MEMORANDUM AND ORDER
This bankruptcy appeal, referred to the magistrate judge for a report and recommendation, comes before the court on objections by the debtor, Kristen Kae Gowin.
Standard of Review
Upon objections to a magistrate judge’s report and recommendation, “the district court must undertake a de novo review of the record.”
Wildermuth v. Furlong,
Procedural background
The relevant factual background stated in the magistrate’s report and recommendation is unchallenged and will not be restated herein. Suffice it to say that Gowin had claims against Autos, some of which arose after her Chapter 13 petition was filed but before that plan was confirmed. Those claims arose from Gowin’s purchase and Autos’ repossession of an automobile. Gowin failed to disclose these claims in her plan as assets in her bankruptcy schedules but did disclose them to the bankruptcy trustee. Approximately eight months after her plan was confirmed, Gowin filed an adversary proceeding, asserting those claims against Autos.
In the adversary proceeding, Autos raised the affirmative defense that Gowin’s claims should be barred because Gowin knew about them prior to her plan confirmation but had failed to raise them during the confirmation process. The bankruptcy judge rejected Auto’s affirmative defense that the confirmation of Gowin’s Chapter 13 plan barred Gowin’s attempt to pursue claims not disclosed prior to the confirmation. The magistrate recommends reversing the bankruptcy judge, finding that “the confirmation order is res judicata for any issue that should have or could have been raised during the confirmation process.” Dk. 12, p. 13. Gowin now objects, contending that the magistrate erred in so finding.
Gowin first challenges the magistrate’s finding of fact that Gowin knew the subject vehicle had been repossessed by Autos when she filed her bankruptcy case. Gow-in contends the magistrate overstepped his bounds by substituting his judgment for that of the bankruptcy court. The magistrate rejected the bankruptcy judge’s finding that Gowin did not know the vehicle was repossessed when she filed her bankruptcy petition, because it found “no rational relationship to the supportive evi-dentiary data.” Dk. 12, p. 11.
The magistrate further found that by April 9, 1999, when the plan was confirmed, Gowin was either aware of Autos’s sale of the vehicle to the third party or should have been aware of the sale. Therefore, the magistrate concluded that all the claims raised by Gowin in the adversary lawsuit were either known to Gow-in at the time she filed her bankruptcy petition or should have been known prior to the time her plan was confirmed by the bankruptcy court. Dk. 12, p. 11.
The finding that Gowin knew or should have known, by the date her plan was confirmed, of all the claims she raised in the adversary lawsuit is sufficient to support the magistrate’s ruling. That factual finding, which is not challenged by Gowin, is fully supported by the record. Accordingly, the court has no need to determine whether the magistrate erred in its finding about what Gowin knew on the date she filed for bankruptcy.
Duty to disclose post-petition assets
Gowin next claims error in the magistrate’s finding of law that “Gowin was under an obligation to amend her plan and financial statements to include new claims against Autos.” Dk. 12, p. 11. Gowin contends that no statute or rule expressly requires Chapter 13 debtors such as Gowin to amend previously-filed bankruptcy schedules to include assets they acquire after the ease is filed.
In determining the existence and extent of a debtor’s duty to disclose, the court begins with the basic proposition, which Gowin does not challenge, see Dk. 13, p. 4, that after-acquired property constitutes property of the bankruptcy estate. The duty to disclose assets flows from the fact that after-acquired property is property of the estate.
Under Chapter 13, property of the bankruptcy estate includes, in addition to the property specified in § 541, “all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed or converted ... [and] earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted ....” 11 U.S.C. § 1306(a)(1) and (2). Except as provided in a confirmed Chapter 13 plan or order confirming a plan, the debtor remains in possession of all property of the estate. 11 U.S.C. § 1306(b). For Chapter 13 to work, given that definition of property of the estate, the Chapter 13 debtor has a continuing duty to disclose property and earnings acquired after the commencement of the case. The Chapter 13 debt- or’s ability to confirm a plan and ultimately obtain a discharge turns, in part, on those assets and earnings. 11 U.S.C. § 1322 and 1325.
In re Wakefield,
This court agrees with the Court of Appeals for the Third Circuit that “a longstanding tenet of bankruptcy law requires one seeking benefits under its terms to satisfy a companion duty to schedule, for
Vesting argument
Gowin next makes a “delayed vesting” or estate preservation argument.
See In re Moore,
Gowin contends that because the estate is preserved even after confirmation, judicial estoppel is inapplicable. No cases are cited in support of this proposition. Case law is to the contrary. Judicial estoppel may be applicable where, as here, the estate is preserved,
see cases cited in judicial estoppel section below,
but not when the property is vested in the control of the debtor and is no longer property of the estate,
see Muse v. Accord Human Resources, Inc.,
Disclosure to trustee
Gowin next contends that even if she had a duty to disclose after-acquired property or interests, she fulfilled that duty by disclosing the claims to the Chapter 13 trustee. Autos asserts that Gowin’s counsel and the trustee exchanged letters wherein “they agreed that any recovery obtained from Autos would be evenly split between Gowin and the bankruptcy estate.” Dk. 12, p. 7. Gowin contends that the trustee’s agreement is merely a recommendation, and that the bankruptcy court has the final authority to determine what amount, if any, Gowin would personally receive.
The court finds this agreement with the trustee insufficient to meet the debtor’s
Judicial estoppel elements
Gowin next claims that none of the elements of judicial estoppel 1 are present.
