IN THE MATTER OF MARRIAGE OF FRIEND, 123 Wn. App. 1003 (2004)

No. 52766-5-IThe Court of Appeals of Washington, Division One.
Filed: August 23, 2004 UNPUBLISHED OPINION

Appeal from Superior Court of Pacific County, Docket No: 99-3-00027-2. Judgment or order under review. Date filed: 08/19/2002. Judge signing: Hon. Douglas E Goelz.

Counsel for Appellant(s), Carl Nathan Warring, Warring Law Firm PS, 1340 E Hunter Pl, Moses Lake, WA 98837-2449.

Counsel for Respondent(s), Gary Arnold Morean, Attorney at Law, PO Box 1106, Aberdeen, WA 98520-0223.

BECKER, J.

John Friend failed to disclose a judgment against his former wife in his post-dissolution bankruptcy proceedings. A trial court later invoked the doctrine of judicial estoppel as the basis for refusing to enforce the judgment. Because the positions John took in the two proceedings were clearly inconsistent and sufficiently involved the court in the inconsistency, the application of judicial estoppel was warranted. Cindy and John Friend divorced in December 1999. They entered arbitration to decide the property division, parenting plan, and child support. They then obtained court orders confirming and carrying out the arbitrator’s decision. The community property — primarily a home and retirement accounts — was to be divided equally. Each of them received a one-half undivided interest in the family home. Cindy’s retirement account was larger than John’s. To equalize the distribution, and allow each to retain their retirement accounts as separate property, the decree of dissolution subjected Cindy’s interest in the home to a `lien’ of $12,500 in favor of John.[1] Cindy and the three children were entitled to live in the home. Upon sale of the property, the first $12,500 of the net seller’s proceeds would go to John. John and Cindy were to equally split any remaining net seller’s proceeds.

In the meantime, Cindy and John were to be equally responsible for the $800 monthly house payment. John was to pay child support of $800 monthly. He was to pay $400 of his child support obligation in the form of his share of the monthly mortgage payment until the house sold. Unfortunately, the house did not sell. Cindy testified that it needed some repairs and she had trouble getting necessary signatures from John to list the property. In the summer of 2000, John petitioned to modify child support. The court reduced the child support for three months because John was unemployed. Child support then continued at the reduced level of $748 with the same condition, i.e., $400 was to be in the form of John’s share of the monthly mortgage payment until the house sold. The court also ordered John to list the home for sale.

The order entered as the result of this hearing used different terminology than in the dissolution decree. It characterized the $12,500 due to John not as a lien but as a `judgment’ against Cindy:

The net proceeds from the sale of the home after payment of the outstanding mortgage and all costs shall be divided as follows: Up to the first $12,500 shall be paid to the respondent to satisfy his judgment against the petitioner as provided by the Decree of Dissolution filed herein. Any remaining proceeds of sale shall be distributed equally to the parties. In the event that the net proceeds of the sale are not sufficient to satisfy the respondent’s $12,500 judgment, he shall receive all proceeds from the sale and shall retain a judgment for the unsatisfied portion of the debt.[2]

The order indicates it was drafted by John’s attorney. But at the time they signed the order, both John and Cindy were appearing pro se. The record does not indicate whether the change in terminology was discussed with the court. The order was dated August 7, 2000. John filed for bankruptcy three days later on August 10.

In December 2000, Cindy decided to move into another house. She sent John a letter telling him of the move, giving him her new address, and stating that she would no longer consider his payments to her as partial house payments, but solely as child support. John informed Cindy that he had filed for bankruptcy. John’s bankruptcy was final and his debts discharged on December 14, 2000. About three months later, the bank notified Cindy that they were foreclosing on the property. Neither John nor Cindy took action to prevent the foreclosure.

Because of changes in residency of the children, John petitioned in July 2001 to modify the parenting plan and child support. In his petition for a temporary order on these matters, John also requested a judgment to be awarded to me in the amount of $12,500.00 which reflects the value of community property distribution awarded to me in the final divorce but not paid by the Petitioner because the house has been foreclosed on. I request the court order the Petitioner to start paying off this judgment in the amount of $200.00 per month.[3]

The court entered an order in August directing the State not to collect past due child support from either party pending a calculation of the net support owed. All other issues were reserved for a later hearing.

In November 2001, both parties moved for the court to enter an order of child support and a parenting plan. According to the worksheets submitted by Cindy, John owed $3,938.92 in back support. By John’s calculations, he had paid more than he owed. John requested that his future payments and any past overpayments be credited by the $12,500 owed by Cindy to him as his portion of the community property.

