears that date.
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¶ 13 Myer represented:
“That as the Chapter 13 Trustee *** all debtors are required by and through
their attorneys, to report to me, as trustee, any and all cash or monies received
during the Chapter 13 bankruptcy proceeding other than the income listed on
the debtor’s Schedule I.
That neither the Bankruptcy Code nor the Bankruptcy Rules require a
Chapter 13 debtor to disclose the acquisition of any property interest after
confirmation of his Chapter 13 plan except if the debtor acquires or becomes
entitled to acquire within 180 days after the date of the filing of the petition,
property by bequest, device [sic], or inheritance, or property received as the
result of a property settlement agreement with the debtor’s spouse or of an
interlocutory or final divorce decree; or funds received as a beneficiary of life
insurance policy or of a death benefit plan. (11 U.S.C. § 541 and Bankruptcy
Rule 1007(h)).”
Myer concluded with her observation that “11 U.S.C. 1322(d)(1) provides that a
Chapter 13 plan may not provide for payments over a period that is longer than 5
years.”
¶ 14 In his affidavit, the Seymours’ bankruptcy attorney, Jeffrey Dahlberg, first
attested to his experience in Chapter 13 bankruptcies, and confirmed relevant filing
dates in the bankruptcy proceeding. Dahlberg recited his file notation that Terry
had been injured, resulting in a workers’ compensation claim around May of 2009,
a date subsequent to the date of filing his Chapter 13 proceeding. His personal
injury claim, arising from an automobile accident, was also subsequent to the
commencement of the bankruptcy proceeding. Dahlberg noted that Meyer advises
debtors at the section 341 meeting that they are required to report any lump sum
funds received in excess of $2,000.00 during the pendency of the bankruptcy
proceeding. Dahlberg stated that nothing in the Bankruptcy Code would prohibit
this case from going forward as the personal injury and workers’ compensation
claims were unliquidated. Dahlberg concluded “because Mr. Seymour’s claims ***
arose subsequent to the filing of his Chapter 13 and because he did not receive any
lump sum funds as a result of the claims during the pendency of the Chapter 13, the
Chapter 13 Trustee will make no claim on future funds which may be generated by
resolution of those claims as the case has closed with discharge.”
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¶ 15 On November 15, 2013, the circuit court entertained oral argument on
defendants’ motion for summary judgment. In the course of that hearing, counsel
for Rockford asserted the following:
“[O]n March 19, 2010, the Chapter 13 bankruptcy was modified. It was to
advise the bankruptcy court that the plaintiff had a workers’ comp. injury and
possible assets from the May 2009 injury.
***
So what happened was this discharge was pending during the time that this
litigation was pending and the plaintiff knew he had to advise the bankruptcy
court of a workers’ comp. claim because he had previously modified his plan to
advise them, and yet after this injury, there’s no similar notification to the
bankruptcy court that there’s now yet another injury and potential lawsuit,
another asset that has become a part of the bankruptcy estate.
And that’s where the judicial estoppel is coming in. We’re telling the Court
that the plaintiff knew. This wasn’t a mistake or mere inadvertence. The
plaintiff knew that he had a duty to disclose, which is why he filed to modify the
plan after the first workers’ comp. injury.”
¶ 16 After hearing argument on the motion for summary judgment, the court took
the matter under advisement, and ultimately issued a written order granting
defendants summary judgment. In that order, the circuit court observed, inter alia,
that: (1) plaintiffs filed for modifications of the plan after its confirmation, and
before discharge, but never disclosed the “work injury and/or the motor vehicle
accident that occurred on June 3, 2010”; (2) “[p]laintiffs’ counsel sent a letter to all
parties in the instant case seeking to mediate and settle the case [during the
pendency of the bankruptcy proceeding]”; and (3) during the pendency of the
bankruptcy case, plaintiffs never made any amendments to their schedules or
statement of financial affairs disclosing the existence of this action.
¶ 17 The court then spoke to applicable legal standards. The court noted that
summary judgment is properly entered only where there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. The
court acknowledged that summary judgment is not appropriate where “reasonable
persons might draw different inferences from the undisputed facts.” The court
observed that “[s]ummary judgment is appropriate when judicial estoppel applies,”
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and judicial estoppel “is an equitable doctrine invoked by the court at its
discretion.” The court recited the prerequisites generally required for the invocation
of judicial estoppel, and concluded with this seemingly inflexible rule:
“ ‘In [the] bankruptcy context, a party is judicially estopped from asserting a
cause of action not raised in a reorganization plan or otherwise mentioned in the
debtor’s schedules or disclosure statements.’ Hamilton, 270 F.3d at 783; see
also Dailey, 684 N.E.2d at 995-96.”
¶ 18 The court then stated, unequivocally, in the first sentence of its “Analysis and
Decision,” “the Court finds that Plaintiffs’ failure to disclose this case as a potential
asset in their Bankruptcy case judicially estops them from seeking a monetary
judgment against the Defendants.” The court cited federal case law requiring
disclosure of this type of action in a bankruptcy proceeding, noted that plaintiffs
became aware of their “potential cause of action” while their bankruptcy was
pending, and observed that they had filed amendments to their bankruptcy
schedules, but “never alerted the bankruptcy court to the instant action.” Based
upon those undisputed facts, the court stated: “The Court can only conclude that
Plaintiffs were attempting to hide this asset from their bankruptcy creditors.”
¶ 19 Addressing the affidavit of the bankruptcy trustee, Lydia Myer, the court stated:
“With due respect to Ms. Myer, the Court completely disagrees with the argument
posited by Plaintiffs that because they believed their personal injury cause of action
was an exempt asset, they had no duty to disclose it in their bankruptcy case.
[D]ebtors have an absolute duty to report whatever interests they hold in property,
even if they believe their assets are worthless or are unavailable to the bankruptcy
estate.” The court inferred that the 2010 modifications sought by plaintiffs in the
bankruptcy proceeding “establish[ed] that the Plaintiffs were aware that the
Bankruptcy Court had to be advised that the Plaintiff, Terry Seymour, had suffered
personal injuries in May, 2009, and therefore the estate had an interest in property
relating to that occurrence.” The court continued: “This awareness is evidenced
[sic] by the March 19, 2010, motion to modify the plan already put in place, which
would allow Plaintiffs to claim an exemption, would give the bankruptcy trustee
time to review the claim for exemptions, and would allow creditors time to object to
the modification and the ensuing possible exemptions of any monies received
pursuant to that occurrence.” According to the court, plaintiffs “knew they needed
to include all of the estate’s assets in their plan, including the after-acquired
property interest, which is why they filed a motion to modify the plan on March 19,
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2010.” The court concluded its order with this statement: “Because [plaintiffs]
failed to disclose their personal injury claims in their bankruptcy case, as they were
legally required to do, the Court finds that they are judicially estopped from
proceeding on their claims against defendants.”
