Nancy Ann Singleman vs The Brewer Family Inc

Case Number

24CV04155

Case Type

Hearing Date / Time

Fri, 02/07/2025 - 10:00

Nature of Proceedings

CMC; Demurrer

Tentative Ruling

For the reasons more fully articulated below, the demurrer is overruled. Defendant is directed to file its answer to the complaint on or before February 21, 2025, or such other date as this Court may specify at the hearing.

BACKGROUND: Plaintiff’s complaint was filed July 26, 2024, and alleges causes of action for premises liability and negligent against defendant The Brewer Family, Inc. dba Santa Barbara Grocery Outlet. The action arises from an incident which occurred on August 24, 2022 at the Grocery Outlet location at 2840 De La Vina Street in Santa Barbara, when plaintiff was walking across the aisles and suddenly slipped on a wet substance, hyperextended her knee, and sustained injuries to her knee which required surgery.

Demurrer: Defendant has demurred to the complaint, on the ground that plaintiff lacks standing to sue. The demurrer requests judicial notice of a Chapter 7 bankruptcy petition filed by plaintiff in the United States Bankruptcy Court for the Central District of California on August 14, 2023, which lists plaintiff’s claim against defendant as an asset of the bankruptcy estate.

The demurrer asserts that once a plaintiff files for Chapter 7 bankruptcy, he or she loses standing to continue prosecuting a civil action. Instead, the real party in interest for the claim is the trustee of the bankruptcy estates. (Cloud v. Northrop Grumman Corp. (1988) 67 Cal.App.4th 995, 1001.) As a result, defendant contends that plaintiff has no standing to pursue her claim against defendant. Defendant acknowledges that plaintiff could theoretically regain her lost standing if her claims were abandoned by the bankruptcy trustee, but absent such abandonment, a Chapter 7 plaintiff may not prosecute a lawsuit belonging to the bankruptcy trustee. (Bostanian v. Liberty Savings Bank (1997) 52 Cal.App.4th 1075, 1080.)

Defendant contends that once plaintiff filed for bankruptcy, her claim against defendant became the property of the bankruptcy estate. Defendant further contends that there is no evidence that her claims were abandoned by the bankruptcy trustee, contending that “we” have an October 19, 2023 letter from the bankruptcy trustee indicating that the lawsuit was at that time the property of the bankruptcy estate. Defendant seeks to have its demurrer sustained, without leave to amend, based upon the lack of standing.

Opposition: Plaintiff has opposed the demurrer, seeking judicial notice of both her bankruptcy schedules, and the docket for her bankruptcy case. From these documents, she contends that the bankruptcy trustee filed a no asset report on January 26, 2024, without administering her claims against defendant. As a result, the claims were abandoned as a matter of law upon the conclusion of the bankruptcy. (11 U.S.C. § 554, subd. (c).) Her bankruptcy concluded on February 29, 2024. She filed the current action after the conclusion of the bankruptcy proceeding.

Pursuant to Section 554, plaintiff contends that she regained standing to pursue her claims, after they were abandoned by the trustee as a matter of law. Section 554 provides that property of the bankruptcy estate that is not administered or explicitly retained by the trustee is deemed abandoned when the case is closed. The court in Cloud v. Northrop Grumman Corp., supra, relied on by defendant, noted that standing could be regained if claims were abandoned by the bankruptcy trustee, and that such property can be abandoned by three methods, one of which is that any property which has been scheduled by which has not been administered by the trustee at the time of closing of a case is abandoned by operation of law. (Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th at p. 1003.)

Plaintiff’s claim against defendant was disclosed in the bankruptcy, and the trustee decided not to administer it. When the bankruptcy subsequently concluded, the trustee’s abandonment of the claim was effectuated, and standing to pursue the claim reverted back to plaintiff. It was only thereafter that plaintiff filed the current action.

The documents submitted by defendant only show that plaintiff filed bankruptcy and disclosed her claim against defendant. They do not show that the claims were administered by the trustee prior to the closure of the action.

Reply: In reply, defendant examines the docket in plaintiff’s bankruptcy case, of which judicial notice was requested by plaintiff. It specifically looked at the June 23, 2024, entry, which contained the Trustee Certification of Services Rendered, wherein the trustee noted that the assets abandoned totaled $2,815.00, and did not specifically mention the lawsuit as property having been abandoned. Since it was not “specifically” abandoned by the Trustee in that entry, and since the $2,815.00 in assets specifically abandoned was the total amount of the value of plaintiff’s personal and household items listed in her petition ($1,875), plus the amount she listed as financial assets ($940).

Defendant also criticizes plaintiff in not providing the Trustee’s Final Report—an issue raised for the first time in this reply—contending that a full administration of a Chapter 7 case sufficient to fall within 11 U.S.C. § 554(c) [“Unless the court orders otherwise, any property scheduled under section 521(a)(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title”] requires a final report by the trustee indicating the distribution of proceeds from liquidated assets, citing Matter of Wade (7th Cir. 1993) 991 F.2d 402, 408. Defendant contends that since no final report of the trustee was provided showing that there are no administrative tasks remaining to be completed, and since the comments by the trustee did not specifically abandon the lawsuit, plaintiff does not have standing. Additionally, defendant points to Section 544(d), which provides that “unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate.” Since only $2,815 was specifically abandoned, and “there is no evidence” that the trustee abandoned the lawsuit, defendant concludes that plaintiff lacks standing.

Finally, defendant asserts that the allegations in the complaint do not include the trustee’s abandonment of the lawsuit, and that plaintiff therefore has standing. While she requests judicial notice of the docket, judicial notice is limited to orders and judgments in the court file, and the court cannot accept as true the contents of court files or records because they are inadmissible hearsay. Defendant contends that the docket entry upon which plaintiff relies is not undisputed, and the court should not consider it. Defendant then again concludes that the demurrer should be sustained without leave to amend.

