Residential Capital, LLC

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK 	NOT FOR PUBLICATION
In re:
RESIDENTIAL CAPITAL, LLC, et al.
Debtors.
Case No. 12-12020 (MG)
Jointly Administered
MEMORANDUM OPINION AND ORDER SUSTAINING OBJECTION AND
EXPUNGING CLAIM NO. 4443 BY CORLA JACKSON
A P P E A R A N C E S:
CORLA JACKSON
Pro Se Claimant
MORRISON & FOERSTER LLP
Counsel for the Debtors and Debtors in Possession
425 Market Street
San Francisco, CA 94105
By: 	Adam A. Lewis
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Before the Court is the Debtors’ Objection to Proof of Claim Filed by Corla Jackson
(Claim No. 4443) (the “Objection,” ECF Doc. # 5100). Through the Objection, Residential
Capital, LLC (“ResCap”) and its affiliated debtors in these chapter 11 cases (the “Chapter 11
Cases”), as debtors and debtors in possession (collectively, the “Debtors”) seek to disallow and
expunge proof of claim number 4443 (the “Jackson Claim”) filed by Corla Jackson (“Ms.
Jackson”) on the grounds that the Jackson Claim is without merit and does not include colorable
claims against any of the Debtors. The Jackson Claim asserts a $100,000,000.00 general
unsecured claim against GMAC Mortgage, LLC (“GMACM”).1 The Objection is supported by
1 	Though the claim form attached to the Jackson Claim lists both GMACM and ResCap, her claim only
asserts causes of action against GMACM and only mentions ResCap as part of what she seems to believe is a larger
GMACM conglomerate. (See Jackson Claim at 1.)
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the Declaration of Lauren Graham Delehey (the “Delehey Decl.,” Objection Ex. 2), in-house
litigation counsel at ResCap. Ms. Jackson did not file a response. On November 15, 2013, the
Court held a hearing, and Ms. Jackson appeared. The Court reserved decision on the Objection.
For the reasons set forth below, the Court SUSTAINS the Objection and EXPUNGES
the Claim.
I. 	BACKGROUND
On May 14, 2012 (the “Petition Date”), each of the Debtors filed a voluntary petition for
relief under chapter 11 of the Bankruptcy Code. On August 29, 2012, the Court entered an order
setting the bar date of November 9, 2012 for filing non-governmental proofs of claim in the
Chapter 11 Cases. (ECF Doc. #1309.) The Court thereafter entered an Order Extending the Bar
Date for Filing Proofs of Claim to November 16, 2012. (ECF Doc. # 2093.) On March 21,
2013, the Court entered an order approving the procedures for the filing of objections to proofs
of claim in these Chapter 11 Cases (the “Procedures Order,” ECF Doc. # 3294). The Court
appointed Kurtzman Carson Consultants LLC (“KCC”) as the notice and claims agent in these
Chapter 11 cases (ECF Doc. # 798). Among other things, KCC is authorized to (1) receive,
maintain, record, and otherwise administer the proofs of claim filed in these Chapter 11 Cases
and (2) maintain an official claims register for the Debtors. According to KCC’s records, the
Jackson Claim asserts a $100,000,000.00 general unsecured claim against GMACM.
Ms. Jackson is no stranger to these proceedings. She previously filed a motion in these
Chapter 11 Cases seeking to lift the automatic stay to permit her to proceed with a lawsuit (the
“District Court Action”) pending in the United States District Court for the Southern District of
Alabama (the “Alabama District Court”) against GMACM, for which no final judgment has been
entered. (ECF Doc. # 856, subsequently amended at ECF Doc. # 858.) The Court denied Ms.
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Jackson’s request in a Memorandum Opinion and Order Denying the Jackson Motion to Lift the
Automatic Stay (the “Jackson Opinion,” ECF Doc. # 1184). After the Court issued the Jackson
Opinion, Ms. Jackson filed another Motion in Reference to Stay Order Violations by GMAC –
GMAC Mortgage Violated/Stay Order Violation Re: GMAC Mortgage Fabricated Documents
and Sold Jackson Home Illegally. (ECF Doc. # 1229.) The Court issued an Order Denying
Corla Jackson Motion in Reference to Stay Order Violations and Fraud by GMAC (the “Jackson
Order,” ECF Doc. # 1720). Ms. Jackson then filed two motions for reconsideration. (ECF Doc.
## 1604, 2248.) The Court denied both of those motions by orders issued January 28, 2013.
(ECF Doc. ## 2724, 2725.) Ms. Jackson has since filed two additional motions related to the
automatic stay; those motions remain pending. (ECF Doc. ## 6198, 6286.)
