               United States Bankruptcy Appellate Panel
                             FOR THE EIGHTH CIRCUIT


                                  No. 06-6026 WM


In re:                                    *
                                          *
Trent Dales Ginter,                       *
                                          *
         Debtor.                          *
                                          *
                                          *        Appeal from the United States
Trent Dales Ginter,                       *        Bankruptcy Court for the
                                          *        Western District of Missouri
                                          *
         Debtor-Appellant,                *
                                          *
               v.                         *
                                          *
Alliant Bank, Boonville,                  *
                                          *
         Creditor-Appellee.               *
                                          *


                              Submitted: August 23, 2006
                               Filed: September 14, 2006


Before KRESSEL, Chief Judge, SCHERMER, and MCDONALD, Bankruptcy
Judges.


SCHERMER, Bankruptcy Judge.
       Trent Dales Ginter (“Debtor”) appeals an order of the bankruptcy court denying
his motion to avoid the lien of Alliant Bank, Boonville (“Creditor”) in certain tools
of the Debtor’s trade on the grounds of res judicata and judicial estoppel. We have
jurisdiction over this appeal from the final order of the bankruptcy court. See 28
U.S.C. § 158(b). For the reasons stated below, we reverse.

                                        ISSUE

       The issue on appeal is whether the doctrines of res judicata and judicial estoppel
prevent the Debtor from avoiding the Creditor’s nonpossessory, nonpurchase-money
security interest in certain tools of the Debtor’s trade pursuant to 11 U.S.C. §
522(f)(1)(B)(ii) after the Debtor stipulated to relief from the automatic stay in the
Creditor’s favor with respect to the tools pursuant to 11 U.S.C. § 362(d). We
conclude that neither res judicata nor judicial estoppel prevent the Debtor from
avoiding the security interest in the tools after consenting to relief from the automatic
stay in the Creditor’s favor with respect to the tools.

                                  BACKGROUND

     The Debtor works as a mechanic for the City of Columbia, Missouri. The
Debtor owns tools which he uses in the course of his employment. The Debtor spent
no more than $3,000 acquiring the tools over the years.

       Prior to filing a Chapter 7 bankruptcy case, the Debtor and his girlfriend
obtained a loan from the Creditor to start a tanning business. They used the proceeds
of the loan to purchase four tanning beds for approximately $11,000. The loan was
secured by an interest in the tanning beds. The Debtor pledged his tools as additional
collateral on the loan.




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       On October 16, 2005, the Debtor filed a petition for relief under Chapter 7 of
the Bankruptcy Code. The Debtor listed the tools as assets in his schedules with a
value of $800 and asserted an exemption in the tools in the amount of $800 as tools
of trade under Missouri Revised Statutes § 513.430(4).

       After filing the bankruptcy petition, the Debtor stipulated to the Creditor’s
motion for relief from the automatic stay with respect to the tanning beds and the
tools. The Debtor stipulated that he owed a debt to the Creditor; that the debt was
secured by an interest in four tanning beds and assorted tools; that the debt to the
Creditor was delinquent; that the Debtor and his girlfriend had no equity in the tanning
beds and the personal property and equipment secured by the debt; that the property
was of inconsequential value or benefit and was burdensome to the estate; and that
cause existed to grant relief from the automatic stay. The Creditor filed the stipulated
motion on December 13, 2005. The bankruptcy court granted the stipulated motion
on December 14, 2005, by docket entry.

       On December 15, 2005, the Debtor filed a motion to avoid the Creditor’s lien
in the tools pursuant to Section 522(f)(1) of the Bankruptcy Code. The Creditor
objected to the motion on waiver and estoppel grounds. The Creditor amended its
objection to dispute the Debtor’s valuation of the tools and their status as tools of
trade. A hearing on the motion was held. The Debtor testified at the hearing that he
used the tools everyday in his work and that the tools had a garage sale value between
$300 and $600. The court denied the motion to avoid lien on the alternate bases of
judicial estoppel and res judicata. The Debtor appealed the order denying his motion
to avoid the lien on the tools.

