California

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT

H025571

2004.CA.0006391

July 20, 2004

DEL CHARRO PROPERTIES, L.P., ET AL., PLAINTIFFS,
CROSS-DEFENDANTS AND APPELLANTS,
v.
JAMES R. HERON, ET AL., DEFENDANTS, CROSS-COMPLAINANTS AND APPELLANTS.

(Santa Clara County Super.Ct.No. CV 797302)

The opinion of the court was delivered by: Elia, J.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

This case involves a complaint for declaratory relief and a cross-complaint for declaratory relief regarding the proper distribution of the liquidated assets of Del Charro Properties, a California limited partnership. The court below granted the motion for summary judgment of James R. Heron, Sherill R. Heron, C. Norman Winningstad, and Heron West Santa Clara Associates, a California limited partnership (hereinafter collectively "Heron"), the defendants and cross-complainants below, and denied the motion for summary judgment of Del Charro Properties, L.P., and Del Charro Project Management, Inc., a California corporation (hereinafter collectively "Del Charro"), the plaintiffs and cross-defendants below.

Both Del Charro Properties and Heron were creditors of William Kelley and Ryland Kelley, who each had interests in the partnership. Heron West Santa Clara Associates, a judgment creditor of the Kelley debtors, obtained a charging order lien against the Kelleys' interests in the partnership that charged those interests with payment of the unsatisfied amount of its money judgment. The critical question here is whether Del Charro Properties has the right to setoff the Kelleys' debts to the partnership, which were discharged in bankruptcy, against the amount owed to Heron under the charging order in distributing its liquidated assets.

Del Charro appeals from the judgment that followed the order granting summary judgment in favor of Heron. Heron appeals from the order after judgment denying attorneys' fees.

We affirm.

I. Appeal From Judgment

A. Standard of Review

A motion for summary judgment "shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).) An order granting summary judgment is reviewed de novo by appellate courts. (See Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476; Regents of University of California v. Superior Court (1999) 20 Cal.4th 509, 531.) We consider "all of the evidence set forth in the papers, except that to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence . . . ." (Code Civ. Proc., § 437c, subd. (c).)

B. Stipulated Facts

The parties stipulated to the following facts on their motions below. On February 6, 1990, a judgment in the amount of $644,654 was entered in favor of plaintiff Heron West Santa Clara Associates and against defendants Kelley West Santa Clara Associates, Ryland Kelley, and William K. Kelley (hereinafter "Kelley judgment"). The action had arisen from a promissory note and the Kelley judgment included an award of attorney fees pursuant to the terms of the note.

Heron West Santa Clara Associates subsequently assigned the Kelley judgment to James R. Heron, Sherill R. Heron, C. Norman Winningstad, who "succeeded to all of the rights and interests of Heron West Santa Clara Associates." There has been a partial recovery of the amount of the judgment but the judgment has not been fully satisfied. As of November 27, 2001, the unpaid amount of the Kelley judgment was no more than $1,772,826. The amount remaining to be paid is disputed.

On March 30, 1990, William Kelley and Ryland Kelley ("the Kelleys") were served with a notice of a motion for a charging order against the Kelleys' partnership interests in approximately 40 partnerships, including Del Charro Apartments and Gilroy Properties, to enforce the Kelley judgment. The Kelleys were served both individually and in their capacities as general partners of Del Charro Apartments and Gilroy Properties. On March 30, the Kelleys each owned general and limited partners' interests in Del Charro Apartments and Gilroy Properties.

According to the stipulation, by operation of law (§ 708.320), "charging order liens attached to each of the Kelleys' partnership interests on March 30, 1990, when the notice of motion for the charging orders was served."

Del Charro Apartments and Gilroy Properties, both California limited partnerships, had lent money to the Kelleys and to Hare, Brewer & Kelley, Inc., "a corporation owned by the Kelleys," through a series of transactions over several years. As of March 30, 1990, the Kelleys were indebted to Del Charro in the amount at least $10 million. Prior to March 30, 1990, the Kelleys had executed written security agreements pledging their entire partnership interests in Del Charro to Del Charro as security for the loans. *fn1 "The Kelleys made no payments on this debt after March 30, 1990, and the amount owed was never less than $10 million thereafter."

