Ajaka v. Brooksamerica Mortg. Corp.

• Decision Date: 29 June 2006
• Docket Number: No. 05-12105.,05-12105.
• Citation: 453 F.3d 1339
• Parties: Temidayo AJAKA, Fehintola Ajaka, Plaintiffs-Counter-Defendants-Appellants, v. BROOKSAMERICA MORTGAGE CORPORATION, Residential Funding Corporation, Defendants-Counter-Claimants-Appellees, Homecomings Financial Network, Inc., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

453 F.3d 1339

Temidayo AJAKA, Fehintola Ajaka, Plaintiffs-Counter-Defendants-Appellants, v. BROOKSAMERICA MORTGAGE CORPORATION, Residential Funding Corporation, Defendants-Counter-Claimants-Appellees Homecomings Financial Network, Inc., Defendant-Appellee.

No. 05-12105.

United States Court of Appeals, Eleventh Circuit.

June 29, 2006.

COPYRIGHT MATERIAL OMITTED

Charles McLeod Baird, Charles M. Baird, Atty. at Law, Atlanta, GA, for Ajakas.

Steven D. Karlin, Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, LLP, New York City, Peter Lawrence Lublin, McCalla, Raymer, Padrick, Cobb, Nichols & Clark, Roswell, GA, for Appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before ANDERSON, BARKETT and BOWMAN^*, Circuit Judges.

BARKETT, Circuit Judge:

Temidayo Ajaka sued BrooksAmerica Mortgage Corporation ("BrooksAmerica") Residential Funding Corporation ("RFC"), and HomeComings Financial Network, Inc. ("HomeComings") — collectively, the "Defendants" — for rescission and damages under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq. The district court granted summary judgment in favor of the defendants because Ajaka failed to timely disclose the TILA claims as contingent assets in his pending Chapter 13 bankruptcy action. Ajaka appeals and we reverse.

BACKGROUND

On April 14, 2000, Ajaka borrowed $35,000 from BrooksAmerica, secured by a second mortgage on his primary residence. The annual percentage rate for the home equity loan was 19.7483%.¹ Two years later, on August 2, 2002, Ajaka filed a Chapter 13 bankruptcy proceeding in the U.S. Bankruptcy Court for the Northern District of Georgia, Atlanta Division. In re Ajaka, No. 02-97844-mhm (Bankr. N.D.Ga.). There is no dispute that at the time he filed for bankruptcy, he was not aware of any potential TILA claim arising out of the loan and the various disclosures appertaining thereto.² The Chapter 13 reorganization plan was confirmed on December 7, 2002. Again, there is no dispute that, at the time the plan was confirmed, Ajaka was not aware of his potential TILA claim. Under Chapter 13, a creditor has 180 days to object to confirmation of the reorganization plan on the basis of fraud. See 11 U.S.C. § 1330(a).

On January 3, 2003, Ajaka met for the first time with Charles Baird, his counsel on this appeal. During that meeting, Ajaka was informed, for the first time, that he may have a viable claim under TILA, although it was unclear at that point against whom the claim could be asserted. Baird also told Ajaka that his bankruptcy schedules would have to be amended to reflect the TILA claim. While Baird advised Ajaka that he would need to disclose his TILA claim as an asset in the bankruptcy proceeding, Ajaka testified in his deposition that he had little — if any — knowledge of the "nature and effect" of his TILA claim in January 2003, or against whom he would assert it.

Two weeks later, on January 18, 2003, Baird sent a rescission demand on behalf of Ajaka to BrooksAmerica, the original holder of the note and security deed.³ Pursuant to 15 U.S.C. § 1635(b), BrooksAmerica was required to respond to the demands within twenty days after receipt of the letter, which it did by advising Ajaka on or around February 13, 2003, that it had assigned its interest in the note and security deed to another company. However, the letter did not inform Baird of the name of the entity to whom BrooksAmerica assigned the mortgage. BrooksAmerica also stated that it had provided Ajaka with the proper disclosures under TILA and that Ajaka did not have the right to rescind.

Because the deed records did not show an assignment of the note and security deed, Ajaka claims that Baird was unable to immediately determine the assignee against whom a TILA claim would be asserted. In addition, Ajaka claims that because BrooksAmerica failed to provide him with notice of the assignment, he was never made aware of the assignment or to whom it was assigned. Ajaka claims that in a follow-up communication, Baird requested the name of the assignee from BrooksAmerica, but did not receive an answer.

