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Edwards v. Franchini5/26/1998
{9} Moreover, the Bankruptcy Reform Act of 1978 fundamentally changed the bankruptcy treatment of exempt property. Prior to the Bankruptcy Reform Act, the bankruptcy estate did not include property which was subject to exemption from attachment or execution under state law. See ("The Bankruptcy Reform Act eliminated the restrictive language of Section 70(a)(5) regarding those causes of action to which a bankruptcy trustee could take title."); . The new Bankruptcy Code takes a different approach. See . Under Section 541(a)(1) of the Bankruptcy Code, the debtor's legal or equitable property interests become part of the estate. Once part of the estate, property becomes eligible for exemption through 11 U.S.C. 522 of the Bankruptcy Code. See ; see also 5 Collier on Bankruptcy 541.LH (Lawrence P. King, Editor-in-Chief, rev. 15th ed. 1997). As a result of this change, the leading cases of the federal circuits interpreting the Bankruptcy Code have considered personal injury claims to be within the estate regardless of the assignability of the claims. See) (" ebtors' pre-petition causes of action for personal injuries are property of their estates."); (petitioner's emotional distress claim is part of bankruptcy estate regardless of whether it is transferable or assignable under state law); (under Bankruptcy Code exempt property of the debtor becomes part of the bankruptcy estate, including unliquidated personal injury claims);) (even though nontransferable, debtor's personal injury claim becomes property of the bankruptcy estate, rejecting its decision in) (per curiam), because Baker applied pre-Bankruptcy Reform Act rationale).
{10} Plaintiffs rely on Scarlett v. Barnes, 121 B.R. 578 (W.D. Mo. 1990), as supporting the proposition that they have standing because the case contains a Discussion of why malpractice claims are exempt under state law. However, we read Scarlett as being more supportive of Defendants', rather than Plaintiffs', position. In Scarlett, the parties agreed that the legal malpractice claim was part of the bankruptcy estate. See id. at 579. They joined issue only on the question of whether a state law exemption applied. See id. Thus, contrary to Plaintiffs' contention, Scarlett actually illustrates the new approach of the Bankruptcy Code.
{11} In short, the issue posed by Plaintiffs of the assignability of their claims against Defendants under New Mexico law is no longer relevant under the scheme of the Bankruptcy Code. Plaintiffs' interests in claims against Defendants were part of the bankruptcy estate once Plaintiffs filed their bankruptcy petition.
Plaintiffs' Request for Remand
{12} After the district court ruled on summary judgment, Plaintiffs filed a motion in the United States Bankruptcy Court to reopen their bankruptcy case requesting that the trustee abandon the claims against Defendants so that Plaintiffs may continue to pursue them. The bankruptcy court reopened the case and ordered the reappointment of the trustee. On April 28, 1997, the bankruptcy court entered an order granting Plaintiffs' requested relief. The order: (1) revoked the previously entered discharge and again dismissed the proceeding; (2) maintained " ll previous, non-appealable orders . . . in full force and effect"; and (3) discharged the trustee and ratified all previously- approved actions of the trustee "including but not limited to administration of assets or disbursements to creditors or parties in interest."
{13} Plaintiffs urge that on the basis of the bankruptcy court's 1997 dismissal, we remand to the district court "for a new ruling absent the existence of any bankruptcy." We decline to do so because Plaintiffs have not provided the proper pred
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