In both the Jackson Opinion and the Jackson Order, this Court made clear to Ms. Jackson
that she could “file a proof of claim in this case – ‘Damages claims against the Debtors, as in the
Jackson Litigation, are the usual grist for the bankruptcy claims allowance process . . . .’” (ECF
Doc. # 1720 at 2 (quoting the Jackson Opinion, ECF Doc. # 1184 at 9).) Ms. Jackson filed the
Jackson Claim on November 9, 2012.
A. 	The Jackson Claim
The Jackson Claim asserts a $100,000,000.00 general unsecured claim2 against Debtor
GMACM. The stated basis for the Jackson Claim is: “They stole my identity [and] everything I
owned causing major damages from 2005-2012 to date.” (Jackson Claim at 1.) To support her
claim, Ms. Jackson attached 162 pages of documents, including pleadings filed in these Chapter
2 	In the Objection, the Debtors assert that Ms. Jackson’s claim is a “secured and general unsecured claim”
(Objection ¶ 3), though Ms. Jackson’s Proof of Claim form fails to indicate any secured portion of her claim.
Instead, she filled in only the portion of Box 4 indicating the value of her property as $340,000.00 and used the rest
of the box to list additional claims against the Debtors, including “They [illegible] home; Identity theft of equity,
land 5 acres estate” and lists as the “basis for perfection” “Toxic Mold + Equity; [illegible]/Medical Bill Still
Coming In.” (Jackson Claim at 1.)
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11 Cases and in Ms. Jackson’s personal bankruptcy cases, account statements, news articles,
medical records, and invoices. The Jackson Claim appears to be predicated on the District Court
Action.
1. 	Ms. Jackson’s Loan History
Ms. Jackson obtained a home mortgage loan (the “Loan”) on May 26, 2004 from Option
One Mortgage Corporation (“Option One”), and executed a note (the “Note”) in the amount of
$240,000.00. (Delehey Decl. ¶ 4, Ex. A.) The Note was secured by a mortgage on real property
located in Mobile, Alabama (the “Property”). (Id. ¶ 4.) GMACM serviced the loan for Option
One, and in June 2008, Option One assigned (the “Assignment”) the Note to GMACM. (Id. ¶ 4,
Ex. B.)
On June 1, 2012, GMACM foreclosed upon the Property and purchased it at a non-
judicial foreclosure sale. (Id. ¶ 15, Ex. K.) GMACM was both the servicer and the owner of the
Note. (Id. ¶ 15.) Ms. Jackson has not vacated the Property and remains in possession. 3
(Objection ¶ 25.) In accordance with Alabama law, in June of 2012, GMACM sent a notice of
demand for possession of the Property to Ms. Jackson. (Delehey Decl. ¶ 15.) Because Ms.
Jackson remains in possession of the Property, her statutory right of redemption has been
waived. ALA. CODE 6-5-251 (1993).
2. 	The Jackson Bankruptcies
a. 	The First Jackson Bankruptcy
In June 2005, Ms. Jackson filed the first of three successive Chapter 13 bankruptcy cases
(the “First Jackson Bankruptcy”) in the United States Bankruptcy Court for the Southern District
of Alabama (the “Alabama Bankruptcy Court”). In re Corla R. Jackson, No. 05-13142-WSS-13
3 	Though the Debtors commenced an eviction proceeding in the District Court of Mobile County, case
number 12-cv-001111-KD-B, the proceeding was dismissed for “procedural technicalities on July 1, 2013.”
(Objection ¶ 25 n.28.)
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(Bankr. S.D. Ala. 2005). GMACM filed two proofs of claim in the First Jackson Bankruptcy:
(1) Claim No. 1 in the amount of $285,946.35 (the amount of the Loan plus interest) and
(2) Claim No. 7 in the amount of $14,809.60 (for Supplemental Arrearages). (See Objection
¶ 14; Proofs of Claim of GMACM, Case No. 05-13142, June 15, 2005 and Mar. 2, 2006.)
The Alabama Bankruptcy Court entered an order confirming Ms. Jackson’s chapter 13
plan (the “Chapter 13 Plan”) on October 25, 2005. (Case No. 05-13142, ECF Doc. # 21.)
Pursuant to the Chapter 13 Plan, Ms. Jackson was required to (1) make payments on unpaid
arrearages (the “Arrearages”) and (2) continue making timely postpetition payments on the Loan
as they became due. (See Chapter 13 Plan, Case No. 05-13142, ECF Doc. # 3 (“A holder of a
secured claim shall retain the lien securing the claim, unless otherwise provided herein.”); see
also Order Confirming Plan and Payment Order, Case No. 05-13142, ECF Doc. # 21.)