On or about March 26, 2003, Baird informed Ajaka's bankruptcy attorney that a TILA claim should be listed as a potential asset in the bankruptcy proceeding. Approximately two days later, Baird forwarded a statutory rescission demand letter to RFC, convinced that either HomeComings or RFC had taken assignment of the mortgage. RFC received the letter on April 2, and was required to respond to the demands within twenty days of receipt. On April 11, 2003, Ajaka filed the instant action, alleging a TILA violation by the Defendants.⁴

On April 21, 2003, still within the time period for filing an objection to confirmation of Ajaka's Chapter 13 reorganization plan, RFC, which had not yet been served with the complaint and summons in Ajaka's TILA action, filed a complaint for declaratory judgment and equitable relief as part of the bankruptcy proceeding. RFC alleged that (1) Ajaka's TILA claim was barred by judicial estoppel; (2) Ajaka's TILA claim was without merit; and (3) even if Ajaka had a right to rescind, he should be required to immediately repay the proceeds of the loan, so as to return the parties to the status quo ante.⁵ Nonetheless, and in any event, there is no question that, due to RFC's filing, all of the creditors were on notice of the potential TILA claim by April 21, 2003, if not before. As such, all of Ajaka's creditors had more than six weeks from the time they learned of his TILA claim to the expiration of the 180-day period for objecting to confirmation of his Chapter 13 reorganization plan and, if they so desired, seeking conversion of Ajaka's bankruptcy from Chapter 13 to Chapter 7.

On June 20, 2003, after that time period expired, Ajaka filed a formal amendment to the bankruptcy action that included disclosure of his TILA claim as a contingent asset. The amendments also reclassified the home equity mortgage from a secured debt to an unsecured debt, assuming Ajaka was successful on his TILA claim. After discovery, the Defendants filed their motions for summary judgment in this case — Ajaka's TILA action — claiming, inter alia, that Ajaka's TILA claim was barred by judicial estoppel because he failed to disclose it in the bankruptcy proceeding. The district court granted the motions for summary judgment on that ground and this timely appeal followed.

DISCUSSION⁶

Judicial estoppel, also sometimes referred to as "equitable estoppel," is an equitable doctrine invoked at a court's discretion. New Hampshire v. Maine, 532 U.S. 742, 750, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001). Under this doctrine, a party is precluded from "asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding. [It] is an equitable concept intended to prevent the perversion of the judicial process." Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002) (citation and internal quotation marks omitted). Judicial estoppel is intended to be a flexible rule in which courts must "take into account all of the circumstances of each case in making our determination." See Palmer & Cay, Inc. v. Marsh & McLennan Cos., 404 F.3d 1297, 1307 n. 17 (11th Cir.2005).

Although not inflexible or exhaustive, we begin with a consideration of two primary factors in determining whether to apply judicial estoppel. "First, the allegedly inconsistent positions must have been taken under oath in a prior proceeding, and second, they must have been calculated to make a mockery of the judicial system." Id. (internal quotation marks omitted). "These factors are not exhaustive, however . . . ." Id.; Burnes, 291 F.3d at 1285-86 (holding that "courts must always give due consideration to all of the circumstances of a particular case when considering the applicability of this doctrine"). One "pertinent factor [is] . . . whether the present position is clearly inconsistent with the earlier position and whether the party successfully persuaded a court to accept the earlier position, so that judicial acceptance of the inconsistent position in a later proceeding creates the perception that either court was misled." Id.; see also New Hampshire, 532 U.S. at 751, 121 S.Ct. 1808 ("A third consideration is 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.").

There is no question that Ajaka failed to timely amend his Chapter 13 reorganization plan to reflect his contingent TILA claim, and that he therefore "took inconsistent positions . . . under oath in a prior proceeding." A debtor seeking shelter under the bankruptcy laws must disclose all assets, or potential assets, to the bankruptcy court. 11 U.S.C. §§ 521(1), 541(a)(7). "The duty to disclose is a continuing one that does not end once the forms are submitted to the bankruptcy court; rather, a debtor must amend his financial statements if circumstances change." Burnes, 291 F.3d at 1286. Because there is no question that Ajaka failed to assert his TILA claim as an asset in the bankruptcy proceeding, the first prong of our judicial estoppel test is satisfied. See id. at 1285 (finding similar failure to disclose in bankruptcy proceeding to satisfy the first factor).

As such, and as the parties recognize, this appeal rises and falls on Ajaka's intent. If Ajaka's failure to timely incorporate the TILA claim into his bankruptcy proceeding was "calculated to make a mockery of the judicial system," then judicial estoppel should bar him from taking advantage of such capriciousness here.⁷

Although our case law recognizes that there is no requirement that the party invoking judicial estoppel show prejudice, see Burnes, 291 F.3d at 1286, prejudice serves an important role in the applicability of the doctrine in this context, for it is difficult to impute an intent "to make a...