                            STANDARD OF REVIEW

       The parties have not raised any issues with the facts as decided by the trial
court in this appeal. Therefore, we need not review the facts for the purposes of

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this decision. We review the application of the legal principle of res judicata de
novo. Ladd v. Ries (In re Ladd), 450 F.3d 751, 753 (8th Cir. 2006); Lundquist v.
Rice Mem’l Hosp., 238 F.3d 975, 976-77 (8th Cir. 2001). We review the
application of judicial estoppel for an abuse of discretion. Stallings v. Hussmann
Corp., 447 F.3d 1041, 1046-47 (8th Cir. 2006); Strong v. America’s Center Food
Service Partners/Levy Rest. Ltd. P’ship, No. 05-2679, 2006 WL 1975996 (8th Cir.
July 14, 2006).

                                   DISCUSSION

                                   Res Judicata

       The doctrine of res judicata prohibits the relitigation by the same parties of
the same cause of action. Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 327, 326,
n.5 (1979). The doctrine of res judicata bars a later suit where (1) an earlier suit
resulted in a final judgment on the merits; (2) the earlier suit was based on proper
jurisdiction; (3) both suits involve the same cause of action; and (4) both suits
involve the same parties or their privies. Lovell v. Mixon, 719 F.2d 1373, 1376 (8th
Cir. 1983). Res judicata does not prevent the lien avoidance motion after the
termination of the automatic stay because the two motions do not involve the same
cause of action.

       The two motions involved in this appeal were each based on a separate
section of the Bankruptcy Code. The motion for relief from the automatic stay was
based on Section 362(d) of the Bankruptcy Code which provides that the automatic
stay may be modified for cause including the lack of adequate protection of an
interest in property. 11 U.S.C. § 362(d)(1). To the extent the automatic stay
applies to property of the estate, it may be modified if the debtor does not have any
equity in the property and the property is not necessary to an effective
reorganization. 11 U.S.C. § 362(d)(2). In order to obtain relief from the automatic

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stay to proceed against collateral which is property of the bankruptcy estate, a
creditor must establish a debt, an interest in property of the estate, and either a lack
of adequate protection of the creditor’s interest in the property of the estate or a
lack of equity in the property and the fact that the property is not necessary for an
effective reorganization. In the stipulated motion, the Debtor agreed that he owed
the Creditor a debt; that the debt was secured by an interest in four tanning beds
and assorted tools; that the debt was delinquent; and that the Debtor had no equity
in the tanning beds and tools. He also agreed that the tools and tanning beds were
of inconsequential value or benefit and burdensome to the estate. This latter
stipulation was not necessary for the modification of the automatic stay, but
satisfied the trustee of the Debtor’s bankruptcy estate that the tanning beds and
tools could not be sold for the benefit of the bankruptcy estate.

       The motion to avoid the lien was based on Section 522(f) of the Bankruptcy
Code which permits a debtor to avoid the fixing of a lien on an interest of the
debtor in property to the extent such lien impairs an exemption to which the debtor
would have been entitled if such lien is a nonpossessory, nonpurchase money
security interest in tools of the debtor’s trade. 11 U.S.C. § 522(f)(1)(B)(ii). In
order to avoid the Creditor’s lien in the tools, the Debtor had to establish that the
Creditor has a security interest in the tools; that the Creditor’s interest is a
nonpossessory, nonpurchase money security interest; that the Debtor is entitled to
an exemption in the tools; that the Creditor’s lien impairs his exemption in the
tools; and that the tools are tools of his trade.

       Actions under Section 362(d) and under Section 522(f) of the Bankruptcy
Code are based on some of the same underlying facts: a creditor-debtor
relationship and a security interest in certain collateral. In the instant case, both
motions require a debt from the Debtor to the Creditor secured by an interest in the
tools. Other facts may tend to support different elements required under Section
362(d) and Section 522(f) of the Bankruptcy Code. For instance, the Debtor owes

                                           5
more to the Creditor than the combined value of the tanning beds and the tools.
This fact supports a finding of lack of equity in the automatic stay context. This
fact also supports a finding that the Creditor’s lien on the tools impairs the
Debtor’s exemption of the tools as tools of his trade in the lien avoidance context.
The two actions share some of the same underlying facts. They are not, however,
based on the same cause of action. They are based on distinct sections of the
Bankruptcy Code designed to serve different purposes.

