In re Baldwin

• Decision Date: 10 March 2004
• Docket Number: Civ.A. No. 03-MC-3152-N.,Adversary No. 03-03014.,Adversary No. 03-03013.
• Citation: 307 B.R. 251
• Parties: In re Sam BALDWIN, Jr., Debtor. Sam Baldwin, Jr., et al., Plaintiffs, v. Citigroup, Inc., et al., Defendants. Citigroup, Inc., et al., Plaintiffs, v. Sam Baldwin, Jr., et al., Defendants.
• Court: U.S. Bankruptcy Court — Middle District of Alabama

307 B.R. 251

In re Sam BALDWIN, Jr., Debtor.

Sam Baldwin, Jr., et al., Plaintiffs, v. Citigroup, Inc., et al., Defendants.

Citigroup, Inc., et al., Plaintiffs, v. Sam Baldwin, Jr., et al., Defendants.

Civ.A. No. 03-MC-3152-N.

Adversary No. 03-03013.

Adversary No. 03-03014.

United States District Court, M.D. Alabama, Northern Division.

March 10, 2004.

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Richard A. Lawrence, C. Lance Gould, Beasley, Allen, Crow, Methvin, Portis & Miles, PC, Montgomery, Al, for debtor.

John R. Chiles, Michael L. Hall, Reid S. Manley, Janine L. Smith, Burr & Forman LLP, Birmingham, for plaintiffs.

Curtis C. Reding, Montgomery, AL, Pro se, trustee.

MEMORANDUM OPINION

ALBRITTON, Chief Judge.

I. INTRODUCTION

This case is before this court on review of the Proposed Findings of Fact and Conclusions of Law in Bankruptcy Case No. 01-06532, Civil Action No. 03-MC-3152-N. Citigroup, Inc., Citifinancial Company, Citifinancial, Inc., Associates First Capital Corporation, Citifinancial Corporation 216 LLC, Citifinancial Mortgage Company, Inc., and Citifinancial Corporation LLC ("Creditor")¹ raised five arguments as to why the bankruptcy court should grant summary judgment enjoining Sam Baldwin ("Debtor") and Lula Baldwin (collectively "Consumers")² from prosecuting an adversary proceeding: 1) judicial estoppel, 2) equitable estoppel, 3) waiver, 4) res judicata, and 5) the effect of 11 U.S.C. § 1327(a). After the bankruptcy court issued its Proposed Findings of Facts and Conclusions of Law, the Creditor timely objected to the Proposed Findings regarding the doctrine of res judicata and the binding effect of 11 U.S.C. § 1327(a).

II. FACTS AND PROCEDURAL HISTORY³

Sam Baldwin cannot read; the fourth grade was the highest level he reached in school. He recognizes some numbers and can apparently write and identify his signature. Nevertheless, Mr. Baldwin handles financial matters for his family, with help from his daughter and granddaughter, who read bills to him. When paying, he receives assistance at Winn-Dixie or Western Union in filling out bill payment forms. He and his wife Lula Baldwin, a co-debtor on the loan, have been married for over forty years. Mrs. Baldwin attended school through the fifth grade. Her reading ability is minimal; it is unclear whether this ability extends beyond her signature and recognizing numbers. During his lifetime, Mr. Baldwin has worked as helper in installing floor tiles, driven a dump truck, and now does clean up work outdoors for the Alabama Department of Transportation; picking up sticks and weed-eating are included among his duties. Mrs. Baldwin has worked as a maid.

Mr. Baldwin alleges that Associates (Associates Financial Services Company of Alabama, Inc) would call him and send letters, informing him that they could help with his financial situation. His response was that he "could use some help if they would help me." Sam Baldwin, Jr. Deposition at 16. He was informed that he could save money, but would need to mortgage his home and have insurance. When the loan application was being signed by Baldwin, he indicates that the lender's agents were aware that he could not read, but that no one read the application to him. Id. at 51-54. With the insurance, "[t]hey just told me this was credit life insurance. You need to sign your signature, and that's what I did." Id. at 26. As for the other loan application materials, Baldwin indicates that he "signed them because they told me what they was, and told me to sign here and I signed them." Id. at 55. The Baldwins indicate that their daughter and grand-daughter were working and in school respectively when the paperwork was being completed and that they did not have anyone else available to read the documents to them.

In January of 2003, Sam Baldwin, Jr. and his wife Lula Baldwin were receiving calls, and phone calls were even being received by his grand- daughter, with the Creditor saying "threatening things over the phone [,]" related to foreclosure upon their home. Id. at 79. Behind on his payments and in fear of foreclosure, Mr. Baldwin sought help. He was going to try to "save my home [and] ... to defend myself." Id. at 78. The Baldwins realized that they "had to do some kind of something." Id. at 83. That something involved finding a lawyer and eventually filing a lawsuit. It was January of 2003, when Baldwin uncovered his claims against the Creditor. Due to their inability to read and lack of knowledge of the internal operations of the Creditor, the Baldwins are highly dependent upon their attorney Mr. Gould, not only for legal guidance, but also to unearth the factual allegations underlying the Creditor's allegedly improper actions.

