January 2, 2009
CLARENCE RUFFIN, PLAINTIFF-APPELLANT,
KINDER MORGAN LIQUIDS TERMINAL, LLC, DEFENDANT-RESPONDENT, AND THE DOW CHEMICAL COMPANY; SGS LABORATORIES, DEFENDANTS.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-8976-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 13, 2008
Before Judges Parrillo, Lihotz and Messano.
In this matter, we review whether judicial estoppel precludes plaintiff's Law Division personal injury action, because he failed to disclose the claim in a previously filed bankruptcy petition. The Law Division dismissed plaintiff's suit, with prejudice. We reverse the December 21, 2007 order because the trial court did not give notice to the Chapter 7 Trustee, who on behalf of plaintiff's creditors is the legal owner of the claim. The trustee must determine whether to prosecute the claim against defendant on behalf of the creditors of the debtor's estate or abandon his interest.
Plaintiff Clarence Ruffin worked as a truck driver transporting liquid chemical material. Plaintiff owned his own tractor. He hauled chemicals for Langer Transport Company (Langer). Plaintiff, using his tractor, picked-up one of Langer's tanker-trailers, took the tanker to be filled with chemical-product and delivered it to Langer's customer.
Defendant, Kinder Morgan Liquids Terminal, LLC, owned and operated a chemical storage facility and truck terminal in Carteret. Defendant stored liquid chemicals, such as ethanol alcohol in its tank farm. As a driver, plaintiff would arrive at the terminal to either fill a tanker-trailer or empty a load of ethanol.
Plaintiff was familiar with the Carteret facility. Initially the facility was owned by GATX. Starting in 1968 until the end of 1995, plaintiff hauled loads from the Carteret terminal as many as four times each week. Many areas of the facility had no specific safety precautions to prevent injury when a driver was atop his tanker. Typically, a station might contain a ladder hanging from a rack over the tanker.
In 1998, Union Carbide developed a portion of the Carteret facility owned by GATX. Specifically, new loading racks were built and a "fall protection" system was installed. GATX provided drivers, including plaintiff, with training on how to use the new equipment, which included a demonstration on how to load the tanker and seal the tanks using the caged inspection racks.
Plaintiff described the procedures he consistently followed in this way. After checking-in, the vehicle was driven underneath an inspection rack. A lab technician would inspect the tanker-trailer for quality assurance purposes. The underside of the tanker was checked for evidence of leaks, then the technician climbed an inspection rack adjacent to the tanker, opened the tanker dome and inspected the inside to verify it was clean and ready for a new load.
After inspection, a driver moved the truck to a filling rack to prepare to receive the product. First, the truck was grounded. Second, the dome of the tanker-trailer was aligned with the filler pump. Next, while wearing a hard hat, goggles, boots and cargo jacket, a driver sealed the outlet valves on the bottom of the trailer. Plaintiff described the button seals used for this purpose as "a copper wire with cups that's got to be put through the wash out caps." Once the bottom was sealed, the driver prepared the seals for the top of the trailer. Most tankers required three top valves and the dome to be sealed.
The rack was equipped with a "fall protection" system to aid a driver working atop the tanker in the event he lost footing while sealing the valves. The driver climbed a ladder and walked out over the trailer on a one-foot aluminum catwalk. The copper wire seals would be crimped as proof the load was not subject to tampering. The tanker was filled and the driver drew a sample of the product for inspection. The driver then sealed the dome and delivered the drawn sample to the lab for testing. Once the sample was approved, the driver was free to deliver the load.
Defendant took over the Carteret facility operation from GATX. In late 1995, plaintiff's assignments from Langer changed so he rarely filled tankers at defendant's facility. In 2002, prior to the accident, plaintiff recalled he was last at the facility in the fall.
