255 Conn. 639 | Conn. | 2001
Opinion
This interlocutory appeal arises out of an action brought by the named plaintiff, Maribeth
On November 22, 1996, subsequent to his alleged negligent representation of the plaintiff, Brayton filed a bankruptcy petition in the United States Bankruptcy Court for the District of Connecticut under chapter 7 of the Bankruptcy Code. 11 U.S.C. § 701 et seq. (Sup. II 1996). Brayton’s petition, which alleged that he had no assets, named the plaintiff as a creditor. Brayton thereafter received a discharge in bankruptcy, thereby extinguishing any right that the plaintiff would have had to recover against Brayton stemming from Brayton’s alleged legal malpractice.
On appeal, Brayton renews his claim that the plaintiffs action against him violates the fresh start policy of the Bankruptcy Code. Specifically, Brayton asserts that the plaintiffs action exposes him to personal liability because the policy requires him to pay the first $5000 in costs, expenses or damages incurred in connection with that action. The plaintiff counters that her action does not expose Brayton to any personal liability and, therefore, does not violate the Bankruptcy Code’s fresh start policy because Brayton’s discharge in bankruptcy released him from any obligation to Continental notwithstanding the $5000 deductible provision in the policy. We agree with the plaintiff.
Before addressing the merits of Brayton’s claim, we note, preliminarily, that, under 11 U.S.C. § 727, a debtor whose bankruptcy petition satisfies the requirements of chapter 7 of the Bankruptcy Code generally is entitled to the discharge of any debt that arose prior to the filing of the petition. The discharge of a debt pursuant to
Finally, “[a] claim will be deemed pre-petition when it arises out of a relationship recognized in, for example, the law of contracts or torts. A claim exists only if before the filing of the bankruptcy petition, the relationship between the debtor and the creditor contained all of the elements necessary to give rise to a legal obligation—a right to payment—under the relevant non-bankruptcy law.”
Brayton contends that the plaintiff cannot maintain her action against him without subjecting him to personal liability because he is responsible for paying the first $5000 in costs, expenses or damages incurred in connection with the defense of the plaintiffs action pursuant to the provisions of the policy. In other words, Brayton claims that, even though the plaintiff does not seek to recover against him personally, her action violates the fresh start policy of the Bankruptcy Code in light of Brayton’s obligation to pay up to a $5000 deductible under the terms of the policy.
We would agree with Brayton’s claim that, if the deductible were enforceable by Continental, then the
The Bankruptcy Code defines “debt” as a “liability on a claim . . . .”11 U.S.C. § 101 (12) (1994). “This definition reveals Congress’ intent that the meanings of ‘debt’ and ‘claim’ be coextensive.” Pennsylvania Dept. of Public Welfare v. Davenport, 495 U.S. 552, 558, 110 S. Ct. 2126, 109 L. Ed. 2d 588 (1990). A “claim” is defined under the Bankruptcy Code as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured . . . .” 11 U.S.C. § 101 (5) (A) (1994). “Congress intended by this language to adopt the broadest available definition of ‘claim.’ ” Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991). “By this broadest possible definition ... [of the term claim, the Bankruptcy Code] contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case.” (Emphasis added; internal quotation marks omitted.) In re Chateaugay Corp., 944 F.2d 997, 1003 (2d Cir. 1991), quoting H.R. Rep. No. 95-595, p. 309 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6266; see also 2 W. Collier, Bankruptcy (15th Ed. Rev. 2000) ¶ 101.05 [1], pp. 101-25
In applying the foregoing principles of bankruptcy law to the present case, we are persuaded that the deductible required by the policy is an obligation that was extinguished by virtue of Brayton’s discharge in bankruptcy. Payment of the deductible is an obligation of the policyholder, Brayton, that was contingent upon the occurrence of a future event, namely, the filing of a malpractice claim against Brayton within the time period covered by the policy. Because an obligation is subject to discharge even if it is contingent, the dis-chargeability of Brayton’s obligation to pay the deductible pursuant to the provisions of the policy was not affected by the fact that, when Brayton purchased the policy, it was uncertain whether and how much Brayton might be required to pay as a deductible. Although the deductible provision in the policy did not give rise to a payment obligation until after the plaintiff had commenced her action against Brayton, the deductible constituted an obligation that would “become due upon
Because Brayton has no enforceable obligation to pay the deductible to Continental under the policy, the plaintiff can maintain her action against Brayton—
The decision of the trial court denying Brayton’s motion to dismiss is affirmed.