GMACM did not receive regular postpetition monthly mortgage payments, and on
January 20, 2006, it moved for relief from the automatic stay. (See Motion for Relief from
Automatic Stay Filed by GMAC Mortgage Corporation, Case No. 05-13142, ECF Doc. # 23.)
At that point, the Loan had been in default since July 2005. (Objection ¶ 15.) The Alabama
Bankruptcy Court conditionally denied GMACM’s motion (the “First GMACM Stay Relief
Order”) subject to the following conditions: (1) Ms. Jackson was required to pay the new
arrearages (the “Supplemental Arrearages”) in the amount of $14,809.60; (2) GMACM was
granted leave to file a proof of claim in the amount of the Supplemental Arrearages (Claim No.
7); (3) Ms. Jackson was required to make timely monthly postpetition payments to GMACM in
accordance with the Chapter 13 Plan and the agreements between Ms. Jackson and GMACM;
and (4) should Ms. Jackson fail to cure any payment default within ten days of receipt of a notice
of default (a “Notice of Default”), the automatic stay would “automatically TERMINATE as it
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pertains to the Real Property and GMAC shall be free to enforce any and all of its right [sic],
title, and interest in and to the Real Property in accordance with loan documentation between the
parties and applicable law” without further order of the Alabama Bankruptcy Court. (First
Conditional GMACM Stay Relief Order, Case No. 05-13142, ECF Doc. # 30, attached to
Jackson Claim at 82.) Under the First GMACM Stay Relief Order, GMACM was also required
to send Ms. Jackson two Notices of Default and allow Ms. Jackson an opportunity to cure the
default; upon Ms. Jackson’s third default, the automatic stay would automatically terminate,
enabling GMACM to “exercise all its rights under its mortgage without further order of this
court.” (Id.)
Pursuant to the First GMACM Stay Relief Order, GMACM sent Ms. Jackson two
Notices of Default for missed mortgage payments on June 8, 2006 and again on August 29,
2006. (Delehey Decl. ¶ 6, Ex. D.) Ms. Jackson never cured the defaults. (Id. ¶ 6.) Under the
terms of the Alabama Bankruptcy Court’s Order, the automatic stay terminated, and GMACM
was entitled to begin foreclosure proceedings. (Id.) As a result, GMACM did not oppose the
Chapter 13 trustee’s objections to Claim Nos. 1 and 7, and the claims were reduced and allowed
to the amount paid. (Id.; see also Amended Order[s] Disallowing Claim[s], Case No. 05-13142,
ECF Doc. ## 103, 104.)
The First Jackson Bankruptcy was closed on January 20, 2010. (Case No. 05-13142,
ECF Doc. #111.) By operation of (1) the Chapter 13 Plan, (2) the Confirmation Order,
(3) Bankruptcy Code sections 1322(b)(2), (b)(5) and 1328(a), and (4) the relief granted in the
First GMACM Stay Relief Order, Ms. Jackson was not discharged of her obligations under the
Loan, including payment of Arrearages, Supplemental Arrearages, and postpetition monthly
payments.
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b. 	The Second Jackson Bankruptcy
On October 15, 2010, Ms. Jackson filed a second voluntary petition for relief in the
Alabama Bankruptcy Court, again under chapter 13 of the Bankruptcy Code (the “Second
Jackson Bankruptcy”). In re Corla R. Jackson, Case No. 10-04820 (Bankr. S.D. Ala. 2010). On
December 20, 2010, the Second Jackson Bankruptcy was dismissed for “failure to pay
[preconfirmation] Chapter 13 plan payments” required by Bankruptcy Code section 1326(a)(1).
(Case No. 10-04820, ECF Doc. # 13.) Ms. Jackson was further barred from filing from
December 20, 2010 to March 20, 2011. (Id.) Ms. Jackson did not receive a discharge, and her
case was closed. (Case No. 10-04820, ECF Doc. # 18.)
c. 	The Third Jackson Bankruptcy
On April 18, 2011, Ms. Jackson filed a third petition under chapter 13 in the Alabama
Bankruptcy Court (the “Third Jackson Bankruptcy”). In re Corla R. Jackson, Case No. 11-
01545 (Bankr. S.D. Ala. 2011). For this third case, Ms. Jackson retained counsel. (Delehey
Decl. ¶ 9.)
Though Ms. Jackson listed an unliquidated claim against Farmers Insurance Company
(“Farmers Insurance”) in Item 20 of her Statement of Financial Affairs, valued at $1.00, she did
not list any potential claims or causes of action against either GMACM or Option One in her
Schedules or Statement of Financial Affairs (together, the “SSFA”), though on October 5, 2011,
Ms. Jackson filed a Summary of Amendments to her Chapter 13 Plan that amended a response to
reflect that the GMACM “monthly note [was] contested and protected.” (Delehey Decl. ¶¶ 10,
12, Ex. H; see also Case No. 11-01545, ECF Doc. # 65.) She did not explain this amendment or
disclose any alleged affirmative claims against GMACM, and on March 12, 2012, Ms. Jackson
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filed another Summary of Amendments to her Chapter 13 Plan deleting her previous amendment.
