THE RESULTS OF CLIENT MATTERS DEPEND ON A VARIETY OF FACTORS UNIQUE TO EACH MATTER. PAST SUCCESSES DO NOT PREDICT OR GUARANTEE FUTURE SUCCESSES
In Ricketts v. Strange, 2017 Va. LEXIS 5 (Feb. 16, 2017), the Supreme Court of Virginia unanimously affirmed the trial court’s granting of summary judgment in favor of the defendant based on the plaintiff’s failure to schedule during her Chapter 7 bankruptcy proceeding her personal injury claim against the defendant. The plaintiff and the defendant had been involved in a motor vehicle accident in Danville, Virginia, on February 3, 2012. On September 21, 2012, the plaintiff filed a petition under Chapter 7 of the United States Bankruptcy Code. Between the date of the accident and the date of her filing for bankruptcy, the plaintiff had incurred $12,336.15 in medical expenses for treatment of injuries she claimed as a result of the accident. She also had submitted a claim for both personal injury and property damage as a result of the accident to the defendant’s automobile liability insurer.
In her bankruptcy schedules, the plaintiff was asked to identify any and all “contingent and unliquidated claims of every nature.” In response, she answered “None.” Elsewhere in her schedules, however, when asked to identify any “liquidated debts owed to [the] debtor,” she wrote “[p]otential funds due to Debtor unknown at this time, including … possible garnishment funds, insurance proceeds, proceeds related to claims or causes of action that may be asserted by the debtor.” It was this language, and this language alone, that the plaintiff claimed to capture her personal injury claim against the defendant.
The plaintiff received a discharge in bankruptcy on December 18, 2012. On January 16, 2014, she filed suit against the defendant. On the defendant’s behalf, FMWM moved for summary judgment, on the grounds that the plaintiff’s failure to schedule with sufficient particularity her personal injury claim during the course of her bankruptcy deprived her of standing to sue. The trial court granted the motion. The trial court also denied the plaintiff’s motion for leave to amend her complaint to name the bankruptcy trustee as the plaintiff, or to substitute the trustee for the plaintiff herself. By the date of the trial court’s ruling, the statute of limitations applicable to the plaintiff’s personal injury claim had expired. The plaintiff appealed.
Affirming the trial court’s judgment, the Supreme Court of Virginia, as a threshold matter, noted that, upon a plaintiff’s filing for bankruptcy, “[a]ll the legal and equitable interests in property that the debtor had before the petition was filed pass to and become a part of the bankruptcy estate, under the control of the trustee.” Such interests include a debtor’s “causes of action which are pending in court” and “those which are only inchoate claims at the time of filing.” Unless and until a claim or cause of action is exempted by the bankruptcy court, “the trustee alone has standing to bring that claim.”
To exempt an asset, “the debtor must list the … asset in his schedule B and then claim it as exempt property on his schedule C using forms prescribed by the bankruptcy rules.” While there are “no bright-line rules” as to the level of specificity with which an asset must be described, the debtor must provide enough detail about the asset “to put the trustee on notice” of its existence.
As to the language in her schedules upon which the plaintiff relied to identify her claim against the defendant, the Supreme Court, building on its opinion in Kocher v. Campbell, 282 Va. 113, 712 S.E.2d 477 (2011), cert. denied, 132 S.Ct. 847 (2011), held that language to be “overly general at best and boilerplate at worst. It provides no useful information that would lead the trustee to discover the claim against” the defendant. Even if this language “was a sincere attempt” on the part of the plaintiff to schedule her cause of action, it was listed in the wrong location. In the portion of her schedules “where the trustee would expect to find any such causes of action, she affirmatively represented that no such claim existed.” For these reasons, the plaintiff’s cause of action “remained an asset of the bankruptcy estate” and the plaintiff “lacked standing to assert it.”
Because the plaintiff lacked standing to sue, her lawsuit against the defendant “was a legal nullity” and did nothing to toll the statute of limitations applicable to her claim. As to the plaintiff’s motion for leave to amend, the Supreme Court held such a motion to be proper only “when the right person is incorrectly named,” not where the plaintiff names the wrong person. Because the plaintiff and the trustee are “not the same person,” there was no “misnomer” for an amendment to correct. As to the plaintiff’s motion to substitute, the Supreme Court cited longstanding Virginia law that “a new plaintiff may not be substituted for an original plaintiff who lacked standing to bring the suit.”
Jason Moyers of FMWM argued this matter before the Supreme Court. He was assisted on brief by Audra Dickens. Mr. Moyers also represented the defendant in the trial court. For the Supreme Court’s full opinion, please visit: http://www.courts.state.va.us/opinions/opnscvwp/1160311.pdf.