¶ 20 A divided panel of the appellate court affirmed the judgment of the circuit
court. 2014 IL App (2d) 140100, ¶ 50. The court, initially, recited the five elements
generally required for application of judicial estoppel, as we enumerated them in
People v. Runge, 234 Ill. 2d 68, 132 (2009) (2014 IL App (2d) 140100, ¶ 25), and
noted that plaintiffs contended defendants failed to establish three of them: that
plaintiffs took factually inconsistent positions in the two proceedings, that they
intended for the bankruptcy court to accept the truth of the facts alleged, and that
they obtained a benefit in the bankruptcy proceeding. Id. ¶ 26.
¶ 21 The court first found, summarily, that the plaintiffs took inconsistent positions
insofar as they “failed to disclose, in the bankruptcy proceeding, the existence of
their personal injury claims,” while, contemporaneously, “relying on the existence
of those claims, they prosecuted their personal injury action in the trial court.” Id.
¶ 27.
¶ 22 The court next addressed the question of whether plaintiffs intended that the
bankruptcy court accept the fact that they did not have such claims. The appellate
majority agreed with plaintiffs that the documents submitted to the bankruptcy
court did not require them, therein, to disclose their postconfirmation cause of
action, and that “[p]laintiffs’ failure to include such information on those forms
thus did not evince that they intended to deceive the bankruptcy court regarding the
existence of their personal injury claims.” (Emphasis added.) Id. ¶ 28. However,
the court concluded: “That does not mean *** that defendants did not establish that
element of judicial estoppel.” Id.
¶ 23 The majority went on to cite federal authority imposing a continuing duty of
disclosure, in a bankruptcy proceeding, of all property acquired postpetition,
including legal claims. Id. ¶ 29. The appellate court noted that plaintiffs did not
disclose the existence of their personal injury claims, despite a clear duty to do so.
The court stated:
“Moreover, when it inured to their benefit, they promptly notified the
bankruptcy court of their changed financial condition due to Terry’s May 2009
work-related injury and loss of income and sought a lower payment schedule
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via a modification of the plan. Those facts show that plaintiffs knew that they
had a continuing duty to disclose any changed financial conditions that might
affect the plan. Yet, when Terry went back to work and was injured again, only
a few months after receiving the plan modification, they never notified the
bankruptcy trustee or the court. Plaintiffs cannot now claim that they were
oblivious to their continuing duty to disclose all assets acquired during the
pendency of the bankruptcy proceeding.” Id. ¶ 30.
“Absent some affirmative statement by the trustee that they did not need to
disclose such an asset, their reliance on the [trustee’s] information regarding
any cash assets exceeding $2,000 did not justify their failure to disclose their
personal injury claims.” Id. ¶ 31.
The court concluded, in light of plaintiffs’ “clear duty to disclose their personal
injury claims, their failure to do so evinced their intent that the bankruptcy court
accept the fact that no such claims existed. Therefore, defendants established that
element of judicial estoppel.” Id. ¶ 32.
¶ 24 The appellate majority next considered the question of whether defendants
established the element that plaintiffs received some benefit in the bankruptcy
proceeding from their failure to disclose their personal injury claims. Citing an
unreported federal district court decision, the majority stated that ongoing
disclosure is required in a Chapter 13 proceeding so that creditors can object to, or
seek modification of, a confirmed plan. Id. ¶ 34 (citing Woodard v. Taco Bueno
Restaurants, Inc., No. 4:05-CV-804-Y, 2006 WL 3542693, at *10 (N.D. Tex. Dec.
8, 2006)). The court cited an Illinois appellate panel’s decision in Shoup v. Gore,
2014 IL App (4th) 130911, for the proposition that the “benefit-received
requirement of judicial estoppel” is satisfied where a plaintiff fails to disclose a
postconfirmation personal injury suit insofar as such a plaintiff has “ ‘his
repayment plan established and performed without giving his creditors any
knowledge of his potential to recover damages in his personal-injury action’ ”
(2014 IL App (2d) 140100, ¶ 34 (quoting Shoup, 2014 IL App (4th) 130911, ¶ 17)),
thus denying creditors the opportunity to “object to, or seek modification of, the
plan.” Id. Moreover, the court observed, as in Shoup, the failure to disclose left
plaintiffs with the ability to permanently avoid their debts (via discharge) and yet
receive a judgment against the defendants in the personal injury case. Id. ¶ 35.
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¶ 25 The majority rejected plaintiffs’ contention that the trial court abused its
discretion—or failed to exercise it at all—insofar as the circuit court did not
demonstrate any analysis of the elements of judicial estoppel, and in effect made a
“blanket finding” that, because they failed to disclose their personal injury action in
the bankruptcy court, they were judicially estopped from maintaining that action.
The majority found it sufficient that the circuit court had allowed argument at a
hearing of the matter and stated, in its written order, that it had reviewed the
“ ‘[m]otion, briefs, affidavits, exhibits, relevant case law, and *** arguments.’ ” Id.
¶¶ 37-39. The appellate majority also found it significant that the circuit court,
citing Runge, identified the five elements of judicial estoppel. Id. ¶ 40.
¶ 26 The majority then directly addressed the primary points made by the dissent.
The court, first, rejected the dissent’s contention that a false statement under oath
was required for judicial estoppel to apply, noting that this court in Runge did not
expressly require that the factual position be taken under oath; rather, this court
“phrased the element more broadly to include any factual assertion that a party
intends for the court to accept as true.” Id. ¶ 42. Second, the appellate court found
“ample evidence” for the trial court to have found “that plaintiffs intended to
deceive the bankruptcy court by not disclosing the lawsuit.” Id. ¶ 43.The appellate
court emphasized “the critical fact that plaintiffs promptly disclosed the existence
of Terry’s first workers’ compensation case when it advantaged them but failed to
disclose the second such case when it appeared likely that it would disadvantage
them.” Id. The appellate court considered that a “key piece of evidence,” with
respect to what the appellate majority saw as an intent to deceive the bankruptcy
court. Id. Finally, the majority found no injustice in applying judicial estoppel here.
