Opinion
CV156008028S
06-30-2016
Efrain Valentin v. WMA Associates, LLC et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO DISMISS #112
John F. Cronan, Judge.
The Connecticut Supreme Court recently addressed the issue of when a legal claim is to be part of the bankruptcy estate, preventing a plaintiff from having standing to bring the legal claim in Weiss v. Smulders, 313 Conn. 227, 96 A.3d 1175 (2014). The Court stated: " In considering the standing issue raised in this case . . . we first are guided by certain fundamental principles of bankruptcy law. When a debtor files for bankruptcy protection, a bankruptcy estate is created . . . Title 11 of the United States Code, § 541, prescribes the property interests of the debtor that comprise the bankruptcy estate. Subject to a few exceptions, such property is defined as 'all legal or equitable interests of the debtor in property as of the commencement of the case . . . It is well settled that such property includes causes of action possessed by the debtor at that time . . . A bankruptcy debtor does not have standing to pursue claims that constitute property of a bankruptcy estate . . .
" Thus, the ultimate question is whether a cause of action that was instituted post-petition constitutes the property of the debtor at the time the bankruptcy case has commenced, namely, by the filing of the petition. The federal courts are split on the proper approach to resolve this question. Some courts, relying on Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979), have determined that applicable state law determines when a cause of action accrues and therefore consider that date in relation to the date on which the petition was filed . . . These courts reason that [a]lthough federal bankruptcy law determines the outer boundary of what may constitute property of the estate, state law determines the nature of a debtor's interest in a given item . . . Therefore, whereas federal law instructs us that [a cause of action] may constitute property of [the debtor's] estate, state law determines whether [the debtor's] interest in the cause of action is sufficient to confer on the estate a property right in the action . . . The Second Circuit, whose decisions carry particularly persuasive weight in our resolution of issues of federal law . . . follows this approach . . .
" Other courts, relying on Segal v. Rochelle, 382 U.S. 375, 86 S.Ct. 511, 15 L.Ed.2d 428 (1966), deem the purposes of federal bankruptcy law controlling, namely, to secure for creditors everything of value the debtor may possess in alienable or leviable form when he files his petition, while leaving the debtor free after the petition date to accumulate new wealth in the future . . . These courts consider whether, even if a cause of action accrued post-petition under state law, that action nonetheless was sufficiently rooted in the prebankruptcy past and so little entangled with the bankrupt's ability to make an unencumbered fresh start that it should be regarded as property of the bankruptcy estate . . . Under this approach, if the claim has sufficient roots in the prebankruptcy past but does not materially impair the bankrupt's ability to obtain the fresh start intended under bankruptcy law, the claim belongs exclusively to the estate." (Citations omitted; emphasis in original; footnotes omitted; internal quotation marks omitted.) Weiss v. Smulders, supra. 313 Conn. 239-43. Ultimately, the Connecticut Supreme Court concluded that they did not need to resolve the split and decide which approach Connecticut was to adopt as the Court determined the plaintiff in that case had standing under both approaches.
" Despite this split of authority, we conclude that we need not resolve in the present case which approach is correct because the defendants' claim fails under both approaches." Weiss v. Smulders, supra, 313 Conn. 244. In Weiss, the plaintiff brought breach of an oral contract and promissory estoppel claims against the defendant, arising out of a distribution agreement, with their first business transaction occurring in 2001. In December 2003, the parties executed the distribution agreement and subsequently, the defendant made repeated representations about a merger and creating a new company. Also in December 2003, the plaintiff filed his petition for bankruptcy. In September 2006, the defendant notified the plaintiff that he would not be merging their companies and terminated the distribution agreement. With respect to whether the plaintiff's promissory estoppel claim belonged to the plaintiff or the bankruptcy estate, the Court determined that the plaintiff had standing to bring the promissory estoppel claim under both approaches because the claim didn't accrue until after the plaintiff filed bankruptcy and the facts forming the promissory estoppel cause of action were not sufficiently rooted in the pre-petition past. Id. 244-45.
In Gianopoulos v. Kitsios, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-11-6012035-S, (December 4, 2015, Lee, J.), the court, Lee, J., follows our Supreme Court and applies both approaches to reach the same result. The plaintiff in that case filed for Chapter 7 bankruptcy on September 13, 2010, it was discharged on February 7, 2011, and the plaintiff filed a breach of contract claim against the defendant on November 28, 2011. The plaintiff, however, did not list the potential breach of contract claim on the schedule of assets or executory contracts upon filing for bankruptcy. The court, Lee J., reasoned that the plaintiff didn't have standing and the breach of contract claim belonged to the bankruptcy estate because the breach of contract claim accrued on December 2008, before the filing of bankruptcy, and all the facts relevant to the breach of contract claim occurred before the plaintiff filed his bankruptcy petition.
With regards to the accrual date of a personal injury negligence claim, our Supreme Court has stated that " [t]he limitation period for actions in negligence begins to run on the date when the injury is first discovered or in the exercise of reasonable care should have been discovered . . . In this regard, the term 'injury' is synonymous with 'legal injury' or 'actionable harm.' 'Actionable harm' occurs when the plaintiff discovers, or in the exercise of reasonable care, should have discovered the essential elements of a cause of action . . . A breach of duty by the defendant and a causal connection between the defendant's breach of duty and the resulting harm to the plaintiff are essential elements of a cause of action in negligence; they are therefore necessary ingredients for 'actionable harm.' " (Internal quotation marks omitted.) Lagassey v. State, 268 Conn. 723, 748-49, 846 A.2d 831 (2004).
CONCLUSION
The court concludes that the claim accrued before the filing of bankruptcy, making it an asset of the bankruptcy estate.
The defendant's motion to dismiss is granted.