A & J Const. Co., Inc. v. Wood

• Decision Date: 21 June 2005
• Docket Number: No. 30743.,30743.
• Court: Idaho Supreme Court
• Parties: A & J CONSTRUCTION CO., INC., Plaintiff-Appellant, v. Floyd WOOD, a/k/a Floyd D. Wood, an individual, Defendant-Respondent.

116 P.3d 12

141 Idaho 682

A & J CONSTRUCTION CO., INC., Plaintiff-Appellant, v. Floyd WOOD, a/k/a Floyd D. Wood, an individual, Defendant-Respondent.

No. 30743.

Supreme Court of Idaho.

June 21, 2005.

Ringert Clark Chtd., Boise, Idaho, for appellant. James G. Reid argued.

Foley, Freeman, Borton & Stern, Chtd., Meridian, Idaho, for respondent. Howard R. Foley argued.

JONES, J.

A & J Construction Co., Inc. (A & J) appeals from the district court's decision to grant Floyd Wood's summary judgment motion based upon judicial estoppel.

I. FACTUAL AND PROCEDURAL BACKGROUND

A & J and Wood entered into a "Joint Venture Agreement and Option to Purchase Real Property" in 1979. Approximately 73 acres of real property near Homedale, Idaho, coined the "Sugar Beet Property," was purchased by Wood in October of that year pursuant to the joint venture agreement. The purchase price of the property was $172,948.43, which was in excess of the market value. The parties believed a highway bypass project was to be constructed along the property line and hoped to make a profit off the land; however, the project never materialized.

A & J filed for bankruptcy in 1991. The company did not list the Sugar Beet Property as an asset or disclose the joint venture agreement, and Wood was not listed as either a debtor or creditor in the bankruptcy schedules or disclosure statement. After A & J filed for bankruptcy and it became clear the highway bypass project was not going to take place, nearly all of the property was sold through individual parcel sales negotiated by either A & J or Wood. A & J filed an action against Wood for an accounting of proceeds, also asserting claims for unjust enrichment, conversion and a decree quieting title. Wood filed a motion for summary judgment, asserting all claims were time-barred, and the motion was granted by the court. A & J was then granted leave to amend its complaint. In the amended complaint, A & J asserts a claim for an accounting of proceeds and distribution of profits based upon the existence of the joint venture. Wood filed a second motion for summary judgment, which he asserted should be granted based upon the statute of frauds and/or judicial estoppel. The court denied the motion based upon the statute of frauds, finding there were genuine, material issues of fact that prohibited the court from granting the motion on that basis. However, the court granted summary judgment in Wood's favor based upon judicial estoppel, finding there were no genuine, material issues of fact on that basis.

A & J asserts that judicial estoppel is inappropriate in this case for a number of reasons. In its brief, the company contends it "honestly believed, perhaps because of confusion, that its interest in the joint venture was not an asset." Since the value of the joint venture was exceeded by the associated debt at the time of the bankruptcy, the company claims its president did not consider the joint venture an asset. A & J claims, further, that the omission occurred because the company president was out of town at the time the bankruptcy filed, requiring his wife to furnish the pertinent information to the bankruptcy attorney, and she was unaware of the joint venture agreement. However, A & J also argues that the details relating to the joint venture were omitted from the bankruptcy filings because of the company's reliance on the advice of its counsel. The district court was not persuaded by A & J's arguments and found that A & J "made, at the very least, a tactical decision not to disclose and the Plaintiff may not assert that the reliance upon advice of bankruptcy counsel was either inadvertent or an excusable mistake." Consequently, the court held that A & J was judicially estopped from asserting claims related to the Sugar Beet Property and the joint venture between Wood and A & J because it had taken inconsistent positions in bankruptcy court and the district court and sought an advantage by taking the inconsistent positions. A & J's claims were dismissed with prejudice and this appeal followed. Wood requests attorney fees on appeal.

II. STANDARD OF REVIEW

The following standard of review applies here:

In an appeal from an order granting summary judgment, this Court's standard of review is the same as that used by the trial court in ruling on the motion. Summary judgment is proper "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." This Court liberally construes all facts and all reasonable inferences in favor of the non-moving party.

Summers v. Cambridge Joint School Dist. No. 432, 139 Idaho 953, 955, 88 P.3d 772, 774 (2004) (citations omitted).