Observing, in “virtually all cases in which judicial estoppel is applied, the result
will seem harsh to the party against whom the doctrine is invoked,” the appellate
majority reiterated that the purpose of judicial estoppel, i.e., to protect the integrity
of the court in question, and prevent manipulation of the judicial system, and found
the doctrine’s “laudable purpose is served” in this case. Id. ¶ 45.
¶ 27 The majority concluded that plaintiffs knowingly took inconsistent positions in
the bankruptcy court and the circuit court regarding the existence of their personal
injury claims, and they did so in a way that benefited them. Thus, the appellate
majority found no abuse of discretion insofar as it determined the trial court’s
decision “was anything but arbitrary, fanciful, or unreasonable” (id. ¶¶ 46-47)—the
applicable standard for abuse of discretion where a circuit court has exercised
discretion in the first instance.
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¶ 28 The dissenting justice, for her part, first noted the equitable nature of judicial
estoppel, observing that it is meant to be “ ‘flexible and not reducible to a pat
formula,’ ” that it should be invoked only to prevent an injustice (id. ¶ 52
(Schostok, J., dissenting) (quoting Ceres Terminals, Inc. v. Chicago City Bank &
Trust Co., 259 Ill. App. 3d 836, 850-51 (1994))), and that it is intended to prevent a
litigant from “playing ‘fast and loose’ ” with the court by “intentionally taking
contrary positions in order to obtain an unfair advantage.” (Internal quotation
marks omitted.) Id. ¶ 52 (citing Holland v. Schwan’s Home Service, Inc., 2013 IL
App (5th) 110560, ¶ 113). Though the majority had determined that the Fifth
District’s opinion in Holland was distinguishable, the dissent found it instructive.
¶ 29 The dissent observed that the facts of Holland were similar to those in this case.
In Holland, the plaintiff, Holland, had filed a Chapter 13 bankruptcy petition in
August 2008 and the repayment plan was confirmed in November 2008. Six
months later, in May 2009, Holland was terminated from his employment and a
claim arose against the defendant-employer, Schwan’s, for retaliatory discharge.
Holland never declared his claim against Schwan’s as an asset of his bankruptcy
estate and Schwan’s argued that Holland should be estopped from asserting his
claim. Holland, 2013 IL App (5th) 110560, ¶ 115.
¶ 30 The Holland court disagreed, noting that judicial estoppel did not apply
because Holland’s failure to declare his claim against Schwan’s as an asset of his
bankruptcy estate did not constitute an inconsistent position under oath. Id. ¶ 118.
Although the Holland court held that an inconsistent statement “under oath” was
still a requirement for application of judicial estoppel (id. ¶ 119), the court noted
that the absence of the oath requirement would not change its determination,
because there was no evidence that Holland intended to omit his claim against
Schwan’s from the bankruptcy estate. Id. ¶ 120. In short, there was no intent to
deceive.
¶ 31 Though the dissenting justice in this case argued for the preservation of an
“under oath” requirement in this context, noting, inter alia, that Runge itself cites
People v. Caballero, 206 Ill. 2d 65, 80 (2002), wherein “the sanctity of the oath”
(internal quotation marks omitted) is mentioned, the dissenter would have found,
“regardless of the oath requirement judicial estoppel should not have been applied
here, because there was no evidence that the plaintiffs intended to omit this cause of
action from the bankruptcy estate. Rather, the evidence in this case indicates that
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the failure to disclose was unintentional.” 2014 IL App (2d) 140100, ¶ 59
(Schostok, J., dissenting).
¶ 32 The dissent observed that the majority, in its analysis, limited the inferential
impact upon the plaintiffs of Myer’s admonition regarding the need to disclose
lump sum amounts received over $2,000 during the pendency of the bankruptcy
proceeding, when “it could equally have been inferred by the plaintiffs [under the
principle we refer to as expressio unius est exclusion alterius (the expression of one
thing is the exclusion of another)] that it was not necessary to disclose any
unliquidated assets.” Id. The dissent also pointed out that there were no bankruptcy
pleadings required to be filed after the cause of action arose. Id.¶ 33 Moreover, the dissent took issue with the majority’s determination that the fact
the plaintiffs disclosed their first workers’ compensation case evinced knowledge
of the need to disclose the pendency of the present suit. The dissenter observed that
reduced income in the former instance necessitated a return to bankruptcy court;
whereas, plaintiffs had received nothing—they might as laymen consider
reportable—as a result of the personal injury action during the pendency of the
bankruptcy proceeding. Id. ¶ 60. The dissent also made the following observations:
“[T]he trustee *** did not believe that disclosure of this suit would have
changed the outcome of the bankruptcy proceeding since no funds were
received during the five years when payments were required. *** Attached to
the defendants’ motion for summary judgment were letters from plaintiffs’
counsel seeking to settle this cause of action prior to the discharge of the
bankruptcy proceeding. If the plaintiffs were trying to avoid creditors, they
would have waited until after the discharge in bankruptcy to attempt to settle
this suit.” Id. ¶ 61.
¶ 34 The dissent concluded that the majority—by automatically finding that
plaintiffs’ failure to disclose the suit evinced the intent to deceive—had applied “a
rigid formula [that] fails to consider the specific circumstances of each case.” Id.
¶ 62. The dissent found the decisions in Dailey, Berge, and Shoup distinguishable
from the present case because, inter alia, they all involved subsequent bankruptcy
filings made where disclosure was specifically required and the plaintiff failed to
make the required disclosure. Id. (citing Shoup v. Gore, 2014 IL App (4th) 130911,
¶ 10, Berge v. Mader, 2011 IL App (1st) 103778, ¶ 17, and Dailey v. Smith, 292 Ill.
App. 3d 22, 28 (1997)).
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¶ 35 ANALYSIS
¶ 36 Judicial estoppel is an equitable doctrine invoked by the court at its discretion.