"As of March 30, 1990, Del Charro had not perfected the security interests in the Kelleys' partnership interests that had been pledged to Del Charro. These security interests were perfected during May 1990."

On May 21, 1990, a court issued an order directing that interests held by the Kelleys and Kelley West Santa Clara Associates in the named partnerships, including Del Charro Apartments and Gilroy Properties, be charged with the payment of the unpaid balance of the judgment against them, plus accrued interest, until Heron West Santa Clara Associates had been paid in full. *fn2 The charging order required the named partnerships to "pay directly and forthwith to Heron . . . any and all income, revenues, distributions, compensation, fees, repayment of debt, or personal property, tangible or intangible, or whatever sort or nature, that have, at any time from the date of service of the notice of motion herein on the respective partnerships or thereafter, become due, payable, or distributable to any one or more of the judgment debtors . . . ."

According to the stipulation, in 1991, "the Kelleys assigned to Del Charro all their partnership rights in Del Charro subject to the Heron Group's charging order lien rights." *fn3 Specifically, each of the Kelleys assigned his interest as a limited partner of Del Charro Apartments and his "right, title and interest" as a general partner of Del Charro Apartments, Del Charro Partners and Gilroy Properties to receive, among other things, all distributions of money made to partners.

In December 1992, William Kelley, Ryland Kelley, and Hare, Brewer, & Kelley, Inc., each filed petitions for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. These bankruptcy cases were subsequently converted to Chapter 7 proceedings. "Del Charro and the Heron Group were duly notified of the bankruptcy proceedings." The bankruptcy court did not determine that "either the debt owed by the Kelleys to Del Charro or the Judgment held by Heron Group against the Kelleys was non-dischargeable pursuant to United States Bankrupcty Code section 523." According to the stipulation, "the Kelleys and Hare, Brewer & Kelley each obtained discharges pursuant to United States Bankruptcy Code section 727 and their bankruptcy cases were closed." *fn4

On October 1, 1994, the "Amended and Restated Limited Partnership Agreement for Del Charro Properties, L.P." amended the terms of the Del Charro Apartments partnership agreement and changed the name of the partnership to Del Charro Properties, L.P. *fn5 According to the stipulation, Del Charro Properties, a California limited partnership, was the successor in interest to Del Charro Apartments and Gilroy Properties. Del Charro Property Management, Inc., a California corporation, had been the general partner of the partnership since 1991 and, at the time of the stipulation, was the current general partner of Del Charro Properties.

At the time of the parties' stipulation, dated September 12, 2002, all the assets of Del Charro Properties had been liquidated and partial distributions had been made to partners. A portion of the money attributable to the interest previously held by the Kelleys had been held in reserve. As of September 1, 2002, the percentage of Del Charro Properties partnership attributable to the interest previously held by the Kelleys and assigned in 1991 to Del Charro Apartments was 18.317207821 percent. *fn6 The cash value of that percentage amounted to approximately $4,625,000.

C. Cross-Motions for Summary Judgment

In the court below, Heron claimed on motion for summary judgment that Del Charro Properties was obligated, under the charging order, to pay the cash attributable to the Kelleys' former partnership interest up to the amount due and owing on the Kelley judgment. Heron asserted that the charging order lien was senior to the security interest held by Del Charro. Heron maintained that Del Charro had no right of setoff because setoff was not asserted in bankruptcy court and, in any event, a claim of setoff would have been denied because, among other reasons, the right to distribution of the liquidated partnership assets was not a prepetition debt owing to the Kelleys "that arose before commencement" of their bankruptcy cases within the meaning of section 553 of the Bankruptcy Code (11 U.S.C.). *fn7 Heron also asserted that a debt discharged in bankruptcy cannot be the basis for an equitable setoff in state court and, regardless, the equities do not support setoff.

