Opinion
No. 03-40883 TD.
October 4, 2007
MEMORANDUM ON REMAND CLARIFYING PREVIOUS ORDER
On December 22, 2005, a bankruptcy court order was entered (the "Bankruptcy Court Order"), authorizing the chapter 7 trustee (the "Trustee") to compromise the controversy of a pre-petition claim asserted by the Debtor against South Shore Beach and Tennis Club et al. ("Defendants"), among other things. The Debtor appealed the Bankruptcy Court Order to the United States District Court. On September 7, 2007, the Bankruptcy Court Order was affirmed except that the proceeding was remanded for clarification of whether the compromise had purported to include claims belonging to the Debtor's son. The Court has reviewed the record and has concluded that it did not.
Prior to the commencement of this bankruptcy case, the Debtor and her son, a minor, were tenants in an apartment building in Alameda, California, known as the South Shore Beach Tennis Club ("South Shore"). Ultimately, they were evicted. Thereafter, the Debtor commenced a lawsuit in Alameda County Superior Court against South Shore, alleging, among other things, racial discrimination. The plaintiffs in the lawsuit were described as Maxine Webb, individually and on behalf of Daniel Clay Webb, Jr: i.e., the Debtor's son. This lawsuit was pending in Alameda County when the bankruptcy case was filed. When the Debtor filed her bankruptcy petition, the Debtor's claims asserted in the lawsuit on her own behalf became property of her bankruptcy estate, subject to the control of the Trustee. Her son's claims, even though asserted by her on her son's behalf, did not become property of her estate. See 11 U.S.C. § 541(a).
Initially, the Trustee entered into a proposed compromise of the Debtor's claims on her own behalf against South Shore for $10,000. Due to various delays, South Shore backed out of the initial settlement before a notice of the proposed compromise could be filed. Thereafter, the Trustee negotiated a new compromise of these claims for $20,000. The Trustee filed a notice of intent to compromise on September 23, 2005. The notice of intent stated that the compromise was "in connection with" the state court litigation and that, upon receipt of the $20,000, the Trustee would file a request for dismissal with prejudice of "all claims owned by the debtor against the Defendant." Since the Debtor did not own her son's claims, the proposed dismissal did not include those claims.
The Debtor objected to the proposed compromise on October 17, 2005 on various grounds. One of the grounds stated was as follows: "More importantly, she [the Trustee] cannot settle any portion of this cause of action for Debtor's son, Dan Clay Webb, Jr." Given the Debtor's objection to the proposed compromise, the Trustee was required to file a noticed motion for Court approval. In her declaration in support of the motion, the Trustee again noted that she sought approval of a compromise only of "all claims owned by the debtor against the Defendant."
Hearing on the motion was conducted on November 10, 2005. At the hearing, the Debtor raised her objection to any proposed compromise by the Trustee of claims belonging to her son. The Court assured the Debtor in open court that no such claims were being compromised. The Court issued a written decision indicating that it would approve the compromise on December 12, 2005. An order approving the compromise was entered on December 22, 2005.
Nothing in the Court's written decision or in the order approving the compromise suggests that the Court was approving the Trustee's compromise of any claims not owned by the Debtor, including but not limited to any claims belonging to the Debtor's son. To the contrary, paragraph 3 of the order approving the proposed compromise stated that "[t]he Trustee's motion to compromise the estate's claims against South Shore is granted . . . [emphasis added]" No evidence has been presented to the Court that the Trustee has improperly submitted to the state court a request for dismissal with prejudice of the claims asserted by the Trustee on behalf of her son.
To the extent that there is any doubt based on the documents described above as to what claims were approved to be compromised by the Trustee, this Memorandum shall serve as an express clarification that the Court has not authorized the Trustee to compromise Debtor's son's claims in the state court litigation against Defendants.