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HomeMy WebLinkAbout2010-4286 HEATHER J. VANCE-RITTMAN, : IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : v. : 10-4286 CIVIL : JODY A. RITTMAN, : CIVIL ACTION – IN DIVORCE Defendant : IN RE: PLAINTIFF’S MOTION FOR PRE-TRIAL JUDICIAL DETERMINATION THAT CLAIMS PRESENTED AND/OR ALLUDED TO BY THE DEFENDANT IN HIS ANSWERS TO PLAINTIFF’S MOTION TO COMPEL AND OBJECTIONS TO THE DEFENDANT’S INTERROGATORIES ARE BARRED BY THE DOCTRINE OF JUDICIAL ESTOPPEL ORDER OF COURT th AND NOW , this 9day of January, 2015, upon consideration of the Plaintiff’s Motion for Pre-Trial Judicial Determination, Defendant’s Response, argument held on August 20, 2014, and the parties’ briefs; IT IS HEREBY ORDERED AND DIRECTED that Plaintiff’s Motion for Pre-Trial GRANTED Judicial Determination is . Defendant is judicially estopped from seeking any claim in equitable distribution against Plaintiff. By the Court, _______________________ M. L. Ebert, Jr., J. Heather J. Vance-Rittman, Esquire Plaintiff, Pro Se Joseph D. Caraciolo, Esquire Attorney for Defendant HEATHER J. VANCE-RITTMAN, : IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : v. : 10-4286 CIVIL : JODY A. RITTMAN, : CIVIL ACTION – IN DIVORCE Defendant : IN RE: PLAINTIFF’S MOTION FOR PRE-TRIAL JUDICIAL DETERMINATION THAT CLAIMS PRESENTED AND/OR ALLUDED TO BY THE DEFENDANT IN HIS ANSWERS TO PLAINTIFF’S MOTION TO COMPEL AND OBJECTIONS TO THE DEFENDANT’S INTERROGATORIES ARE BARRED BY THE DOCTRINE OF JUDICIAL ESTOPPEL OPINION AND ORDER OF COURT Ebert, J., January 9, 2015 – Plaintiff filed this Motion for Pre-Trial Judicial Determination seeking to bar Defendant’s claims based on Judicial Estoppel. For the reasons that follow, Plaintiff’s Motion is granted. Statement of Facts/Procedural History The parties were married on August 3, 1996, and separated on or about June 19, 2010. The divorce action was filed on June 29, 2010. Plaintiff still resides in the parties’ marital home at 180 Meadow Lane, Mechanicsburg, Pennsylvania. Plaintiff was granted exclusive possession of the marital home on January 11, 2011. Defendant currently resides at 5 Countryside Court, Camp Hill, Pennsylvania. After the parties’ separation, Defendant took a jointly titled 2005 Acura TL. Plaintiff retained a jointly titled 2006 Honda Odyssey Minivan. Defendant was making 1 1 payments on the Honda, while Plaintiff was making payments on the Acura. On March 11, 2011, Plaintiff was granted sole use and exclusive possession of the Honda vehicle, while Defendant was granted sole use and exclusive possession of the Acura vehicle. Additionally, each party was ordered to pay their own insurance on the vehicle in their possession. On March 1, 2013, Defendant filed for Chapter 7 Bankruptcy in the Middle District of Pennsylvania. Along with his voluntary bankruptcy petition, Defendant was required to file various schedules and a Statement of Financial Affairs detailing his assets and financial situation. On April 12, 2013, Plaintiff filed a Complaint to Determine Dischargeability of Debt in an adversary proceeding to Defendant’s bankruptcy. The parties reached a stipulation which was made an Order of Court on May 17, 2013. The parties’ stipulation read in relevant part: NOW THEREFORE, in consideration of the mutual promises herein contained, and intending to be legally bound hereby, the parties agree that any obligations owed by Jody A. Rittman \[Defendant\] to Heather Vance- Rittman \[Plaintiff\], presently existing or hereinafter determined to exist, related in any way to their marriage, be in the nature of child support, spousal support, alimony pendent lite, alimony, equitable distribution or otherwise, are hereby agreed to be non dischargeable. On June 12, 2013, Defendant was granted a no asset Chapter 7 Discharge. All Defendant’s debts were discharged, and Defendant did not reaffirm any debts with the 2 exception of obligations to Plaintiff as indicated by the above stipulation. On May 5, 2014, Plaintiff filed a Motion to Compel Defendant to Certify that Discovery is Complete. In that motion, Plaintiff indicated that the issues of equitable 1 See Plaintiff’s Petition for Special Relief, ¶ 8-12, filed Jan. 5, 2011; See also Defendant’s Answer to Petition for Special Relief, ¶ 8-12, filed Jan. 28, 2011 2 See Plaintiff’s Petition for Special Relief, ¶ 3; See also Defendant’s Answer to Petition for Special Relief, ¶ 3. 