112 F.3d 569 (1st Cir. 1997), 96-2009, Gens v. Resolution Trust Corp.

Docket Nº:96-2009.
Citation:112 F.3d 569
Party Name:In re Helen D. GENS, d/b/a Helen Gens and Associates, Appellant, v. RESOLUTION TRUST CORPORATION (Federal Deposit Insurance Corporation), Appellee.
Case Date:May 05, 1997
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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112 F.3d 569 (1st Cir. 1997)

In re Helen D. GENS, d/b/a Helen Gens and Associates, Appellant,



Corporation), Appellee.

No. 96-2009.

United States Court of Appeals, First Circuit

May 5, 1997

Heard Feb. 4, 1997.

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[Copyrighted Material Omitted]

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Richard H. Gens, Centerville, MA, for appellant.

Barbara R. Sarshik, Counsel, FDIC, Washington, DC, with whom Ann S. DuRoss, Assistant General Counsel, FDIC, Thomas L. Hindes, Senior Counsel, FDIC, Washington, DC, Joseph G. Butler, and Barron & Stadfeld, Boston, MA, were on brief, for appellee.

Before SELYA, Circuit Judge, CYR, Senior Circuit Judge, and STAHL, Circuit Judge.

CYR, Senior Circuit Judge.

Chapter 11 debtor-in-possession Helen D. Gens ("Gens") challenges a bankruptcy court order which allowed the Federal Deposit Insurance Corporation ("FDIC") to amend its proof of claim following the bar date for filing claims. We affirm.



In July 1988, Gens executed a promissory note ("the Gens Note") payable to U.S. Funding Inc. of America ("U.S.Funding") in the principal amount of $70,000, by signing it both in her "individual" capacity and in her representative capacity as trustee for the Old Jail Trust ("Trust"). The Gens Note was secured by a third mortgage on real property in Barnstable, Massachusetts, owned by the Trust ("the Barnstable Property"). Although the Barnstable Property was subject to two prior mortgages, U.S. Funding and Gens allegedly arranged for $36,000 of the $70,000 in loan proceeds to be used to satisfy the preexisting second mortgage. U.S. Funding promptly assigned the Gens Note to Key Financial Services ("Key"), which assigned it to Home Owners Savings Bank ("Home Owners").

In October 1989, Home Owners commenced suit against Key in federal district court, alleging that the purchase-sale agreement, whereby Home Owners acquired the Gens Note from Key, had been induced by fraud or that Key had breached its title-insurance provisions. Home Owners demanded either rescission or damages for breach of contract.

The Trust defaulted on the Gens Note in or about January 1990 and the first mortgagee foreclosed on the Barnstable Property. The foreclosure sale resulted in no surplus for application to any junior lien, including the third mortgage securing the Gens Note. In September 1990, Home Owners was declared insolvent and the Resolution Trust Corporation ("RTC") was appointed receiver. RTC designated Knutson Mortgage Corporation ("Knutson") as its servicing agent on the Gens Note, and gave Knutson a limited power of attorney.

Meanwhile, in the ongoing federal action brought by Home Owners against Key, the district court entered partial summary judgment for RTC and Home Owners, finding that Key had breached the purchase-sale agreement. The attendant district court order directing Key to repurchase the Gens Note never became final, however, apparently because RTC and Key were unable to agree upon a repurchase price.

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Gens commenced a voluntary chapter 11 proceeding in September 1993, but failed to schedule the Gens Note as a liability. Knutson, as RTC's agent, filed a proof of claim ("POC") in relation to the Gens Note in December 1993 ("original POC"), well before the May 16, 1994 bar date for filing claims. The original POC incorrectly listed Knutson itself as the creditor, failed to disclose that Knutson was the authorized RTC servicing agent, mischaracterized the claim as secured, and mistakenly identified February 24, 1989 (rather than July 1988) as the date Gens incurred the Gens Note obligation.

Almost seven months after the bar date, Knutson filed an amended POC in relation to the Gens Note, correctly listing RTC as the creditor, but still (i) failing to disclose that Knutson was RTC's agent, and (ii) incorrectly characterizing the claim as "secured." Knutson eventually submitted additional amended POCs correcting these deficiencies.

Gens objected to the original and amended POCs, asserting inter alia judicial estoppel and discharge of the note, see Mass. Gen. Laws Ann. ch. 106, § 3-606. While these objections were pending, FDIC, successor to RTC, was substituted as the creditor on all POCs filed by Knutson. Ultimately, the objections to the original and amended POCs were rejected by the bankruptcy court and the district court affirmed.



