Shewmaker v. Etter

• Decision Date: 28 December 1994
• Docket Number: No. 49A02-9310-CV-525,49A02-9310-CV-525
• Citation: 644 N.E.2d 922
• Parties: Steve SHEWMAKER, Appellant-Plaintiff, v. Gerald ETTER, Appellee-Defendant, and William J. Franzmann, Nominal Appellee-Defendant.
• Court: Indiana Appellate Court

Page 922

644 N.E.2d 922

Steve SHEWMAKER, Appellant-Plaintiff, v. Gerald ETTER, Appellee-Defendant, and William J. Franzmann, Nominal Appellee-Defendant.

No. 49A02-9310-CV-525.

Court of Appeals of Indiana,

Second District.

Dec. 28, 1994.

James R. Fisher, Donald M. Snemis, Ice Miller Donadio & Ryan, Indianapolis, for appellant.

Mark R. Smith, T. Neil Bemenderfer, Smith & Bemenderfer, Indianapolis, for appellee Gerald Etter.

OPINION

SULLIVAN, Judge.

Steve Shewmaker (Shewmaker) appeals a grant of summary judgment in favor of Gerald Etter (Etter). The parties present several issues, which we restate as:

I. Whether the trial court erred in allowing Etter to amend his answer to include several affirmative defenses;

II. whether the trial court erred in finding that Shewmaker lacked standing to bring this personal injury claim against Etter;

III. whether Shewmaker waived any objection to the trial court's finding that his claim was barred by the doctrines of equitable estoppel, judicial estoppel, and res judicata; and

IV. whether the trial court erred in finding that Shewmaker's claim was barred by the doctrines of equitable estoppel, judicial estoppel, and res judicata.

We reverse.

In May of 1990, Shewmaker was driving a motorcycle when it left the road and crashed into a metal guard rail erected on Etter's property. Shewmaker sustained serious injury. On October 18 of the same year, Shewmaker filed a Chapter 7 bankruptcy petition seeking relief from $62,319.47 in medical bills which he had incurred as a result of the collision. The only creditors listed were the doctors and medical institutions which provided goods and services to Shewmaker as a result of his injuries. Shewmaker failed to list his cause of action against Etter upon his schedule of personal property. In February of 1991, Shewmaker received a discharge in bankruptcy from the United States Bankruptcy Court. Unknown to Shewmaker or to the bankruptcy court judge, Shewmaker actually never had any creditors. Because Shewmaker was covered by Medicare, he never had responsibility to pay the health care providers listed as creditors in the bankruptcy petition. The sole remedy of the health-care providers was against Medicare.

In October of 1991, Shewmaker filed a personal injury action against Etter alleging that Etter was negligent in placing the guard rail upon his property. Almost one year after the suit was filed, Etter discovered that Shewmaker had received a discharge in bankruptcy, but had failed to list the present cause of action on the schedule of assets. Shortly after receiving notice of Shewmaker's bankruptcy, Etter moved for summary judgment based upon the bankruptcy discharge, relying upon the affirmative defenses of standing, equitable estoppel, judicial estoppel, and res judicata.

Before filing his response to Etter's motion for summary judgment, Shewmaker, along with the bankruptcy trustee, petitioned the bankruptcy court to reopen the bankruptcy proceedings. The bankruptcy court granted the motion, specifically finding that Shewmaker never had any creditors and that the discharge had provided him no relief from debt. The court then amended the property schedule to include Shewmaker's claim against Etter, and on April 6, 1993, dismissed the bankruptcy petition nunc pro tunc as of June 1, 1990, more than one year before the filing of the personal injury action.

After receiving relief in the bankruptcy court, Shewmaker responded to Etter's motion for summary judgment, arguing that the dismissal cured all defects. The trial court granted summary judgment in favor of Etter. The court determined that, because Shewmaker had failed to list the chose in action in his original assets schedule, he did not own the action and thus lacked standing to sue. Further, the court found that the action was barred by equitable estoppel, judicial estoppel, and res judicata.

I. Amendment

Shewmaker contends that the trial court erred in allowing Etter to amend his answer to include affirmative defenses twenty months after filing his original answer. We disagree.

Although the parties engaged in discovery in the year after Shewmaker filed his complaint, it was not until October 7, 1992, that one of Etter's discovery requests revealed the fact that Shewmaker had filed bankruptcy. Two weeks later, Etter moved for summary judgment alleging the four affirmative defenses. Rather than responding directly to the summary judgment motion, Shewmaker moved to strike the summary judgment motion claiming that Etter had waived these affirmative defenses for failing to assert them in his answer. Subsequently, Etter moved for leave to amend his answer to include them. The trial court granted Etter leave to amend. ¹

It is within the trial court's sound discretion to grant a party leave to amend an answer to include an affirmative defense. Indiana Dept. of Public Welfare v. Clark (1985) 1st Dist.Ind.App., 478 N.E.2d 699, 703, cert. denied (1986) 476 U.S. 1170, 106 S.Ct. 2893, 90 L.Ed.2d 980. The grant will only be reversed for abuse thereof. The policy of this state is to liberally allow amendments in order to bring all issues before the trial court. Cox v. Indiana Subcontractors Ass'n (1982) 1st Dist.Ind.App., 441 N.E.2d 222, 225. Accordingly, a party may not claim error where he has not been prejudiced by the amendment.

