IN RE: MARY E. BUSCONE, d/b/a FroYo To Go,

Case Type:
Case Status:
22-9001 (1st Circuit, Feb 22,2023) Published
Providing a useful primer on judicial estoppel in the bankruptcy context, the U.S. Court of Appeals for the First Circuit (Circuit) affirmed the order of the U.S. Bankruptcy Court of Massachusetts (BC), previously affirmed by the Circuit's Bankruptcy Appellate Panel (BAP), in the adversary proceeding started by Ann T. Botelho (ATB or CR) against Mary E. Buscone (DR), a chapter 7 debtor, seeking to exempt her claim of $91,673.45 from the DR's discharge, that denied the DR's motion for summary judgment, granted the CR's motion to compel, and denied the DR's reconsider motion.
Procedural context:
After the DR commenced her own chapter 7 case, but before any discharge was granted, the CR launched an adversary proceeding seeking a determination that the debt owed to her was excepted from any discharge under sections 523(a)(2)(A) and 523(a)(4). The DR responded with a motion to dismiss, arguing that judicial estoppel barred ATB's complaint due to her failure to disclose the existence of her claim in her own chapter 7 petition. After this effort petered out without success, the litigation devolved into a bitter discovery dispute resulting in the entry of a default judgment against the DR and the imposition of monetary sanctions against her attorney. The DR timely appealed.
Yogurt was there at the beginning. Dreaming wildly, the DR and ATB entered into a partnership to operate T & M Desserts, doing business as FroYo To Go, from July 2012 through January 2014. In October 2014, ATB filed a chapter 7 bankruptcy petition, but, despite the fact that the parties' partnership had ended in turmoil, did not list a claim against the DR on her schedules. Eventually, ATB received a chapter 7 discharge; soon thereafter, her case was closed. In 2018, ATB commenced a state court action against the DR. When the DR failed to respond, ATB sought, and won, a default judgment against the former. Naturally, she proceeded to record a judicial lien of $92,669 against the DR's residence. With a lien now hanging over her head, the DR opened her own (and first) chapter 7 case. She scheduled ATB as a judgment creditor holding an undisputed claim of $91,673. On the DR's motion, the BC avoided the CR's lien. In time, even as the adversary raged, the DR received her chapter 7 discharge.
O. Rogeriee Thompson; Gustavo Gelpí; and Sandra Lynch

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