Judicial estoppel is a discretionary remedy courts may invoke “to prevent ‘improper use of judicial machinery.’ ”
New Hampshire v. Maine,
Although the Tenth Circuit has traditionally refused to apply judicial estoppel,
United States v. 162 MegaMania Gambling Devices,
“First, a party’s later position must be ‘clearly inconsistent’ with its earlier position.” Id. (citation omitted). Moreover, the position to be estopped must generally be one of fact rather than of law or legal theory. Lowery v. Stovall,92 F.3d 219 , 224 (4th Cir.1996). Second, “whether the party has succeeded in persuading a court to accept that party’s earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create ‘the perception that either the first or the second court was misled.’” New Hampshire,532 U.S. at 750 ,121 S.Ct. 1808 (citation omitted). The requirement that a previous court has accepted the prior inconsistent factual position “ensures that judicial estoppel is applied in the narrowest of circumstances.” Lowery,92 F.3d at 224 . Third, “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.” New Hampshire,532 U.S. at 751 ,121 S.Ct. 1808 .
Johnson v. Lindon City Corp.,
Gowin summarily asserts that she has not taken an inconsistent position in this case. The court disagrees.
Courts of various jurisdictions have held that a debtor’s assertion of legal claims not disclosed in earlier bankruptcy proceedings constitutes an assumption of inconsistent positions. (State court citations omitted.) See Payless Wholesale Distributors, Inc. v. Alberto Culver,989 F.2d 570 , 571 (1st Cir.1993), cert. denied,510 U.S. 931 ,114 S.Ct. 344 ,126 L.Ed.2d 309 (1993); Oneida,848 F.2d at 419 ; Brassfield [v. McLendon Furniture, Inc.], 953 F.Supp. [1424] at 1432-33 [(M.D.Ala.1996)]. This holding stems from the requirement that a debt- or seeking the shelter provided by federal bankruptcy laws disclose all legal or equitable property interests to bankruptcy court. See 11 U.S.C. §§ 521(a), 541; Ryan [Operations G.P. v. Santiam-Midwest Lumber Co.], 81 F.3d [355] at 362 [(3rd Cir.1996)]; Oneida,848 F.2d at 416 . Because the bankruptcy court relies on the information disclosed by a debtor, the importance of full disclosure cannot be overemphasized. Luna [v. Dominion Bank of Middle Tennessee, Inc.], 631 So.2d [917] at 918 [(Ala.1993)] (quoting Oneida,848 F.2d at 417 ).
Chandler,
The omission of a cause of action or claim “from ... mandatory bankruptcy filings is tantamount to a representation that no such claim existed.”
In re Superior Crewboats, Inc.,
Court’s acceptance of earlier position
Gowin asserts, without additional support, that “she was not successful in persuading the Bankruptcy Court that the claims she now asserts against Autos did not exist.” Dk. 13, p. 13.
The court finds this element met because the bankruptcy court accepted the nonexistehce of these claims by approving Gowin’s debtor’s 'disclosure státerii'eht hhd confirming'her ’plan.
See In re USinternetworking, Inc.,
Unfair advantage/detriment
Gowin contends that she seeks no unfair advantage and that “no unfair detriment would be imposed on Autos” if her claims are not estopped. Dk. 13, p. 10.
Gowin also contends because she brought her claims in an adversary proceeding as part of the bankruptcy proceedings, instead of in a separate state court action, judicial estoppel is inapplicable. Case law applying judicial estoppel to adversary proceedings refutes this position.
See e.g., In re Hovis,
The court notes Gowin’s repeated assertions in her adversary pleadings that the matter concerns property of the estate and that any recovery will be shared by her prepetition creditors. This fails to negate Gowin’s unfair advantage, however. Gow-in’s non-disclosure benefits her by increasing the percentage of recovery that will flow to her. As Autos concedes, had the claims been properly disclosed prior to confirmation of the plan, creditors could have objected to the agreement between Gowin and the Trustee and demanded that all of the proceeds, rather than just fifty percent of them, be contributed to the estate for distribution among the creditors.
Sufficient detriment is shown here because the omitted disclosures would have assisted the judge in making fully informed decisions about the bankruptcy plan and would have enabled creditors, who relied upon the schedules, to determine the appropriate course of action.
See Chandler,
Appropriate remedy
Although the court agrees with the Magistrate Judge that the elements of judicial estoppel may be present in this case, it finds that dismissing Gowin’s claims against Autos would provide a windfall to the wrongdoer and would deprive creditors of a bankruptcy asset, small though it may be.
See Richardson v. United Parcel Service,
The court finds that the better remedy in this case is to require Gowin to distribute any and all damages recovered in the adversary action among the creditors of
:-IRie..court.recogpizes,., tl^^j^Jgqg need for finality ip. confiqne4 p^ap^^ut believes that need is oufeyeig^qd^yvjihe equities in the present case. , TJiq;'.cour¡t notes the huge expenditure of judicial resources on this case, the small amount ($1,471.93 minus trustee’s fee) that may be available for distribution among creditors, and the disproportionately large amount of statutory attorney fees that may potentially be recovered by plaintiffs attorney. The court has no desire to burden the bankruptcy court with further case administration so declines to direct the manner in which the bankruptcy court should implement this order, and trusts that it will do so by the most efficient means possible.
IT IS THEREFORE ORDERED that plaintiff take nothing, that the order of the bankruptcy court dated May 19, 2003 is reversed to the extent it awarded damages to plaintiff, and that the case is remanded to the United States Bankruptcy Court For The District Of Kansas for further proceedings consistent with this decision.
Notes
. The magistrate referred to the doctrine of
res judicata
in finding that Gowin was bound by the confirmation order. In this context, the two doctrines are similar and have the same effect.
See In re Hovis,
. The court rejects Gowin’s assertion that detrimental reliance is a required element.
See Coastal Plains,
. This is the remedy specifically requested by plaintiff. See Dk. 13, p. 4-5.