Here, Shewmaker claims that he was prejudiced by the amendment because it led to a summary judgment against him. Shewmaker does not claim that the delay in asserting the defenses caused him prejudice; rather, he claims that prejudice resulted because the defenses were successful. According to this logic, a defendant should never be allowed to plead affirmative defenses in the first instance because it might cause the plaintiff to lose. We hold that prejudice must result from delay in asserting the defense, not from the likelihood of the success of the defense itself. ²

Shewmaker claims prejudice upon two other grounds. He argues that if Etter had asserted the affirmative defenses in his original answer, Shewmaker would have been within the one-year time limit in which revocation of a bankruptcy may be had. Alternatively, he argues that at the time of the original answer, the two-year statute of limitations period on the claim had not yet run, and that therefore he could have substituted the bankruptcy trustee as the correct plaintiff. These arguments have been rejected before. Bradley v. Stiller (1992) 3d Dist.Ind.App., 604 N.E.2d 1242, trans. denied; Clark, supra, 478 N.E.2d 699. Shewmaker's failure to seek revocation of the bankruptcy within the statutory time limit cannot be charged to Etter, especially where Shewmaker did not advise Etter of the bankruptcy until the time limit had expired. The reason that the bankruptcy trustee did not prosecute the action is because Shewmaker did not disclose it in the bankruptcy petition--not because Etter delayed in asserting his affirmative defenses. Bradley, supra at 1245.

Shewmaker claims that the trial court's decision was inequitable because it gave Etter a "windfall" in that Etter was relieved of the responsibility to "pay for his torts." Reply Brief of Appellant at 22. Even a plaintiff who has a clearly meritorious claim against the most egregious of wrong-doers may lose his cause of action if he fails to comply with certain procedural requirements, e.g., the statute of limitations. Arguably, this is a windfall to the defendant. However, our State imposes a duty upon plaintiffs to comply with requirements necessary for an orderly and workable system of justice. Where the plaintiff's chargeable failure to comply with these requirements results in loss of his cause of action, he may not successfully complain.

Shewmaker has not directed us to a case in which the grant of leave to amend has been reversed, and we find no abuse of discretion here. ³

II. Standing

When a debtor files a petition in bankruptcy, the debtor is divested of all of his or her assets, including any potential causes of action. 11 U.S.C. § 541(a) (1986). Etter argues that the bankruptcy dismissal did not return ownership of Shewmaker's claim to him and, therefore, Shewmaker had no standing to sue. Shewmaker argues that the bankruptcy court's order did return the cause of action to him and to hold otherwise would violate the Supremacy Clause of the federal Constitution. We agree.

The federal Constitution grants the federal government exclusive power to promulgate bankruptcy laws. U.S. Const., art. I, § 8. Accordingly, United States Bankruptcy Court rulings upon bankruptcy issues are controlling upon state court issues pursuant to the Supremacy Clause. ⁴ Renges, Inc. v. PAC Financial Corp. (1987) 2d Dist.Ind.App., 515 N.E.2d 563. Specifically, a bankruptcy court has exclusive jurisdiction to interpret the scope and effect of its dismissal order. See Hendrix v. Page (1993) 1st Dist.Ind.App., 622 N.E.2d 564, 567, reh'g. denied 640 N.E.2d 1081 (1994).

The bankruptcy court dismissed Shewmaker's petition pursuant to 11 U.S.C. § 349 (1985). "The basic purpose of the [dismissal] subsection is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case." In re Genovese (1988) E.D.Tenn., 91 B.R. 831, 838, quoting S.Rep. No. 989, 95th Cong., 2d Sess. 49, U.S.Code Cong. & Admin.News 1978 at pp. 5787, 5835. To this end, a dismissal "revests the property of the [bankruptcy] estate in the entity in which such property was vested immediately before the commencement of the [bankruptcy] case...." 11 U.S.C. § 349(b). The word "entity" means debtor. In re Baylies (1990) D.Colo., 114 B.R. 324. Finally, "The court is permitted to order a different result for cause." In re Genovese, supra, (emphasis in original).

Despite the statutory wording and history, Etter points out that Shewmaker did not receive a dismissal until after he had been...