Opinion
No. 1:01-cv-242.
June 14, 2002
MEMORANDUM AND ORDER
Plaintiff Donald R. Prince ("Prince") brings this breach of contract action against defendant Allstate Insurance Company ("Allstate") under Tennessee law to recover fire loss insurance benefits from a homeowners insurance policy. Prince suffered the loss of real and personal property when his residence and its contents were destroyed by fire. Allstate denied the insurance claim. Prince seeks to recover compensatory damages and the bad faith penalty provided in TENN. CODE ANN. § 56-7-105. Allstate removed the case from state court and has invoked this Court's diversity jurisdiction pursuant to 28 U.S.C. § 1332.
Allstate moves for either complete or partial summary judgment pursuant to FED. R. CIV. P. 56. [Court File No. 7]. It is argued by Allstate that Prince is judicially estopped from claiming that the amount of his property loss exceeds prior statements Prince made under oath in a bankruptcy proceeding. Allstate further argues that Prince's entire complaint should be dismissed on the ground that he has attempted to commit fraud by overstating and exaggerating the actual value of the property he claims to have lost in the fire. Allstate contends the alleged fraud voids the insurance policy.
Prince opposes the motion. [Court File No. 12]. After reviewing the record, the Court concludes that Allstate's motion for complete or partial summary judgment will be DENIED.
I. Standard of Review
Summary judgment is appropriate where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). In ruling on a motion for summary judgment, the Court must view the facts contained in the record and all inferences that can be drawn from those facts in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); National Satellite Sports, Inc. v. Eliadis Inc., 253 F.3d 900, 907 (6th Cir. 2001). The Court cannot weigh the evidence or determine the truth of any matter in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
The moving party bears the initial burden of demonstrating that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To refute such a showing, the non-moving party must present some significant, probative evidence indicating the necessity of a trial for resolving a material, factual dispute. Celotex Corp., 477 U.S. at 322. A mere scintilla of evidence is not enough. Anderson, 477 U.S. at 252; McLean v. Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000). The Court's role is limited to determining whether the case contains sufficient evidence from which a jury could reasonably find for the non-moving party. Anderson, 477 U.S. at 248, 249; National Satellite Sports, 253 F.3d at 907.
II. Facts
The Court has reviewed the record in the light most favorable to Prince and makes the following findings of fact. Prince owned a residence in Birchwood, Tennessee. On February 23, 1998, Prince filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Tennessee at Chattanooga. The Bankruptcy Court granted him a discharge in bankruptcy on July 2, 1998. There were two property schedules appended to the bankruptcy petition. These bankruptcy schedules required Prince to state the "current market value of debtor's interest in property without deducting any secured claim or exemption." In Schedule A concerning his real property, Prince stated under oath that the then current market value of his residence was $50,000. In Schedule B concerning his personal property, Prince stated under oath that the then current market value of his furniture, clothing, jewelry, and firearms was $1,300.
After the bankruptcy proceeding had been concluded, Prince applied to Allstate in September 1999, for a homeowners insurance policy to insure the same premises against fire loss. Allstate issued a homeowners insurance policy to Prince. The residence and its contents were destroyed by fire on July 22, 2000. At the time of the fire loss, the policy provided a dwelling coverage limit of $66,000 and contents coverage limit of $46,200.
After the fire, Prince submitted a sworn statement in proof of loss to Allstate along with a document captioned "Property Loss Worksheet." Prince claimed that the actual cash value of his residence at the time of the fire was $76,000. Prince also claimed the actual cash value of his personal property damaged or destroyed by the fire was $29,358. This figure of $29,358 includes personal property purchased by Prince in the years 1995-1997 with a claimed cash value of $19,917. Allstate emphasizes that most of the personal property and contents of the dwelling were purchased by Prince before the bankruptcy proceeding in 1998.
The insurance policy contains the following provision: "We [Allstate] do not cover any loss or occurrence in which any insured person has concealed or misrepresented any material fact or circumstance." Based on this language, Allstate argues that the policy is void as a result of Prince's alleged fraudulent conduct in making a false insurance claim. Allstate contends it is relieved of any contractual obligation to pay insurance proceeds to Prince on the theory that Prince has made material misrepresentations to Allstate about the true value of his property.
