Can Potential Tort Actions Become a Part of the Bankruptcy Estate ?
In In re Doemling (127 Bankr 954), the chapter 11 petition was filed in August 1988, and, five months later, Mrs. Doemling was seriously injured when a car struck her.
The issue before the District Court was whether the Bankruptcy Court had properly found that any potential recovery from tort litigation arising out of Mrs. Doemling's accident was not part of the bankruptcy estate.
In affirming the Bankruptcy Court, the District Court reasoned as follows:
"The debtors, Eugene and Regina Doemling, have an identity independent of the bankruptcy estate that was created when the Doemlings filed their petition.
The debtors and the estate are not interchangeable. n 1 the property at issue is a cause of action stemming from a tort inflicted upon the person of Mrs. Doemling.
The Doemlings acquired whatever property interest they have in that cause of action in their personal capacities. the estate did not acquire this cause of action independent of the Doemlings.
Any recovery in this cause of action would be to compensate the Doemlings for injuries to their persons.
It would not compensate for any injury to the estate itself.
Thus, section 541(a)(7) is inapplicable because, as the Bankruptcy Court noted, it is limited to property acquired post-petition by the estate as opposed to property acquired by the debtors."
"Under Segal v. Rochelle (382 US 375 ), property acquired by the debtor after the commencement of the bankruptcy proceeding will become property of the estate only if it is sufficiently rooted in the prebankruptcy past and is not entangled with the bankrupt's ability to make an unencumbered fresh start. Segal v. Rochelle, 382 U.S. at 380...
The Doemlings' potential causes of action as a result of Mrs. Doemling's accident are quite obviously not rooted in their prebankruptcy past.
Indeed, these causes of action did not even exist until 5 months after the bankruptcy petition was filed. Cf. In re Bobroff, 766 F.2d 797, 803 (3d Cir. 1985) (holding that a debtor's property interest in a defamation suit was not part of the bankruptcy estate where the actionable events did not occur until after the Chapter 7 bankruptcy petition was filed.)
Thus, the Doemlings' potential tort actions are not sufficiently rooted in their pre-bankruptcy past to justify assigning the causes of action to the bankruptcy estate." (In re Doemling, supra, at 957.)