Opinion
A098606.
7-17-2003
STACEY JOHNSON, Plaintiff and Appellant, v. BOLAND INC., Defendant and Respondent.
Stacey Johnsons employment with S&S Supply Company (S&S Supply) was terminated on June 16, 1998. On March 24, 1999, Johnson filed a complaint with the Department of Fair Employment and Housing alleging S&S Supply denied him reasonable accommodation for his back injuries and discriminated against him on the basis of physical disability and race. On April 2, 1999, Johnson received a "notice of right to sue" on the employment complaint. Johnson did not immediately file a civil action against S&S Supply, however, and on July 12, 1999 he filed a voluntary petition for chapter 7 bankruptcy relief. In the schedule of assets filed with this petition, Johnson did not disclose any claim or potential claim against S&S Supply. On August 27, 1999, Johnson filed an amended petition and amended schedules, but again he listed no claim or potential claim against S&S Supply. Johnson received a discharge and his federal bankruptcy case was closed in October 1999. Five months later, on March 31, 2000, Johnson filed a complaint against S&S Supply, initiating the instant civil action.
S&S Supply brought a motion for judgment on the pleadings and/or summary judgment and asked the trial court to take judicial notice of Johnsons bankruptcy filings. Because Johnsons claims against S&S Supply accrued before the bankruptcy, and because the bankruptcy trustee never issued orders exempting the claims or abandoning the bankruptcy estates interest in them, S&S Supply argued Johnsons claims were the property of the bankruptcy estate and Johnson had no standing to pursue them. On December 10, 2001, the trial court granted the motion for judgment on the pleadings. The court concluded Johnson was not the real party in interest and only the trustee of his bankruptcy estate retained the right to prosecute the action. However, the court allowed Johnson 90 days leave to amend his complaint to substitute a real party in interest. Johnson failed to amend, and on March 25, 2002 the trial court dismissed the action with prejudice.
DISCUSSION
Johnson filed a notice of appeal, in pro per, challenging the dismissal of his action and an unspecified order of "sanctions against Plaintiff." In his opening brief on appeal, Johnson states he was sanctioned $ 1,202.50, apparently for bringing an unmeritorious motion to compel discovery. Neither this order, nor the briefing leading up to it, is contained in the record on appeal. In a December 10, 2001 order, the court did order Johnson to pay $ 273 in sanctions and provide further responses to form interrogatories served by S&S Supply; however, this sanctions order does not appear to be the subject of Johnsons current complaints. Besides failing to provide documents supporting his claim of error, Johnson has also failed to support the claim with any reasoned argument or citation to authority; therefore, we do not address it. (Stevens v. Owens-Corning Fiberglas Corp. (1996) 49 Cal.App.4th 1645, 1657 [appellant must demonstrate error upon an adequate record]; San Mateo County Coastal Landowners Assn. v. County of San Mateo (1995) 38 Cal.App.4th 523, 559 [appellant must support claim with some argument or citation to authority].)
Johnson also complains the trial court erred in granting S&S Supplys motion for protective order and preventing him from taking the deposition of the companys owner, Sam Sarkissian. We do not address this argument because the grant of a protective order is not reviewable on direct appeal. (Bartschi v. Chico Community Memorial Hospital (1982) 137 Cal. App. 3d 502, 507-508, 187 Cal. Rptr. 61; see also Datig v. Dove Books, Inc. (1999) 73 Cal.App.4th 964, 984 [order denying motion to compel deposition not appealable].)
Johnsons challenge to the dismissal of his action is also unavailing. From the sequence of events previously described, and Johnsons own admissions in deposition testimony, it is clear that all of the events giving rise to Johnsons claims against S&S Supply occurred before he filed a petition for chapter 7 bankruptcy protection. Thus, the causes of action asserted against S&S Supply accrued before Johnsons bankruptcy filing.
