United States District Court, S.D. Mississippi, Northern Division
P. JORDAN III CHIEF UNITED STATES DISTRICT JUDGE
contract dispute is before the Court on Plaintiffs Palas and
John Mitchell's Motion for Reconsideration  of
United States District Judge William H. Barbour, Jr.'s
September 26, 2018 Order . Defendants Cenlar Federal
Savings Bank (“Cenlar”) and MGC Mortgage,
Inc.'s (“MGC” collectively
“Defendants”) have also moved for summary
judgment . For the following reasons, Plaintiffs'
motion is granted in part and denied in part. Defendants'
motion is terminated for the Court to adopt a new briefing
this case examines whether Defendants breached their contract
with Plaintiffs in three separate instances. In each,
Defendants, acting as loan servicers, sent Plaintiffs'
mortgaged-property insurers letters informing them that
foreclosure proceedings “had commenced” on the
insured/mortgaged property, which resulted in two of the
insurers cancelling Plaintiffs' policies. See,
e.g., Shelter Letter [114-2] at 30.
facts begin in 2005 when Plaintiffs received a loan secured
by their property located in Richland, Mississippi.
Defendants serviced the loan. Plaintiffs defaulted in 2011
and Defendants sent the first letter to Alfa Mutual Insurance
Company (“Alfa”). Alfa then terminated
Plaintiffs' insurance. Following that, Defendants
purchased a force-placed insurance policy on Plaintiffs'
property through American Security Insurance Company
(“American Security”). Once that policy expired,
Plaintiffs insured the property through State Farm.
again commenced foreclosure proceedings on the property in
November 2014 and sent the second disputed letter, this time
to State Farm. Like Alfa, State Farm terminated
Plaintiffs' insurance, and Plaintiffs then bought
insurance through Shelter Mutual Insurance Company
(“Shelter”). Defendants sent the third letter to
Shelter in 2015 after Plaintiffs' default continued. But
Shelter did not terminate Plaintiffs' insurance until
2016 when Plaintiffs failed to make timely payments on the
Shelter policy. Again, Defendants force-placed coverage, this
time for a two-month period, until Plaintiffs made their
payments and Shelter re-instituted the policy.
Plaintiffs filed their Complaint on October 17, 2016,
alleging that Defendants, among other things, breached the
loan agreement by sending the three letters which led their
insurers to cancel their policies. Before leaving the bench,
Judge Barbour held that Plaintiffs were judicially estopped
from pursuing certain claims. Sept. 26, 2018 Order  at
6. Then, following reassignment, Plaintiffs sought
reconsideration under Federal Rule of Civil Procedure 60(b),
and Defendants responded that Plaintiffs failed to meet Rule
60(b)'s procedural requirements. But because Judge
Barbour's order was interlocutory, the parties should
have addressed it under Rule 54(b). Accordingly, the Court
held a status conference and instructed Defendants to file a
substantive response under Rule 54(b), which they did.
Plaintiffs failed to file a timely response. In addition,
Defendants have moved for summary judgment.
Plaintiffs' Motion for Reconsideration
Rule 54(b), a district court may “reconsider and
reverse its decision for any reason it deems
sufficient.” McClendon v. United States, 892
F.3d 775, 781 (5th Cir. 2018) (holding that failing to apply
Rule 54(b) standard to motion to reconsider interlocutory
order creates reversible error) (citation omitted).
Accordingly, the Court has discretion to consider the legal
issues de novo. See also Galvan v. Norberg, 678 F.3d
581, 588 (7th Cir. 2012) (finding reassigned judge properly
reconsidered order issued by first judge under Rule 54(b)).
Plaintiffs generally say Judge Barbour misapplied judicial
estoppel as it relates to their two bankruptcy proceedings.
On January 6, 2012, Plaintiffs filed a Chapter 13 Petition
for Relief, and the United States Bankruptcy Court for the
Southern District of Mississippi (“bankruptcy
court”) confirmed the plan on May 30, 2012. See In
re Mitchell, No. 12-45-ee (Bankr. S.D.Miss.)
(“Mitchell I”). But Plaintiffs failed to disclose
any potential civil claims before the bankruptcy court
dismissed the case on September 18, 2014. Sept. 26, 2018
Order  at 2. They then filed a second Chapter 13
petition in bankruptcy (“Mitchell II”) on March
11, 2015, and again failed to disclose their claims.
Barbour found that before the plan was confirmed Plaintiffs
had knowledge of the events surrounding Defendants' first
letter to their insurer. Id. at 5. Accordingly,
Judge Barbour held that “[b]ecause the Mitchells did
not disclose their breach of contract and fraud claims to the
bankruptcy court in Mitchell I, those claims remain property
of [the Mitchell I estate], and cannot be pursued
here.” Id. This precluded Plaintiffs from
“proceed[ing] on their fraud claim or their breach of
contract claims arising from any event taken before September
18, 2014, ” the day Mitchell I was dismissed.
Id. at 6. But because Mitchell II was still pending,
Judge Barbour allowed Plaintiffs to amend their schedules to
disclose breach-of-contract claims accruing after Mitchell I
was dismissed. Id. at 6.
ask this Court to set aside that holding for two reasons.
First, they say it was unreasonable for Judge Barbour to
expect them “to be aware that they had specific causes
of action . . . during the pendency of Mitchell I.”
Pls.' Mem.  at 1 (font altered). Next, Plaintiffs
say Judge Barbour's Order made a “clear
mistake” by holding that the precluded claims were
property of the Mitchell I estate that is now closed.
Id. at 3. Specifically, Plaintiffs argue that
“any potential claims held as property of the Mitchell
I estate reverted back to the Plaintiffs” under 11
U.S.C. § 349(b)(3). Id. at 2. Plaintiffs are
Judge Barbour correctly applied judicial estoppel. “A
court should apply judicial estoppel if (1) the position of
the party against which estoppel is sought is plainly
inconsistent with its prior legal position; (2) the party
against which estoppel is sought convinced a court to accept
the prior position; and (3) the party did not act
inadvertently.” Jethroe v. Omnova Sols., Inc.,
412 F.3d 598, 600 (5th Cir. 2005) (citing In re Coastal
Plains, Inc., 179 F.3d 197, 206-07 (5th Cir. 1999)).
“Judicial estoppel is particularly appropriate where,
as here, a party fails to disclose an asset to a bankruptcy
court, but then pursues a claim in a separate tribunal based
on that undisclosed asset.” Id.
take issue with Judge Barbour's holding on only the third
element, wherein he ...