Haaland v. Corporate Management, Inc

In Haaland v. Corporate Management, Inc. (S.D.Cal. 1989) 172 B.R. 74, the court held a debtor was not entitled to exempt as personal injury damages ( 704.140) the entire amount of a legal malpractice claim against his former lawyer, where the legal malpractice resulted in a loss of the debtor's homestead exemption (although another type of exemption, under 704.910, referring to homesteads, did apply.) The court in Haaland noted that legislative history showed section 704.140 was originally proposed because "existing law provided exemptions for insurance benefits for personal injury or death but did not exempt settlements or awards for the personal injury of a judgment debtor." ( Haaland, supra, 172 B.R. at p. 77.) The court stated, "Thus, the legislative history indicates that the intent behind this legislation was to afford the same exemption to personal injury claimants who obtain awards through litigation or settlement as those who claim an exemption for insurance benefits under former sections 690.9 through 690.11. The former sections allow exemption only for health, disability, or life insurance benefits received when the beneficiary is physically injured or dies. There is no indication that section 704.140, which directly tracks the preceding sections relating to health, disability, and life insurance and which was enacted in the precise form suggested by the Commission, was intended to be read more broadly than its predecessor sections in this regard." ( Haaland, supra, 172 B.R. at p. 77.)