New Hampshire v. Maine, 532 U.S. 742, 750 (2001); People v. Runge, 234 Ill. 2d
68, 132 (2009); People v. Jones, 223 Ill. 2d 569, 598 (2006); People v. Caballero,
206 Ill. 2d 65, 80 (2002). As the Supreme Court has observed, the uniformly
recognized purpose of the doctrine is to protect the integrity of the judicial process
by prohibiting parties from “deliberately changing positions” according to the
exigencies of the moment. (Internal quotation marks omitted.) New Hampshire,
532 U.S. at 749-50. Judicial estoppel applies in a judicial proceeding when litigants
take a position, benefit from that position, and then seek to take a contrary position
in a later proceeding. Barack Ferrazzano Kirshbaum Perlman & Nagelberg v.
Loffredi, 342 Ill. App. 3d 453, 460 (2003).
¶ 37 This court has identified five prerequisites as “generally required” before a
court may invoke the doctrine of judicial estoppel. The party to be estopped must
have (1) taken two positions, (2) that are factually inconsistent, (3) in separate
judicial or quasi-judicial administrative proceedings, (4) intending for the trier of
fact to accept the truth of the facts alleged, and (5) have succeeded in the first
proceeding and received some benefit from it. Runge, 234 Ill. 2d at 132; Jones, 223
Ill. 2d at 598; Caballero, 206 Ill. 2d at 80.
¶ 38 Notably, a statement “under oath” has not been listed among those
requirements. Indeed, although this court in Caballero mentioned “ ‘the sanctity of
the oath’ ” in its discussion of judicial estoppel (Caballero, 206 Ill. 2d at 80(quoting Bidani v. Lewis, 285 Ill. App. 3d 545, 549 (1996))), the court did not
subsequently list an oath requirement among the requisites for application of the
doctrine (see Barack Ferrazzano Kirshbaum Perlman & Nagelberg v. Loffredi, 342
Ill. App. 3d 453, 464 (2003) (noting the absence of an oath requirement among the
elements listed in Caballero)), and this court has not mentioned it since. See Runge,
234 Ill. 2d at 132; Jones, 223 Ill. 2d at 598. The core concern is, and it seems should
be, that a party takes factually inconsistent positions, in separate proceedings,
intending that the trier of fact accept the truth of the facts alleged. As the appellate
majority in this case aptly observed, “there might well be situations in which a party
could intend a court to accept the truth of its factual position even without a
statement under oath.” 2014 IL App (2d) 140100, ¶ 42; see also Department of
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Transportation v. Coe, 112 Ill. App. 3d 506, 510 (1983) (relaxing the oath
requirement but holding that the record must “clearly reflect that the party intended
the trier to accept the truth of the party’s position”). We now expressly hold that a
statement under oath is not required for the doctrine of judicial estoppel to apply.
Application of the five factors enumerated in Cabellero, Runge, and Jones
addresses, without undue restriction, the problem of a party acting in bad faith,
playing “ ‘fast and loose’ ” with the court. Runge, 234 Ill. 2d at 133.
¶ 39 We also agree with the appellate majority’s statement that, “[j]udicial estoppel,
like all estoppels, must be proved by clear and convincing evidence.” 2014 IL App
(2d) 140100, ¶ 25 (citing Smeilis v. Lipkis, 2012 IL App (1st) 103385, ¶ 20 (judicial
estoppel), and Boelkes v. Harlem Consolidated School District No. 122, 363 Ill.
App. 3d 551, 554 (2006) (collateral, equitable and judicial estoppel) (citing Geddes
v. Mill Creek Country Club, Inc., 196 Ill. 2d 302, 314 (2001) (equitable estoppel))).
We believe that evidentiary standard properly accounts for a degree of caution with
which this doctrine should be considered and applied. See Construction Systems,
Inc. v. FagelHaber, LLC, 2015 IL App (1st) 141700, ¶ 38 (noting that courts have
warned the doctrine is “an extraordinary one which should be applied with caution
(internal quotation marks omitted)”).
¶ 40 We turn now to the appropriate standard of review. The parties dispute the
applicable standard of review: the defendants arguing for abuse of discretion; the
plaintiffs urging us to apply de novo review.
¶ 41 Since we have said that judicial estoppel is an equitable doctrine invoked by the
court at its discretion (Runge, 234 Ill. 2d at 132; Jones, 223 Ill. 2d at 598;
Caballero, 206 Ill. 2d at 80), it would seem to follow that we review a court’s
invocation of the doctrine under the abuse-of-discretion standard (see Highmark
Inc. v. Allcare Health Management System, Inc., 572 U.S. ___, ___, 134 S. Ct.
1744, 1748 (2014) (noting that, “[t]raditionally,” decisions on matters of discretion
are reviewable for abuse of discretion)), irrespective of the procedural mechanism
that culminated in the court’s ruling. An abuse of discretion occurs only when the
trial court’s decision is arbitrary, fanciful, or unreasonable or where no reasonable
person would take the view adopted by the trial court. Holland, 2013 IL App (5th)
110560, ¶ 114.
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¶ 42 On the other hand, defendants raised this issue via a motion for summary
judgment, seeking dismissal pursuant to the doctrine. 4 An appeal following a grant
of summary judgment, like an appeal from a section 2-619 dismissal, is subject to
de novo review. Raintree Homes, Inc. v. Village of Long Grove, 209 Ill. 2d 248, 254
(2004). Summary judgment is appropriate when there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.
Nationwide Financial, LP v. Pobuda, 2014 IL 116717, ¶ 25. Summary judgment is
a drastic measure and should only be granted if the movant’s right to judgment is
clear and free from doubt. Bagent v. Blessing Care Corp., 224 Ill. 2d 154, 163
(2007). Where a reasonable person could draw divergent inferences from
undisputed facts, summary judgment should be denied. Pielet v. Pielet, 2012 IL
112064, ¶ 53. On a motion for summary judgment, the trial court has a duty to
construe the record strictly against the movant and liberally in favor of the
nonmoving party. Williams v. Manchester, 228 Ill. 2d 404, 417 (2008). As a result,
summary judgment is not appropriate: (1) if “there is a dispute as to a material fact”
(Jackson v. TLC Associates, Inc., 185 Ill. 2d 418, 424 (1998)); (2) if “reasonable
persons could draw divergent inferences from the undisputed material facts” (id.);
or (3) if “reasonable persons could differ on the weight to be given the relevant
factors” of a legal standard (Calles v. Scripto-Tokai Corp., 224 Ill. 2d 247, 269
(2007)).
