Jennifer Diane Davis

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IN THE UNITED STATED BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE: 	)
)
JENNIFER DIANE DAVIS, 	) 	Case No. 13-bk-1096
)
Debtor. 	) 	Chapter 7
___________________________________ 	)
MEMORANDUM OPINION
Martin P. Sheehan, the Chapter 7 trustee appointed to administer the Debtor’s bankruptcy
estate (the “Trustee”), objects to the Debtor’s second amended claim of exemptions and asks the
court to prohibit the amendment based upon res judicata and the doctrines of estoppel and laches.
The Debtor asserts that her amendment is permitted by Federal Rule of Bankruptcy Procedure
(“Rule”) 1009(a) and the Supreme Court’s holding in Law v. Siegel, 134 S. Ct. 1188 (2014).
For the reasons stated herein, the court will overrule the Trustee’s Objection to Claim of
Amended Exemptions insofar as he asks the court to disallow the Debtor’s second amended
claim of exemptions based upon estoppel and laches.
I. 	BACKGROUND
On September 17, 2013, the Debtor filed her Chapter 7 voluntary petition and schedules
with this court. 	Among the real property disclosed on her Schedule A, the Debtor listed her
ownership interests in the following three parcels: her residence in Monongalia County, West
Virginia; 68.5% of an undivided one-half interest in property located in Naples, Florida (the
“Naples Property”); and a timeshare identified as being located at Villa Del Palmar (the
“Timeshare”). On her Schedule B, she identified various articles of personal property, including
an anticipated 2010 tax refund valued at $8,000; various potential legal claims and an anticipated
property settlement, each with an unknown value; a John Deere lawn tractor valued at $1,000; a
2004 Mercedes automobile valued at $6,000; and a check for $10,136 from the sale of a 2010
Toyota Camry.
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On her Schedule C, the Debtor used the $25,800 exemption provided by W. Va. Code §
38-10-4(e) to claim as exempt the following interests in real and personal property of the estate:
$11,064 of the Naples Property; $1,000 of the lawn tractor, $3,600 of the 2004 Mercedes, and
$10,136 of the check from the sale of the 2010 Toyota Camry. 	The Debtor did not exempt any
portion of her various potential legal claims or her anticipated property settlement from her
divorce. On October 18, 2013, the Trustee indicated that the bankruptcy estate contained assets
for liquidation and distribution to creditors, and the Clerk of Court subsequently issued notice for
creditors to file claims against the estate by January 18, 2014. On December 4, 2013, the Debtor
amended her claimed exemptions to reduce the amount of her claimed exemption in the Naples
Property from $11,064 to $7,314 and to apply the resulting $3,750 of available exemption to her
interest in her anticipated 2010 tax refund of $8,000. 	The Trustee subsequently objected to the
Debtor’s amended claim of exemptions, and on February 13, 2014, the Debtor and Trustee
submitted to the court an agreed order resolving the Trustee’s objection. 	The agreed order
modified the character of the property claimed as exempt but did not affect the value of the
Debtor’s claimed exemptions. Specifically, it provided that
The Trustee has asserted that the Debtor’s claims in the Amended Claim
of Exemption are incorrect, in that specific items of property in which the Debtor
has claimed an interest, are actually subject to recovery for the Debtor and the
Debtor’s Estate in a proceeding in the Family Court of Monongalia County, West
Virginia. 	The Trustee has no objection to the amount claimed for the specific
items of property, but does believe the claim of Exemption should be recognized
in the value of the Property Settlement listed as an asset. The Debtor is amenable
to such treatment of the amended Exemptions and the Exemptions shall be
deemed to have been so claimed. It is therefore,
ORDERED that the debtor’s amended exemptions as herein modified
shall be approved.
Agreed Order Resolving the Trustee’s Objection to Exemptions (Doc. No. 32).
On October 7, 2014, the Trustee filed his Motion to Settle Property Issues in Family
Court by Engaging in Several Transactions (the “Motion to Settle”). 	On October 29, 2014, the
Debtor filed her objection to the Motion to Settle and her second amended claim of exemptions.
The Debtor, by her second amended claim of exemptions, claims her interest in the following
property as exempt under W. Va. Code § 38-10-4(e): $12,064 of the Naples Property; $3,600 of
the 2004 Mercedes, and $10,136 of the check from the sale of the 2010 Toyota Camry. Notably,
the Debtor no longer claims as exempt her interest in the anticipated 2010 tax refund, but she
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now claims 100% of her interest in the various potential legal claims as exempt under W. Va.
Code § 38-10-4(k)(5).