On December 12, 2002, plaintiff picked-up his assignment from Langer. He was to load a tanker with ethanol alcohol from defendant's facility and deliver the load to Dow Chemical. Plaintiff checked into defendant's facility and when told drove his tanker to an inspection rack. Upon inspection, the technician noted the tanker was not sealed. Defendant recalled the process with which he was familiar required the tanker to be sealed where it was loaded after inspection. The inspector told plaintiff "things have changed." Plaintiff was directed to seal the truck before inspection and told to move the truck to an open portion of the yard so he would not delay other drivers waiting behind him. The area to which plaintiff moved his truck was not equipped with a fall protection system. Plaintiff proceeded to the area and climbed the catwalk onto the top of his tanker to seal the valves. After plaintiff sealed several valves, he stood to turn and lost his footing. Plaintiff fell headfirst over the catwalk, striking the truck's fender.
Plaintiff suffered two back fractures and head injuries and was hospitalized for eleven days. After his discharge, plaintiff used a back brace and walker for approximately one month and engaged other treatments to resolve his back and resultant medical problems. He was unable to return to work until he commenced a new position in August 2003. He lost that job after two months. Plaintiff returned to Langer as a company driver where he worked from 2004 through February 2006.
On July 16, 2004, plaintiff sought bankruptcy protection by filing a voluntary petition pursuant to Chapter 7 of the Bankruptcy Code. Plaintiff recalls answering questions over the telephone posed by his attorney from the firm of Jenkins and Clayman. The bankruptcy schedules accompanying his petition did not reveal the negligence claim against defendant. At the time plaintiff requested bankruptcy protection, it is clear he had spoken to personal injury counsel regarding filing suit against defendant. Plaintiff filed his personal injury complaint against defendant on December 9, 2004.*fn1
Trial commenced on December 11, 2007. On December 13, 2007 plaintiff was cross-examined. He was asked to identify his bankruptcy petition and schedules. At sidebar, defense counsel was asked to provide a proffer, to which he responded: "He perjured himself again," and then added, "And then we'll be moving for a dismissal based on judicial estoppel."
Cross-examination continued. Plaintiff acknowledged on Schedule B, which lists all assets of a debtor, at line 20, labeled "Other contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims," plaintiff marked "None." Plaintiff admitted he did not disclose the possible personal injury claim, as it had not yet been filed. Plaintiff's expert and another fact witness were presented. The trial was recessed for the weekend. Defense counsel requested that prior to resumption of the trial, motions be presented.
On December 17, 2007, defendant filed a motion to dismiss plaintiff's action. Citing judicial estoppel, defendant argued plaintiff's failure to disclose his negligence claim against defendant as an asset on his bankruptcy schedules was irreconcilably inconsistent with pursuit of the Law Division action and thus, the personal injury complaint must be dismissed.
The trial court considered the arguments of the parties and stated:
In this case the -- plaintiff sought protection from the Bankruptcy [Code] . . . and while that . . . proceeding was going on in 2004, he basically . . . lied . . . .
[I]n the . . . bankruptcy court case [his position] was . . . he did not have any other claim as an asset, which would be subject to the Bankruptcy [Code]. And in this case he had approximately [$]111[,000] or $112,000 worth of unsecured creditors, which were essentially washed away by his false perjurous and misleading filing of the voluntary [petition]. And basically the Court finds that it does not accept the plaintiff's version that either A, he didn't understand what he was signing, [or] B, that his attorney in the . . . bankruptcy proceeding didn't explain it to him, or that he never met the attorney or whatever. Nevertheless, the bankruptcy petition which the Court received a certified copy [of] . . . basically shows that that's what [defendant] certified to . . . . [T]he Court has no problem at all in indicating that . . . basically he said he had no claim, when, in fact, several months later I believe on December 9th or the 8th of 2004 [he] went ahead and filed a claim for this case . . . . [Plaintiff is] essentially trying to . . . get two bites at the apple. One is . . . the creditors, and the second one is . . . the case now against [defendant].
The court granted defendant's motion and dismissed plaintiff's complaint with prejudice.