III. ANALYSIS

A. The District Court Did Not Err In Granting Wood's Motion For Summary Judgment.

Judicial estoppel precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position. Sword v. Sweet, 140 Idaho 242, 252, 92 P.3d 492, 502 (2004). The Idaho Supreme Court adopted the doctrine of judicial estoppel in Loomis v. Church, 76 Idaho 87, 277 P.2d 561 (1954). Robertson Supply, Inc. v. Nicholls, 131 Idaho 99, 101, 952 P.2d 914, 916 (Ct.App. 1998). This Court listed numerous court decisions from other states as support for adopting the doctrine and noted:

It is quite generally held that where a litigant, by means of such sworn statements, obtains a judgment, advantage or consideration from one party, he will not thereafter, by repudiating such allegations and by means of inconsistent and contrary allegations or testimony, be permitted to obtain a recovery or a right against another party, arising out of the same transaction or subject matter.

Loomis, 76 Idaho at 93-94, 277 P.2d at 565. The Idaho Court of Appeals further explained the doctrine as follows:

Essentially, this doctrine prevents a party from assuming a position in one proceeding and then taking an inconsistent position in a subsequent proceeding. There are very important policies underlying the judicial estoppel doctrine. One purpose of the doctrine is to protect the integrity of the judicial system, by protecting the orderly administration of justice and having regard for the dignity of judicial proceedings. The doctrine is also intended to prevent parties from playing fast and loose with the courts.

Robertson Supply, 131 Idaho at 101, 952 P.2d at 916 (internal citations omitted).

While Idaho appellate courts have applied the doctrine of judicial estoppel in a number of cases, the courts have not dealt with a situation where the first proceeding from which a party later takes an inconsistent position is a bankruptcy proceeding. The Ninth Circuit Court of Appeals provides guidance in a similar case, Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778 (9th Cir.2001). Hamilton brought suit against State Farm for bad faith and breach of contract after the insurance company refused to pay his claims relating to alleged acts of theft and vandalism. Hamilton, 270 F.3d at 780. State Farm denied Hamilton's claim only a few days after Hamilton had filed for bankruptcy. Id. at 781. Hamilton's bankruptcy schedules listed the vandalism loss against his estate but failed to list the corresponding claims against State Farm as assets of the estate. Id. State Farm filed a motion to dismiss Hamilton's claims against the insurance company and the motion was granted based upon the doctrine of judicial estoppel. This decision was affirmed on appeal. Id. at 782. The Ninth Circuit Court of Appeals cited the following rule regarding application of the doctrine in the bankruptcy context:

In the bankruptcy context, a party is judicially estopped from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor's schedules or disclosure statements. Hay v. First Interstate Bank of Kalispell, N.A., 978 F.2d 555, 557 (9th Cir.1992) (failure to give notice of a potential cause of action in bankruptcy schedules and Disclosure Statements estops the debtor from prosecuting that cause of action); In re Coastal Plains, 179 F.3d 197, 208 (5th Cir.1999), cert. denied, 528 U.S. 1117, 120 S.Ct. 936, 145 L.Ed.2d 814 (2000) (holding that a debtor is barred from bringing claims not disclosed in its bankruptcy schedules); Payless Wholesale Distributors, Inc. v. Alberto Culver (P.R.) Inc., 989 F.2d 570, 572 (1st Cir.), cert. denied, 510 U.S. 931, 114 S.Ct. 344, 126 L.Ed.2d 309 (1993) (debtor who obtained relief on the representation that no claims existed cannot resurrect such claims and obtain relief on the opposite basis); Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 419 (3rd Cir.), cert. denied, 488 U.S. 967, 109 S.Ct. 495, 102 L.Ed.2d 532 (1988) (debtor's failure to list potential claims against a creditor `worked in opposition to preservation of the integrity of the system which the doctrine of judicial estoppel seeks to protect,' and debtor is estopped by reason of such failure to disclose).

Id. at 783.

The court went on to recite the following rationale for the rule:

The rationale for . . . decisions [invoking judicial estoppel to prevent a party who failed to disclose a claim in bankruptcy proceedings from asserting that claim after emerging from bankruptcy] is that the integrity of the bankruptcy system depends on full and honest disclosure by debtors of all of their assets. The courts will not permit a debtor to obtain relief from the bankruptcy court by representing that no claims exist and then subsequently to assert those claims for his own benefit in a separate proceeding. The interests of both the creditors, who plan their actions in the bankruptcy proceeding on the basis of information supplied in the disclosure statements, and the bankruptcy court, which must decide whether to approve the plan of...