Fifth Circuit Court Cases - Case Law and Opinions from the 5th Circuit Federal Court - Court of Appeals

	ROMINGER LEGAL
		Fifth Circuit Court of Appeals Opinions - 5th Circuit
					Need Legal Help?
					Need Legal Help?
LEGAL RESEARCH CENTER
LEGAL RESEARCH CENTER			LEGAL HEADLINES - CASE LAW - LEGAL FORMS	NOT FINDING WHAT YOU NEED? -CLICK HERE

This opinion or court case is from the Fifth Circuit Court or Appeals. Search our site for more cases - CLICK HERE

LEGAL RESEARCH

COURT REPORTERS

PRIVATE INVESTIGATORS

PROCESS SERVERS

DOCUMENT RETRIEVERS

EXPERT WITNESSES

Find a Private Investigator

Find an Expert Witness

Find a Process Server

Case Law - save on Lexis / WestLaw.

Legal News - Legal Headlines

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-60673
Summary Calendar
IN THE MATTER OF: LAWYER WHEELER, SR.; RUBY S. WHEELER,
Debtors,
LAWYER WHEELER, SR.,
Appellant,
VERSUS
LAWRENCE M. MAGDOVITZ; ALEX B. GATES,
Appellees.
Appeal from the United States District Court
For the Northern District of Mississippi
March 30, 1998
Before JOLLY, BENAVIDES and PARKER, Circuit Judges.
PER CURIAM:
Lawyer Wheeler, Sr. ("Wheeler") appeals from a judgment of the
district court sitting as an appellate court over a bankruptcy
matter. Wheeler contends that the district court erred in
affirming the bankruptcy court's determination that his legal
malpractice claim against Lawrence M. Magdovitz is an asset of the
bankruptcy estate. We affirm.
FACTS AND PROCEDURAL HISTORY
Wheeler, through his attorney Lawrence M. Magdovitz, commenced
a Chapter 7 bankruptcy proceeding on May 1, 1989. The petition,
1

prepared by Magdovitz and signed by Wheeler, indicated that the
bankruptcy estate contained no assets. Pursuant to these
misrepresentations, Wheeler's case was treated as though it had no
assets.
On August 30, 1989, Wheeler received a discharge from his
indebtedness. Approximately five years later, Wheeler was indicted
and convicted for falsifying and concealing assets which should
have been included in the bankruptcy estate.
Wheeler has now filed an action for legal malpractice against
Magdovitz. Wheeler, a man of relatively little formal education,
contends that he hired Magdovitz as his attorney to properly
prepare and file his bankruptcy documents. Wheeler asserts that
his bankruptcy fraud conviction resulted from Magdovitz's negligent
handling of his bankruptcy action. After a hearing, the bankruptcy
court entered an order finding that the legal malpractice claim
against Magdovitz is owned exclusively by the Chapter 7 bankruptcy
estate. The district court affirmed that decision on appeal.
DISCUSSION
Findings of fact made by a bankruptcy court are reviewed under
the clearly erroneous standard, while conclusions of law are
reviewed de novo. Matter of Transamerican Natural Gas Corp., 978
F.2d 1209, 1415 (5th Cir. 1992).
A bankruptcy estate consists of "all legal or equitable
interest of the debtor in property as of the commencement of the
case." 11 U.S.C. § 541(a)(1). The issue in this appeal is whether
the state law malpractice claim against Magdovitz arose before the
2