We pause to review plaintiff's bankruptcy pleadings and certain procedures applicable to his Chapter 7 filing. Plaintiff filed a voluntary petition, initiating a case as a debtor pursuant to Chapter 7 of the Bankruptcy Code on July 19, 2004. 11 U.S.C.A. § 301(a).
By filing a bankruptcy petition, a debtor formally requests the relief afforded by the Bankruptcy Code. The petition not only initiates a bankruptcy action, it also acts as an Order for Relief of a debtor, as provided by the case under which the petition is submitted. A debtor becomes obligated to provide full disclosure of his or her financial affairs, 11 U.S.C.A. § 521, in exchange for the protections afforded by the Bankruptcy Code, such as, the automatic stay provisions of 11 U.S.C.A. § 362(a).
The purpose of a Chapter 7 case, sometimes called a liquidation, is to allow an individual debtor to retain certain exempt assets, 11 U.S.C.A. § 522, surrender all assets in excess of those exemptions to the appointed Chapter 7 trustee, 11 U.S.C.A. § 704, and discharge all unsecured debts, 11 U.S.C.A. § 727(a), in order to make an unencumbered fresh start, relieved from the immediate financial pressure that drove the debtor to file bankruptcy. Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 660, 112 L.Ed. 2d 755, 765 (1991).
The commencement of a bankruptcy case also creates an estate, which consists of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C.A. § 541(a). "The scope of this [Code section] is broad. It includes all kinds of property, including tangible or intangible property, causes of action, . . . and other forms of property." Senate Report No. 95-989. All property comes into the debtor's estate and is administered by the trustee in a Chapter 7 bankruptcy case, who succeeds to a debtor's interest in property as fiduciary to a debtor's creditors.
A debtor's petition is accompanied by schedules listing all assets and liabilities. 11 U.S.C.A. § 521(a)(1)(B)(i). The debtor has an affirmative duty to provide complete disclosure. Ibid.; see Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 416 (3d Cir. 1988) (§ 521 outlines a non-exhaustive list of the debtor's duties in a bankruptcy case), cert. denied, 488 U.S. 967, 109 S.Ct. 495, 102 L.Ed. 2d 523 (1988). Schedule B requires disclosure of all personal property "of whatever kind," in which a debtor has a whole or partial interest. The schedule lists various categories of assets and requires a debtor to describe the nature and location of the property, whether it is owned with another, and the value of the debtor's interest. Specifically, item 20 requests disclosure of "[o]ther contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims." A debtor who has an interest in an unliquidated personal injury claim must disclose that claim. Among the property a debtor may retain as exempt is "a payment, not to exceed $20,200, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor[.]" 11 U.S.C.A. § 522(d)(11)(D).
Once a case is filed, the Chapter 7 panel trustee conducts a meeting of creditors. 11 U.S.C.A. § 341(a). A "debtor shall appear and submit to examination under oath" conducted by the trustee at the meeting of creditors. 11 U.S.C.A. § 343. Any creditor may examine a debtor at the § 341(a) meeting. Ibid.
A Charter 7 debtor who fulfills all duties described by the Code, see 11 U.S.C.A. § 521, and otherwise provides full disclosure, is eligible to retain all scheduled exempt property, 11 U.S.C.A. § 523 and any other property of the estate, see 11 U.S.C.A. § 541(a), abandoned or not administered by the trustee.
11 U.S.C.A. § 554(a) and (c). Moreover, a debtor is entitled to a discharge of the unsecured debts. 11 U.S.C.A. 727(a).
Here, plaintiff requested protection under Chapter 7 of the Code. As a Chapter 7 debtor, he filed his Schedules of Assets and Liabilities. On Schedule B, plaintiff revealed he had an interest in $20,080 of personal property. He did not disclose the chose in action against defendant under section 20. Unquestionably, plaintiff's claims against defendant arose prior to the filing of his Chapter 7 petition. The interest in that claim is property of the estate under 11 U.S.C.A. § 541(a). Finally, on approximately November 30, 2004, plaintiff received a discharge under 11 U.S.C.A. § 727(a).