        Res judicata prevents not only the relitigation of issues which were actually
litigated but also issues which could have been litigated in the first action. Lovell v.
Mixon, 719 F.2d at 1376. Lien avoidance actions are separate from stay relief
matters. Lien avoidance rights are not affirmative defenses to a motion for relief
from the automatic stay. Furthermore, a pending lien avoidance motion would not
necessarily defeat a motion for relief from the automatic stay. Therefore, the
stipulation to relief from the automatic stay does not prevent the later lien
avoidance motion.

       Res judicata is normally an affirmative defense which is lost if not timely
raised. Arizona v. California, 530 U.S. 390, 410 (2000). Fed. R. Civ. P. 8(c),
applicable in the bankruptcy context pursuant to Fed. R. Bankr. P. 7008(a). A
court may raise the issue of res judicata sua sponte if it is on notice that it has
previously decided the underlying substantive issue in dispute. Arizona v.
California, 530 U.S. at 412. This result is consistent with one of the policies
underlying res judicata: the avoidance of unnecessary judicial waste. Id.
However, where no judicial resources have been spent on the resolution of a
question, a court must be cautious about raising a preclusion bar sua sponte. Id. at
412-13. As previously stated, the issues in the stay motion and the lien avoidance
motion are not the same and, therefore, res judicata does not apply.




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                                 Judicial Estoppel

       Judicial estoppel prevents a party from prevailing in one phase of litigation
on an argument and then relying on a contradictory argument to prevail in another
phase of the litigation. New Hampshire v. Maine, 532 U.S. 767, 749
(2001)(citations omitted). Where a party assumes a certain position in a legal
proceeding and succeeds in maintaining that position, that party may not thereafter
assume a contrary position simply because of changed interests, especially if the
change in position would prejudice a party who acquiesced to the original position.
Id. The doctrine of judicial estoppel is uniformly recognized as having the purpose
of protecting the integrity of the judicial process by prohibiting parties from
deliberately changing positions according to the exigencies of the moment. Id. at
749-50. Courts may invoke the doctrine of judicial estoppel at their discretion
because it is intended to prevent improper use of the judicial machinery. Id. at 750.

       No inflexible prerequisites or exhaustive formula exists for determining the
applicability of judicial estoppel. Id. at 751. Nonetheless, several factors typically
inform the decision to apply the doctrine in a particular case. Id. at 750. First, a
party’s later position must be clearly inconsistent with its earlier position. Id.
Second, success in persuading the court to accept the party’s earlier position is
important. In such a situation, judicial acceptance of an inconsistent position in a
later proceeding would create the perception that one of the courts was mislead.
Id. Absent success in a prior proceeding, a party’s later inconsistent position
introduces no risk of inconsistent court determinations or perceptions of fraud on
or misleading of the court. Id. at 750-51. A third consideration is whether the
party seeking to assert the inconsistent position would derive an unfair advantage
or impose an unfair detriment on the opposing party if not estopped. Id.

     In the present case, the Debtor has not taken inconsistent positions.
Accordingly, the doctrine of judicial estoppel is not implicated. In the motion for

                                          7
relief from the automatic stay, the Debtor stipulated that he owed the Creditor a
debt; that the debt was secured by an interest in the tools and the tanning beds; that
he did not have any equity in the tools and the tanning beds; and that the Creditor
was entitled to relief from the automatic stay to pursue its security interest in the
tanning beds and the tools. In the lien avoidance motion, the Debtor again asserted
that he owed the Creditor a debt and that the debt was secured by an interest in the
tools. These facts are necessary for relief in the automatic stay context under
Section 362 of the Bankruptcy Code as well as in the lien avoidance context under
Section 522 of the Bankruptcy Code. The Debtor also asserted that he was entitled
to avoid the otherwise valid lien under Section 522(f) of the Bankruptcy Code. A
lien avoidance under Section 522(f) does not change the fact that the Creditor had a
valid lien on an earlier date and was entitled to relief from the automatic stay under
Section 362 at such time. Judicial estoppel is simply not appropriate in this
situation because the Debtor has not taken clearly inconsistent positions.