On its motion for summary judgment, Del Charro asserted that Heron was the equivalent of an assignee of the Kelleys under the applicable statutory provisions governing charging orders and their rights were subject to all defenses, including the defense of setoff, that could have been raised against the Kelleys. Del Charro conceded that its security interest was subordinate to Heron's rights as charging order lien creditor but maintained it had a right of setoff under Code Civil of Procedure section 431.70 and equitable setoff principles. As to the impact of bankruptcy law, Del Charro contended that setoff was a question of state law, and, furthermore, setoff of mutual prepetition debts is expressly permitted by section 553 of the Bankruptcy Code and the right to receive distributions by virtue of the partnership interest was a prepetition debt, albeit contingent and unmatured, within the meaning of bankruptcy law.

D. Trial Court's Ruling

The trial court's ruling on the summary judgment motions was based on the following legal analysis: "The debt of the Kelley parties to Del Charro was not reduced to a judgment or lien perfected until after the date upon which the lien of the Heron charging order attached. . . . Del Charro retained rights of setoff but failed to assert them in the bankruptcy of the Kelley parties, of which it had notice. Under the broad language of In re Marriage of Williams (1984) 157 Cal.App.3d 1215, 1223-1224, California courts have interpreted bankruptcy law such that a discharge of the Kelleys in bankruptcy operated as an injunction against any action to recover an offset against them, and an offset cannot be used in a later court proceeding to revive a debt thus discharged in bankruptcy. As Heron had a charging order against the Kelleys' interest in the partnership, it stood in the shoes of the Kelleys and was entitled to disbursement of the Kelleys' partnerhip interest upon liquidation, at all times after March 30, 1990. Del Charro never obtained a setoff against that interest before or in the bankruptcy proceeding."

E. Charging Order

On appeal, Del Charro argues that, under the charging order, Heron had no greater rights than had the Kelleys. Heron does not directly dispute this assertion but maintains that it is the "senior secured creditor."

At the time notice of motion for a charging order was served on March 30, 1990, Code of Civil Procedure section 708.310 provided: "If a money judgment is rendered against a partner but not against the partnership, the judgment debtor's interest in the partnership may be applied toward the satisfaction of the judgment by an order charging the judgment debtor's interest pursuant to Section 15028 [Uniform Partnership Act] or 15673 [CRLPA] of the Corporations Code." (Stats. 1985, ch. 41, § 9, p. 132.) At that time, Code of Civil Procedure section 708.320 provided: "(a) Service of a notice of motion for a charging order on the judgment debtor and on the other partners or the partnership creates a lien on the judgment debtor's interest in the partnership. [] (b) If a charging order is issued, the lien created pursuant to subdivision (a) continues under the terms of the order. If issuance of the charging order is denied, the lien is extinguished." (Stats.1982, ch. 1364, § 2, p. 5197.)

At the time notice of motion for a charging order was served on March 30, 1990, former Corporations Code section 15028 provided in pertinent part: "(1) On due application to a competent court by any judgment creditor of a partner, the court which entered the judgment, order, or decree, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon; and may then or later appoint a receiver of his share of the profits, and of any other money due or to fall due to him in respect of the partnership, and make all other orders, directions, accounts, and inquiries which the debtor partner might have made, or which the circumstances of the case may require." (Stats. 1949, ch. 383, § 1, p. 681; see former Corp. Code, § 15006, subd. (2) [applicability of Uniform Partnership Act to limited partnerships] see also Corp. Code, § 15522 [charging order against indebted limited partner under Uniform Limited Partnership Act] [Stats. 1949, ch. 383, § 1, p. 694].) *fn8

At the time notice of motion for a charging order was served on March 30, 1990, Corporations Code section 15673 provided, and continues to provide, in pertinent part: "On application to a court of competent jurisdiction by any judgment creditor of a partner, the court may charge the limited partnership interest of the partner with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the limited partnership interest." *fn9 (Italics added.) However, Del Charro Properties did not elect to be governed by the California Revised Limited Partnership Act until 1994. (See Corp. Code, §§ 15711-15712, 15714.)