In response, Prince denies that he willfully or deliberately made any material misrepresentations to Allstate concerning the actual cash value of his property damaged and destroyed by the fire. Prince submits his affidavit [Court File No. 12] wherein he states the following. With regard to his level of education, Prince completed the eighth grade but dropped out of high school before the end of his ninth grade year. He relied on his attorney's advice concerning the completion of the bankruptcy petition and property schedules. According to Prince, no one ever instructed him to list every item of personal property he owned in the bankruptcy petition and appended schedule. Prince merely answered a few questions in the bankruptcy case to the best of his ability. He denies having any intent to mislead anyone about the value of his personal property.
Prince also denies making any willfully false statements to Allstate regarding the actual cash value of his residence. In November 1998, Prince refinanced his residence and the lender had his residence appraised. Prince received a written report dated November 9, 1998, from a State certified residential real estate appraiser stating that the fair market value of his residence was $76,000. A copy of the appraisal report is attached to Prince's affidavit. This is where Prince came up with the figure of $76,000 as being the market value of his residence when he filed his sworn proof of loss statement with Allstate after the fire occurred on July 22, 2000.
Prince says that when he applied to Allstate for the homeowners insurance policy in September 1999, an Allstate agent or employee came to his residence to visually inspect and evaluate the property to be insured. After this visit, Allstate notified Prince about the amount of insurance coverage he would get. No one from Allstate ever asked Prince any questions about the value of his personal property. Allstate determined and established the amount of insurance coverage. The coverage limit on the structure was set at $66,000. Allstate issued what it commonly refers to as a "deluxe policy" whereby Allstate automatically establishes the contents insurance coverage at 70 % of the coverage limit on the structure. Consequently, under the terms of the policy, the limit of insurance coverage on Prince's personal property is $46,200 which is 70 % of the $66,000 coverage limit on the structure. The fire loss claim Prince submitted to Allstate in the amount of $29,358 for the value of his personal property is approximately 63.55 % of the content limit set by Allstate in the policy ($46,200 x .6355 = $29,360).
III. Analysis
Allstate argues Prince is estopped from claiming that the actual cash value of the residence is $76,000 and the actual cash value of the personal property is $29,358. Allstate contends Prince is bound by the previous statements he made under oath during the bankruptcy proceeding regarding the value of his property. In other words, Allstate asserts that the Tennessee doctrine of judicial estoppel precludes Prince from claiming that the current value of his residence exceeds $50,000 which is the amount Prince previously stated in his bankruptcy real property schedule.
It is argued by Allstate that Prince is estopped from claiming that the actual cash value of his personal property exceeds a total of $9,441. Allstate calculates the figure of $9,441 by subtracting $19,917 from $29,358 ($29,358 — $19,917 = $9,441). According to Allstate, the $9,441 represents the value of personal property that Prince stated in his bankruptcy property schedule ($1,300) combined with the value of personal property Prince claims he acquired after his discharge in bankruptcy.
This Court, sitting in diversity pursuant to 28 U.S.C. § 1332, follows and applies Tennessee substantive law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Pedigo v. Unum Life Ins. Co. of America, 145 F.3d 804, 808 (6th Cir. 1998); Bailey Farms, Inc. v. NOR-AM Chem Co., 27 F.3d 188, 191 (6th Cir. 1994). Tennessee has long recognized the equitable doctrine of judicial estoppel. As a matter of public policy, "a party will not be permitted to occupy inconsistent positions or to take a position in regard to a matter which is directly contrary to, or inconsistent with, one previously assumed by him, at least where he had, or was chargeable with, full knowledge of the facts, and another will be prejudiced by this action." Marcus v. Marcus, 993 S.W.2d 596, 602 (Tenn. 1999) (quoting Obion County v. McKinnis, 364 S.W.2d 356, 357 (Tenn. 1962)); Shell v. Law, 935 S.W.2d 402, 408 (Tenn.Ct.App. 1996); see also Browning v. Levy, 283 F.2d 761, 775 (6th Cir. 2002); Teledyne Industries, Inc. v. N.L.R.B., 911 F.2d 1214, 1217-18 (6th Cir. 1990); Reynolds v. Commissioner of Internal Revenue, 861 F.2d 469, 472-73 (6th Cir. 1988).
