Carmona v. Robinson

• Decision Date: 03 September 1964
• Docket Number: No. 19183.,19183.
• Citation: 336 F.2d 518
• Parties: Bernard Duran CARMONA, Bankrupt, Appellant, v. Gilbert ROBINSON, Trustee in Bankruptcy, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

336 F.2d 518 (1964)

Bernard Duran CARMONA, Bankrupt, Appellant, v. Gilbert ROBINSON, Trustee in Bankruptcy, Appellee.

No. 19183.

United States Court of Appeals Ninth Circuit.

September 3, 1964.

Hillel Chodos, Beverly Hills, Cal., Margolis & McTernan, Los Angeles, Cal., for appellant.

Lee J. Cohen, Bernfeld & Cohen, Los Angeles, Cal., for appellee.

Before BARNES and JERTBERG, Circuit Judges, and McNICHOLS, District Judge.

McNICHOLS, District Judge.

This is an appeal from an order of the above court affirming, on petition of review, a decision of the referee in Bankruptcy. We have jurisdiction under 11 U.S.C. § 47.

The undisputed facts, stipulated to below, may be summarized as follows: The appellant, Bernard Carmona, hereinafter referred to as the bankrupt, suffered a personal injury through the alleged negligence of a third party. Suit was filed in the Superior Court of Los Angeles County, State of California, on the claimed cause of action. While the matter was pending, and on May 16, 1962, the bankrupt filed a voluntary petition in bankruptcy and was, on said date, adjudicated a bankrupt. The trustee (appellee) appointed in the bankruptcy action took the position that title to the bankrupt's cause of action for personal injuries vested in the trustee as of the date of bankruptcy. The referee sustained the trustee and on proper petition for review, the District Court affirmed.

We are asked to determine whether or not, in the State of California, title to a cause of action for personal injuries, filed by the bankrupt prior to the petition in bankruptcy, vests in the trustee upon adjudication as a bankrupt. We are persuaded that it does and that we should affirm the District Court.

The National Bankruptcy Act, Sec. 70, sub. a(5),¹ paraphrased, provides that the trustee in bankruptcy is vested, by operation of law, in rights of action of the bankrupt for personal injuries where the law of the state makes such actions subject to "attachment, execution, garnishment, sequestration, or other judicial process". Sec. 70, sub. c² of the Act (sometimes known as the "strong arm clause") provides in part as follows:

"* * * The trustee, as to all property, whether or not coming into possession or control of the court, upon which a creditor of the bankrupt could have obtained a lien by legal or equitable proceedings at the date of bankruptcy, shall be deemed vested as of such date with all the rights, remedies, and powers of a creditor then holding a lien thereon by such proceedings, whether or not such a creditor actually exists."

Section 688.1, California Code of Civil Procedure, accepted by the parties as the controlling state statute, reads, in part, as follows:

"Upon motion of a judgment creditor of a plaintiff or plaintiffs in an action or special proceeding made in the court in which the action or proceeding is pending upon written notice to all parties, the court or judge thereof may, in his discretion, order that the judgment creditor be granted a lien upon the cause of action and upon any judgment subsequently procured in such action or proceeding, and, during the pendency of such action, may permit said judgment creditor to intervene therein. Such judgment creditor shall have a lien to the extent of his judgment upon all moneys recovered by his judgment debtor in such action or proceeding and no compromise, settlement or satisfaction shall be entered into by or on behalf of said debtor without the consent of said judgment creditor, unless his lien is sooner satisfied or discharged. * * *"

A solution of the controversy requires a resolution of two questions: 1) Whether the California statute (Sec. 688.1, above) is applicable to causes of action founded on personal injuries; and 2) If so, does the right granted by the California law, when read with either Sec. 70, sub. a(5) or Sec. 70, sub. c of the Bankruptcy Act, vest title to such cause of action in the trustee in bankruptcy. As to the application of this California statute to causes of action for personal injuries, we appear to be faced with a case of first impression before an appellate court in California.

The bankrupt makes the point that historically in California, under the Common Law, and in most jurisdictions, choses in action for personal injury were not legally within the reach of creditors of the injured person prior to entry of judgment. He strenuously urges that Sec. 688.1 was not intended to change the law in this regard. No authorities specifically sustaining the position of the bankrupt are presented. On the other hand, the trustee contends that all available California court precedents, dealing with Sec. 688.1, indicate that the statute was intended to permit creditors to perfect a lien on such causes of action.

Our attention has not been directed to a California state court decision which is exactly in point. However, in a relatively recent California case (Apostolos v. Estrada, 1958 163 Cal.App.2d 8, 328 P.2d 805), it is clear that a lien had been perfected by a creditor under Sec....