Dana L. Hauner v. Cap Ventures Group, Inc. ( 2023 )

RENDERED: MARCH 31, 2023; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-0611-ME
DANA L. HAUNER APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE ANGELA MCCORMICK BISIG, JUDGE
ACTION NO. 19-CI-004456
CAP VENTURES GROUP, INC. APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CALDWELL, GOODWINE, AND MCNEILL, JUDGES.
MCNEILL, JUDGE: Dana L. Hauner (“Hauner”) appeals from the Jefferson
Circuit Court’s judgment finding her claims barred by judicial estoppel. Finding
no error, we affirm.
On September 20, 2018, Hauner deeded property to CAP Venture
Group, Inc. (“CAP”) as collateral for a loan. The same day, she signed a lease
agreement with CAP along with an option to re-purchase the property. On January
3, 2019, Hauner filed for Chapter 13 bankruptcy and did not identify CAP as her
creditor. Her Chapter 13 Plan filed a month later similarly made no mention of
CAP.
In early March 2019, CAP sent Hauner a notice terminating the lease
and option due to alleged breaches. Hauner then amended her bankruptcy
schedules to include CAP as a creditor,1 but did not list the property, lease
agreement, option agreement, or potential pre- or post-petition causes of action
against CAP. Following the termination notice, Hauner filed a complaint in
Jefferson Circuit Court alleging various claims, including breach of contract and
fraud. CAP subsequently filed a motion for summary judgment alleging that
Hauner should be judicially estopped from asserting claims based upon the lease
and option agreements because she did not disclose those assets, or her interest in
the real property, in the bankruptcy proceeding. The trial court granted the motion
and dismissed Hauner’s complaint. This appeal followed.
The standard of review on appeal of a summary judgment is whether
the trial court correctly found there were no genuine issues as to any material fact
and that the moving party was entitled to judgment as a matter of law. CR2 56.03.
“The record must be viewed in a light most favorable to the party opposing the
1
Hauner amended her bankruptcy schedules on March 21, 2019.
2
Kentucky Rules of Civil Procedure.
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motion for summary judgment and all doubts are to be resolved in his favor.”
Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991).
“Because summary judgment involves only legal questions and the existence of
any disputed material issues of fact, an appellate court need not defer to the trial
court’s decision and will review the issue de novo.” Lewis v. B & R Corporation,
56 S.W.3d 432, 436 (Ky. App. 2001).
Hauner lists several reasons why the trial court’s grant of summary
judgment was in error, but because its dismissal was based upon judicial estoppel,
we shall only consider her arguments on this issue. Hauner claims judicial
estoppel should not apply because she eventually disclosed CAP as a creditor, CAP
was not prejudiced, and CAP’s own fraudulent conduct should prevent the
doctrine’s application. We would note that Hauner’s arguments concerning
judicial estoppel are mainly conclusory and undeveloped in her brief. “It is not our
function as an appellate court to research and construct a party’s legal arguments.”
Hadley v. Citizen Deposit Bank, 186 S.W.3d 754, 759 (Ky. App. 2005).
Nevertheless, we will analyze the trial court’s application of judicial estoppel more
generally for error.
Judicial estoppel is “an equitable principle intended to protect the
integrity of the judicial process by prohibiting a party from taking inconsistent
positions in judicial proceedings.” Mefford v. Norton Hosps., Inc., 507 S.W.3d
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580, 584 (Ky. App. 2016) (citing Colston Investment Co. v. Home Supply Co., 74
S.W.3d 759, 763 (Ky. App. 2001)). Factors to consider in determining whether to
apply judicial estoppel include: “(1) whether the party’s later position is clearly
inconsistent with its earlier position; (2) whether the party succeeded in persuading
a court to accept the earlier position; and (3) whether the party seeking to assert an
inconsistent position would derive an unfair advantage or impose an unfair
detriment on the opposing party if not estopped.” Hisle v. Lexington-Fayette
Urban Cnty. Government, 258 S.W.3d 422, 434-35 (Ky. App. 2008) (citing New
Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S. Ct. 1808, 1815, 149 L. Ed. 2d
968 (2001)). “These same factors have been applied on a modified basis in the
bankruptcy context where a debtor fails to disclose an asset either in the original
bankruptcy petition or by subsequent amendment.” Mefford, 507 S.W.3d at 584-
85. In the bankruptcy context, the Sixth Circuit has described the doctrine of
judicial estoppel as barring a party from “(1) asserting a position that is contrary to
one that the party has asserted under oath in a prior proceeding, where (2) the prior
court adopted the contrary position either as a preliminary matter or as part of a
final disposition.” Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002) (internal
quotation marks and citation omitted).