(Delehey Decl. ¶¶ 12–13, Ex. I.)
As in the First Jackson Bankruptcy, on July 25, 2011, GMACM filed a motion for relief
from the automatic stay because Ms. Jackson’s Loan was in default. (See Motion for Relief from
Automatic Stay Filed by GMAC Mortgage, L.L.C., Case No. 11-01545, ECF Doc. # 42.) The
Alabama Bankruptcy Court conditionally denied GMACM’s request on August 29, 2011, subject
once again to Ms. Jackson’s compliance with continued payment terms similar to the terms in the
First GMACM Stay Relief Order (the “Second GMACM Stay Relief Order,” Case No. 11-
01454, ECF Doc. # 59.) On October 11, 2011, after Ms. Jackson failed to comply with the
conditions of the Second GMACM Stay Relief Order, GMACM filed a notice of the termination
of the automatic stay with the court. (Case No. 11-01454, ECF Doc. # 70.) On December 8,
2011, the Alabama Bankruptcy Court denied Ms. Jackson’s motion to reinstate the automatic
stay. (Case No. 11-01454, ECF Doc. # 89.)
Though a Plan was confirmed in the Third Jackson Bankruptcy on March 23, 2012, the
case was dismissed on September 27, 2012 based on Ms. Jackson’s failure to comply with a
Consent Order,4 and Ms. Jackson was barred from filing another bankruptcy case for 90 days.
(Id. ECF Doc. # 116.)
3. 	The District Court Action
Despite not listing any potential claims or causes of action against either GMACM or
Option One in the SSFA filed in the Third Jackson Bankruptcy, and before foreclosure of her
property, on January 18, 2012, Ms. Jackson filed a complaint against GMACM (the
4 	The “Consent Order” was issued by Bankruptcy Judge William Shulman conditionally denying the chapter
13 trustee’s Motion to Dismiss Case for Feasibility and requiring Ms. Jackson to make plan payments to the trustee.
(Case No. 11-01454, ECF Doc. # 64.)
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“Complaint”) in Mobile County Circuit Court (the “State Court Action”). (Delehey Decl. ¶ 14,
Ex. J.) The State Court Action was removed to the United States District Court for the Southern
District of Alabama based on diversity jurisdiction, where it became the District Court Action.5
(Id. ¶ 14.) In the Complaint, Ms. Jackson alleges, among other things, that GMACM did not
own her Note and that GMACM violated a pooling and servicing agreement to which Ms.
Jackson was a purported third-party beneficiary. (Id. Ex. J.) Ms. Jackson further sought
damages arising from GMACM’s and/or Farmers Insurance’s alleged failure to repair hurricane
damage to the Property. (Id.) All claims in the District Court Action relate to events preceding
the Third Jackson Bankruptcy.
On March 8, 2012, GMACM filed a Motion to Dismiss the District Court Action based
on judicial estoppel and Ms. Jackson’s alleged failure to comply with pleading standards. (Id. ¶
16, Ex. L.) Due to the commencement of these Chapter 11 Cases, the District Court Action was
stayed before the court decided the motion. (Id. ¶ 16.)
B. 	The Debtors’ Objection
The Debtors seek an order disallowing and expunging the Jackson Claim on the grounds
that the Claim is without merit and does not include colorable claims against any of the Debtors.
The Debtors argue that (1) the District Court Action is barred by the doctrine of judicial estoppel,
(2) the District Court Action is predicated on a deficient pleading that lacks sufficient specificity
and fails to put the Debtors on notice of what they are charged with having done, and (3) to the
extent it is decipherable, the Jackson Claim lacks merit. (Objection ¶ 4.)
C. 	The November 15, 2013 Hearing
At the hearing on November 15, 2013, the Debtors argued that since Ms. Jackson could
not have paid her creditors in full in the Third Jackson Bankruptcy, the evidence suggests that
5 	Jackson v. GMAC Mortgage Corp., Case No. 12-cv-00111-KD-B (S.D. Ala. Feb. 23, 2012).
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“she concealed these claims in order to hold onto [sic] the proceeds of them, rather than sharing
them with her creditors.” (Nov. 15 Tr. 51:1–3.) The Court inquired as to the status of the Third
Jackson Bankruptcy and it was established that the case had been dismissed due to Ms. Jackson’s
failure to comply with a consent order that required her to make payments to the chapter 13
trustee. The Court asked the Debtors to provide copies of the trustee’s motion to dismiss, the
consent order, and the order dismissing the Third Jackson Bankruptcy. (Id. 59:18–20.) After the
November 15 hearing, the Debtors provided the Court with copies of those documents.