Both parties asked to present oral testimony. The court scheduled a hearing and defined the issues to be decided as follows:

the court shall set the current child support amount, determine appropriate support amounts for all periods of shared/split physical custody of the children, establish judgments for any delinquent support amounts, set the postsecondary educational support amounts and conditions for the eldest child, determine the appropriate characterization of the obligation on the former family home, determine attorney fees and rule on any other issues that the court determines are just and equitable at that time.[4]

The hearing was held in May 2002. John, his current wife Candus, and Cindy all testified. Pertinent to this appeal, the court’s oral ruling stated that the transformation of the lien into a judgment was `res judicata’, and could offset the back support John owed Cindy, but only if John had properly listed the judgment as an asset in his bankruptcy proceeding. Otherwise he would be `judicially estopped’ from claiming a right to the judgment.[5] The court gave John a two week deadline to deliver his bankruptcy papers for examination.

After examining the bankruptcy papers, the court found that John did not properly list the judgment as an asset in bankruptcy. At the hearing for the entry of the final order on modification of child support, the court ordered the clerk of the court to mark the $12,500 obligation as paid and satisfied:

The lien described in the Decree of Dissolution entered on December 14, 1999, and later clarified as a judgment in the Order Re Adjustment of Support, entered on August 7, 2000, wherein the petitioner owed the respondent $12,500, is hereby voided, and made unenforceable and uncollectible, and the Clerk of the Court is ordered to mark this obligation as paid and satisfied in full upon the records of the court.[6]

John appeals from this ruling. He contends the court’s refusal to enforce his judgment against Cindy was an improper application of judicial estoppel.

TIMING OF INCONSISTENT POSITIONS NOT DISPOSITIVE
`Judicial estoppel precludes a party from gaining an advantage by taking one position and then seeking a second advantage by taking an incompatible position in a subsequent action.’ Johnson v. Si-Cor Inc., 107 Wn. App. 902, 906, 28 P.3d 832 (2001). John first argues that judicial estoppel can have effect only on the second action (the bankruptcy), not on the first action (matters relating to the dissolution).

We do not read the caselaw as dictating that judicial estoppel can be applied only to the second proceeding. But even assuming that to be so, the inconsistent position was John’s attempt to enforce the $12,500 `judgment’ in the modification proceedings after claiming that it did not exist in the bankruptcy proceedings. Although the `judgment’ terminology first appeared three days before John filed for bankruptcy, he did not attempt to enforce his right to the judgment until months after his debts were discharged. We conclude the chronology of events does not preclude application of judicial estoppel.

NOT ALL MARKLEY FACTORS NEED BE PRESENT
John next argues that the necessary elements of judicial estoppel are not all present. In Markley v. Markley, 31 Wn.2d 605, 198 P.2d 486 (1948), the Supreme Court, quoting extensively from secondary authority, enumerated six factors said by some authorities to be `essential’ to judicial estoppel. Markley, 31 Wn.2d at 614. Those factors are (1) the inconsistent position first asserted must have been successfully maintained; (2) a judgment must have been rendered; (3) the positions must be clearly inconsistent; (4) the parties and questions must be the same; (5) the party claiming estoppel must have been misled and have changed his position; (6) it must appear unjust to one party to permit the other to change. Markley, 31 Wn.2d at 614-15. John contends that judicial estoppel cannot be applied here because Cindy cannot satisfy all six factors: She was not a party to the bankruptcy, was not misled, and did not change her position.

We do not read Markley as holding that all six factors must be present. The court engaged in a general discussion of the authorities and recognized that the rule against maintaining inconsistent positions in judicial proceedings `may be regarded not strictly as a question of estoppel, but as a matter in the nature of a positive rule of procedure based on manifest justice’. Markley, 31 Wn.2d at 614. After enumerating the six factors as set forth by a treatise, the Markley court continued quoting from that same treatise a comment that courts disagree in how to apply the factors and do not uniformly hold that each individual factor needs to be present in every case. For example, whether the other party was misled or induced to change her position is not consistently thought to be as important as in ordinary equitable estoppel. Markley, 31 Wn.2d at 615. The only factors specifically mentioned in Markley as being present were that one party took inconsistent positions, and the other party relied on the first position taken. Markley, 31 Wn.2d 617.

The doctrine of judicial estoppel is designed to protect the court, and not the litigants. We have previously declined to read Markley as holding that privity detrimental reliance, and final judgment must be present as would be the case in equitable or collateral estoppel. Johnson v. Si-Cor Inc., 107 Wn. App. 902, 28 P.3d 832 (2001). In that case, Johnson broke his tooth on a small stone in a McDonald’s breakfast sandwich. Johnson, 107 Wn. App. at 904. Johnson, who was going through bankruptcy at the time, failed to inform the bankruptcy trustee or his creditors about the potential lawsuit. He did not amend the bankruptcy schedules. Johnson, 107 Wn. App. at 905. Six months after receiving a Chapter 7 discharge, Johnson sued McDonald’s. Applying judicial estoppel because of the nondisclosure in bankruptcy of the potential claim, the trial court dismissed the suit on summary judgment, precluding Johnson from pursuing the lawsuit against McDonald’s.