In this opinion the other justices concurred.
The plaintiff brought this action in her individual capacity and as executrix of the estate of her deceased father, Victor Benedetto.
Continental is a party to the underlying action but is not a party to this appeal.
"For nearly 100 years it has been the primary purpose of the old Bankruptcy Act and now the new Bankruptcy Code to relieve the honest debtor from the weight of oppressive indebtedness and permit him [or her] to start afresh, Williams v. [United States Fidelity & Guaranty Co.], 236 U.S. 549, 554-55, 35 S. Ct. 289, 59 L. Ed. 713 (1915), by providing the debtor a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt. Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S. Ct. 695, 78 L. Ed. 1230 (1934).” (Internal quotation marks omitted.) In re Renshaw, 222 F.3d 82, 86 (2d Cir. 2000). This overriding purpose of the Bankruptcy Code is known as the fresh start policy. See, e.g., Grogan v. Garner, 498 U.S. 279, 286, 111 S. Ct. 654, 112 L. Ed. 2d 755
“In ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader.” Pamela B. v. Ment, 244 Conn. 296, 308, 709 A.2d 1089 (1998).
The plaintiff does not dispute that Brayton’s discharge in bankruptcy relieved Brayton of any financial obligation that he may have had to the plaintiff or her father’s estate arising from his alleged malpractice.
Brayton is named as a defendant only because he is the owner of the policy. See footnote 15 of this opinion.
[A]n insurer’s duty to defend ... is determined by reference to the allegations contained in the [injured party’s] complaint. . . . The duty to defend an insured arises if the complaint states a cause of action which appears on its face to be within the terms of the policy coverage. . . . Because [t]he duty to defend has a broader aspect than the duty to indemnify and does not depend on whether the injured party will prevail against, the insured . . . [i]f an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured.” (Citations omitted; emphasis in original; internal quotation marks omitted.) Imperial Casualty & Indemnity Co. v. State, 246 Conn. 313, 323-24, 714 A.2d 1230 (1998); see also Keithan v. Massachusetts Bonding & Ins. Co., 159 Conn. 128, 138-39, 267 A.2d 660 (1970).
Brayton informs us that he already has paid attorney’s fees totaling $1252.34 in connection with the defense of the plaintiffs action. We note that Brayton’s counsel was selected by Continental in accordance with its right to do so under the policy.
General Statutes § 52-265a provides: “Direct appeal on questions involving the public interest, (a) Notwithstanding the provisions of sections 52-264 and 52-265, any party to an action who is aggrieved by an order or decision of the Superior Court in an action which involves a matter of substantial public interest and in which delay may work a substantial injustice, may appeal under this section from the order or decision to the Supreme Court within two weeks from the date of the issuance of the order or decision. The appeal shall state the question of law on which it is based.
“(b) The Chief Justice shall, within one week of receipt of the appeal,
“(c) Upon certification by the Chief Justice that a substantial public interest is involved and that delay may work a substantial injustice, the trial judge shall immediately transmit a certificate of his decision, together with a proper finding of fact, to the Chief Justice, who shall thereupon call a special session of the Supreme Court for the purpose of an immediate hearing upon the appeal.
“(d) The Chief Justice may make orders to expedite such appeals, including orders specifying the manner in which the record on appeal may be prepared.”
The Chief Justice had disqualified himself from consideration of the petition.
Because the issue raised by this appeal presents a question of law, our review of the trial court’s determination is plenary. E.g., In re David W., 254 Conn. 676, 686, 759 A.2d 89 (2000); Commission on Human Rights & Opportunities v. Sullivan Associates, 250 Conn. 763, 786, 739 A.2d 238 (1999).