II. DISCUSSION
The Trustee argues that the court should disallow the Debtor’s amended claim of
exemptions based upon res judicata or the principles of estoppel and laches. 	In support of his
argument regarding res judicata, he asserts that the court recognized its potential applicability in
In re Scotchel, No. 12-09, 2014 WL 4327947 (Bankr. N.D.W. Va. Aug. 28, 2014). In that case,
the court considered the application of res judicata to the facts before it but ultimately found that
res judicata did not bar Mr. Scotchel from amending his claimed exemptions. Here, the Trustee
asserts that res judicata precludes the Debtor’s amended claim of exemptions because the agreed
order allowed the Debtor’s claim of exemptions as claimed by her first amended claim of
exemptions but recharacterized certain of those claimed exemptions, including in the Debtor’s
potential causes of action, as being claimed in the anticipated Property Settlement. 	Moreover,
the Trustee asserts that the Debtor cannot now abandon her claimed exemption in the anticipated
tax refund because it allegedly ceased being property of the bankruptcy estate once the
exemption was allowed such that he cannot now recapture it for administration in this case.
In support of his objection based upon estoppel and laches, he argues that those principles
are the same or substantially similar to res judicata such that the court should also consider those
equitable principles as bases to bar a debtor’s amended exemptions. 	Moreover, he asserts that
Rule 1001 requires the court to disallow the Debtor’s amended claim of exemption because the
Rules, including Rule 1009(a) permitting the filing of amended exemptions at any time until the
case is closed, are to “be construed to secure the just, speedy, and inexpensive determination of
every case and proceeding.” Rule 1001.
The Trustee is correct that the court in Scotchel recognized the applicability of res
judicata as a basis upon which to disallow a debtor’s amended claim of exemption. See Scotchel,
2014 WL 4327947, at *2 (citing In re Romano, 378 B.R. 454, 464 (Bankr. E.D.Pa. 2007)). Res
judicata, a generic term for claim preclusion, is a common-law doctrine whereby “a final
judgment forecloses ‘successive litigation of the very same claim, whether or not relitigation of
the claim raises the same issues as the earlier suit.’” Taylor v. Sturgell, 553 U.S. 880, 892 (2008)
(citing New Hampshire v. Maine, 532 U.S. 742, 748 (2001)). Specifically, the application of res
judicata precludes the bringing of claims that were or could have been raised in a prior action,
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between the same parties or their privies, and which were resolved by a final judgment on the
merits. 	See JPMorgan Chase Bank, N.A. v. Mechem, Civil Action Nos. 3:11-CV-26(L), 3:11-
CV-25, & 3:11-CV-27, 2011 WL 2491382, at *3 (N.D.W. Va. June 22, 2011) (citation omitted).
“Importantly, however, res judicata . . . will not preclude a debtor from filing amended
exemptions under Rule 1009(a)[] unless a final order denying an exemption claim for the same
asset has previously been entered.” Id. (internal quotation omitted).
Here, the order that the Trustee asserts precludes the Debtor’s amended claim of
exemption provides that
The Trustee has asserted that the Debtor’s claims in the Amended Claim
of Exemption are incorrect, in that specific items of property in which the Debtor
has claimed an interest, are actually subject to recovery for the Debtor and the
Debtor’s Estate in a proceeding in the Family Court of Monongalia County, West
Virginia. 	The Trustee has no objection to the amount claimed for the specific
items of property, but does believe the claim of Exemption should be recognized
in the value of the Property Settlement listed as an asset. The Debtor is amenable
to such treatment of the amended Exemptions and the Exemptions shall be
deemed to have been so claimed. It is therefore,
ORDERED that the debtor’s amended exemptions as herein modified
shall be approved.
Agreed Order Resolving the Trustee’s Objection to Exemptions (Doc. No. 32).
Regarding the preclusive effect of the agreed order, it cannot be disputed that the
Trustee’s current objection to the Debtor’s amended claim of exemptions involves parties
identical to the previous dispute resolved by the agreed order. Likewise, the finality of the order
cannot be disputed because neither party can be heard to complain about its terms based upon
their agreement thereto. The issue is thus whether the extant dispute involves claims that were or
could have been raised in conjunction with the Trustee’s previous objection. The agreed order is
vague, however, and does not indicate which of the Debtor’s property and claimed exemptions
were recharacterized by the agreed order as being included in the “Property Settlement.”
According 	to 	the 	Trustee, 	the 	property, 	and 	associated 	exemptions 	therein, 	that 	were
recharacterized by the agreed order included, among other things, the Debtor’s interest in her
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potential causes of action. 1 The Debtor, on the other hand, asserts that the agreed order did not
recharacterize her potential causes of action as being part of the Property Settlement; at least she
did not intend that result. 	Looking to the Trustee’s initial objection for clarity in that regard, the
only property specified is the anticipated 2010 tax return. Notably, the court convened a hearing
on the Trustee’s initial objection to the Debtor’s first amended claim of exemptions, but the
Trustee failed to appear and the parties later submitted the agreed order resolving the matter. It
is thus difficult for the court to discern the precise scope of the agreed order. The vagueness of
the agreed order therefore makes it necessary for the court to conduct further proceedings to
determine the intended scope of the agreed order. 2 Thereafter, the court should be in a better
position to decide whether res judicata precludes the Debtor’s second amended claim of
exemptions; at least to the extent that the Debtor now seeks to specifically exempt property that
was 	previously recharacterized 	by the 	agreed 	order 	as 	being included 	in 	the 	“Property
Settlement.”