The appellate court reversed. The court, after examining the factors in Markley, concluded that the doctrine may be applied even if the two actions involved different parties, and there was no reliance, no resultant damage, and no final judgment entered in the first action. Johnson, 107 Wn. App. at 908. But upon further review of authorities, the court also concluded that judicial estoppel applies `only if a litigant’s prior inconsistent position benefited the litigant or was accepted by the court.’ Johnson, 107 Wn. App. at 909. The federal code did not require Johnson to disclose the after acquired asset, and even upon the conversion to Chapter 7, he was entitled to retain the proceeds of his lawsuit against McDonald’s. Thus he did not receive a benefit from nondisclosure of the asset nor did he involve the court in accepting an inconsistent position. Johnson, 107 Wn. App. at 911-912.

While judicial estoppel was inapplicable on the facts of Johnson, analytically the case permits application of the doctrine here even though all six Markley factors are not present. We follow the reasoning of Johnson in this case.

JOHN’S POSITIONS WERE INCONSISTENT
One constant factor is that the positions taken by the litigant in two different proceeding must be `not merely different, but so inconsistent that one necessarily excludes the other.’ Markley, 31 Wn.2d at 615; Mastro v. Kumakichi Corp., 90 Wn. App. 157, 163-64, 951 P.2d 817 (1998). John argues that his positions in the two proceedings were not clearly inconsistent. He claims that because he listed the property in the schedule of real property and listed the dissolution proceedings in the statement of affairs, the bankruptcy trustee had notice of the contents of the decree and the lien. Cindy responds that the judgment against her was an asset and a piece of property that belonged to John, and should have been disclosed when he filed his bankruptcy petition, and his failure to disclose it was inconsistent with his attempt to enforce it later.

Cindy’s argument has merit. The code and rules for bankruptcy proceedings `impose upon bankruptcy debtors an express, affirmative duty to disclose all assets, including contingent and unliquidated claims.’ In re Coastal Plains, Inc., 179 F.3d 197, 207-08 (5th Cir. 1999) (emphasis in original) (judicial estoppel precluded claims against a creditor that were not disclosed in bankruptcy schedules). The rationale for invoking judicial estoppel in bankruptcy proceedings is to prevent a party who fails to disclose a claim from asserting that claim after emerging from bankruptcy. In re Coastal Plains, 179 F.3d at 208. John was aware of the order characterizing the lien as a `judgment’, enforceable against Cindy, when he filed for bankruptcy. He testified at the modification hearing that he was present at the August 7th hearing, and said it was his expectation from the beginning that he would be able to collect from Cindy personally should the house sell for less than $12,500.

On Schedule B, John was supposed to disclose to the trustee all of his personal property. Where the form asks for `Alimony, maintenance, support, and property settlements to which the debtor is or may be entitled’, John checked the column marked `NONE’.[7] He likewise marked `NONE’ for `Other liquidated debts owing debtor’, and for `Other contingent and unliquidated claims of every nature’.[8] As the court below stated, the judgment against Cindy would clearly fall under one or another of these categories.

Declaring `NONE’ was inconsistent with John’s later attempt to enforce the judgment against Cindy.

John responds that he listed the judgment in a manner that he and his attorney believed to be appropriate. But this is not a mere technical dispute about how to fill out bankruptcy forms. The integrity of the bankruptcy system depends on full and honest disclosure by debtors of all their assets. The interests of both the creditors, who plan their actions in the bankruptcy proceeding on the basis of information supplied in the disclosure statements, and the bankruptcy court, which must decide whether to approve the plan of reorganization on the same basis, are impaired when the disclosure provided by the debtor is incomplete.

In re Coastal Plains, Inc., 179 F.3d at 208 (emphasis in original) (quoting Rosenshein v. Kleban, 918 F. Supp. 98, 104
(S.D.N.Y. 1996)). John’s mention of the decree in the bankruptcy petition, without specific reference to a judgment against Cindy, was an incomplete disclosure. To deny the existence of a judgment and then try to enforce it in another action is to take positions so inconsistent that one necessarily excludes the other. Judicial estoppel will apply even if the nondisclosure was unintentional and inadvertent. In re Coastal Plains, Inc., 179 F.3d at 210.