"The filing of a petition in bankruptcy commences the case and creates a bankruptcy estate. (11 U.S.C. § 541(a).) The bankruptcy estate includes all of the debtors legal and equitable interests in property as of the commencement of the case. (11 U.S.C. § 541(a)(1).) The scope of section 541 is broad and `property includes causes of action. (Bostanian v. Liberty Savings Bank [(1997)] 52 Cal.App.4th 1075, 1083.) `It is of course indisputable that any causes of action which accrue to a debtor who has filed for relief under the Bankruptcy Act before the filing of the bankruptcy petition become the property of the bankruptcy estate and may thereafter be prosecuted only by the trustee or a duly appointed representative of the estate. [Citations.] [Citation.]" (Haley v. Dow Lewis Motors, Inc. (1999) 72 Cal.App.4th 497, 503-504; see also Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1001 [after chapter 7 bankruptcy filing, all causes of action previously possessed become property of the bankrupt estate]; People v. Kings Point Corp. (1986) 188 Cal. App. 3d 544, 548, 233 Cal. Rptr. 227 [upon bankruptcy filing, all of the debtors assets, including any interest in a cause of action, pass to the bankruptcy trustee].) "Under federal decisional authority, a chapter 7 debtor may not prosecute on his or her own a cause of action belonging to the bankruptcy estate unless the claim has been abandoned by the trustee. [Citations.]" (Bostanian v. Liberty Savings Bank, supra, 52 Cal.App.4th at p. 1081.) Stated another way, because the trustee controls the bankruptcy estate, the trustee is the real party in interest with standing to sue regarding any cause of action that belonged to the debtor when the bankruptcy petition was filed. (Ibid.)
The court addressed a similar factual situation in Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th 995. In Cloud, after the plaintiffs employer terminated her employment in November of 1995, the plaintiff filed for chapter 7 bankruptcy protection in June 1996. She did not disclose any claim or potential claim against her employer in the petitions schedule of assets. (Id. at p. 998.) Several months later, the plaintiff filed a complaint with the Department of Fair Employment and Housing, and she received a "right to sue" letter in November 1996. (Ibid.) The following month, shortly after the plaintiff received a bankruptcy discharge but while her bankruptcy action was still pending, the plaintiff filed a civil suit against her employer for wrongful termination and sexual harassment. The bankruptcy suit was eventually closed, but the plaintiffs civil suit continued. (Id. at p. 998-999.) Division Two of the Second District Court of Appeal concluded the plaintiff lacked standing to sue her employer because her claims accrued before the filing of the bankruptcy petition and were not exempt from inclusion in the bankruptcy estate under federal law. (Id. at p. 1001-1003; see also Harris v. St. Louis University (Bankr.E.D.Mo. 1990) 114 B.R. 647 [plaintiff lacked standing to pursue age and sex discrimination causes of action based on events that occurred before filing of chapter 7 bankruptcy petition].)
Although Johnson had not yet filed the complaint in this action when he entered chapter 7 bankruptcy, the claims alleged against S&S Supply had already accrued and should have been disclosed in the bankruptcy petitions schedule of assets-which, among other things, required a listing of all "contingent and unliquidated claims of every nature. . . ." The claims became the part of the bankruptcy estate with Johnsons chapter 7 filing, and therefore the bankruptcy trustee is the real party in interest with standing to pursue them. (Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th at pp. 1001-1003; Harris v. St. Louis University, supra, 114 B.R. at p. 648.) Therefore, the trial court properly determined Johnson was not the real party in interest.
In May 2002, after the trial court dismissed the action and Johnson filed a notice of appeal, Johnson submitted to the superior court a declaration from Joseph Euretig, the trustee who had administered Johnsons bankruptcy estate. Johnson also attached this declaration to his opening brief on appeal. This declaration is not properly before us, since it was not available to the trial court in ruling on the motion for judgment on the pleadings. Moreover, even if we could consider the declaration, it would not provide a basis for reversal. Euretig asserts he "is not the real party" in Johnsons "civil lawsuit case number 014568, A098606. . . .," and he declares this suit "was deemed abandoned" in the bankruptcy proceedings. Of course, Euretigs statement that he is not the real party in interest is a purely legal conclusion of no evidentiary value. Likewise, Euretigs declaration that the lawsuit against S&S Supply was deemed abandoned is a legal conclusion, and an incorrect one at that.