Under former section 2422 of the Civil Code (Stats. 1929, ch. 864, § 1, p. 1904), from which former Corporations Code section 15028 was derived (see Baum v. Baum (1959) 51 Cal.2d 610, 613; Sherwood v. Jackson (1932) 121 Cal.App. 354, 356), an order charging a partner's interest in the partnership was restricted to the share of the judgment debtor in the partnership and the judgment creditor did not acquire "any greater rights than the debtor [was] entitled to for his own benefit (commissioners' note to § 28 of the Uniform Partnership Act)." (Ribero v. Callaway (1948) 87 Cal.App.2d 135, 138.) Presumably, the same principle applied to charging orders under former Corporations Code section 15028 or Corporations Code section 15522 [Uniform Limited Partnership Act] *fn10 and Corporations Code section 15673 continues this principle.

Thus, under the charging order and lien that attached in 1990, Heron acquired no greater rights than had the Kelleys to distributions based upon their interests in the partnership.

F. Effect of Bankruptcy Discharge

Del Charro maintains that more recent federal case law concludes, contrary to In re Marriage of Williams, supra, 157 Cal.App.3d 1215, that section 553 of the Bankruptcy Code controls setoffs, notwithstanding the language of section 524, subdivision (a). Del Charro insists that the Kelleys' debt may be setoff against the charging order lien despite the bankruptcy discharges of the Kelleys' personal liability. Heron counters that the Kelleys' bankruptcy discharges preclude the Kelleys' discharged debt from being used as a setoff.

Under section 524, subdivision (a)(2), a bankruptcy discharge "operates as an injunction 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, whether or not discharge of such debt is waived . . . ." (Italics added.) Subdivision (e) of section 524 provides: "Except as provided in subsection (a)(3) of this section [special community property provision], 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." Thus, section 524 operates as a total prohibition on debt collection efforts against the discharged debtor. (See Sen. Rep. No. 95-989, reprinted in 1978 U.S. Code Cong. & Admin. News, p. 5866.)

However, section 553, subdivision (a), generally provides, with exceptions not here applicable: "[T]his title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case . . . ." *fn11

Section 553, subdivision (a), preserves in bankruptcy, to the extent provided, whatever right of setoff otherwise exists. (Citizens Bank of Maryland v. Strumpf (1995) 516 U.S. 16, 18 [116 S.Ct. 286].) "Section 553 'is not an independent source of law governing setoff; it is generally understood as a legislative attempt to preserve the common-law right of setoff arising out of non-bankruptcy law.' [Citation.]" (Newbery Corp. v. Fireman's Fund Ins. Co. (9th Cir. 1996) 95 F.3d 1392, 1398.)

In In re Marriage of Williams, supra, 157 Cal.App.3d 1215, following an interlocutory judgment of dissolution of marriage, the trial court allowed the husband to offset the amount the wife owed him together with any amounts he had paid to creditors on indebtedness that the wife had been ordered to pay against arrearages he owed to her under the dissolution decree. (Id. at p. 1218.) Based on this setoff, the trial court granted the husband's motion to quash the writ of execution obtained by the wife and to vacate the levy of execution upon his savings account. (Ibid.) The reviewing court held that the "trial court's order permitting husband to offset wife's indebtedness which had been discharged in bankruptcy frustrate[d] the intent and purpose of the federal Bankruptcy Act and violate[d] the federal supremacy clause of the United States Constitution." (Id. at p. 1219.)

The appellate court noted: "Husband had received notice that wife had filed a petition in bankruptcy and that wife had named him as a creditor. However, husband did not appear in the bankruptcy proceeding to object to wife's discharge or to attempt to offset in that proceeding the amount of wife's indebtedness to him against his indebtedness to her for the arrearages . . . ." (Id. at p. 1220.) The court stated: "The major problem in the instant case, and one which this court cannot resolve, is that the issues should have been presented to and handled by the bankruptcy court while wife's proceeding was pending." (Id. at p. 1221.) The appellate court believed that the language of section 553 made clear that its setoff provisions are "applicable only in the bankruptcy court" and any doubts as to the correctness of this conclusion were eliminated by section 524. (Id. at p. 1223.)

