Judicial Estoppel Defeats Title Claim
A debtor’s failure to include her
purported property interest in a bankruptcy petition precludes her from
recovering that interest in a later state court proceeding. Kriz v. Loaknauth, et al., #8219/2005 (Supreme Court, Bronx County, NY, March 31, 2013).
In the instant proceeding, Kriz alleged that her husband had forged her signature on a deed to himself in
2000. He subsequently mortgaged
the property. In June 2004, Kriz filed for Chapter 7 in Florida, but did not
list the property in her petition. In November 2004, she verified the complaint
in the instant proceeding. She subsequently obtained a bankruptcy discharge.
Even if Kriz had only a “contingent claim”
on the property (due to the then-unproven forgery claim), she was obligated to
list in on her petition. Given the temporal proximity between her petition and
the instant complaint, “it is clear that Plaintiff was aware of a possible
cause of action relating to the real property at the time of her bankruptcy
proceeding.” Accordingly, she was judicially estopped from claiming an
equitable interest in the property or any rental income therefrom.
(Kudos to Constructive Notice subscriber Jennifer Beltrami,
Esq. and her team at Fidelity National Law Group on their impressive win.)
Kriz claimed that her failure to
list the property was not intended to mislead the bankruptcy court or
misrepresent any facts. The Supreme Court brushed this aside—“[n]either
ignorance of the law nor inadvertent mistake excuses a plaintiff’s failure to
list…a potential asset in a bankruptcy petition. She could not assert a
position contrary to her earlier one simply because she decided to challenge the validity of the deed.