¶ 43 Where the prospect of judicial estoppel is raised via a motion for summary
judgment, Illinois appellate decisions are in conflict over the applicable standard of
review. As the appellate court noted in this case, some courts have applied an
abuse-of-discretion standard (Berge, 2011 IL App (1st) 103778, ¶ 9; Bidani, 285
Ill. App. 3d at 550), while others have ultimately applied a de novo standard to
dismissal, reasoning that the underlying motion, for summary judgment or under
section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2012)), is
4
We note that one appellate panel addressing judicial estoppel in this context, and the
appropriate standard of review, has observed that, though raised in a motion for summary judgment,
a motion seeking dismissal essentially raises an affirmative matter that seeks to defeat the claim, and
is more appropriate for a motion to dismiss under section 2-619(a)(9) of the Code of Civil Procedure
(735 ILCS 5/2-619(a)(9) (West 2008)). Berge v. Mader, 2011 IL App (1st) 103778, ¶ 9. Some
federal courts take a similar view. See Barley v. Fox Chase Cancer Center, 54 F. Supp. 3d 396, 404
(E.D. Pa. 2014) (“Judicial estoppel is properly classified as an affirmative defense, see Fed.R.Civ.P.
8(c)(1); see also 18B Charles Alan Wright and Arthur R. Miller, Federal Practice and Procedure
§ 4477 (2d ed.2014), and, like all affirmative defenses, it is the defendant’s burden to properly plead
and prove.”).
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“inseparable” from the decision to apply judicial estoppel (Smeilis, 2012 IL App
(1st) 103385, ¶¶ 22-23 (citing Barack, 342 Ill. App. 3d at 459 (stating that the court
applied an abuse-of-discretion standard to application of judicial estoppel, but
applied de novo review to the grant of summary judgment)). 2014 IL App (2d)
140100, ¶ 19. Divergent opinions as to the appropriate standard of review are not
limited to Illinois jurisprudence.
¶ 44 We note that federal courts are split as to whether dismissal on grounds of
judicial estoppel should be reviewed de novo or for abuse of discretion when a
ruling was rendered on a motion for summary judgment—which is normally
subject to de novo review—though the clear majority favor the abuse-of-discretion
standard. See Uzdavines v. Weeks Marine, Inc., 418 F.3d 138, 142 (2d Cir. 2005)
(applying de novo standard of review); Solomon v. Vilsack, 628 F.3d 555, 561
(D.C. Cir. 2010) (same); Mirando v. United States Department of Treasury, 766
F.3d 540, 545 (6th Cir. 2014) (same); Queen v. TA Operating, LLC, 734 F.3d 1081,
1086-87 (10th Cir. 2013) (reviewing for abuse of discretion); Ah Quin v. County of
Kauai Department of Transportation, 733 F.3d 267, 270-71 (9th Cir. 2013) (same);
Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 795 (7th Cir.
2013) (same); Rockwood v. SKF USA Inc., 687 F.3d 1, 10 (1st Cir. 2012) (same);
In re Oparaji, 698 F.3d 231, 235 (5th Cir. 2012) (same); Capella University, Inc. v.
Executive Risk Specialty Insurance Co., 617 F.3d 1040, 1051 (8th Cir. 2010)
(same); In re Kane, 628 F.3d 631, 636 (3d Cir. 2010) (same); Stephens v. Tolbert,
471 F.3d 1173, 1175 (11th Cir. 2006) (same).
¶ 45 Although we have not conducted comprehensive research on the subject, we
note that some other jurisdictions have opted for de novo review. See Tarver v. City
of Sheridan Board of Adjustments, 2014 WY 71, ¶ 10, 327 P.3d 76 (Wyo. 2014)
(application of the principles of judicial estoppel, collateral estoppel and/or the law
of the case are matters of law; consequently, our review is de novo); NOLM, LLC v.
County of Clark, 100 P.3d 658, 663 (Nev. 2004) (“Whether judicial estoppel
applies is a question of law subject to de novo review.”); State v. Petty, 548 N.W.2d
817, 820 (Wis. 1996) (“Determining the elements and considerations involved
before invoking the doctrine of judicial estoppel are questions of law which we
decide independently [of the circuit court or court of appeals].”); Spohn v. Van
Dyke Public Schools, 822 N.W.2d 239, 246 (Mich. Ct. App. 2012) (Michigan court
of appeals noted that judicial estoppel is an equitable doctrine and, when reviewing
equitable actions, that court reviews the trial court’s decision de novo); Atkins v.
4940 Wisconsin, LLC, 93 A.3d 1286, 1289 (D.C. 2014) (de novo review); compare
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Regents of the University of California v. Superior Court, 166 Cal. Rptr. 3d 166,
186 (Cal. Ct. App. 2014) (“The determination of whether judicial estoppel can
apply to the facts is a question of law reviewed de novo, i.e., independently
[citations], but the findings of fact upon which the application of judicial estoppel is
based are reviewed under the substantial evidence standard of review. [Citations.]
Even if the necessary elements of judicial estoppel are found, because judicial
estoppel is an equitable doctrine [citations], whether it should be applied is a matter
within the discretion of the trial court. [Citations.] The exercise of discretion for an
equitable determination is reviewed under an abuse of discretion standard.”
(Internal quotation marks omitted.)).
¶ 46 The appellate court in this case stated the standard of review thusly:
“In the context of this appeal, both standards apply. In applying the
summary-judgment standard, we must decide first whether there were any
issues of material fact related to the applicability of judicial estoppel. If there
were, then summary judgment would be improper. If not, then we must decide
whether defendants were entitled to judgment as a matter of law. To answer that
latter question, we necessarily must decide whether the court abused its
discretion in applying judicial estoppel under the undisputed facts. If it did, then
defendants would not be entitled to judgment as a matter of law. If it did not,
then they would be.” 2014 IL App (2d) 140100, ¶ 22.
