Supreme Court of Illinois, September 24, 2015
In Seymour the Illinois Supreme Court addresses whether action, or inaction, in connection with a Federal case such as a Bankruptcy, should give rise to estoppel in connection with a State cause such as personal injury. The Answer is something of a surprise.
In 2008 the Seymours filed a Chapter 13 Bankruptcy Petition. 2 years into their Plan or Reorganization, they filed a personal injury action based on a 2010 automobile accident. In 2010 they successfully moved to modify their Plan; reducing their monthly payments because Mr. Seymour was unable to work due to the accident and the couple’s sole source of income was now workers’ compensation.
Despite having moved to modify their Plan, the Seymours never officially apprised the Bankruptcy Court that their circumstances changed; nor did they amend their Bankruptcy Schedules. On that basis, the Defendants in the State Court case were able to secure summary judgment using an estoppel argument. The notion was that since the Debtors failed to advise the Bankruptcy Court of their case, they should not be permitted to proceed in State Court
The Illinois Supreme Court reversed, noting that just because the Seymours had a legal duty to disclose their suit but failed to do so did not establish intent to deceive or manipulate the Bankruptcy Court. Nor, as the Defendants had asserted, did the Seymours’ 2010 Motion to Modify constitute proof that they were aware of a need to separately disclose the personal injury cause of action.