Ms. Jackson did not respond to the Debtors’ argument that she is judicially estopped from
asserting a claim she failed to schedule in the Third Jackson Bankruptcy except to say that
“everything [the Debtors] said is invalid.” (Id. 51:13.) Instead, Ms. Jackson focused on the First
Jackson Bankruptcy, which granted her a discharge. She again argued that GMACM
“fabricated” her Note (id. 52:10) and twice fabricated a loan in her name (id. 60:4–5), that “the
judge said they [didn’t have] a contract with me” 6 (id. 52:13–14), that her home was paid off in
full with a “zero balance,” which is apparently reflected on her credit report (id. 60:3–4, 60:13–
14), and that the Debtors “stole” her land and “put two loans on [her] property” (id. 60:15–16).
II. 	DISCUSSION
Section 501(a) of the Bankruptcy Code provides that “[a] creditor . . . may file a proof of
claim” to claim an interest in a debtor’s bankruptcy estate. 11 U.S.C. § 501(a). “The proof of
claim, if filed in accordance with section 501 and the pertinent Bankruptcy Rules, constitutes
prima facie evidence of the validity and amount of the claim under Federal Rule of Bankruptcy
3001(f) and Code section 502(a).” 4 COLLIER ON BANKRUPTCY ¶ 502.02[3][f] (Alan N. Resnick
& Henry J. Sommer eds., 16th rev. ed. 2011). Section 502(a) provides that a claim or interest,
6 	Ms. Jackson did not indicate to which judge she was referring, though she referred to orders issued by the
First Jackson Bankruptcy court multiple times during the proceeding.
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properly filed, “is deemed allowed, unless a party in interest . . . objects.” 11 U.S.C. § 502(a).
Under section 502, if an objection is made, the court shall determine the amount of such claim
“as of the filing date.” In re Solutia, Inc., 379 B.R. 473, 483 (Bankr. S.D.N.Y. 2007) (citation
omitted).
Claims objections have a shifting burden of proof. Pursuant to Federal Rule of
Bankruptcy Procedure 3001(f), a claimant establishes a prima facie case against a debtor upon
filing a proof of claim alleging facts sufficient to support the claim. The objecting party is
thereafter required to produce evidence equal in force to that provided by the claimant to rebut
the presumption of the claimant’s prima facie case. In re Allegheny Int’l, Inc., 954 F.2d 167,
173–74 (3d Cir. 1992) (“In practice, the objector must produce evidence which, if believed,
would refute at least one of the allegations that is essential to the claim’s legal sufficiency.”). If
the objecting party satisfies that requirement, the burden then shifts back to the claimant to
produce additional evidence to prove the validity of the claim by a preponderance of the
evidence. Id. at 174.
Bankruptcy Code section 502(b)(1) provides that claims may be disallowed if
“unenforceable against the debtor and property of the debtor, under any agreement or applicable
law.” To determine whether a claim is allowable by law, bankruptcy courts look to “applicable
nonbankruptcy law.” In re W.R. Grace & Co., 346 B.R. 672, 674 (Bankr. D. Del. 2006). “What
claims of creditors are valid and subsisting obligations against the bankrupt at the time a petition
is filed, is a question which, in the absence of overruling federal law, is to be determined by
reference to state law.” In re Hess, 404 B.R. 747, 749 (Bankr. S.D.N.Y. 2009) (quoting Vanston
Bondholders Protective Comm. v. Green, 329 U.S. 156, 161 (1946)).
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A. 	The Jackson Claim Is Barred by Judicial Estoppel.
The Debtors argue that the Jackson Claim, predicated on the same causes of action and
allegations set forth in the stayed District Court Action,7 should be disallowed and expunged for
the same reason her District Court Action fails: Ms. Jackson’s claims are barred by judicial
estoppel. (Objection ¶ 41.)
When a debtor files for bankruptcy protection, her assets, including legal and equitable
interests, become property of the bankruptcy estate. 11 U.S.C. § 541(a)(1); Rosenshein v.
Kleban, 918 F. Supp. 98, 102 (S.D.N.Y. 1996). “[E]very conceivable interest of the debtor,
future, nonpossessory, contingent, speculative, and derivative, is within the reach of § 541,”
including “causes of action owned by the debtor.” Chartschlaa v. Nationwide Mut. Ins. Co., 538
F.3d 116, 112 (2d Cir. 2008) (per curiam) (internal quotation marks omitted, bracket in original)
(citing Seward v. Devine, 888 F.2d 957, 963 (2d Cir. 1989)). As a result, “[p]re-petition causes
of action belonging to the debtor are included among the estate’s assets.” Kassner v. 2nd Ave.