The Williams court determined: "Read together, 11 United States Code section 524 and 553 make it clear that offset cannot be used to revive in a state court proceeding a debt already discharged in bankruptcy. [Citation.]" (Id. at p. 1224.) It concluded that the trial court had erred in ordering the offset and in granting the husband's motion. (Ibid.)

Williams appears to be consistent with the minority view that section 524 takes precedence over section 553 of the Bankruptcy Code (see e.g. In re Dezarn (Bankr. E.D.Ky.1988) 96 B.R. 93, 94-95 [section 524 precluded bank from retaining face value of matured certificate of deposit as setoff against discharged Chapter 7 debtor's prepetition debt consisting of amounts due under promissory note]; In re Johnson (Bankr.M.D.Tenn.1981) 13 B.R. 185, 188-189 [section 524 prevented defendants from offsetting the unpaid balance due on a promissory note against any post-petition recovery in a Truth in Lending Act cause of action, regardless whether the cause of action arose prior to bankruptcy].) *fn12

However, as Collier on Bankruptcy has observed: "A majority of the courts that have addressed the issue answer that confirmation and discharge do not prohibit the defensive use of setoff in a subsequent action by the debtor." (5 Collier on Bankruptcy (15th ed. 2003) Setoff, 553.08 [1], p. 553-83, fn. omitted.) In In re Davidovich (10th Cir. 1990) 901 F.2d 1533, United States Court of Appeals, Tenth Circuit, affirmed the bankruptcy court's judgment insofar as it held that the debtor's former law partner was entitled to offset the debtor's debt under an arbitration award against the former law partner's obligations to the debtor under that same award even though the former law partner failed to file a proof of claim against the bankruptcy estate and the debtor obtained a discharge. (Id. at pp. 1537-1539.) The court, however did not decide whether there might be a different result if "a creditor asserts a right to setoff or recoupment in a personal action brought by the debtor alone, rather [than] an action brought by the bankruptcy trustee to recover assets for the bankruptcy estate." (Id. at p. 1539, fn. 4.)

Subsequently, in In re Buckenmaier (Bankr. 9th Cir. 1991) 127 B.R. 233, 236, the bankruptcy appellate panel of the Ninth Circuit considered whether a bankruptcy court had properly foreclosed a creditor, a hospital, from asserting a setoff of its contingent contribution claim against the potential recovery that the discharged debtor might obtain in a state court action. In that case, the debtor had gone to the hospital for psychiatric treatment of homicidal and suicidal thoughts because he believed his wife was having an affair. (Id. at p. 234.) Upon his discharge the same day, the debtor had stabbed his wife and the man with whom the debtor believed she was romantically involved. (Id. at pp. 234-235.) The victims had sued the debtor, the hospital, and the treating psychiatrist. (Id. at p. 235.) The debtor had sued the hospital and the psychiatrist, alleging he received negligent treatment at the hospital. (Ibid.) The hospital and the psychiatrist asserted that they possessed "unmatured rights of contribution and indemnification" against the debtor. (Ibid.)

The court in Buckenmaier observed: "Most cases hold that a valid setoff claim cannot be defeated by a discharge in bankruptcy. These cases rely on § 553's statement that, with certain exceptions not applicable here, 'this title does not affect any right of a creditor to offset. . . .' This language has been interpreted to mean that a creditor's right to setoff a mutual, pre-petition debt survives even the discharge of the debtor . . . . [Citations.]" (In re Buckenmaier, supra, 127 B.R. at p. 237; cf. In re De Laurentiis Entertainment Group Inc. (9th Cir. 1992) 963 F.2d 1269, 1271, 1276-1278 [creditor may defensively assert setoff following confirmation of Chapter 11 reorganization plan discharging prepetition debts not provided for in the plan].) The court held that the hospital's "setoff of its contingent claim for contribution [was] not enjoined under Code § 524(a)(2)" and the setoff was "allowable, pursuant to Code § 553(a), against any personal recovery" by the debtor against the hospital. (In re Buckenmaier, supra, 127 B.R. at p. 239.)

