Dotlich v. Tucker Hester, LLC
| Decision Date | 31 December 2015 |
| Docket Number | No. 29A02–1503–CC–125.,29A02–1503–CC–125. |
| Parties | Steven E. DOTLICH, Appellant–Defendant, v. TUCKER HESTER, LLC, Appellee–Plaintiff. |
| Court | Indiana Appellate Court |
Matthew A. Griffith, Griffith Law Group, LLC, Indianapolis, IN, Attorney for Appellant.
Bradley J. Buchheit, Tucker Hester Baker & Krebs, LLC, Indianapolis, IN, Attorney for Appellee.
BROWN
, Judge.
[1] Steven E. Dotlich appeals the trial court's entry of summary judgment in favor of William Tucker with respect to Dotlich's malpractice claim against Tucker. Dotlich raises five issues which we consolidate and restate as whether the court erred in entering summary judgment in favor of Tucker. We affirm.
[2] Dotlich first met with Tucker, an attorney with Tucker Hester, ETC (the “firm”) on January 24 or 25, 2011. At the meeting, Dotlich explained that most of his debts were secured by crane equipment, vehicles, or other assets, and that he was mostly concerned about saving his family home and his 12.5% limited partnership interest his father had given him in Speedway Industrial Park, L.P. Dotlich met again with Tucker on February 3, 2011, at which time Dotlich signed an engagement letter, and Tucker filed a voluntary petition for bankruptcy under Chapter 7 of the Bankruptcy Code on behalf of Dotlich on the same day. Tucker filed “Schedule B—Personal Property” with the bankruptcy court on February 17, 2011, which included an interest of 12.5% in “Speedway Industrial Park, Inc.”1 Appellant's Appendix at 149. Tucker filed a motion to withdraw his appearance from Dotlich's bankruptcy case on August 24, 2011, and two days later the court granted the motion.
[3] On December 23, 2011, the firm filed a Complaint on Account in the Hamilton Superior Court against Dotlich alleging that he owed the firm $10,658.73. On February 23, 2012, Dotlich by new counsel filed an answer. On April 2, 2012, Dotlich's new counsel also entered an appearance for him in his bankruptcy case. In the Hamilton Superior Court, Dotlich filed a Motion for Leave to Amend Answer to Complaint and a Motion to Join Person as Party on July 27, 2012, and the court granted the motions, including that William Tucker was named as a counter-defendant on August 1, 2012. Dotlich filed an Amended Answer and Counterclaims on August 28, 2012, alleging:
Id. at 127–128.2 The bankruptcy court's docket shows that a discharge of debtor was entered on March 4, 2013, and that the bankruptcy case was closed on April 8, 2014.
[4] On June 19, 2014, Tucker filed a motion for summary judgment together with a designation of evidence. He contended that Dotlich was judicially estopped from pursuing his counterclaim, that Dotlich failed to amend his bankruptcy schedules to reflect his malpractice claim and accordingly represented to the bankruptcy court that he had no such claim, and that Dotlich would gain an unfair advantage if not estopped as the bankruptcy trustee relied on his misrepresentations and determined that there were fewer available assets for distribution to his creditors.
[5] Dotlich filed a response together with designated evidence. He contended that Tucker's motion was premised on the false conclusion that the malpractice claim is an asset of the bankruptcy estate, and that Tucker made a number of post-petition errors, including improperly listing assets as exempt and failing to accurately describe assets and their true values. He noted that Chapter 7 differs from bankruptcy under Chapters 11 and 13, and asserted that the filing of a Chapter 7 bankruptcy petition creates a bankruptcy estate encompassing all interests of the debtor in property “as of the commencement of the case” and that his malpractice claim arose after the filing of the petition. Id. at 109.
[6] In his reply, Tucker argued that only the bankruptcy trustee could pursue the claims, and all of the elements of a claim for legal malpractice were present at the time the bankruptcy petition was filed. He also argued that, even if the malpractice claim did not accrue under Indiana law “as of” the filing date, the claim has sufficient roots in Dotlich's pre-bankruptcy activities to warrant inclusion in his bankruptcy estate. Id. at 913.