Previously, Sam Baldwin, Jr., the Debtor, filed a chapter 13 petition for relief on October 16, 2001. He did not disclose a possible cause of action arising out of a loan transaction with the Creditor. The Debtor listed Citifinancial Mortgage Company, Inc. as a secured creditor with a lien on the debtor's residence, with Lula Baldwin, the Debtor's wife listed as a co-debtor. No other secured creditors were listed. He filed a plan proposing to cure the pre-petition arrearage on the mortgage through the trustee with future payments to be made directly to the creditor. Under the proposal one hundred percent payment would be made on allowed unsecured claims over a twenty seven month period.

Neither the Creditor nor the Chapter 13 trustee filed an objection to the confirmation of the Chapter 13 plan. Without an evidentiary hearing, the plan was confirmed summarily on December 19, 2001. The Debtor defaulted on direct payments. Citifinancial filed a motion for relief from the automatic stay. The parties agreed to allow the Debtor to pay the post-petition arrearage through the plan. A consent order, as amended, was entered in April of 2002; Citifinancial filed an amended arrearage claim consonant with the order.

On January 17, 2003, the Debtor and his wife, Lula Baldwin, filed a complaint in state court against Citifinancial, Inc. and others alleging claims arising from the loan transactions with the Creditor. The Baldwins' state court complaint advanced the following claims: 1) fraudulent misrepresentation and/or omission, 2) negligent hiring, training and supervision, 3) wanton hiring, training and supervision, 4) unconscionability, and 5) unjust enrichment. The Consumers did not learn about this lender liability action until January of 2003. They were in possession of loan documents and statements made at the closing, but there is no indication that the Consumers had actual knowledge of the cause of action including the Creditor's allegedly tortuous internal operations.

The Defendants removed the state court action to the bankruptcy Court on January 23, 2003. Citifinancial Corporation 216 LLC filed a counterclaim requesting judicial foreclosure on the mortgage. The Consumers filed a motion, which is currently pending before the bankruptcy court, to remand the action to state court. The Creditor then filed a motion to enjoin the Debtor from prosecuting the removed action arguing that the Debtor's claims are barred by res judicata, judicial estoppel, equitable estoppel, waiver, and the effect of 11 U.S.C. § 1327(a).

Less than a month after discovering his claim against the creditor, the Debtor amended his Schedule B on February 7, 2003 to list as personal property a "possible cause of action against Associate Financial Services and/or Transouth Financial Corporation or related corporations regarding requiring Credit Life Insurance, property insurance, or other insurance." Creditor's Exhibit 14. Still pending before the bankruptcy court are an issue of compelling arbitration, a motion to remand, and the Chapter 13 bankruptcy proceeding itself.

III. STANDARD OF REVIEW

When a district court reviews the proposed findings of fact and conclusions of law filed by a bankruptcy judge in a non-core case heard pursuant to 28 U.S.C. § 157(c)(1), Rule 9033(d) of the Federal Rules of Bankruptcy Procedure sets forth the standard of review.⁴ "The district judge shall make a de novo review upon the record or, after additional evidence, of any portion of the bankruptcy judge's findings of fact or conclusions of law to which specific written objection has been made in accordance with this rule. The district judge may accept, reject, or modify the proposed findings of fact or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy judge with instructions." FED. R. BANKR. P. 9033(d).⁵ A district court may refer a case to a bankruptcy judge for proposed findings of fact and conclusions of law. 28 U.S.C. § 157(c)(1). Any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected. Id.

IV. DISCUSSION⁶

A. Res Judicata and § 1327

"Federal preclusion principles apply to prior federal decisions, whether previously decided in diversity or federal question jurisdiction." CSX Transp., Inc. v. Brotherhood of Maintenance of Way Employees, 327 F.3d 1309, 1316 (11th Cir.2003). Res judicata, also known as claim preclusion, "bars the parties from re-litigating a cause of action that was or could have been raised in that action." In re Piper Aircraft Corp., 244 F.3d 1289, 1296 (11th Cir.2001). To demonstrate that res judicata applies, the party asserting the bar must prove that (1) there was a prior judgment on the merits, (2) entered by a court of competent jurisdiction, (3) with substantial identity of the parties or their privies, (4) involving the same cause of action. Id.; see also Southeast Florida Cable, Inc. v. Martin County, Fla., 173 F.3d 1332, 1336 (11th Cir.1999). If any element is missing, res judicata is inapplicable. In re...