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Pelletier v. U.S. Bank National Association

United States District Court, First Circuit

November 26, 2013

Randall D. and Dawn M. Pelletier
v.
U.S. Bank National Association Opinion No. 2013 DNH 162

Krista E. Atwater, Esq. Mary F. Stewart, Esq. Megan O’Keefe Manzo, Esq. Walter H. Porr, Jr., Esq. Lawrence P. Sumski, Esq. Geraldine L. Karonis, Esq.

MEMORANDUM ORDER

Joseph N. Laplante United States District Judge

This appeal from the Bankruptcy Court presents a question about the application of judicial estoppel. Randall and Dawn Pelletier have appealed an order of that court granting summary judgment against them in their adversary proceeding against U.S. Bank National Association (“the Bank”). The Pelletiers alleged that, while the Bank filed a proof of claim in their bankruptcy based on a note secured by a mortgage against their property, the Bank had failed to establish that it was the holder of the note.[1]But the Bankruptcy Court found that, before the Pelletiers commenced the adversary proceeding, they had executed--and the court had approved--a stipulation in their bankruptcy case “agreeing, among other things, that [the] Bank is the holder of the note and mortgage.” Pelletier v. U.S. Bank Nat’l Ass’n (In re Pelletier), Adv. No. 11-1135 (Bkrtcy. D.N.H. Dec. 21, 2012), slip op. at 3 (Kornriech, B.J.).

Ruling that “[j]udicial estoppel bars [the Pelletiers] from taking a contrary position” in support of their adversary proceeding, the Bankruptcy Court granted summary judgment in favor of the Bank, and against the Pelletiers. Id. The Pelletiers have appealed that order to this court, which has jurisdiction under 28 U.S.C. § 158(a)(1) (appeals from “final judgments, orders and decrees” of the Bankruptcy Court in core proceedings). As fully explained below, this court affirms the ruling of the Bankruptcy Court, because it did not abuse its discretion in applying judicial estoppel to grant summary judgment against the Pelletiers.

I. Background

In March 2011, the Pelletiers filed a voluntary petition for bankruptcy protection with the Bankruptcy Court for the District of New Hampshire. In re Pelletier, No. 11-10938 (Bnkrtcy. D.N.H. Mar. 14, 2011). In their subsequent statement of financial affairs, the Pelletiers listed, as the sole item of real property in which they had any interest, a single-family home in Groveton, New Hampshire. Two weeks prior to the Pelletiers’ bankruptcy filing, however, the Bank had foreclosed on that property, and gone on to purchase the property at the foreclosure sale. But the Bank had yet to record the foreclosure deed by the time the Pelletiers filed for bankruptcy protection.[2]

In late March 2011, the Pelletiers filed their proposed plan of reorganization with the Bankruptcy Court. Arguing that this plan failed to adequately protect the Bank’s interest in the property, and that the property was not essential to any reorganization, the Bank filed a motion for relief from the automatic stay. See 11 U.S.C. § 362. Through this motion, the Bank sought to “foreclose the mortgage and for it or a third party purchaser to . . . evict any persons residing in the property” (capitalization and parenthetical omitted).

The Pelletiers filed an objection, arguing, among other things, that the Bank had “failed to establish it is both the holder of the note and mortgage securing the note” and thus “failed to even articulate the necessary elements for the court to grant a motion for relief from stay” (capitalization omitted). The Bankruptcy Court then issued an order directing the parties to “submit a stipulation for adequate protection, separate proposals for adequate protection or a proposed scheduling order with an evidentiary hearing to determine adequate protection.” In re Pelletier, No. 11-10938 (Bnkrtcy. D.N.H. May 27, 2011).

In the meantime, the Bank filed a proof of claim stating that the Pelletiers owed it more than $140, 000 based on a “mortgage note” secured by the Pelletiers’ property. Attached to this filing were a copy of (1) a mortgage on the property in favor of Aegis Lending Corporation, bearing the signatures of the Pelletiers and the date of July 26, 2006, and reciting that it secured a loan evinced by a note signed by the Pelletiers that same date, (2) an adjustable rate note payable to Aegis in the amount of $112, 800, also bearing the signatures of the Pelletiers and the date of July 26, 2006, and (3) an “allonge to promissory note” referring to a note of that date in the amount of $112, 800, naming Pelletier as the borrower, and identifying the property with the address of the mortgaged premises. This allonge bore an indorsement in blank by Residential Funding Company, LLC, which was the transferee of the note by way of a chain of indorsements made on the face of the note itself.

Through counsel, the parties later executed a document entitled “Stipulation Regarding Motion for Relief from the Automatic Stay, ” which was filed with the Bankruptcy Court. This document stated that the Bank and the Pelletiers, “by and through their attorneys, stipulate” to a number of facts, including, in relevant part, that the “Bank is the current holder of the mortgage granted by the [Pelletiers] . . . with respect to [their property] . . . which secures a note in the amount of $112, 800 of even date (‘Mortgage Loan’).” In the stipulation, the Pelletiers agreed, among other things, to “timely remit post-petition payments under the Mortgage Loan” to SPS, which the stipulation identified “as the present servicer for the Mortgage Loan.” The stipulation further provided that it was “conditioned on the approval by the Bankruptcy Court” and that, once approved, its terms would “continue for the pendency of this [bankruptcy] case or further agreement between the Parties with regard to the amounts due under the Mortgage Loan as approved by the Court” (parenthetical omitted).

Importantly, the stipulation contains nothing purporting to reserve the Pelletiers’ right to challenge the Bank’s interest in, or entitlement to payments under, the “Mortgage Loan.” Of course, the Pelletiers had first mounted that challenge in their objection to the Bank’s motion for relief from the automatic stay--the very motion that the stipulation explicitly addressed.

The day after the stipulation was filed, the Bankruptcy Court approved it by endorsing the proposed order submitted with the stipulation. In re Pelletier, No. 11-10938 (July 1, 2011). Nearly two months later, the Pelletiers filed an objection to the Bank’s proof of claim, asserting, among other things, that the Bank was not, in fact, the holder of the note and mortgage. The Pelletiers then commenced an adversary proceeding against the Bank, alleging that the Bank’s proof of claim failed to establish that it was the holder of the note and mortgage. Pelletier v. U.S. Bank Nat’l Ass’n (In re Pelletier), Adv. No. 11-1135 (Bkrtcy. D.N.H. Oct. 26, 2011). To resolve this dispute, the parties filed cross-motions for summary judgment.

Following a hearing, the Bankruptcy Court issued a written order denying the Pelletiers’ motion, and granting the Bank’s. The Bankruptcy Court observed that, “[i]n resolution of a motion for relief from stay filed by [the] Bank in the main [bankruptcy] case, the [Pelletiers] and [the] Bank executed a stipulation agreeing, among other things, that [the] Bank is the holder of the note and mortgage.” In re Pelletier, slip op. at 3. Thus, the Bankruptcy Court ruled, “[j]udicial estoppel bars [the Pelletiers] from asserting a ...


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