Title 11 of the United States Code, § 524, provides in relevant part: “(a) A discharge in a case under this title—
“(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged . . .
“(2) operates as an ipjunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor . . .
Title 11 of United States Code, § 524 (e), provides in relevant part that the “discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.”
Brayton’s concession that a claimant has a right to maintain an action against a discharged debtor solely for the purpose of allowing the claimant to seek recovery against the debtor’s insurer is consistent with the great weight of authority. E.g., In re Edgeworth, 993 F.2d 51, 54 (5th Cir. 1993) (“[m]ost courts have held that the scope of a [§] 524 (a) injunction does not affect the liability of liability insurers and does not prevent establishing their liability by proceeding against a discharged debtor”); Green v. Welsh, supra, 956 F.2d 33 (“[njumerous courts, confronted with a tort claimant who seeks to proceed against a discharged debtor only for the purpose of recovering against an insurer, have relied on §§ 524 (a) and 524 (e) and the fresh start policy in concluding that the discharge injunction does not bar such a suit”); In re Shondel, 950 F.2d 1301, 1307 (7th Cir. 1991) (“When it is necessary to commence or continue a suit against a debtor in order, for example, to establish liability of another, perhaps a surety, such suit would not be barred. Section 524 (e) was intended for the benefit of the debtor but was not meant to affect the liability of third parties or to prevent establishing such liability through whatever means required.”); In re Walker, 927 F.2d 1138, 1142 (10th Cir. 1991) (“[i]t is well established that [11 U.S.C. § 524 (e)] permits a creditor to bring or continue an action directly against the debtor for the purpose of establishing the debtor’s liability when . . . establishment of that liability is a prerequisite to recovery from another entity”).
Under § 38a-321, the plaintiff is required to obtain a judgment against Brayton before seeking to recover against Continental. General Statutes § 38a-321 provides: "Liability of insurer under liability policy. Each insurance company which issues a policy to any person, firm or corporation, insuring against loss or damage on account of the bodily iivjury or death by accident of any person, or damage to the property of any person, for which loss or damage such person, firm or corporation is legally responsible, shall, whenever a loss occurs under such policy, become absolutely liable, and the payment of such loss shall not depend upon the satisfaction by the assured of a final judgment against him for loss, damage or death occasioned by such casualty. No such contract of insurance shall be cancelled or annulled by any agreement between the insurance company and the assured after the assured has become responsible for such loss or damage, and any such cancellation or annulment shall be void. Upon the recovery of a final judgment against any person, firm or corporation by any person, including administrators or executors, for loss or damage on account of bodily injury or death or damage to property, if the defendant in such action was insured against such loss or damage at the time when the right of action arose and if such judgment is not satisfied within thirty days after the date when it was rendered, such judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment.”
In this case, the relevant nonbankruptcy law is, of course, state contract law. Furthermore, as we have indicated, it is undisputed that Continental issued its policy to Brayton prepetition.
We note that Brayton makes no claim that his failure to name Continental as a creditor in his bankruptcy petition, which alleged that he had no assets, affects the dischargeability of his obligation to Continental. Cf. In re Madaj, 149 F.3d 467, 472 (6th Cir. 1998).
As we have indicated, Brayton, in accordance with the terms of the deductible provision of the policy, has paid attorney’s fees totaling $1252.34 in connection with the defense of the plaintiffs action. See footnote 8 of this opinion. In light of our conclusion regarding the dischargeability of Brayton’s obligation to pay the deductible, it is apparent that Brayton had a complete defense to any claim by Continental that he make such payment. For purposes of this appeal, we need not consider the propriety of Bray-ton’s payment.
We note that Brayton may be required to participate in further proceedings relating to this case, including, for example, deposition or trial testimony, as requested by the plaintiff or Continental. This fact alone, however, does not impermissibly interfere with his fresh start; see, e.g., In re Doar, 234 B.R. 203, 206 (Bankr. N.D. Ga. 1999); and Brayton makes no such claim.