Delicatessen, Inc., No. 04 CV 7274 (GBD), 2005 WL 1018187, at *2 (S.D.N.Y. Apr. 29, 2005)
(citations omitted).
Pursuant to 11 U.S.C. § 521(1), the debtor is required to disclose all of her actual or
potential assets, which would include any known causes of action. See 11 U.S.C. §§ 521(1),
1306; Chartschlaa, 538 F.3d at 122 (citing 11 U.S.C.§§ 521(a)(1)(B)(i), (iii)); Rosenshein, 918
F. Supp. at 102. “[I]f the debtor has enough information . . . prior to confirmation to suggest that
it may have a possible cause of action, then it is a ‘known’ cause of action such that it must be
disclosed.” In re Coastal Plains, 179 F.3d 197, 208 (5th Cir. 1999) (citations omitted). A
debtor’s disclosure is “essential to the proper functioning of the bankruptcy system,” and “the
7 	In fact, it appears that the only difference in terms of causes of action alleged between the complaint Ms.
Jackson filed in the District Court Action and the Jackson Claim here is the addition of wrongful foreclosure
allegations here.
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Bankruptcy Code severely penalizes debtors who fail to disclose assets.” Chartschlaa, 583 F.3d
at 122.
To invoke judicial estoppel in the Second Circuit, “(1) the party against whom it is
asserted must have advanced an inconsistent position in a prior proceeding, and (2) the
inconsistent position must have been adopted by the court in some matter.” Peralta v. Vasquez,
467 F.3d 98, 205 (2d Cir. 2006) (citations omitted); accord Uzdavines v. Weeks Marine, Inc., 418
F.3d 138, 148 (2d Cir. 2005) (quoting Stichting v. Schreiber, 407 F.3d 34, 45 (2d Cir. 2005));
Bates v. Long Island R.R. Co., 997 F.2d 1028, 1038 (2d Cir. 1993). The doctrine of judicial
estoppel requires “a true inconsistency between the statements in the two proceedings.” Simon v.
Safelite Glass Corp., 128 F.3d 68, 72–73 (2d Cir. 1997). “If the statements can be reconciled
there is no occasion to apply an estoppel.” Id. at 73 (citations omitted). Application of judicial
estoppel should be limited “to situations where the risk of inconsistent results with its impact on
judicial integrity is certain.” Id. at 72 (citation omitted); accord Uzdavines, 418 F.3d at 148.
While “[t]he circumstances under which the doctrine could be applied are far from clear,”
Young v. U.S. Dep’t of Justice, 882 F.2d 633, 639 (2d Cir. 1989), many courts in this circuit have
applied judicial estoppel in the bankruptcy context to dismiss undisclosed claims. See, e.g.,
Coffaro v. Crespo, 721 F. Supp. 2d 141, 145 (E.D.N.Y. 2010) (“In the bankruptcy context,
judicial estoppel is commonly invoked in order ‘to prevent a party who failed to disclose a claim
in bankruptcy proceedings from asserting that claim after emerging from bankruptcy.’” (quoting
Negron v. Weiss, No. 06-CV-1288 (CBA), 2006 WL 2792769, at *3 (E.D.N.Y. Sept. 27, 2006)));
Kunica v. St. Jean Fin., Inc., 233 B.R. 46, 58 (S.D.N.Y. 1999) (collecting cases); Rosenshein,
918 F. Supp. at 104 (same).
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In the Eleventh Circuit, where the District Court Action is pending, judicial estoppel has
likewise been used the in bankruptcy context to dismiss undisclosed claims. See Burnes v.
Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002). Burnes identifies two prongs to judicial
estoppel, similar to those used in the Second Circuit: “First, it must be shown that the allegedly
inconsistent positions were made under oath in a prior proceeding. Second, such inconsistencies
must be shown to have been calculated to make a mockery of the judicial system.” Id. at 1285.
These factors are not exhaustive, and courts must always give due consideration to the
circumstances of each particular case. Id.
The Debtors contend that Ms. Jackson’s situation is particularly analogous to an Eleventh
Circuit case that applied judicial estoppel to bar a chapter 13 debtor from pursuing claims that
she filed in a postpetition forum, after she failed to include those claims in her schedules in the
bankruptcy court. See Robinson v. Tyson Foods, Inc., 595 F.3d 1269 (11th Cir. 2010). In
Robinson, the chapter 13 debtor, prior to receiving a discharge or dismissal, brought an
employment discrimination claim against her former employer for a cause of action that arose
during the pendency of her chapter 13 plan. Id. at 1272. After she received a full discharge from
her bankruptcy, and in connection with her employment discrimination lawsuit, the revealed
during a deposition that she had not disclosed the discrimination claim to the bankruptcy court.