We review the trial court's application of the judicial estoppel doctrine. "The doctrine of judicial estoppel is well entrenched in New Jersey's jurisprudence." Newell v. Hudson, 376 N.J. Super. 29, 38 (App. Div. 2005); Koppel v. Olaf Realty Corp., 56 N.J. Super. 109, 121 (Ch. Div. 1959), aff'd, 62 N.J. Super. 103 (App. Div. 1960).
"It is 'an equitable doctrine precluding a party from asserting a position in a case that contradicts or is inconsistent with a position previously asserted by the party in the case or a related legal proceeding.'" Ibid. (quoting Tamburelli Properties v. Cresskill, 308 N.J. Super. 326, 335 (App. Div. 1998)); McCurrie v. Town of Kearney, 174 N.J. 523, 533-43 (2002). "The purpose of the judicial estoppel doctrine is to protect 'the integrity of the judicial process.'" Kimball Int'l, Inc. v. Northfield Metal Prod., 334 N.J. Super. 596, 606 (App. Div. 2000), (quoting Cummings v. Bahr, 295 N.J. Super. 374, 387 (App. Div. 1996)), certif. denied, 167 N.J. 88 (2001). Essentially, if a litigant's position in one matter is true, then the contrary position in the subsequent matter cannot be. Thus, the doctrine is not intended to bar every inconsistency, but "[r]ather . . . designed to prevent litigants from 'playing fast and loose with the courts.'" Cummings, supra, 295 N.J. Super. at 387 (citing Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 358 (3d Cir. 1996)); Koppel, supra, 56 N.J. Super. at 121.
The application of judicial estoppel, particularly to bar a plaintiff's cause of action, is an extraordinary remedy and its application is subject to the court's sound discretion. See Klein v. Stahl GMBH & Co. Maschinefabrik, 185 F.3d 98, 108 (3rd Cir. 1999) (citing McNemar v. Disney Store, Inc., 91 F.3d 610, 613 (3rd Cir. 1996) (Appellate courts "review the application of judicial estoppel under an 'abuse of discretion' standard."), cert. denied, 519 U.S. 1115, 117 S.Ct. 958, 136 L.Ed. 845 (1997). We note, however, that as an equitable doctrine, judicial estoppel "should be invoked only 'when a party's inconsistent behavior will otherwise result in a miscarriage of justice.'" Kimball Int'l, supra, 334 N.J. Super. at 608 (quoting Ryan Operations, supra, 81 F.3d at 365); State Farm Fire & Cas. Co. v. Connolly, 371 N.J. Super. 119, 125 (App. Div. 2004). A misapplication of a trial court's discretion results when "its ruling is founded on an error of law or a misapplication of law to the facts.'" Montrose v. Med. Group Participating Sav. Plan v. Bulger, 243 F.3d 773, 780 (3d Cir. 2001) (citing In re O'Brien, 188 F.3d 116, 122 (3rd Cir. 1999)).
Plaintiff argues the trial court abused its discretion in applying judicial estoppel to the instant action because the trial judge failed to conduct a proper inquiry to determine whether to apply the doctrine and failed to allow plaintiff a meaningful opportunity to explain. In support of this position, plaintiff notes the trial judge did not review transcripts of the bankruptcy matter, and gave credit to plaintiff's statement that he did not know if he would pursue a claim against defendant when he filed bankruptcy. Plaintiff's position suggests the omission of the personal injury action from his bankruptcy petition was a "good faith mistake," not an intentional omission. We reject this argument.
The trial judge, who had the benefit of hearing plaintiff's testimony regarding the incomplete bankruptcy pleadings, made strong findings that plaintiff was not credible. We defer to the trial court's credibility findings unless "they are so wholly unsupportable as to result in a denial of justice[.]" Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974); Dolson v. Anastasia, 55 N.J. 2, 7 (1969); State v. Cerefice, 335 N.J. Super. 374, 383 (App. Div. 2000).
