Cruz v Montgomery

[*1] Cruz v Montgomery 2004 NY Slip Op 51464(U) Decided on November 29, 2004 Supreme Court, New York County Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 29, 2004
Supreme Court, New York County

WASHINGTON CRUZ, Plaintiff,

against

KENNETH MONTGOMERY, M.D., LENOX HILL HOSPITAL, DR. "JOHN" ASA (first name fictitious, real name unknown), NORTH MANHATTAN FAMILY MEDICAL OFFICE and MANHATTAN ORTHOPEDICS, P.C., Defendants.



101438/02

Stanley L. Sklar, J.

The principal issue presented on this motion is whether a party who has filed a Chapter 7 bankruptcy petition has the capacity to commence a medical malpractice action when the malpractice first arises after the bankruptcy petition is filed but before the party has been discharged in bankruptcy. I conclude that such capacity exists.

In this action which arises out of surgery performed on August 13, 1999 by Kenneth Montgomery, M.D., Dr. Montgomery, Manhattan Orthopedics, P.C., evidently his employer, and Lenox Hill Hospital, the institution where the surgery was performed, move for an order permitting them to amend their answers to assert that the plaintiff, Washington Cruz, lacks the capacity to sue based on the fact that he filed a Chapter 7 bankruptcy petition on June 10, 1999 and was discharged in bankruptcy on October 20, 1999. The movants further seek, in the event that application to amend is granted, an order dismissing this action on the ground of plaintiff's lack of capacity.

The motion is denied. As to the branch of the motion which seeks leave to amend their answers the movants have failed to establish that such application is meritorious [See, East Asiatic Co. v. Corash, 34 AD2d 432 (1st Dept, 1970)], and it is evident from the motion itself that it is not.

The movants' counsel asserts that Cruz had a duty before he was discharged in bankruptcy on October 20, 1999 to list the malpractice claim, which allegedly accrued on August 13, 1999, as an asset of the estate, but that he did not, thereby committing a fraud on the Bankruptcy Court and Cruz' creditors. Aside from the fact that it is dubious that Cruz, who was recovering from hand surgery, was still going for post-operative visits, and who was instructed to have physical therapy (See, motion exh J), would be aware before the bankruptcy discharge that he was injured and that malpractice was committed, Cruz had no obligation to amend his [*2]bankruptcy papers and list the potential lawsuit as an estate asset. With limited exceptions, under the Bankruptcy Code the debtor is required to list his assets including potential lawsuits, which existed as of the commencement of his bankruptcy case, namely when the bankruptcy petition is filed, which in the instant case was on June 10, 1999. See, 11 USC 541 (a); Collier on Bankruptcy, 15th Ed § 541.02 As a general proposition with respect to Chapter 7 filings, after - acquired property of an individual debtor does not become property of the bankruptcy estate; rather it "becomes the debtor's personal property, clear of all claims that are ultimately discharged in the bankruptcy case". Id at § 541.03 While 11 USC 541 (a)(7) indicates that the bankruptcy estate consists of "[a]ny interest in property that the estate acquires after the commencement of the case" that provision merely refers to property acquired by the estate not by the debtor. See, Id § 541.18; Niedermeier v. St. Joseph Hospital, 188 Misc 2d 107, 112 (Sup Ct., Erie County, 2001) Thus a personal injury lawsuit which had neither accrued at the time the bankruptcy petition was filed nor had its roots in the pre -bankruptcy past is not an asset of the bankruptcy estate. See, Niedermeier supra; Lamanna v. Carrigan, 196 Misc 2d 98 (Richmond City, 2003); In re Doemling, 127 B.R. 954 (USDC, W. D. PA, 1991)

In addition while bankruptcies commenced under Chapter 13 of the Bankruptcy Code include after - acquired property of the debtor as part of the bankruptcy estate (See, 11 USC 1306) there is no such provision with respect to Chapter 7 bankruptcies. Indeed when a Chapter 13 petition is converted to one under Chapter 7 "property of the estate in the converted case... consists of property of the estate, as of the date of the filing of the petition, that remains in the possession of or is under the control of the debtor on the date of conversion". See, 11 USC 348 (f)(1); Collier, supra at § 1306.04; 1994 USCCAN 3340, 3365-3366; Farmer v. Taco Bell Corp., 242 BR 435 (absent a bad faith conversion a slip and fall suit, arising after a Chapter 13 plan was filed but prior to a conversion to a Chapter 7 plan, belonged to the debtor); See also, Hannan v. Kirchenbaum, 24 BR 691 (claims arising out of a car accident, which claims arose after the Chapter 13 plan was filed and before the Chapter 7 conversion, belonged to the debtor).

Obviously if a debtor's negligence suit which arises between the filing of a Chapter 13 bankruptcy proceeding and the conversion to a Chapter 7 proceeding is not ordinarily part of the bankruptcy estate then neither is a personal injury lawsuit which arises after the institution of a Chapter 7 bankruptcy proceeding.

The bulk of the cases relied on by defense counsel are not to the contrary since the lawsuits either accrued before the bankruptcy petitions were filed or were rooted in the pre- bankruptcy past. This is even true of Ervolino v. Scappatura [162 AD2d 654 (2nd Dept, 1990)] since a review of the record on appeal reveals that plaintiff claimed that the defendants' wrongdoing dated back to 1983, i.e. before the bankruptcy petition was filed in 1985. To the extent, if any, that the decision in Shepmoes v. Hilles [122 AD2d 35 (2nd Dept, 1986)] is to the contrary (and it is unclear from the face of the decision whether it is) I decline to follow it. See, LaManna [FN1], supra. [*3]

In light of the foregoing the motion is denied.

Settle order.

Dated:

J.S.C. Footnotes

Footnote 1: Both the decisions in LaManna (supra) and Neidermeier (supra) suggested that a debtor filing under a Chapter 13 plan would have no standing to sue with respect to after - acquired property, and thus is distinguishable from a Chapter 7 or Chapter 11 debtor. However such a Chapter 13 debtor may have standing to sue irrespective of whether the property is estate property under the Bankruptcy Code. See, Kenney v. National Fuel Gas Distribution, 8 AD3d 989 (4th Dept, 2004); Giovinco v. Goldman, 276 AD2d 469 (2nd Dept, 2000)