Soames Lane Trust v. Gonzalez (In re Soames Lane Trust)

Citation:
United States Bankruptcy Appellate Panel of the Ninth Circuit, BAP No. CC-16-1042-FDKu (Aug. 8, 2016)
Tag(s):
Ruling:
Judicial estoppel precluded a debtor that had argued in response to a motion to convert or dismiss its case that it was a business trust eligible to file for bankruptcy protection from subsequently arguing that the case should be dismissed because the debtor was not a business trust and was not eligible to file for bankruptcy protection.
Procedural context:
Appeal from order of the bankruptcy court denying the debtor's motion to dismiss the converted chapter 7 case on the grounds that the debtor was not a business trust eligible for bankruptcy protection.
Facts:
An individual defaulted on a loan secured by real estate. Prior to the foreclosure sale, the individual transferred the property to a trust created by his father, and the trust then filed a chapter 11 case to stop the foreclosure. The debtor filed schedules identifying itself as a business trust eligible for bankruptcy protection. The United States Trustee filed a motion to dismiss or convert, arguing among other things that the debtor was not a business trust and did not file the case in good faith. The debtor responded that it was a business trust. The bankruptcy court granted the motion and converted the case to chapter 7. The debtor then filed a motion to dismiss on the grounds that it was not a business trust and ineligible to be a debtor. The bankruptcy court denied the motion, holding that judicial estoppel precluded the debtor from arguing it was not a business trust. On appeal, the BAP first held that the bankruptcy court had subject matter jurisdiction over the case even if the debtor was ineligible for relied under section 109. The BAP then upheld the judicial estoppel holding. The debtor 's statements were inconsistent, the bankruptcy court relied upon the debtor's first statement in deciding to convert and not dismiss the case, the debtor had benefited from the first statement because it successfully stayed the foreclosure by filing for bankruptcy, and caused the chapter 7 trustee to incur fees and expenses.
Judge(s):
Faris, Dunn & Kurtz

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