The doctrine applies to one who makes a sworn statement of fact in a former legal proceeding which he undertakes to contradict in a later judicial proceeding. Allen v. Neal, 396 S.W.2d 344, 346 (Tenn. 1965); Decatur County Bank v. Duck, 969 S.W.2d 393, 397 (Tenn.Ct.App. 1997); Shell, 935 S.W.2d at 408. The previous sworn statement of fact is not merely evidence against the party, but rather precludes him from denying its truth. It is treated not as an admission against interest but instead as an absolute bar to the party denying the truth of his previous sworn statement. Marcus, 993 S.W.2d at 602; Sartain v. Dixie Coal Iron Co., 266 S.W. 313, 318 (Tenn. 1924); Terox Corp. of America v. Carr, 376 S.W.2d 735, 738-39 (Tenn.Ct.App. 1964).
The Tennessee courts have expressed two basic rationales for judicial estoppel. The Supreme Court of Tennessee has said that the judicial estoppel is based on the public policy of "upholding the sanctity of an oath." Allen, 396 S.W.2d at 346; Sartain, 266 S.W. at 318; Stearns Coal Lumber Co. v. Jamestown R. Co., 141 Tenn. 203, 208 S.W. 334 (1919); see also Chandler v. D. Canale Co., 2001 WL 568027, **3-4 (Tenn.Ct.App. May 25, 2001). The doctrine is designed to prevent fraud on the court and prejudice to the administration of justice. The primary purpose of judicial estoppel is to safeguard the administration of justice by placing a restraint upon the propensity of some parties to indulge in false swearing and thereby preserve public confidence in the purity, consistency, and efficiency of judicial proceedings. Chandler, 2001 WL 568027, at *3; Greenman v. Hutchins, 1998 WL 205742, *5 (Tenn.Ct.App. April 29, 1998); Melton v. Anderson, 222 S.W.2d 666, 669 (Tenn.Ct.App. 1948).
The Sixth Circuit has said that judicial estoppel exists to protect the courts from perversion of the judicial machinery through a party's attempt to take advantage of both sides of a factual issue at different stages of judicial proceedings. Teledyne Industries, 911 F.2d at 1220; Edwards v. Aetna Life Insurance Co., 690 F.2d 595, 599 (6th Cir. 1982). The doctrine is utilized to preserve "the integrity of the courts by preventing a party from abusing the judicial process through cynical gamesmanship." Browning, 283 F.2d at 776 (quoting Teledyne Industries, 911 F.2d at 1218).
Some Tennessee cases hold that the doctrine is also intended to prevent unscrupulous or dishonest litigants from gaining an unfair advantage over their adversaries by taking contradictory positions on the same factual issue in different lawsuits. Marcus, 993 S.W.2d at 602; Carvell v. Bottoms, 900 S.W.2d 23, 30 (Tenn. 1995); Chandler, 2001 WL 568027, at **3, 5; Dietz v. Keith, 2000 WL 472870, *4 (Tenn.Ct.App. April 24, 2000); Leatherwood v. United Parcel Service, 708 S.W.2d 396, 402 (Tenn.Ct.App. 1985).