  1. Judicial Estoppel

    The companion doctrines of judicial estoppel and election of remedies 1 essentially preclude a party from asserting a legal or factual position "inconsistent" with its position in a prior proceeding. See Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 212 (1st Cir.1987). The estoppel defense advanced by Gens is predicated entirely on the contract-rescission claim Home Owners asserted in the federal court action against Key, alleging inter alia that Key had made material misrepresentations in negotiating the purchase-sale agreement. Implicit in Home Owners' demand for rescission of the purchase-sale agreement was its averment that Key's fraud rendered the purchase-sale agreement voidable ab initio, and therefore that Home Owners never became a "holder" of the Gens Note. See, e.g., In re Southern Indus. Banking Corp., 46 B.R. 306, 313 (Bankr.E.D.Tenn.1985) ("A party to a transaction induced by fraud may elect between two remedies--he may treat the contract as voidable and sue for the equitable remedy of rescission or he may sue for damages at law under the tort theory of 'deceit.' ").

    In January 1992, the district court awarded summary judgment to RTC on its contract claim. Gens now contends, therefore, that FDIC is estopped from asserting a claim under the Gens Note in her bankruptcy proceeding, since its POC is legally and factually inconsistent with the litigation position adopted by Home Owners in the district court action, namely, that Home Owners never became a holder of the Gens Note because the purchase-sale agreement was rescindable from its inception. We disagree. 2

    Judicial estoppel is not implicated unless the first forum accepted the legal or factual assertion alleged to be at odds with the position advanced in the current forum:

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    [W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.... Judicial estoppel should be employed when a litigant is "playing fast and loose with the courts," and when "intentional self-contradiction is being used as a means of obtaining unfair advantage in a forum provided for suitors seeking justice."

    Patriot Cinemas, 834 F.2d at 212 (emphasis added) (citations omitted). 3 Similarly, the primary purpose served by the "election of remedies" doctrine is "to prevent double [viz., sequential] recoveries for the same wrong." Tavormina v. Fir, Inc. (In re Alchar Hardware Co.), 764 F.2d 1530, 1534 (11th Cir.1985).

    Contrary to Gens' contention, RTC permissibly displaced its contract-rescission claim by moving for partial summary judgment on its alternative claim that Key had breached the purchase-sale agreement. See Fed.R.Civ.P. 8(e)(2) ("A party may also state as many separate claims [in its complaint] ... as the party has[,] regardless of consistency...."). 4 Under an express provision in the purchase-sale agreement, the exclusive remedy for its breach was the repurchase of the Gens Note by Key upon demand by Home Owners. Thus, unlike a rescindment, which necessarily presumes a disaffirmance of the purchase-sale agreement by Home Owners ab ovo, the RTC breach-of-contract claim implicitly acknowledged a valid contract whereby Home Owners became the holder of the Gens Note until Key repurchased the Note. Accordingly, the current FDIC litigation position is not inconsistent with that advanced by its predecessor, RTC, since Home Owners and RTC failed to persuade the district court that the purchase-sale agreement was voidable, hence invalid from its inception. 5

  2. Validity of Knutson Authorization

    Next, Gens contends that the original and amended POCs submitted by RTC are

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    invalid because Knutson was not authorized to act as agent for RTC. See Fed. R. Bankr.P. 3001(b) ("A proof of claim shall be executed by the creditor or the creditor's authorized agent ...."); see also Fed. R. Bankr.P. 9010(a)(2). Gens asserts that it would have demonstrated, at an evidentiary hearing, that RTC regulations, see 12 C.F.R. § 1606.4; see also 12 U.S.C. § 1441a(n)(6), presumptively disqualified Knutson from serving as an RTC agent because, as an affiliate of Home Owners, presumably it was complicit in whatever financial misfeasance or malfeasance led to the Home Owners insolvency. As the bankruptcy court aptly noted, however, Gens lacked standing to challenge Knutson's agency status.

    The RTC regulation pursuant to which Knutson was designated is designed (i) to "ensure that contractors [hired by RTC] meet minimum standards of competence, integrity, fitness, and experience and are held to the highest standards of ethical conduct in performing services for RTC," (ii) to prevent "the direct or indirect use of information gained through performance of a contract ... for personal gain not contemplated by the contract," and (iii) to preclude "the use of personal relationships or improper influence to gain unfair competitive advantage in obtaining contracts with the RTC." 12 C.F.R. § 1606.1. The RTC regulation...

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