[7] On December 15, 2014, the court held a hearing, and on February 9, 2015, entered summary judgment in favor of Tucker and against Dotlich on Dotlich's counterclaim. The court found that Dotlich received a discharge in bankruptcy more than seven months after he moved for leave to file his counterclaim in this case, he did not amend his bankruptcy schedules or notify the trustee of the claim, and that the counterclaim was property of the bankruptcy estate and only the bankruptcy trustee could pursue it. The court noted that Section 541(a)(1) of the Bankruptcy Code
defines “property of the estate” to include “all legal or equitable interests of the debtor in property as of the commencement of the case,” and that property of the estate is broadly construed. Id. at 14 (citing 11 U.S.C. § 541(a)(1) ). The court found that causes of action that accrue as a result of the filing of a bankruptcy petition are property of the estate. Id. at 15 (citing In re Strada Design Assocs., Inc., 326 B.R. 229, 235 (Bankr.S.D.N.Y.2005) ; In re Alvarez, 224 F.3d 1273, 1278 (11th Cir.2000), cert. denied, 531 U.S. 1146, 121 S.Ct. 1083, 148 L.Ed.2d 959 (2001) ; In re Dow, 132 B.R. 853, 860 (Bankr.S.D.Ohio 1991) ). The court further stated that this conclusion follows from a comparison between 11 U.S.C. §§ 541(a)(1) and (a)(7), where Section 541(a)(1) deals with the debtor's interests “as of the commencement of the case” as opposed to interests “before” or “prior to” filing, id. (citing Alvarez, 224 F.3d at 1278 ), and Section 541(a)(7) defines property of the estate to include any interest in property that the estate acquires “after the commencement of the case.” Id.
[8] The court found that, under Indiana law, a legal malpractice claim consists of four elements: an attorney-client relationship, negligence, proximate cause, and damages, and that a claim “based on negligently advising a client to file a bankruptcy petition accrues, at the latest, at the time the petition is filed.” Strada Design Associates, 326 B.R. at 237
; see also
Alvarez, 224 F.3d at 1279 (same); In re Bounds, 495 B.R. 725, 732 (W.D.Tex.2013) (same); Dow, 132 B.R. at 859–60 (same). The court noted that Dotlich's counterclaim alleged that “Tucker breached his duty of care by filing Dotlich's bankruptcy petition” and that “Tucker's breach was the proximate cause of Dotlich's damages.” Id. at 18–19 ().
[9] The court further concluded that, “[a]ssuming for the sake of argument that Dotlich's malpractice claim did not accrue under Indiana law ‘as of’ the filing date, it still has sufficient roots in Dotlich's pre-bankruptcy activities to warrant inclusion into his estate.” Id. at 20. The court found in part:
28. Here, Dotlich's malpractice claim has all its roots in his pre-bankruptcy past. He consulted with and retained Tucker prior to the petition date. The allegations of lack of due care, culminating in the filing of Dotlich's chapter 7 petition, relate to Tucker's pre-petition advice. Finally, Dotlich suffered his alleged injury—loss of control of his ownership interest in Speedway Industrial Park, Inc., subjecting it to the liquidation powers of the trustee—at the moment the petition was filed.
[10] The court found that unless and until the bankruptcy trustee abandoned the claim from the estate, Dotlich had no standing to pursue it.
[11] The court also concluded that Dotlich is judicially estopped from pursuing his counterclaim, noting that federal courts have developed a basic default rule that, if a plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the bankruptcy schedules and obtains a discharge (or plan confirmation), judicial estoppel bars the action and that Indiana abides by this rule. Id. at 24 (citing Hammes v. Brumley, 659 N.E.2d 1021, 1028 n. 4 (Ind.1995)
(), reh'g denied;
Shewmaker v. Etter, 644 N.E.2d 922, 930 (Ind.Ct.App.1994) (), adopted by
Hammes ).
[12] The order provided there was no just reason for delay and expressly directed the entry of judgment in favor of Tucker and against Dotlich on his counterclaim pursuant to Trial Rule 54(B)
.
[13] The issue is whether the trial court erred in entering summary judgment in favor of Tucker on Dotlich's counterclaim. Our standard of review is the same as it is for the trial court. Manley v. Sherer, 992 N.E.2d 670, 673 (Ind.2013)
. The moving party bears the initial burden of making a prima facie showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Id....
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