As a general rule, judicial estoppel is not favored in Tennessee law. Layhew v. Dixon, 527 S.W.2d 739, 741 (Tenn. 1975). The Tennessee courts have equated the requisite false statement with perjury. Judicial estoppel only applies where a statement of fact is willfully false in the sense of knowing, deliberate perjury. A statement that falls short of a willfully false statement of fact is insufficient to invoke the doctrine of judicial estoppel. Chandler, 2001 WL 568027, at *3; Dietz, 2000 WL 472870, at **4, 6; Seymour v. Seymour, 1998 WL 761854,*4 (Tenn.Ct.App. Oct. 30, 1998)); Werne v. Sanderson, 954 S.W.2d 742, 745 (Tenn.Ct.App. 1997); State ex rel. Scott v. Brown, 937 S.W.2d 934, 936 (Tenn.Ct.App. 1996); Woods v. Woods, 638 S.W.2d 403, 406 (Tenn.Ct.App. 1982). Prince is entitled to have the opportunity to explain and show that his prior statements in the bankruptcy proceeding were either inadvertent or not willfully false statements. State ex. rel. Page v. Trabal, 2001 WL 533345, *2 (Tenn.Ct.App. (May 21 2001)); Scott, 937 S.W.2d at 936; Terox Corp., 376 S.W.2d at 739; Sturkie v. Bottoms, 310 S.W.2d 451, 453 (Tenn. 1958); Hamilton National Bank v. Woods, 238 S.W.2d 109 (Tenn.Ct.App. 1948); State ex rel. Ammons v. City of Knoxville, 232 S.W.2d 564, 567-68 (Tenn.Ct.App. 1950); Monroe County Motor Co. v. Tennessee Odin Ins. Co., 231 S.W.2d 386, 392 (Tenn.Ct.App. 1950); D.M. Rose Co. v. Snyder, 206 S.W.2d 897, 906 (Tenn 1947).
The Court is not persuaded that Allstate is entitled to either partial or complete summary judgment. With regard to the value of the real property, the evidence does not show that Prince willfully made a false statement or material misrepresentation to Allstate as part of his insurance claim. The evidence in the record does not show that Prince has engaged in fraud, false, swearing, or conduct tantamount to perjury concerning the value of his residence or dwelling structure. When Prince submitted his sworn statement in proof of loss to Allstate after the fire, he listed the value of his residence as $76,000. Prince did not invent or pull this figure of $76,000 out of thin air in an effort to perpetrate a fraud upon Allstate. The figure of $76,000 was reasonably derived by Prince from the independent appraisal of his residence prepared in November 1998 by a certified residential real estate appraiser. The appraisal was done after the bankruptcy proceeding but before the fire loss. Prince has every right to utilize and rely on the $76,000 post-bankruptcy appraisal in presenting his fire loss insurance claim to Allstate.
Prince did state in his prior bankruptcy proceeding in 1998 that the market value of his residence was only $50,000. However, after the bankruptcy proceeding was completed, Prince received new and probably more reliable, accurate information about the fair market value of his residence through the appraisal. Judicial estoppel is an equitable doctrine. The Court finds it is fair, equitable, and objectively reasonable for Prince to rely on the November 1998 real estate appraisal when he subsequently files his insurance claim with Allstate stating that the current cash value of his residence is $76,000. Under these facts and circumstances, Prince is not judicially estopped from claiming the value of his residence is $76,000 rather than $50,000. In the aftermath of the November 1998 real estate appraisal, Prince has a right to revise or update and increase his estimate of the fair market/cash value of his residence to $76,000. In sum, Allstate has not met its burden of showing that such conduct by Prince constitutes either fraud or the making of willfully false statements under oath.
With regard to Prince's statement that the total value of his personal property destroyed by the fire is $29,358, the Court cannot grant summary judgment is favor of Allstate under Rule 56. There is a genuine issue of material fact in dispute whether Prince willfully made a false statement and misrepresentation to Allstate. Prince proffers an explanation for his conduct and he flatly denies the allegation that he made a willfully false statement. The Court is required under Rule 56 to review the record in the light most favorable to Prince.
The issues of fraud and willfully false statements raised by Allstate involve the element of Prince's intent which, in light of Prince's affidavit, cannot be determined by the Court on summary judgment. It is up to the trier of fact to make a factual finding whether Prince has acted with fraudulent intent or willfully made a false statement. The jury at trial can determine whether Prince has acted with fraudulent intent or willfully made a false statement in his claim for insurance benefits. At trial, Allstate may test the credibility of Prince and seek to impeach his testimony by presenting evidence of the statements Prince made under oath in the bankruptcy proceeding. But this is not a matter for summary judgment pursuant to Rule 56. In ruling on Allstate's summary judgment motion, the Court is not authorized to make a determination of Prince's credibility and whether Prince is telling the truth.
Accordingly, Allstate's motion for summary judgment [Court File No. 7] is DENIED.
SO ORDERED.