Wischan, Matter of, s. 95-30425

• Decision Date: 19 March 1996
• Docket Number: Nos. 95-30425,95-30426,s. 95-30425
• Parties: Bankr. L. Rep. P 76,927, 10 Tex.Bankr.Ct.Rep. 199 In the Matter of Ronald WISCHAN, Debtor. Ronald WISCHAN, Appellant, v. David V. ADLER, Appellee. In the Matter of Philip DE NICOLA, Debtor. Philip DE NICOLA, Appellant, v. David V. ADLER, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 875

77 F.3d 875

Bankr. L. Rep. P 76,927, 10 Tex.Bankr.Ct.Rep. 199

In the Matter of Ronald WISCHAN, Debtor.

Ronald WISCHAN, Appellant, v. David V. ADLER, Appellee.

In the Matter of Philip DE NICOLA, Debtor.

Philip DE NICOLA, Appellant, v. David V. ADLER, Appellee.

Nos. 95-30425, 95-30426.

United States Court of Appeals, Fifth Circuit.

March 19, 1996.

Anne LaCour Neeb, David L. Neeb, Metairie, LA, for appellants in both cases.

Emile L. Turner, Jr., Turner, Young, Hebbler & Babin, New Orleans, LA, for appellee in both cases.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before JOLLY, JONES and BENAVIDES, Circuit Judge.

EDITH H. JONES, Circuit Judge:

These consolidated appeals present the question whether, upon filing a bankruptcy petition under Chapter 7, the debtor's entire interest in a pre-petition personal injury claim becomes property of the estate under 11 U.S.C. § 541(a)(1). In both cases, the bankruptcy and district courts held that the debtor's entire interest was indeed property of the estate. The debtors contend that some portion of the awards for future pain and suffering involve post-petition events and should not be included as property of the debtors' estates. We agree with the trial court and affirm.

FACTUAL BACKGROUND

A. Philip De Nicola v. David V. Adler

Since both parties have adopted the bankruptcy court's findings of fact, a brief outline of the dispute will suffice. In June of 1987, Philip De Nicola ("debtor") sustained personal injuries in a traffic accident. The debtor filed a lawsuit in February of 1988 seeking compensation for these injuries.

In August of 1990, the debtor filed for relief under Chapter 7 of the Bankruptcy Code. In September of 1993, the bankruptcy court entered an order allowing David Adler, the trustee, ("trustee") to enter into a compromise and settlement yielding $115,000 in a lump sum and permitting payment in full of the personal injury attorney's fees and expenses, including Nicola's medical expenses. Shortly thereafter, the debtor filed an adversary proceeding claiming that the settlement proceeds were not property of the estate and that the bankruptcy court should apportion these proceeds into pre- and post-petition compensation. After a hearing, the bankruptcy court rejected the debtor's argument and concluded that the entire settlement was property of the bankruptcy estate. On appeal, the district court affirmed this decision.

B. Ronald Wischan v. David V. Adler

In February of 1990, Ronald Wischan was injured when a plate glass window shattered, cutting his hand and wrist. A year later, after receiving medical treatment and undergoing surgery for his injuries, the debtor filed a damage lawsuit. Three months after that, Wischan filed for relief under Chapter 7.

In May 1993, the debtor was awarded a judgment of $72,713.93, plus interest and court costs, as compensation for his injuries; this total was apportioned among medical expenses, past pain and suffering, and (in one lump sum) disfigurement, future pain and suffering, and disability. In December of 1993, the bankruptcy court ordered the debtor to pay to the trustee the proceeds of his judgment, less expenses, including medical

                bills, and attorney's fees.   The remaining amount was tendered to the trustee.   Wischan filed an adversary proceeding seeking recovery of these proceeds, but the complaint was dismissed with prejudice by the bankruptcy court.   On appeal, the district court affirmed the decision
                

DISCUSSION

We review de novo the bankruptcy and district courts' analysis of the law. Section 541 of the Bankruptcy Code encompasses "all legal and equitable interests of the debtors as of the commencement of the case" as property of the estate. 11 U.S.C. § 541(a)(1). See also, United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05, 103 S.Ct. 2309, 2313-14, 76 L.Ed.2d 515 (1983) (discussing the expansive reach of § 541). Notwithstanding this broadly inclusive definition, the debtor may seek to exempt property from the bankruptcy estate by means of 11 U.S.C. § 522 or some other valid nonbankruptcy law exemption. See Tignor v. Parkinson, 729 F.2d 977, 980 (4th Cir.1984). Although property that ultimately becomes exempt will not be available for distribution to creditors, it is nonetheless property of the bankruptcy estate at the outset of the case. 11 U.S.C. § 522(b).

Consequently, these debtors' pre-petition causes of action for personal injuries are property of their estates. See, e.g., Tignor, 729 F.2d at 981 (holding that "[t]he debtor's claims for injuries to the person, whether unliquidated as when the petition was filed, or settled as occurred during the proceeding, are thus property of the bankrupt estate as of the commencement of the case."); Sierra Switchboard Co., v. Westinghouse Electric Corp., 789 F.2d 705, 709 (9th Cir.1986) ("regardless of whether a personal injury claim is transferable or assignable under state law, such claims become part of the bankruptcy estate under § 541."); In re Richards, 57 B.R. 662, 663 (Bankr.D.Nev.1986). The fact that the causes of action may have borne fruit in settlement or judgment after commencement of the bankruptcy case does not transform them into post-petition property of the debtor--excluded from the bankruptcy estate--any more than post-petition payments on a pre-petition note owed to the debtor would be excluded from the estate.

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