¶ 47 We believe the procedural and analytical sequence should proceed as follows. 5
First, the trial court must determine whether the prerequisites for application of
judicial estoppel are met. In this respect, the party to be estopped must have (1)
taken two positions, (2) that are factually inconsistent, (3) in separate judicial or
quasi-judicial administrative proceedings, (4) intending for the trier of fact to
accept the truth of the facts alleged, and (5) have succeeded in the first proceeding
5
As will appear hereafter, in this case we would not need to engage in the full analysis we
outline, i.e., review of the ruling on summary judgment, and could perhaps decline to settle the
matter of standards of review in that respect (see The Venture—Newberg-Perini, Stone & Webster v.
Illinois Workers’ Compensation Comm’n, 2013 IL 115728, ¶ 14 (refraining from deciding the
applicable standard of review as the result would be the same under either standard); People v.
Edwards, 2012 IL 111711, ¶ 30 (same); see also Hoffler v. Bezio, 726 F.3d 144, 151-52 (2d Cir.
2013) (stating that a court need not determine standard of review when the result would be the same
under either standard), we nonetheless address the issue in order to provide guidance in future cases;
however, we provide the discussion here to guide future courts confronted with this question. See
Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 236 (2010) (“judicial dictum is entitled to
much weight, and should be followed unless found to be erroneous” (internal quotation marks
omitted)).
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and received some benefit from it. Runge, 234 Ill. 2d at 132; Jones, 223 Ill. 2d at
598; Caballero, 206 Ill. 2d at 80. We note, even if all factors are found, intent to
deceive or mislead is not necessarily present, as inadvertence or mistake may
account for positions taken and facts asserted. Second, if all prerequisites have been
established, the trial court must determine whether to apply judicial estoppel—an
action requiring the exercise of discretion. Multiple factors may inform the court’s
decision, among them the significance or impact of the party’s action in the first
proceeding, and, as noted, whether there was an intent to deceive or mislead, as
opposed to the prior position having been the result of inadvertence or mistake.
New Hampshire, 532 U.S. at 753 (acknowledging that it may be appropriate to
resist application of judicial estoppel when a party’s prior position was based on
inadvertence or mistake); accord Holland, 2013 IL App (5th) 110560, ¶ 120
(“ ‘The Courts have been reluctant to apply the doctrine of judicial estoppel in the
bankruptcy context where the nondisclosure of a claim was inadvertent.’ ” (quoting
Jaeger v. Clear Wing Productions, Inc., 465 F. Supp. 2d 879, 882 (S.D. Ill. 2006));
see also Jaeger, 465 F. Supp. 2d at 882 (suggesting—in what may, perhaps, be a
minority view in federal bankruptcy jurisprudence—that judicial estoppel should
apply only where there is “deliberate,” “cold manipulation,” or a “scheme to
mislead the court,” not where there is “inadvertent oversight,” a “confused
blunder,” or a “good-faith mistake”).
¶ 48 With respect to the applicable standard of review, we believe it logically
follows that we review a trial court’s exercise of discretion for abuse of discretion.
That standard also appears to be consistent with the approach commonly taken by
other courts where an exercise of discretion is concerned. Highmark Inc., 572 U.S.
at ___, 134 S. Ct. at 1748 (“[t]raditionally,” decisions on matters of discretion are
reviewable for abuse of discretion). Therefore, where a trial court has exercised its
discretion in the application of judicial estoppel, we review for abuse of discretion.
¶ 49 However, where the exercise of that discretion results in the termination of the
litigation, and that result is brought about via the procedural mechanism of a
motion for summary judgment, it follows, as well, that we review that ruling
de novo. As the authorities previously cited indicate, the necessary representations
in a successful motion for summary judgment are that: there are no genuine issues
of material fact and the moving party is entitled to judgment as a matter of law
(Nationwide Financial, LP, 2014 IL 116717, ¶ 25), as reasonable persons could not
draw divergent inferences from the undisputed facts (Pielet, 2012 IL 112064, ¶ 53),
and the movant’s right to judgment is clear and free from doubt (Bagent, 224 Ill. 2d
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at 163). The record must be strictly construed against the movant and liberally in
favor of the nonmoving party. Williams, 228 Ill. 2d at 417. There can be no room
for reasonable persons to “differ on the weight to be given the relevant factors” of a
legal standard. Calles, 224 Ill. 2d at 269.
¶ 50 In this case, our review is necessarily truncated by circumstances. When a court
is required by law to exercise its discretion, the failure to do so may itself constitute
an abuse of discretion, precluding deferential consideration on appeal. People v.
Newborn, 379 Ill. App. 3d 240, 248 (2008); People v. Whirl, 351 Ill. App. 3d 464,
467 (2004); see also Arizona v. Washington, 434 U.S. 497, 510 n.28 (1978) (“If the
record reveals that the trial judge has failed to exercise the ‘sound discretion’
entrusted to him, the reason for such deference by an appellate court disappears.”).
We find that principle applicable in this case. Although the circuit court, at the
outset in its written order, recited the proposition that judicial estoppel “is an
equitable doctrine invoked by the court at its discretion,” it does not otherwise
appear from this record—as we will elaborate hereafter—that the court exercised
discretion in its application of the doctrine, finding, rather, that the presence of
certain facts, i.e., the mere failure to disclose the personal injury cause of action in
the bankruptcy proceeding, mandated dismissal. 6 Because no discretion was
exercised—or if arguably exercised, clearly abused by reason of erroneous
assessment of the evidence—no deferential review would be warranted in any
event. We find hereafter, pursuant to independent consideration, judicial estoppel
was inequitably applied.
¶ 51 We note, at the outset, there are some relevant bankruptcy questions upon
which the federal courts are not in agreement. Because we find the dispositive issue
in this case to be whether the plaintiffs “deliberately” changed positions according
to the exigencies of the moment, whether they used “intentional self-contradiction
*** as a means of obtaining unfair advantage” (internal quotation marks omitted)
(New Hampshire, 532 U.S. at 750-51) we deem it unnecessary to weigh in on those
federal questions.
6
The circuit court’s inaccurate references to the content of the Seymours’ February 2010
motion to modify the bankruptcy plan, as indicative of their knowledge of the need to disclose, and
their intent, does not convince us otherwise. In any event, the Supreme Court’s recent statement in
Highmark Inc. would seem applicable here: “The abuse-of-discretion standard does not preclude an
appellate court’s correction of a district court’s legal or factual error: ‘A district court would
necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly
erroneous assessment of the evidence.’ Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405
(1990).” Highmark Inc., 572 U.S. at ___ n.2, 134 S. Ct. at 1748 n.2.
