The question in this case is whether a plaintiff’s failure to list a tort cause of action as an asset in bankruptcy deprives the plaintiff of capacity to maintain the tort claim.
One of the basic requirements of bankruptcy is that the debtor provide a complete accounting of all its assets, including any claims the debtor may have. The debtor typically loses any right to such a claim and can regain that right only if the claim is “dealt with” in the bankruptcy or the claim is abandoned by the bankruptcy trustee. But neither of these things can happen if the debtor fails to list the claim as an asset in bankruptcy. And so courts have held that a debtor who fails to list a claim as an asset in bankruptcy lacks capacity to maintain that claim later.
This case implicates this no-capacity rule. Plaintiff commenced this slip-and-fall action in 2013. In 2015, she filed for bankruptcy without disclosing the slip-and-fall action in her bankruptcy proceeding. Her bankruptcy petition was dismissed in 2016, and in 2017 defendant in the slip-and-fall action moved for summary judgment on the ground that plaintiff lacked capacity to maintain the action because she failed to disclose it in bankruptcy.
Supreme Court dismissed the action, and the Second Department affirmed. Relying on the progeny of Dynamics v. Marine Midland, 69 N.Y.2d 191 (1987), the Second Department held that “[t]he failure of a party to disclose a cause of action as an asset in a prior bankruptcy proceeding, which the party knew or should have known existed at the time of that proceeding, deprives him or her of the legal capacity to sue subsequently on that cause of action.”
The Court of Appeals granted plaintiff leave to appeal.
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