"Property of a bankruptcy estate can be abandoned by three methods: (1) after notice and hearing, the trustee may unilaterally abandon property that is `burdensome . . . or . . . of inconsequential value (11 U.S.C. § 554(a)); (2) after notice and hearing, the court may order the trustee to abandon such property (11 U.S.C. § 554(b)); (3) any property which has been scheduled, but which has not been administered by the trustee at the time of closing of a case, is abandoned by operation of law. (11 U.S.C. § 554(c).)" (Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th at p. 1003.) Because Johnson did not disclose the existence of his claims against S&S Supply in the asset schedules filed in bankruptcy court, these claims could not be "deemed abandoned" when the bankruptcy estate closed. (Hester v. Farmers Home Admin. (Bankr.E.D.Mo. 1985) 49 B.R. 593, 599; see also Vreugdenhill v. Navistar Internat. Transportation Corp. (8th Cir. 1991) 950 F.2d 524, 525-526 [property must have been formally scheduled to be abandoned as a matter of law, and "it is not enough that the trustee learns of the property through other means. . . ."]; Sierra Switchboard Co. v. Westinghouse Electric Corp. (9th Cir. 1986) 789 F.2d 705, 709-710 [there can be no abandonment without notice to creditors].)
Euretig also declares the discrimination claims Johnson filed with the Department of Fair Employment and Housing and the Equal Employment Opportunity Commission "may be exempt under bankruptcy laws," and therefore they were considered to be of no value in the estate. However, the Ninth Circuit does not distinguish between types of claims and has held all pre— petition causes of action become property of the bankruptcy estate. (Sierra Switchboard Co. v. Westinghouse Electric Corp., supra, 789 F.2d at p. 709; see Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th at p. 1001.) Even if the trustee believed Johnsons claims had no value (because they were non-transferable), these claims became part of the bankruptcy estate and could not be abandoned without notice to creditors.
Having concluded the plaintiff is not the real party in interest due to a chapter 7 bankruptcy filing, some appellate courts have nevertheless reversed dismissals because the plaintiff was not allowed a reasonable opportunity either to amend the complaint to substitute the trustee as a party or to reopen bankruptcy proceedings and seek an abandonment of claims by the trustee. (See, e.g. Haley v. Dow Lewis Motors, Inc., supra, 72 Cal.App.4th at pp. 506-509, 511; Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th at pp. 1004-1011.) In the present case, however, the trial court did grant Johnson 90 days leave to amend his complaint to substitute the real party in interest, i.e., the bankruptcy trustee. Because he failed to do so, the trial court properly granted S&S Supplys motion for dismissal of the action. (Code Civ. Proc., § 581, subd. (f)(2); see Ramirez v. USAA Casualty Ins. Co. (1991) 234 Cal. App. 3d 391, 397, 285 Cal. Rptr. 757 ["A judgment on the pleadings is governed by the standards governing a judgment following a successful demurrer"].)
Johnson also challenges the award of $ 10,980 in costs to S&S Supply, although he did not file an appeal from the cost judgment. Assuming the cost award may be reviewed on appeal from the underlying judgment (Grant v. List & Lathrop (1992) 2 Cal.App.4th 993, 998; but see Gouskos v. Aptos Village Garage, Inc. (2001) 94 Cal.App.4th 754, 764 — 765 [discretionary attorney fee award may only be reviewed in appeal from post-judgment order awarding fees]), S&S Supply was clearly entitled to an award of costs because it was the prevailing party. (Code Civ. Proc., § 1032, subds. (a)(4) & (b).) We do not consider whether the amount of costs awarded was appropriate because Johnson did not file a motion to tax costs.
DISPOSITION
The judgment is affirmed. Costs to respondents.
We concur: McGuiness, P.J., and Corrigan, J.