ANALYSIS: For the reasons more fully articulated below, the Court will overrule the demurrer. Defendant shall file its answer to the complaint no later than February 21, 2025.

1.         Judicial notice.

In its demurrer, defendant requests judicial notice of Plaintiff’s Chapter 7 Bankruptcy Petition, filed on August 14, 2023, in the U.S. Bankruptcy Court, Central District of California. In her opposition, plaintiff requests judicial notice of the Bankruptcy Court’s docket in her case.

Matter to be judicially noticed must be relevant to the issues in the case. (Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, disapproved on other grounds by In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276.)

Pursuant to Evidence Code section 452(d), judicial notice may be taken of the records of any court of record of the United States. However, not all matters contained in court records are indisputably true, and while the existence of any document in a court file may be judicially noticed, the truth of matters asserted in such documents is not necessarily subject to judicial notice. (Copenbarger v. Morris Cerullo World Evangelism, Inc. (2018) 29 Cal.App.5th 1, 14.) A court cannot take judicial notice of the truth of hearsay statements just because they are part of a court record or file. (Kilroy v. State of California (2004) 119 Cal.App.4th 140, 145-147.)

It is appropriate to take judicial notice of both the Bankruptcy Petition and the docket in the bankruptcy case. In accordance with the law, however, the Court will take judicial notice of the documents, but not the truth of the hearsay statements made in the documents.

2.         Standards for demurrer.

The court’s task in ruling on a demurrer is to determine whether the complaint states a cause of action. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300.) A demurrer admits the truth of all material facts properly pleaded (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-967), no matter how unlikely or improbable they may be (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604), or how unlikely it will be that plaintiff will be able to prove the claim (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214). The court also assumes the truth of all reasonable inferences that may be drawn from the properly pleaded facts. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1083.) The assumption of truth does not apply, however, to contentions, deductions, or conclusions of law or fact. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters, and therefore lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.)

3.         Standing to pursue claims after filing Chapter 7 bankruptcy.

Defendant contends that the complaint fails to state facts sufficient to constitute any cause of action against it, because plaintiff’s lack of standing to pursue the action appears on a matter judicially noticeable, i.e., the Chapter 7 Bankruptcy Petition which she filed on August 14, 2023.

            A.        Applicable law.

As set forth in defendant’s demurrer, when a person files for bankruptcy protection, any causes of action previously possessed by that person become the property of the bankrupt estate. (11 U.S.C. §§ 541(a)(1) and 323; Cloud v. Northrup Grummon Corp. (1998) 67 Cal.App.4th 995, 1001.) As a result, the debtor lacks standing to individually pursue the claim, which must be pursued, if at all, by the trustee on behalf of the bankruptcy estate. The debtor can, however, regain the lost standing to pursue the claim, if the property is abandoned by the bankruptcy trustee. (Cloud v. Northrop Grummon Corp., supra, 67 Cal.App.4th at p. 1003.)

11 U.S.C. § 554 sets forth the means through which the bankruptcy trustee may abandon property of the bankruptcy estate. It provides:

(a)        After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.

(b)        On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.

(c)        Unless the court orders otherwise, any property scheduled under section 521(a)(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title.

(d)       Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate.       

            B.        Application.

The incident which gave rise to this action occurred on August 24, 2022, and plaintiff filed the current action on July 26, 2024.

Defendant’s demurrer contends that the complaint fails to state facts sufficient to constitute a cause of action against it, based upon plaintiff’s filing of her Chapter 7 bankruptcy petition on August 14, 2023, at which time she lost standing to pursue her claim. On that basis, defendant contends that its demurrer should be sustained without leave to amend.

Certainly, the judicially noticed bankruptcy petition establishes that plaintiff lost standing to pursue her claim as of the date of its filing on August 14, 2023. What it does not establish, however, is that plaintiff does not currently have standing to pursue her claim, such that her complaint fails to allege facts sufficient to state a cause of action against defendant—which would be required for this Court to sustain defendant’s demurrer.

Once standing to pursue a claim has been lost by a debtor’s filing of a bankruptcy petition, it is not necessarily lost to that debtor forever and for all time. As expressly set forth by the authorities on which defendant relied in its demurrer, a Chapter 7 bankruptcy debtor who has lost standing to pursue a claim can regain that standing if the claim is abandoned by the trustee, and there are multiple ways that can happen, including ways which do not require its “specific” abandonment. (11 U.S.C. § 554.) Nothing in the mere filing of the August 14, 2023 petition establishes that plaintiff did not regain her standing to pursue her claim prior to the filing of her complaint, and/or currently lacks standing to pursue it. As a result, the demurrer failed to meet its burden of establishing that plaintiff currently lacks standing because of her claim is an asset of her bankruptcy estate, and that the complaint therefor fails to state sufficient facts to constitute a cause of action against defendant, and must be overruled.

Defendant’s arguments morphed in its reply papers, and attempted to place the burden on plaintiff to affirmatively establish that the bankruptcy trustee specifically abandoned her cause of action against it before the bankruptcy case was closed, chastising plaintiff for failing to present the Trustee’s Final Report—something never mentioned in the demurrer itself, and never made an issue until plaintiff pointed out that the mere filing of her bankruptcy petition in mid-2023 did not conclusively establish that she does not, right now, lack standing to pursue her claim. That was not plaintiff’s burden on defendant’s demurrer, particularly since the demurrer failed to meet its initial burden. Further, issues brought up for the first time in a reply brief are properly disregarded by the court. (See, e.g., San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 316; American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453.)

The Court will therefore overrule the demurrer, and direct defendant to file its answer to the complaint on or before February 21, 2025, or such other date as this Court may specify at the hearing on this matter.