Applying the elements of judicial estoppel to the facts of this case, we
cannot say the trial court erred in dismissing Hauner’s claims. First, Hauner’s
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position in the civil action is clearly contrary to her position in the bankruptcy
proceeding. “A debtor in a Chapter 13 proceeding has a duty to disclose any
potential claim as an asset to the bankruptcy court in a schedule of assets and
liabilities.” Davis v. Fiat Chrysler Automobiles U.S., LLC, 747 Fed. App’x 309,
314 (6th Cir. 2018) (citing 11 U.S.C.3 § 521; Lewis v. Weyerhaeuser Co., 141 Fed.
App’x 420, 424 (6th Cir. 2005)). By failing to disclose her potential claims
concerning the lease and option agreements, Hauner was saying she had no
contingent or unliquidated claims, contradicting her civil complaint. See
Stephenson v. Malloy, 700 F.3d 265, 274 (6th Cir. 2012) (citation omitted)
(holding that “omission [of potential claims] was equivalent to a statement that
there were no such claims and was therefore inconsistent with his pursuit of the
instant action”). Second, the bankruptcy court adopted Hauner’s position that she
had no potential claims when it confirmed her bankruptcy plan. See Davis, 747
Fed. Appx. at 314 (citation omitted) (“The bankruptcy court confirmed [the]
bankruptcy plan without the potential claim listed as an asset, which is sufficient to
satisfy the second consideration.”).
Nevertheless, “judicial estoppel is inappropriate in cases of conduct
amounting to nothing more than mistake or inadvertence.” Browning, 283 F.3d at
776 (citations omitted). In determining whether Hauner’s conduct resulted from
3
United States Code.
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mistake or inadvertence, we consider whether: “(1) she lacked knowledge of the
factual basis of the undisclosed claims; (2) she had a motive for concealment; and
(3) the evidence indicates an absence of bad faith[,]” particularly looking at
Hauner’s attempts to advise the bankruptcy court of her omitted claim. White v.
Wyndham Vacation Ownership, Inc., 617 F.3d 472, 478 (6th Cir. 2010).
Hauner had knowledge of the potential claims during the bankruptcy
proceeding yet failed to amend her schedules to include them. Hauner filed her
bankruptcy petition in January 2019. In March 2019, CAP notified Hauner it was
terminating the lease and option agreement. At this point, Hauner would have
been aware of her potential claims concerning the lease and option agreements, yet
she did not amend her schedules to include them.4 Further, Hauner testified
multiple times at a temporary injunction hearing that she did not disclose the lease
and option agreement, or her interest in the property, because she intended to
repurchase the property from CAP outside of the bankruptcy proceeding.
Hauner also had a motive to conceal these claims and her interest in
the property since it “is always in a Chapter 13 petitioner’s interest to minimize
income and assets.” Lewis, 141 Fed. Appx. at 426 (citation omitted). “If the tort
action becomes part of the estate, ‘then the proceeds from it could go towards
4
Hauner amended her schedules to include CAP as a creditor but made no mention of her assets:
the potential claims or her interest in the property.
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paying [the debtors’] creditors, rather than simply to paying [the debtor].’”
Mefford, 507 S.W.3d at 585 (citing White, 617 F.3d at 479).
Finally, we find Hauner’s single attempt to correct her omission
inadequate to demonstrate her lack of bad faith. See White, 617 F.3d at 480(footnote omitted) (“Since the bankruptcy system depends on accurate and timely
disclosures, the extent [one’s] efforts [to correct an omission], together with their
effectiveness, is important. Furthermore, since judicial estoppel seeks to prevent
parties from abusing the judicial process through cynical gamesmanship, the
timing of [the] effort is also significant.”). Hauner made one attempt to correct her
omission on March 21, 2019, and only after CAP notified her it was terminating
the lease and option contract. Further, she did not adequately fix her error, only
amending her schedules to include CAP as a creditor. At no time did Hauner list
her potential claims concerning the lease and option agreement or her interest in
the property, despite CAP calling attention to these omissions in the bankruptcy
proceeding.
Based upon the foregoing, the judgment of the Jefferson Circuit Court
is affirmed.
ALL CONCUR.
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BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Robert Frederick Smith Megan P. Keane
Prospect, Kentucky Louisville, Kentucky
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