John cites language in Johnson that at first blush appears to support his argument. There, the court stated, `we conclude that, in and of itself, a bankruptcy debtor’s failure to schedule an asset does not sufficiently involve the court so that the debtor’s position becomes a position accepted by the court.’ Johnson, 107 Wn. App. at 910. What John fails to acknowledge is the court’s earlier statement that in a Chapter 7 `no asset’ case — John’s very circumstance — failure to schedule an asset does involve the court if the debtor is then able to keep the asset that may have otherwise been available to the unsecured creditors. The bankruptcy court, by closing the case, `implicitly accepts the debtor’s position, as stated in the debtor’s bankruptcy schedules, that the liquidation of the debtor’s nonexempt assets would not create a dividend for unsecured creditors.’ Johnson, 107 Wn. App. at 909. Unlike in Johnson, the bankruptcy court’s discharge of John’s debts implicitly accepted his position that he had no assets that could be liquidated for the benefit of his creditors. Judicial estoppel was properly applied. John’s attempt to enforce the judgment was clearly inconsistent with the position accepted by the bankruptcy court.

A CR 60 MOTION WAS NOT REQUIRED
The order states that `the lien later clarified as a judgment is hereby voided, and made unenforceable and uncollectible, and the Clerk of the Court is ordered to mark this obligation as paid and satisfied in full upon the records of the court.’[9]
John argues that the only appropriate means to `void’ his judgment was by a party’s motion under CR 60. A trial court does not have the authority to vacate on its own motion a judgment which is not void on its face. Krueger Engineering, Inc. v. Sessums, 26 Wn. App. 721, 724, 615 P.2d 502 (1980). John also contends he did not have `an opportunity to muster all the possible evidence on this issue.’[10]

John raises this legal argument for the first time on appeal. We will not ordinarily consider a theory as ground for reversal unless the issue was first presented to the trial court. Doe v. Puget Sound Blood Center, 117 Wn.2d 772, 780, 819 P.2d 370
(1991). While the trial court did raise the issue of judicial estoppel sua sponte, John had several weeks in which to respond to the issue. His motion for reconsideration simply argued that the asset was properly listed. Consequently, his CR 60 argument is not properly before this court.

In any event, a judgment is subject to being vacated under CR 60 as `void’ only when the issuing court lacks personal jurisdiction over the party or subject matter jurisdiction over the claim. Marley v. Department of Labor Indus., 125 Wn.2d 533, 539, 886 P.2d 189 (1994). Neither situation is alleged here. If the court had truly intended to `void’ the judgment, there would have been no reason to mark it paid and satisfied. We construe the order as reflecting the court’s intention to leave the judgment in place but prevent John from collecting on it. Because judicial estoppel is for the protection of the court, not the litigants, we see no reason why a trial court cannot raise the issue. We conclude the court did not err in acting on its own motion and outside the parameters of CR 60.

THE USE OF JUDICIAL ESTOPPEL DID SUBSTANTIAL JUSTICE
John asserts the principle that forfeiture of property is abhorred in equity and should not be granted unless there is no other recourse. He contends the equities were not sufficiently clear to warrant forfeiture to Cindy of his right to the $12,500 judgment.

A trial court’s decision on the application of judicial estoppel is reviewed for an abuse of discretion. See New Hampshire v. Maine, 532 U.S. 742, 750, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001) (`Because the rule is intended to prevent `improper use of judicial machinery,’ . . . judicial estoppel `is an equitable doctrine invoked by a court at its discretion”) (quoting Konstantinidis v. Chen, 626 F.2d 933, 938 (D.C. Cir. 1980), Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)).

Equity’s goal is always to do substantial justice to both parties when a forfeiture is sought. Shoemaker v. Shaug, 5 Wn. App. 700, 704, 490 P.2d 439 (1971). While Cindy benefits because the court refused to enforce the judgment against her, John also benefited. As the superior court judge put it, `no creditor of Mr. Friend had any reason to believe that Mr. Friend had money coming from his ex-wife in this case. It would be inequitable to now allow Mr. Friend to recover on this debt.’[11] Judicial estoppel, an equitable doctrine, was equitably applied in these circumstances.

ATTORNEY FEES
Cindy has timely requested attorney fees on appeal based on RCW 26.09.140. This statute authorizes the court to order a party to pay a reasonable amount for the costs and attorney fees of the other party based upon consideration of the financial resources of both parties. Having reviewed the record and affidavits of the parties, we conclude John’s financial resources are somewhat greater than Cindy’s. A modest award of fees to Cindy for this appeal is ordered, subject to compliance with RAP 18.1(d).

Affirmed; fees on appeal awarded to Cindy Friend.

GROSSE and AGID, JJ., concur.

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