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Shirley Berge v. Kuno Mader and Dmg America

September 30, 2011


Appeal from the Circuit Court of Cook County No. 07 L 12812 Honorable Eileen Mary Brewer, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Quinn

PRESIDING JUSTICE QUINN delivered the judgment of the court, with opinion. Justices Harris and Connors concurred in the judgment and opinion.


¶ 1 The trial court held that the doctrine of judicial estoppel prevented plaintiff, Shirley Berge, from pursuing a tort action against defendants Kuno Mader and DMG America, Inc., after failing to disclose the case in her bankruptcy petition. Because Berge's contradictory actions met all the elements for invoking judicial estoppel, we find that the trial court did not abuse its discretion in invoking the doctrine and affirm.


¶ 3 In April 2006, plaintiff, Shirley Berge, filed for bankruptcy under chapter 13. 11 U.S.C. Chapt. 13, et seq. The following month, she was involved in an auto accident with a car owned by defendant DMG America, Inc., and driven by DMG's employee, defendant Kuno Mader. Plaintiff filed her negligence complaint concerning this accident in state court in November 2007 which is now the subject of this appeal. In May 2009, plaintiff converted her chapter 13 bankruptcy petition to a chapter 7 petition. 11 U.S.C. Chapt.7, et seq. In October 2009, she received a "no assets" discharge of her debts in bankruptcy court and her chapter 7 petition was closed as fully resolved. It is undisputed that plaintiff never disclosed her state court claim against the defendants to the bankruptcy court while her chapter 13 and 7 petitions were pending, although plaintiff had numerous opportunities to do so. Defendants independently learned of plaintiff's bankruptcy case and filed a motion, captioned as one for summary judgment, which requested the state trial court to apply the doctrine of judicial estoppel and dismiss the case for plaintiff's failure to disclose the negligence claim in her list of statutorily required disclosures in bankruptcy court. After initial briefing of defendants' motion, plaintiff also returned to bankruptcy court to reopen her discharged case to disclose the instant case.


¶ 5 Plaintiff raises for the first time on appeal that the state court does not have jurisdiction to decide whether this personal injury case can proceed because of the plaintiff's non-compliance with the statute that requires her to list any lawsuit as an asset in her bankruptcy case, as required by statute. The argument presented is that only the bankruptcy court can decide issues stemming from the bankruptcy filing. This argument is without merit. It is the state court, in the first instance, that decides whether it has or does not have jurisdiction in any particular case. Defendants' position is that plaintiff is barred from raising this jurisdictional issue because the plaintiff failed to raise it in the trial court. However, it is axiomatic that jurisdictional issues can be raised at any time, even sua sponte. See, e.g., City of Marseilles v. Radke, 287 Ill. App. 3d 757 (1997).

¶ 6 Specifically, plaintiff argues that a finding of "bad faith" surrounding her failure to disclose the case in bankruptcy court is required to apply judicial estoppel, and the state court cannot issue a ruling on plaintiff's motives because the bankruptcy court has exclusive jurisdiction over the bankruptcy case. Even if that statement were accurate, of the five elements that must exist for Illinois courts to impose judicial estoppel, a finding of "bad faith" surrounding a nondisclosure is not one of them. Plaintiff was clearly aware of her state court action while the bankruptcy case was pending, and although she disclosed other litigation she had pending, she failed to inform the bankruptcy court of this case. Federal statute places an affirmative duty on the plaintiff to disclose claims in bankruptcy. 11 U.S.C. § 541 et seq. (2006). Even if "bad faith" were an element of judicial estoppel, her concealment of this state court case, which had the potential for her to realize financial gains, coupled with her statutory duty are sufficient for any trial court to infer "bad faith."

¶ 7 The effect of plaintiff's suggestion that "bad faith" is a necessary element for imposition of judicial estoppel and that only the bankruptcy court has jurisdiction to evaluate plaintiff's action for "bad faith" has potential results that are impractical - even absurd. An entire state court case would be held in abeyance while some nonparty to the bankruptcy case who is involved as a defendant in undisclosed litigation attempts to reopen a closed bankruptcy case to request a hearing on plaintiff's "bad faith." State courts have jurisdiction over whether judicial estoppel applies to a claim filed with them that was not disclosed in bankruptcy proceedings. In Dailey v. Smith, 292 Ill. App. 3d 22, 26 (1997), this court accepted appellant's argument that omitting a claim from a bankruptcy petition based on good-faith reliance upon advice of counsel did not invalidate a debtor's discharge in bankruptcy. However, this court continued: "we would find [this assertion] relevant were this an action challenging the validity of a debtor's discharge in bankruptcy, which it plainly is not. [Citation.]. Plaintiff is bringing an action for money allegedly owed to him by defendants, not fending off a challenge to his earlier discharge in bankruptcy." Dailey v. Smith, 292 Ill. App. 3d 22, 26 (1997). Plaintiff cites to no case where the parties were directed to seek a bankruptcy ruling on "bad faith" before proceeding with a motion to apply judicial estoppel and we could not find one. The Illinois trial court has jurisdiction to evaluate plaintiff's actions in the context of a motion for application of judicial estoppel, but as will be discussed later, such a finding, either way, is neither necessary nor relevant.

¶ 8 A. Standard of Review

¶ 9 The defendants filed this judicial estoppel issue via a motion for summary judgment and the trial court treated it as such. Motions for summary judgment receive de novo review. General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284 (2002). However, we are also guided not by just the caption of the motion, but the substance it presents. The motion raised an affirmative matter that seeks to defeat the claim more appropriate for a motion to dismiss under section 2-619(a)(9) of the Code of Civil Procedure (735 ILCS 5/2- 619(a)(9) (West 2008)). These motions are also reviewed de novo. Nowak v. St. Rita High School, 197 Ill. 2d 381, 389 (2001). The plaintiff submits that we should apply the de novo standard of review to this case. However, it is well settled that the standard of review when a trial court rules on the application of judicial estoppel is "an abuse of discretion" standard regardless of the procedural manner in which it was raised. As explained in Ceres Terminals, Inc. v. Chicago City Bank & Trust Co., 259 Ill. App. 3d 836 (1994), the purpose behind judicial estoppel is to prevent the perversion of the judicial process. It is intended to protect the courts from a party who plays fast and loose in a forum designed for parties seeking justice. See also Bidani v. Lewis, 285 Ill. App. 3d 545 (1996); Giannini v. First National Bank of Des Plaines, 136 Ill. App. 3d 971 (1985); Cashmore v. Builders Square, Inc., 211 Ill. App. 3d 13 (1991).

¶ 10 B. Judicial Estoppel

ΒΆ 11 This case presents this court with a simple question: Should plaintiff's failure to disclose a cause of action as an asset in her bankruptcy case prevent her from proceeding with that cause of action ...

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