Id. The district court subsequently granted summary judgment on the basis of judicial estoppel;
by failing to disclose her employment discrimination suit to the bankruptcy court, the district
court reasoned, she had taken inconsistent positions under oath with the intention of misleading
the court. Id.
The Robinson debtor appealed to the Eleventh Circuit, arguing that “she did not take
inconsistent positions under oath because she did not have a continuing duty to disclose changes
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in her asset schedule.” Id. The Eleventh Circuit disagreed, emphasizing “the importance of full
and honest disclosure in bankruptcy proceedings,” which, the court noted, is “‘crucial’ to the
system’s ‘effective functioning.’” Id. at 1274 (citing Burnes 291 F.3d at 1285). In Burnes, the
Eleventh Circuit had previously observed that “[t]he 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.
To determine whether a party intends to make a mockery of the judicial system, the
Eleventh Circuit, like the Second Circuit, requires clear inconsistency. The inconsistent
statements must evince “intentional contradictions, not just simple error or inadvertence.” Am.
Nat’l Bank of Jacksonville v. FDIC, 710 F.2d 1528, 1536 (11th Cir. 1983). “In considering
judicial estoppel for bankruptcy cases, the debtor’s failure to satisfy its statutory disclosure duty
is ‘inadvertent’ only when [ ] the debtor either lacks knowledge of the undisclosed claims or has
no motive for their concealment.” Robinson, 595 F.3d at 1275 (quoting Barger v. City of
Cartersville, 348 F.3d 1289, 1295–96 (11th Cir. 2003)).
The first requirement for judicial estoppel is satisfied in this case. Ms. Jackson failed to
disclose her claims against GMACM in the Third Jackson Bankruptcy. Though she amended her
Chapter 13 Plan during the pendency of her bankruptcy to reference that her Note was contested,
she never disclosed the existence of any affirmative claims she held against GMACM. But Ms.
Jackson subsequently filed the District Court Action asserting prepetition claims against
GMACM. (See Delehey Decl. Ex. J.)
Ms. Jackson does not contest the Debtors’ argument that she knew of her potential claims
against GMACM during the Third Jackson Bankruptcy. Indeed, it strains credulity to suggest
that Ms. Jackson did not know at that time that she had potential claims against GMACM. By
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the Third Jackson Bankruptcy, she had previously (1) completed her first chapter 13 plan and
received a discharge in the First Jackson Bankruptcy, (2) had the Second Jackson Bankruptcy
dismissed, and (3) retained counsel for the Third Jackson Bankruptcy. The claims Ms. Jackson
asserts in the District Court Action and in the Jackson Claim stem from her theory that she was
discharged of any obligation to pay GMACM in the First Jackson Bankruptcy and that
GMACM’s subsequent attempts to collect further payments from her are “fraudulent,” which is
made evident by her failure to pay arrearages in her subsequent bankruptcy filings. Thus, Ms.
Jackson’s claims in the District Court Action and the Jackson Claim are obviously based on
causes of action preceding the Third Jackson Bankruptcy. Item 21 of Schedule B asks for “Other
contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the
debtor, and rights to setoff claims. Give estimated value of each.” This clearly called for Ms.
Jackson to disclose her alleged claims against GMACM, regardless of whether she had initiated
her lawsuit.
And Ms. Jackson did in fact list an unliquidated claim against Farmers Insurance for
hurricane damage to her property in Schedule B (though in item 20 instead of 21) (one of the
claims she asserts against GMACM in the District Court Action as well as in the Jackson Claim),
further indicating that she understood unliquidated claims should be disclosed to the bankruptcy
court. Even if she did not know that she had a claim against GMACM when she filed the Third
Jackson Bankruptcy, she certainly knew when she filed the action that became the District Court
Action, and she failed to amend her SSFA.
The Court is equally concerned with the second prong of the judicial estoppel analysis in
this case. Ms. Jackson filed the District Court Action while the Third Jackson Bankruptcy was
pending. But she never disclosed this fact to the Alabama Bankruptcy Court. Her concealment
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of the District Court Action undermines the integrity of the judicial system. While the Eleventh
Circuit noted in Robinson that “full monetary repayment does not necessarily preclude a finding
of motive to conceal,” Robinson, 595 F.3d 1275 (citing Burnes, 291 F.3d at 1286 (concluding
that since judicial estoppel is intended to protect the judicial system, those asserting it need not
demonstrate individual prejudice)), Ms. Jackson’s plan did not contemplate paying her creditors
in full. Ms. Jackson’s conduct clearly indicates her intent to gain an unfair advantage in the
Third Jackson Bankruptcy. Had she successfully obtained a settlement from GMACM or
realized any other proceeds from the suit during the pendency of the Third Jackson Bankruptcy,
she would have been able to keep for herself what she clearly believes to be significant assets,
preventing them from being used to satisfy her debts. Ms. Jackson had between eight and nine
months to file amendments to her SSFA in the Third Jackson Bankruptcy, where she was
represented by counsel, but failed to do so. By contrast, she had no qualms sharing an
unliquidated Farmers Insurance claim valued at $1.00 with her creditors.