Additionally, both the bankruptcy petition and the statement of assets and liabilities contain a statement above the debtor's-plaintiff's signature, that "under penalty of perjury," the information provided is "true and correct." Plaintiff consulted with personal injury counsel prior to seeking bankruptcy counsel. Presumably, he was advised of the date his negligence claim would toll. Also, plaintiff knew the extent of wages he lost and the nature of the injuries he suffered.
The negligence complaint was filed on December 9, 2004, five months following the bankruptcy petition's filing. Admittedly, the suit date was driven by the expiration of the statute of limitations on December 10, 2004. However, the timing was also coincident with the notice of discharge issued October 29, 2004 and last date for creditors to object to discharge on November 29, 2004.*fn2
We do not view plaintiff's negligence action as "so tenuous as to be fanciful" dispensing with the obligation to provide disclosure. Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. General Motors Corp., 337 F.3d 314, 323 (3d Cir. 2003), cert. denied, 541 U.S. 1043, 124 S.Ct. 2172, 158 L.Ed. 2d 732 (2004). Admittedly, causation was challenged. However, plaintiff's action was sufficient to present its disposition to a jury. Had the prior bankruptcy filing not been discovered, and had plaintiff received a verdict in the negligence matter, plaintiff's $111,161.55 of unsecured claims would have been discharged and plaintiff would have retained all proceeds recovered from suit. We conclude, the coincidence of timing cannot be attributed to mistake, as the claim was concealed from creditors with the expectation the recovery would be retained by plaintiff.
Plaintiff's assertion he did not act in bad faith is unavailing. We concluded judicial estoppel applies when "the estopping position and the estopped position [are] directly inconsistent, that is, mutually exclusive . . . . [and] the responsible party must have succeeded in persuading a court to accept its prior position." Atlantic City v. Cal. Ave. Ventures, LLC, 23 N.J. Tax 62, 68 (App. Div. 2006). We have rejected the position advanced by plaintiff, concluding the "required finding of 'bad faith' is not a requirement under New Jersey law." Ibid.*fn3
However, plaintiff persuasively argues the trial court had an obligation to "narrowly tailor the application of the doctrine to [address] the specific harm[.]" See Montrose, supra, 243 F.3d at 777-78. We agree the trial judge should have pursued a different course once defendant identified the omission in plaintiff's bankruptcy disclosure. Had plaintiff complied with 11 U.S.C.A. § 521(a) and listed the chose in action, the Chapter 7 trustee, on behalf of the creditors, would have determined whether to pursue the litigation. As we noted, plaintiff's maximum permissible retention of any recovery is $20,000. 11 U.S.C.A. § 522(d)(11); In re Smith, 263 B.R. 71, 75 (Bankr. D.N.J. 2001); In re Scott, 245 B.R. 17, 21 (Bankr. D.N.J. 2000). Any excess recovery would inure to the benefit of the unsecured creditors.
Such a result may still be achieved. A debtor's case may be reopened at any time to administer assets. 11 U.S.C.A. § 350(b). As necessary, the trustee may examine the debtor or other evidence to assess the prospects of recovery for the estate to be distributed for benefit of the creditors. If he chooses to assume the presentation of the claims as pled, trial shall be rescheduled. If a recovery is realized, the funds shall be paid to the trustee on behalf of the estate, because the approval of any distribution of the monies rests with the Bankruptcy Court. Our determination should not be construed to reward plaintiff for his omission. Krystal, supra, 337 F.3d at 325 (citing Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1288 (11th Cir. 2002)). If the trustee abandons the claim, then defendant's application for dismissal may again be presented.
We have reviewed plaintiff's remaining arguments suggesting the trial court failed to allow a meaningful opportunity to oppose defendant's application and, pursuant to Rule 4:5-4, defendant waived the assertion of the defense. After analyzing the record in light of the written and oral arguments advanced by the parties, we conclude these issues are without sufficient merit to warrant discussion in a written opinion. Rule 2:11-3(e)(1)(E).
We vacate the order of dismissal and remand the matter for additional proceedings consistent with our opinion.