Although the court finds it necessary to conduct further proceedings regarding the
preclusive effect of the agreed order, it can still dispose of the Trustee’s objection to the Debtor’s
1 Insofar as the Trustee asserts that the Property Settlement also includes the anticipated 2010 tax
refund, the court fails to see the logic in the Trustee’s argument that the Debtor’s $3,750
exemption claimed therein caused the asset, at least the exempted portion thereof, to leave the
bankruptcy estate. 	In the court’s opinion, the Trustee cannot maintain that the agreed order
recharacterized the anticipated tax refund as part of the Property Settlement and also that the
Debtor’s claimed exemption in the tax refund removed it from the bankruptcy estate. 	In that
regard, the court notes that the exemption under W. Va. Code § 38-10-4(e) does not provide a
debtor with the ability to exempt an asset in kind but only an exemptible interest in certain
property of the estate. Exempt property generally remains property of the estate even though the
debtor may exempt an interest therein from being liable to pay claims against the estate.
Compare 11 U.S.C. § 522(c) and (k) with 11 U.S.C. § 554 (providing how property may be
abandoned from the bankruptcy estate).
2 The court’s interpretation of its own orders is generally left to its sound discretion. See In re
Kelley, 488 B.R. 97, 99 (B.A.P. 8th Cir. 2013) (citation omitted). When the order at issue is an
agreed 	order, 	however, 	“the 	interpretation 	of 	its 	terms 	presents 	a 	question 	of 	contract
interpretation.” 	Covington v. Covington Landing Ltd. P’ship, 71 F.3d 1221, 1227 (6th Cir.
1995). “The goal is to determine the rights, duties, and reasonable expectations of the parties, as
disclosed to and blessed by the Court.” 	American LaFrance, LLC, v. RT Jedburg Commerce
Park, LLC (In re American LaFrance, LLC), 461 B.R. 267, 272 (Bankr.D.Del. 2011) (citation
omitted).
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amended claim of exemption based upon equitable considerations of estoppel and laches. In that
regard, the court does not believe that it can restrict the Debtor’s otherwise unfettered right to
amend her claimed exemptions “at any time before the case is closed.” 	Rule 1009(a).
Specifically, the court held in Scotchel that Law v. Siegel, 134 S. Ct. 1188 (2014), explicitly
abrogated cases decided before it that held that a court could disallow a debtor’s exemption or
amended exemption based upon equitable considerations, which includes estoppel and laches.
Scotchel, 2014 WL 4327947, at *4; see Black’s Law Dictionary 667 (10th ed. 2014) (defining
“estoppel” as “3. 	An affirmative defense alleging a good-faith reliance on a misleading
representation and an injury . . . resulting from that reliance”); Black’s Law Dictionary 1006
(10th ed. 2014) (emphasis added) (defining “laches” as “2. The equitable doctrine by which a
court denies relief to a claimant who has unreasonably delayed in asserting the claim, when that
delay has prejudiced the party against whom relief is sought”). 	Insofar as the Trustee contends
that estoppel and laches are nonetheless sufficiently analogous to res judicata such that the court
should similarly consider those as bases to disallow the Debtor’s amended claim of exemption,
the court disagrees. Notably, and contrary to the Trustee’s assertion to the contrary, estoppel and
laches, or any other equitable objection to a debtor’s claimed exemptions, are different than res
judicata because res judicata is not a basis, per se, for objecting to a debtor’s claimed exemptions
or any amendment in that regard. Rather, the application of res judicata depends upon and gives
effect to a previous court order disposing of an objection to a debtor’s claimed exemptions and
limiting the debtor’s ability to later amend his claim of exemption. See In re Romano, 378 B.R.
at 464 (“Whenever . . . there has been a final, non-appealed ruling sustaining the trustee’s
objection, all of the elements of claim preclusion have been established, and so the debtor cannot
later amend her exemptions to relitigate that issue[.]”). Therefore, consistent with its holding in
Scotchel, the court cannot exercise its equitable power to disallow the Debtor’s amended claim
of exemptions.
III. CONCLUSION
Based on the foregoing analysis, the court will enter a separate order overruling, in part,
the Trustee’s objection to the Debtor’s second amended claim of exemptions and setting further
proceedings regarding the preclusive effect of the agreed order resolving the Trustee’s first
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objection to the Debtor’s initial amended claim of exemptions and the Trustee’s Motion to
Settle.3
3 	Although the court also took the Trustee’s Motion to Settle under advisement, it cannot
adjudicate the Motion to Settle in light of its analysis here regarding the disposition of the
Trustee’s Objection to Claim of Amended Exemptions.
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