Collier on Bankruptcy has opined: "If a claim has been discharged, the better view is that, notwithstanding the discharge, the creditor should be entitled to assert the claim defensively in an action brought by the debtor to collect on a debt. . . . [H]owever, a creditor holding a discharged claim may not obtain an affirmative recovery above the amount of the debt." (5 Collier on Bankruptcy, supra, Setoff, 553.08 [2], p. 553-86, fn. omitted.)

Although we are bound by the decisions of the United States Supreme Court on questions of federal law (U.S. Const., art. VI, cl. 2; Rohr Aircraft Corp. v. County of San Diego (1959) 51 Cal.2d 759, 764-765, revd. on other grounds (1960) 362 U.S. 628, 636 [80 S.Ct. 1050]; Stock v. Plunkett (1919) 181 Cal. 193, 194-195), we are not obligated to follow decisions of the lower federal courts (People v. Bradley (1969) 1 Cal.3d 80, 86). "Where lower federal precedents are divided or lacking, state courts must necessarily make an independent determination of federal law [citation] . . . ." (Etcheverry v. Tri-Ag Service, Inc. (2000) 22 Cal.4th 316, 321; see Tully v. World Savings & Loan Assn. (1997) 56 Cal.App.4th 654 [declining to follow a bankruptcy court decision].) "In the absence of a controlling United States Supreme Court decision on a federal question, this court is free to adopt one of the divergent lines of authority." (Alicia T. v. County of Los Angeles (1990) 222 Cal.App.3d 869, 879.)

We believe the majority view of the federal courts with respect to interplay of sections 524 and 553 is consistent with the cardinal rules of statutory interpretation. "The fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law. [Citations.] Moreover, 'every statute should be construed with reference to the whole system of law of which it is a part so that all may be harmonized and have effect.' (Stafford v. Los Angeles etc. Retirement Board, 42 Cal.2d 795, 799 [270 P.2d 12].) If possible, significance should be given to every word, phrase, sentence and part of an act in pursuance of the legislative purpose. (People v. Western Air Lines, Inc., 42 Cal.2d 621, 638 [268 P.2d 723].)" (Select Base Materials v. Board of Equal. (1959) 51 Cal.2d 640, 645.) "Where reasonably possible, we avoid statutory constructions that render particular provisions superfluous or unnecessary. [Citations.]" (Dix v. Superior Court (1991) 53 Cal.3d 442, 459.)

"[A] central purpose of the [Bankruptcy] Code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy 'a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.' [Citation.]" (Grogan v. Garner (1991) 498 U.S. 279, 286 [111 S.Ct. 654, 659].) A creditor's post-discharge defensive assertion of a right to offset mutual debts arising "before commencement of the [bankruptcy] case" (§ 553, subd. (a)), if preserved by section 553, would not undermine this objective.

Although equality of distribution among creditors is also a central policy of the Bankruptcy Code (see Begier v. I.R.S. (1990) 496 U.S. 53, 58 [110 S.Ct. 2258]), "[o]rdinarily, liens and other secured interests survive bankruptcy." (Farrey v. Sanderfoot (1991) 500 U.S. 291, 297 [111 S.Ct. 1825, 114 L.Ed.2d 337]; see 4 Collier on Bankruptcy, supra, 507.02[4][2], p. 507-18; 524.02[2][d], pp. 524-22, 524-24.) Under the Bankruptcy Code, a creditor's allowed claim is considered secured to the extent it is subject to setoff under section 553 (§ 506, subd. (a) [determination of secured status].) A creditor's post-discharge defensive assertion of setoff to the extent permitted by section 553 would not interfere with the code's treatment of creditors.