commencement of the bankruptcy estate. Under Mississippi law, a
cause of action does not accrue until an injury occurs. Owens-
Illinois v. Edwards, 573 So.2d 704, 706-707 (Miss. 1990). Wheeler
contends that he was not injured by Magdovitz's malpractice until
he was indicted for bankruptcy fraud on June 10, 1994. He
therefore urges this court to conclude that his malpractice claim
against Magdovitz did not arise pre-petition.
Courts have taken several approaches to the question of how
the term "claim," as used in the Bankruptcy Code, relates to
unaccrued tort liability. Some courts have agreed with Wheeler's
position in this case that a "claim" does not arise in bankruptcy
until a cause of action has accrued under non-bankruptcy law. See,
e.g., Avefllino & Bienes v. M. Frenville Co. (In re M. Frenville
Co.), 744 F.2d 332, 337 (3rd Cir. 1984). Other courts have
rejected the accrual theory and have determined that a claim arises
at the moment the conduct giving rise to the alleged liability
occurred. See, e.g., Grady v. A.H. Robins Co. (In re A.H. Robins
Co.), 839 F.2d 198, 202-203 (4th Cir. 1988). Still other courts
have determined that a claim arises at the time of the negligent
conduct forming the basis for liability only if the negligent actor
had some type of specific relationship with the debtor at that
time. See, e.g., In re Piper Aircraft Corp., 162 B.R. 619
(Bankr.S.D.Fla. 1994). In Lemelle v. Universal Mfg. Corp., 18 F.3d
1268 (5th Cir. 1994), after reviewing these various approaches to
the problem, this court held that, at a minimum there must be
evidence of pre-petition contact, privity or other relationship
3

between the tort-feasor and the injured claimant, thereby adopting
the Piper middle ground approach to the question. However, the
court added the caveat that:
We do not here decide whether, if evidence of some pre-
petition relationship between [the tort-feasor and the
victims] had been adduced, we might nonetheless conclude
that neither [of the parties] had a "claim". . . . We
need not reach that question on this record.
Lemelle, 18 F.3d at 1277-78. It is clear in this case that
Wheeler and Magdovitz had a pre-petition relationship sufficient to
meet the Piper and Lemelle requirement.
Further, under Miss. Code Ann. § 15-1-49, a claim accrues when
a plaintiff "discover[s], or by reasonable diligence should have
discovered, the injury." Both the bankruptcy court and the
district court invoked In re Tomaiolo, 205 B.R. 10 (Bankr. D. Mass.
1997), as authority for their decision. In Tomaiolo, a debtor's
legal malpractice claim was filed after the debtor had been
convicted of bankruptcy fraud. Id. at 11. Debtor Tomaiolo argued
that the claim was not property of the estate since he had neither
discovered nor incurred harm from the malpractice at the time of
filing the bankruptcy petition. Id. at 13. The court disagreed
with the debtor and found that the claim was property of the
bankruptcy estate. Id. at 14. The court based its decision on the
fact that the "bulk of the Debtor's claims" was based on the
negligence of the attorney in providing prepetition advice and
prepetition services and in preparing the petition to be signed by
the debtor. Id. at 13. The court found particularly persuading
the fact that the debtor signed the petition and schedules, which
4

pertained to his own assets and financial affairs. The court
stated, "[The debtor] obviously should have known of any
misstatements when he signed them. Prior to the filing, he should
have discovered the alleged malpractice. This is sufficient to
meet the discovery requirement under state law." Id. at 13. In
this case, as in Tomaiolo, Wheeler should have discovered any
discrepancies between his actual assets and those listed on his
bankruptcy petition at the time he signed the petition. The
bankruptcy filing consisted of relatively few pages and clearly
misrepresented Wheeler's assets and liabilities. We also reject
Wheeler's "uneducated person" argument. As the Tomaiolo court
held, "Because the documents relate to his own assets and financial
affairs, the Debtor faced no layman's difficulty in assessing the
quality of his counsel's services in preparing them. All he had to
do was read them." Id. at 14.
Finally, Wheeler's argument that his cause of action did not
arise for bankruptcy purposes until he was "injured" by indictment
is without merit. A debtor need not be aware of the full extent of
his harm, since it is sufficient that he "knew, or should have
known, that any false statements and concealments in his bankruptcy
filing were transgressions which could bring about serious
consequences." Tomaiolo, 205 B.R. at 14.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court
holding that the Chapter 7 bankruptcy estate owns Wheeler's cause
of action against Magdovitz for legal malpractice.
5