2 distribution had been litigated in Defendant’s bankruptcy and, therefore, the divorce matter could move forward as Defendant had no equitable distribution claims remaining. Defendant filed a response to this motion on May 28, 2014, where he indicated that he 3 still retains an interest in the marital assets following his bankruptcy. It was Defendant’s Answer to the Motion to Compel which caused Plaintiff to file the instant Motion for a Pre-Trial Judicial Determination. Plaintiff argues that Defendant has no interest in the marital property because Defendant did not include the pending divorce and possible equitable distribution matter on his Statement of Financial Affairs as required. On the other hand, Plaintiff argues she has preserved her claims against Defendant with the stipulation filed during Defendant’s bankruptcy proceeding. Defendant argues that he still has an interest in a portion of the marital property. Discussion Plaintiff urges this Court to apply judicial estoppel to preclude Defendant from making any claims to the remaining marital property because Defendant failed to include the pending divorce action and a possible equitable distribution claim on his bankruptcy filings. Plaintiff argues that Defendant should be precluded from asserting equitable distribution claims now, especially since the Bankruptcy Court discharged all of Defendant’s debt, including marital debt, based on Defendant’s assertions on his Statement of Financial Affairs and other bankruptcy filings. Defendant argues that he did not forgo his right to equitable distribution by discharging his debts and obligations in bankruptcy. Judicial estoppel is used to prevent a party “from assuming a position inconsistent with his or her assertion in a previous action if his or her contention was 3 See Defendant’s Answer to Plaintiff’s Motion to Compel, ¶ 7, filed May 28, 2014 3 successfully maintained”. Morris v. S. Coventry Twp. Bd. Of Supervisors, 898 A.2d 1213, 1218 (Pa. Cmwlth. Ct. 2006) (internal citations omitted). Judicial estoppel depends on the relationship of a party to a tribunal and is used to prevent litigants from “playing fast and loose” with the judicial system by changing positions to advance their legal needs. Id. at 1218 (internal citations omitted). However, judicial estoppel is not intended to eliminate all inconsistences. In re Kane, 628 F.3d 631, 638 (3d Cir. 2010). The criteria for determining whether to apply judicial estoppel is: First, the party to be estopped must have taken two positions that are irreconcilably inconsistent. Second, judicial estoppel is unwarranted unless the party changed his or her position in bad faith – i.e., with intent to play fast and loose with the court. Finally, a district court may not employ judicial estoppel unless it is tailored to address the harm identified and no lesser sanction would adequately remedy the damage done by the litigant’s misconduct. Id. at 638 (quoting Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314, 319-20 (3d Cir. 2003)(emphasis original). Judicial estoppel is fact specific to each case and is an “equitable doctrine invoked by a court at its discretion”. Kane, 628 F.3d at 638 (citing New Hampshire v. Maine, 532 U.S. 742, 751 (2001). When a debtor files for bankruptcy, he must submit several schedules and a Statement of Financial Affairs. On these schedules, a debtor must include all property of the estate. Property of the estate includes all legal or equitable interest in property. 11 U.S.C.S. § 541. This includes property settlement agreements with the debtor’s spouse or interlocutory or final divorce decrees. Id. For example, on Schedule B – Personal Property, a debtor has the option to select whether he has any “alimony, maintenance, support, and property settlements to which the debtor is or may be 4 4 entitled”. The Statement of Financial Affairs also has a place to “list all suits and administrative proceedings to which the debtor is or was a party within one year 5 immediately preceding the filing of this bankruptcy action”. In support of her position that Defendant was required to list his pending divorce and possible equitable distribution action on his bankruptcy filings, Plaintiff cites to In re Kane, supra. In Kane, a wife filed for bankruptcy. She included the marital home in her Schedule A and indicated the parties were separated. She also included her husband as an unsecured creditor in her Schedule F stating the possibility of obligations from the marital proceedings. She was unable to provide an amount for the potential debt to her husband as no final equitable distribution order had been entered. Instead, she stated her debt amount was unknown and included the divorce action on her Statement of Financial Affairs stating it was currently pending. Thereafter, the husband filed for bankruptcy and the wife filed a proof of claim in his bankruptcy proceeding. The husband attempted to expunge his wife’s claim. Kane, 628 F.3d at 634-35. The Third Circuit Court of Appeals