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¶ 52 Though trustee Myer’s affidavit suggests otherwise, and the statute and rule
she cited (11 U.S.C. § 541 (2006) and Bankruptcy Rule 1007(h) (Fed. R. Bankr. P.
1007(h))) may well support her position, 7 we will assume, for purposes of our
analysis, that the Seymours were under a continuing duty to disclose their personal
injury cause of action during the pendency of their Chapter 13 bankruptcy
proceeding. There appears to be general agreement with the position taken by the
Eleventh Circuit Court of Appeals in Robinson v. Tyson Foods, Inc., 595 F.3d
1269, 1274 (11th Cir. 2010):
“A debtor seeking shelter under the bankruptcy laws has a statutory duty to
disclose all assets, or potential assets to the bankruptcy court. 11 U.S.C.
§§ 521(1), 541(a)(7). ‘The duty to disclose is a continuing one that does not end
once the forms are submitted to the bankruptcy court; rather the debtor must
amend [her] financial statements if circumstances change.’ Burnes, 291 F.3d at
1286. This duty applies to proceedings under Chapter 13 and Chapter 7 alike
because ‘any distinction between the types of bankruptcies available is not
sufficient enough to affect the applicability of judicial estoppel because the
need for complete and honest disclosure exists in all types of bankruptcies.’
De Leon v. Comcar Industries, Inc., 321 F.3d 1289, 1291 (11th Cir.2003).”
Accord In re Flugence, 738 F.3d 126, 128-31 (5th Cir. 2013). 8 Specifically, it has
been said that federal courts have uniformly held that Chapter 13 debtors are
7
See In re Padula, No. 11-12985-BFK, 2015 WL 1931977, at *4 n.6 (E.D. Va. Apr. 28, 2015):
“Fed. R. Bankr. P. 1007(h). The Rule is limited by its terms to the kinds of property described in
Bankruptcy Code Section 541(a)(5). It does not apply to post-petition property covered by Section
1306, that is, to the kind of property at issue in Carroll v. Logan and in this case. In re Kemp,
Adversary No. 11–5002, 2011 WL 3664497, at *3 (W.D.La. Aug. 19, 2011) (Rule 1007(h) ‘does
not, however, cover the property brought into the estate under section 1306, including post-petition
causes of action. Nevertheless, courts have uniformly held that a Chapter 13 debtor is obligated to
disclose post-petition causes of action.’)”
8
We note, for purposes of applying judicial estoppel, federal authority holds that a debtor’s
failure to disclose an asset is generally deemed inadvertent only when the debtor either lacks
knowledge of the undisclosed claims or has no motive for their concealment (Eastman v. Union
Pacific R.R. Co., 493 F.3d 1151, 1157 (10th Cir. 2007) (“courts routinely, albeit at times sub
silentio, infer deliberate manipulation”)), neither of which—lack of knowledge or motive—is often
the case. See also Flugence, 738 F.3d at 130-31 (the controlling inquiry with respect to inadvertence
is whether the debtor knew of the facts giving rise to her claim and had a motive to conceal; “[A]
lack of awareness of a statutory disclosure duty for [ ] legal claims is not relevant.” (Internal
quotation marks omitted.)).
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obligated to disclose postpetition causes of action. In re Padula, No.
11-12985-BFK, 2015 WL 1931977 (E.D. Va. Apr. 28, 2015). 9
¶ 53 So we begin with the assumption that the Seymours were under a legal duty to
disclose their personal injury cause of action as an asset in the bankruptcy
proceeding, and the undisputed fact that they failed to do so. We assume further, for
purposes of this analysis, that the prerequisites generally required for the
application of judicial estoppel are established, i.e., that the parties to be estopped
have (1) taken two positions, (2) that are factually inconsistent, (3) in separate
judicial or quasi-judicial administrative proceedings, (4) intending for the trier of
fact to accept the truth of the facts alleged, and (5) have succeeded in the first
proceeding and received some benefit from it. Runge, 234 Ill. 2d at 132; Jones, 223
Ill. 2d at 598; Caballero, 206 Ill. 2d at 80.
¶ 54 We may well say that the Seymours intended for the bankruptcy court to accept
the truth of the fact, or their position, that they had no “assets”—as they understood
the term—other than those disclosed; however, there is no evidence that they
intended to deceive or mislead the court—a critical factor in the application of
judicial estoppel. The one factor cited by the circuit court as evincing the
Seymours’ knowledge of the need to disclose their personal injury claim, i.e., that
they had recognized the need to disclose Terry’s workers’ compensation claim as
an asset in their 2010 motion to modify the bankruptcy plan, simply does not exist.
¶ 55 The inference that plaintiffs knew they had to disclose the June 3, 2010, injuries
and derivative claims because they had disclosed similar “assets” or sought
“exemptions” previously in their motion to modify the bankruptcy plan, finds no
basis in the bankruptcy court’s records or the affidavits before the circuit court. We
9
While our primary focus here is on the knowledge and intent of the debtors, we consider the
value of the personal injury claim to the creditors a relevant consideration under the circumstances
of this case. One might well ask what a postpetition, postconfirmation, unliquidated cause of action
is worth to debtors’ creditors in a Chapter 13 bankruptcy, which is, as trustee Myer attested, to be
completed within a five-year period. See 11 U.S.C. § 1322(d)(1) (2006). Surprisingly, though many
decisions speak to the need for disclosure, far fewer address valuation of the claim, which is the only
issue that should be of practical interest to the debtors’ creditors. Those that do—usually in the
context of claimed exemptions—concede that a cause of action is an asset that is not easily valued,
insofar as, prior to judgment, a cause of action’s value is unliquidated and contingent. Wissman v.
Pittsburgh National Bank, 942 F.2d 867, 871 (4th Cir. 1991) (adding that “claiming a specific dollar
exemption” for a cause of action “is, at best, speculation”); accord In re Ball, 201 B.R. 210, 214
(Bankr. N.D. Ill. 1996).