       Second, by consenting to the motion for relief from stay, the Debtor did not
succeed in convincing the Court of a position contrary to any taken in the lien
avoidance motion. To the contrary, the Debtor merely stipulated that grounds
existed for relief from the automatic stay under Section 362(d) of the Bankruptcy
Code. In doing so, the Debtor acquiesced to the Creditor’s representations
necessary for it to convince the court to grant it relief from the automatic stay. The
Debtor did not mislead the court nor is he asking the court to take inconsistent
positions.

       Finally, the Debtor neither gained an unfair advantage nor imposed an unfair
detriment on the Creditor by consenting to the stay relief motion. Rather, the
Debtor conferred several benefits on the Creditor by consenting to the stay relief
motion. A filing fee is not required for a stipulated stay relief motion. Therefore,
by consenting to the motion, the Debtor saved the Creditor the filing fee and the
costs associated with attending a hearing and litigating a contested matter.

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Furthermore, the stay relief motion related to the tanning beds and the tools, with
substantial value existing in the tanning beds. Accordingly, the Creditor would
likely have filed the stay relief motion without the Debtor’s consent with respect to
the tools. Regardless, no evidence of any prejudice to the Creditor was presented
at the hearing on the lien avoidance motion. The Debtor did not force the Creditor
to incur any additional costs, prejudice the Creditor, nor gain an unfair advantage
by consenting to the stay relief motion. Judicial estoppel is not appropriate in this
situation. The court abused its discretion in applying judicial estoppel to deny the
lien avoidance motion.

                                  CONCLUSION

       The Debtor’s right to avoid the lien in the tools under Section 522(f) of the
Bankruptcy Code did not involve the same cause of action as the earlier relief from
stay proceeding under Section 362(d) of the Bankruptcy Code. Furthermore, the
Debtor did not take inconsistent positions by consenting to the Creditor’s relief
from stay motion and then filing the lien avoidance motion. Therefore, the court
should not have denied the lien avoidance motion under the doctrine of res judicata
or judicial estoppel. The order denying the lien avoidance motion is therefore
REVERSED. The bankruptcy court never addressed the merits of the lien
avoidance motion. We therefore REMAND for such a determination.

       We do not encourage the Debtor’s tactics in stipulating to relief from the
automatic stay and then turning around and filing a lien avoidance motion. Better
practice would have been to at least advise the Creditor of the Debtor’s intentions
to avoid the lien if not filing the lien avoidance motion prior to signing the
stipulation. In waiting until after relief from stay was granted, the Debtor risked
the repossession of the tools by the Creditor which would have transformed the
Creditor’s security interest from an avoidable nonpossessory interest into a non-
avoidable possessory interest. However, the Debtor did not take inconsistent legal

                                          9
positions, he did not waste judicial time, and he did not prejudice the Creditor. To
the contrary, by stipulating to relief from the automatic stay, the Debtor enabled
the Creditor to avoid the payment of a filing fee for the motion and the expense of
a hearing. Furthermore, the relief from stay related to the tanning beds as well as
the tools, and the tanning beds had significantly greater value than the tools.
Therefore, the Creditor would have undoubtedly sought relief from the stay with
respect to the tanning beds even if the Debtor had filed a motion to avoid the lien
on the tools on the day he filed his bankruptcy petition. By stipulating to relief
from the automatic stay the Debtor also eliminated the need for a hearing on the
stay motion, minimizing the use of judicial resources in the stay relief context.
Nonetheless, we encourage debtors to determine their intentions with respect to
collateral at the outset of a bankruptcy case and, if they wish to avoid liens, to
promptly file the necessary pleadings to accomplish their intentions.




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