had to decide whether the wife’s claim in her husband’s bankruptcy proceeding was permitted or whether it would be judicially estopped. The Court found that the wife’s claim in her husband’s bankruptcy proceeding was not judicially estopped because the disclosures the wife made on her own bankruptcy petition were satisfactory to allow her to pursue her claim against her husband. The Court reasoned that based on the wife’s disclosures on her own petition the trustee knew about her pending divorce action and could have pursued the 4 See Ex. A, p. 10 to Plaintiff’s Motion for Pre-Trial Judicial Determination 5 See Ex. A, p. 29 to Plaintiff’s Motion for Pre-Trial Judicial Determination 5 6 economic claims on her behalf but chose not to. Therefore, the wife had preserved her future economic claims against her husband even though she did not have a final equitable distribution order in place and could not state how much her pending claim was worth on her bankruptcy filings. Id. at 643. In a later case, In re Ruitenberg, 745 F.3d 647 (3d Cir. 2014), the court dealt with a similar issue when an interest in the equitable distribution of marital assets in a divorce proceeding becomes a claim against the bankruptcy estate. The court found that a non-debtor spouse has an allowable pre-petition claim against the debtor’s bankruptcy estate for equitable distribution when the parties are in divorce proceedings before the bankruptcy petition is filed. Id. 745 F.3d at 653. However, even more important for the instant matter was the court’s reasoning in reaching that conclusion. In Ruitenberg, the court discussed Kane at length and stated that: a debtor who has already begun divorce proceedings must disclose any expected share of his or her marital property as an asset of the estate under § 541, and, conversely, a non-debtor spouse may file a pre-petition claim against the estate based on his or her expected equitable share of the marital property even if no final judgment of divorce existed at the time of the bankruptcy filing. Ruitenberg, 745 F.3d at 652 (emphasis added). The court makes it clear that a debtor has the responsibility to include a possible equitable distribution claim on their bankruptcy filings if a divorce proceeding is already pending even if no claim has been finalized. Defendant argues that a party does not forgo his right to equitable distribution by discharging debts and obligations in bankruptcy and that, therefore, he is entitled to a portion of the marital assets in equitable distribution. Defendant further argues that if 6 See Kane, n. 4. The wife’s petition disclosed the divorce litigation and was discussed at length at her 341 meeting. 6 Plaintiff was dissatisfied with the discharge of Defendant’s debts, including the mortgage on the marital home, she should have filed an objection. Defendant relies on Hogg v. Hogg, 816 A.2d 314 (Pa. Super. 2003) and Cohen v. Goldberg, 720 A.2d 1028 (Pa. 1998), to make his argument. In Hogg, supra, the parties entered into a settlement agreement following their divorce. The agreement allocated certain debts to the husband and others to the wife. Thereafter, the husband filed for bankruptcy and received a discharge of debts, including those debts allocated to him through the agreement. The court held that because the wife did not pursue her rights in the bankruptcy proceeding the state court could not reaffirm her husband’s obligation to pay those debts after they had been discharged by the bankruptcy court. Hogg, 816 A.2d at 316. It is the responsibility of the non-debtor spouse to raise an adversary proceeding to protect property settlement issues. Id. at 319. In Cohen, supra, the wife had made several large loans to her husband during the course of their marriage. The husband filed for bankruptcy and received a discharge of debts. His wife did not receive anything from his bankruptcy discharge and did not object to the discharge. Shortly thereafter, the parties separated and the wife tried to argue that she was entitled to a recoupment in equitable distribution for the loans she made to the husband that were discharged. The court held that the wife was not entitled to recoupment because both debts did not arise from the same transaction. Cohen, 720 A.2d at 1029. Although both the Hogg and Cohen cases allowed the debtor spouse equitable distribution after receiving a bankruptcy discharge, neither case is applicable to the 7 instant situation. Initially, in both Hogg and Cohen, the non-debtor spouse had failed to preserve equitable distribution clams against the debtor spouse by filing an adversary proceeding in the bankruptcy case. This is not the case in the instant matter as Plaintiff filed an adversary