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quote here the pertinent allegations and representations of the motion to modify the
Chapter 13 plan filed in the bankruptcy court on February 25, 2010:
“That the Debtor, TERRY L. SEYMOUR, was injured at work and has
been unable to work and receiving only workmen’s compensation benefits
since May, 2009. He anticipates being released to work within the next few
weeks.
That the Debtors’ combined gross income during 2009 was approximately
$8800.00 less than their gross income at the time of the filing of their petition.
Because of reduced income, the Debtors have fallen behind in payment of their
monthly living expenses.
The Debtors received tax refunds for the year 2009 in the amount of
approximately $7805.00. They need said refunds to supplement their living
expenses.
That if their Chapter 13 Plan were modified as hereinafter provided, the
Debtors believe they would be able to make future payments to the Trustee and
complete their Chapter 13 Plan within the time allowed by law.”
The Debtors thereafter prayed only that they be allowed to retain the entirety of
their 2009 income tax refunds—an amount in excess of $2000—“to supplement
their living expenses” and that “all other provisions of their Chapter 13 Plan remain
in full force and effect.”
¶ 56 The order that was entered on March 19, 2010, modifying the plan, provided
only:
“That the Chapter 13 Plan of the Debtors is hereby modified to provide that
the Debtors are hereby allowed to retain all of their 2009 income tax refunds to
supplement their living expenses.
That all other provisions of the Debtors’ Chapter 13 Plan shall remain in full
force and effect.”
¶ 57 The workers’ compensation benefit was not asserted as an asset; it was, as the
dissenting appellate justice observed in this case (2014 IL App (2d) 140100, ¶ 60
(Schostok, J., dissenting)), referenced only as a cause of reduced income.
Obviously, there was no claim of an exemption.
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¶ 58 Moreover, the circuit court was not justified in extrapolating its inference from
Myer’s affidavit. As we have noted, Myer indicated that Terry Seymour had filed a
motion to modify, stating that he had been injured at his job and was unable to
work. As a consequence, he had been receiving only workers’ compensation
benefits since May of 2009. In a separately numbered paragraph, without
correlative reference, Myer stated that workers’ compensation proceeds, “pursuant
to Illinois Compiled Statutes, are specifically exempt from bankruptcy.” She never
said that the Seymours claimed the workers’ compensation proceeds as an
exemption, nor did any other affidavits filed on behalf of the plaintiffs. The filing of
the motion to modify does not evince knowledge, on the part of the plaintiffs, of the
need to disclose their personal injury claim in the bankruptcy proceeding. As the
dissenting appellate court justice in this case aptly observed, the 2009 injury and
workers’ compensation claim were relevant, and submitted, in the motion to
modify only because they explained the Seymours’ decrease in income. Id.¶ 59 Moreover, as the dissenter noted, citing letters the Seymours’ personal injury
counsel sent to defendants seeking to settle the case during the pendency of the
bankruptcy case, “If the plaintiffs were trying to avoid creditors, they would have
waited until after the discharge in bankruptcy to attempt to settle this suit.” Id. ¶ 61.
¶ 60 It is also clear from Myer’s affidavit that, had she been apprised of the personal
injury claim, she, at least, would not have taken action with respect thereto. It is, as
we have suggested, and federal case law indicates (see Wissman, 942 F.2d at 871)
difficult to discern how this asset might have been valued so as to benefit the
Seymours’ creditors within the applicable period of Chapter 13 bankruptcy.
¶ 61 Further, the uncontroverted affidavits of the Seymours and their bankruptcy
attorney confirm that Myer advised them that they had to report any lump sum
funds received in excess of $2,000 during the pendency of the bankruptcy. It is
understandable that laymen might infer, in the absence of advice to the contrary
from their bankruptcy attorney—which appears not to have been forthcoming in
this case—that smaller sums—and certainly unliquidated claims for money—did
not have to be disclosed.
¶ 62 We are not willing, as appears to be the case in prevailing federal authority
given these circumstances (see Eastman, 493 F.3d at 1157; Flugence, 738 F.3d at
130-31), to presume that the debtors’ failure to disclose was deliberate
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manipulation. We do not find that inference or presumption controlling in Illinois,
much less given the facts of this case.
¶ 63 Where there is affirmative, uncontroverted evidence, that debtors did not
deliberately change positions according to the exigencies of the moment, that they
did not employ “intentional self-contradiction *** as a means of obtaining unfair
advantage,” we believe the purpose of the doctrine of judicial estoppel is not
furthered by application of the doctrine in this case. We are not so ready, as the
federal courts appear to be, to penalize, via presumption, the truly inadvertent
omissions of good-faith debtors in order to protect the dubious, practical interests
of bankruptcy creditors. Compare Flugence, 738 F.3d at 130-31 (“the controlling
inquiry, with respect to inadvertence, is the knowing of facts giving rise to
inconsistent positions”; a “lack of awareness of a statutory disclosure duty for [ ]
legal claims is not relevant”; expressing concern that a different rule would “land
another blow on the victims of bankruptcy fraud” (internal quotation marks
omitted)); Payne v. Wyeth Pharmaceuticals, Inc., 606 F. Supp. 2d 613, 616 (E.D.
Va. 2008) (federal authority holds that a debtor’s failure to disclose an asset is
deemed inadvertent only when the debtor either lacks knowledge of the
undisclosed claims or has no motive for their concealment). In this case, given
these uncontested facts, we find the failure to disclose the personal injury action
insufficient, in itself, to warrant the application of judicial estoppel.
¶ 64 In sum, we agree with the dissent’s summary in this matter. The fact that the
plaintiffs had a legal duty to disclose this suit, and failed to do so, does not, given
the facts of this case, establish the intent to deceive and/or manipulate the
bankruptcy court. “[T]his reasoning diminishes the application of judicial estoppel
to a rigid formula and fails to consider the specific circumstances of each case.”
2014 IL App (2d) 140100, ¶ 62 (Schostok, J., dissenting). Moreover, the filing of
the Seymours’ 2010 motion to modify the bankruptcy plan does not evince their
awareness of the need to disclose this personal injury cause of action. Any
inference otherwise is based on a wholesale misconstruction of the motion to
modify and the pertinent affidavits submitted in this case. We find that the
application of judicial estoppel was not warranted here. We, therefore, reverse the
judgments of the circuit and appellate courts, and remand for further proceedings.
¶ 65 Reversed and remanded.
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