The law is clear that Ms. Jackson had a duty to disclose substantial changes in her assets.
See id. at 1274. She failed to do so. The evidence presented indicates that she intended to
conceal any settlement or other proceeds from her creditors. As such, her opposing statements
made under oath manifest the requisite intent to undermine the judicial system and make judicial
estoppel applicable here. Consequently, the Jackson Claim is disallowed and expunged.
B. 	The Jackson Claim Lacks Merit.
Additionally, the Debtors are correct in their assertion that the Jackson Claim lacks merit.
Even though the Court has construed Ms. Jackson’s proof of claim liberally because she is
proceeding pro se, “the court is not permitted to serve as a ‘de facto counsel’ and ‘rewrite an
otherwise deficient pleading in order to sustain an action.’” Gonzalez v. Asset Acceptance, LLC,
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308 F. App’x 429, 430 (11th Cir. 2009) (citing GJR Inv., Inc. v. Cnty. Of Escambia, Fla., 132
F.3d 1359, 1369 (11th Cir. 1998)).
Under the shifting burden standard for objections to proofs of claim, the Jackson Claim
was considered prima facie evidence of the validity and amount of her claim. The Debtors made
a well-founded Objection, supported by the Declaration of Lauren Graham Delehey, that Ms.
Jackson’s claim does not present a cognizable basis for relief under the many grounds listed.
Specifically, the Debtors presented evidence that established that (1) GMACM was the servicer
of the Loan beginning in 2004, (2) GMACM obtained ownership of the Note from Option One in
June 2008, (3) the automatic stay with respect to the First Jackson Bankruptcy proceeding
automatically terminated after Ms. Jackson violated a conditional order, (4) GMACM
accordingly did not object to the chapter 13 trustee’s objections to its proofs of claim in the First
Jackson Bankruptcy, (5) GMACM received similar stay relief following Ms. Jackson’s failure to
comply with another conditional order in the Third Jackson Bankruptcy, and (6) GMACM
subsequently foreclosed on Ms. Jackson’s house by non-judicial foreclosure on June 1, 2012
after she had been in default since July of 2005. These facts rebut Ms. Jackson’s theory that
because the Debtors did not own her Note and acquired it through fraud, false documentation,
false signatures, and “identity theft,” they therefore had no authority to foreclose on her house.
For the same reasons, her claims for slander of title and clouded title lack merit. And her claims
for personal injuries and property damage are frivolous; she has shown no connection between
the actions of the Debtors and the alleged injuries and damages.
Thus, the burden shifted back to Ms. Jackson to prove the validity of her claim by the
preponderance of the evidence. She has failed to do so. Even construing her Claim liberally,
Ms. Jackson has not alleged a cognizable theory of liability against the Debtors sufficient to
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carry her burden of persuasion. Her allegations are conclusory and lacking in any evidentiary
detail. They are also belied by other evidence in the record. She has provided no proof that the
Debtors did not own her Note or that she had already “repaid in full” before the First Jackson
Bankruptcy, other than her mistaken interpretation of certain orders in the First Bankruptcy
Action. Those orders did not relieve Ms. Jackson of her obligations under the Loan, as the
evidence produced by the Debtors and the documents from the First Jackson Bankruptcy show.
Her allegations that GMACM, by attempting to collect money owed on the Loan, was violating
Bankruptcy Judge Mahoney’s orders in the First Jackson Bankruptcy are unfounded. Finally,
Ms. Jackson presented no new evidence at the November 15 hearing to substantiate her claims.
Consequently, Ms. Jackson failed to establish the validity of her Claim, providing another basis
for disallowing and expunging the Jackson Claim.
III. 	CONCLUSION
Since the Court finds that the Jackson Claim is barred by judicial estoppel and lacks
merit, the Court need not consider the Debtors’ argument that the Jackson Claim fails to satisfy
basic pleading standards.
For the reasons stated above, the Court SUSTAINS the Debtors’ Objection to Proof of
Claim 4443; Proof of Claim 4443 is therefore DISALLOWED and EXPUNGED; and it is
further
ORDERED that KCC is directed to disallow and expunge the Jackson Claim.
IT IS SO ORDERED.
Dated: January 27, 2014
New York, New York
_____Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
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