proceeding and the parties entered into a stipulation that Defendant’s bankruptcy would not discharge any potential equitable distribution claims Plaintiff had or may have against Defendant. Furthermore, neither Hogg nor Cohen discusses judicial estoppel or the pending court dockets a debtor spouse must include on his bankruptcy filings. Rather, this matter is much more in line with Kane and Ruitenberg, which both require that a debtor who files for bankruptcy is required to list all possible equitable distribution claims against the non-debtor spouse if the divorce action was pending prior to filing for bankruptcy. In this case, the divorce action was pending prior to Defendant’s bankruptcy filing. Therefore, Kane and Ruitenberg required Defendant to state that he had a potential equitable distribution claim against Plaintiff in order to allow the trustee to pursue such claims for the bankruptcy estate if he or she so wished. It is true that similar to the wife in Kane Defendant listed the marital residence and the vehicles on his Schedule A and Schedule B and indicated that the parties were separated. However, Defendant did nothing else to indicate that he had a potential claim against Plaintiff for equitable distribution. Defendant did not list Plaintiff as a potential creditor, nor did he include the pending divorce action as a suit to which he was a party, both of which the wife in Kane did. Defendant also presented no evidence that the trustee was aware a pending divorce action existed. For example, Defendant indicated the parties were separated, but he still included income from a spouse on his 8 Schedule I – Current Income of Individual Debtor(s) form and indicated on his Chapter 7 Statement of Current Monthly Income and Means-Test Calculation form that his filing status was “\[m\]arried, not filing jointly, without the declaration of separate 7 households…”. There was also no evidence of any discussions with a trustee at a 341 meeting showing the trustee was aware of any impending divorce and equitable distribution claim as was present in Kane. Therefore, it is clear that Defendant did not “disclose any expected share of his…marital property as an asset under the estate…”. See Ruitenberg, 745 F.3d at 652. Judicial estoppel is appropriate in this matter. First, Defendant made assertions indicating he had no pending equitable distribution claims on his bankruptcy petition. Defendant even failed to include the pending divorce docket as a suit he was a party to. Secondly, Defendant has received a benefit from his position in the bankruptcy court as he was discharged from marital debt, including the mortgage and payments on a vehicle in his possession. Now, Defendant is attempting to assert that he has an equitable distribution claim against Plaintiff, an irreconcilably inconsistent position with his Bankruptcy Court filings. Bad faith on the part of Defendant can be inferred as now he would seek a portion of the marital estate after he has already received the benefit of discharging those debts; debts Plaintiff has still been obligated to pay. Additionally, Plaintiff properly protected any of her claims for equitable distribution against Defendant by filing an adversary proceeding and having a stipulated order of court entered that made any future equitable distribution claims of Plaintiff against Defendant non- 7 See Ex. 1 to Plaintiff’s Motion for Judicial Determination. On his Chapter 7 Statement of Current Monthly Income and Means-Test Calculation form Husband also had the option of selecting his filing status as “\[m\]arried, not filing jointly, with declaration of separate households”, which required the parties to be legally separated. 9 dischargeable. It would be grossly unfair to allow Defendant to discharge his marital debts through bankruptcy, while Plaintiff still pays them, and then to argue later that he is entitled to a portion of the value of those same assets. By failing to include and inform the Bankruptcy Court of any potential equitable distribution claims, Defendant is judicially estopped from seeking those claims now. The following order will be entered: th AND NOW , this 9 day of January, 2015, upon consideration of the Plaintiff’s Motion for Pre-Trial Judicial Determination, Defendant’s Response, argument held on August 20, 2014, and the parties’ briefs; IT IS HEREBY ORDERED AND DIRECTED that Plaintiff’s Motion for Pre-Trial GRANTED Judicial Determination is . Defendant is judicially estopped from seeking any claim in equitable distribution against Plaintiff. By the Court, _______________________ M. L. Ebert, Jr., J. Heather J. Vance-Rittman, Esquire Plaintiff, Pro Se Joseph D. Caraciolo, Esquire Attorney for Defendant 10 11