We conclude that section 524's general injunction against offsetting a discharged debt "as a personal liability of the debtor" must be construed, in light of section 553's language ["this title does not affect any right of a creditor to offset a mutual debt . . ."], as not affecting any setoff right preserved by section 553. Consequently, a creditor may defensively assert a discharged debt as a setoff against a discharged Chapter 7 debtor in a state action to the extent any such right of setoff is preserved by section 553 but the creditor may not obtain an affirmative recovery based on the discharged debt. This conclusion is entirely consistent with the Bankruptcy Code's fresh start policy and usual treatment of secured claims in bankruptcy. (Cf. In re Luongo (5th Cir. 2001) 259 F.3d 323, 333) [spirit of § 524(a)(2) not violated by allowing "a discharged debt to be setoff upon compliance with the terms and conditions provided in § 553, notwithstanding § 524(a)'s post-discharge bar"].) We disagree with Williams insofar as it is inconsistent with our holding. *fn13

G. Jurisdiction

Heron maintains that the bankruptcy court was the proper forum for resolving the issue of setoff and the trial court lacked jurisdiction to adjudicate the issue. According to Heron, the bankruptcy court had exclusive jurisdiction because the issue of setoff in the face of a discharge injunction was a "core proceeding" under section 28 United States Code section 157, subdivision (b)(2)(A), (b)(2)(I), (b)(2)(K), or (b)(2)(O). *fn14 Heron asserts that the case law cited by Del Charro does not hold that "a state court has jurisdiction to decide issues arising under the bankruptcy laws, as this would be a departure from deeply rooted constitutional principles."

"The jurisdiction of the bankruptcy courts, like that of other federal courts, is grounded in, and limited by, statute." (Celotex Corp. v. Edwards (1995) 514 U.S. 300, 307.) Title 28 United States Code section 1334, subdivision (a) states: "Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11." (Italics added.) "Title 28 U.S.C. § 1334(b) provides that 'the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11 . . . .' " *fn15 (Celotex Corp. v. Edwards, supra, 514 U.S. at p. 307.) Title 28 United States Code section 1334, subdivision (e) (formerly subd. (d)), provides that "[t]he district court in which a case under title 11 is commenced or is pending shall have exclusive jurisdiction of all of the property, wherever located, of the debtor as of the commencement of such case, and of property of the estate."

"The district courts may, in turn, refer 'any or all proceedings arising under title 11 or arising in or related to a case under title 11 . . . to the bankruptcy judges for the district.' 28 U.S.C. § 157(a)." *fn16 (Celotex Corp. v. Edwards, supra, 514 U.S. at p. 307.) In addition, Title 28 United States Code section 157, subdivision (b), provides that "[b]ankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11, referred under subsection (a) of this section . . . ." (Italics added.) It further provides a non-exhaustive list of core proceedings. (28 U.S.C. § 157, subd. (b)(2).) That section also authorizes a bankruptcy judge to "hear" a non-core proceeding "that is otherwise related to a case under title 11" and submit proposed findings of fact and conclusions of law to the district court, which generally enters the final order or judgment. (See 28 U.S.C., § 157, subd. (c), but see 28 U.S.C., § 1334, subds. (c)(1) [permissive abstention], (c)(2) [mandatory abstention].)

As Collier on Bankruptcy has observed, " 'proceedings . . . related to a case under title 11' that are referred to the bankruptcy judges under section 157(a) are not included within the language of section 157(b)(1). . . . The phraseology of section 157 leads to the conclusion that there is no such thing as a core matter that is 'related to' a case under title 11. [Fn. omitted.] Core proceedings are, at most, those that arise in title 11 cases or arise under title 11." *fn17 (Collier on Bankruptcy, supra, 3.02[2], p. 3-35.)

The instant proceedings between creditors holding interests in the Kelleys' former partnership interests did not arise in a case under title 11. As already discussed, any right to setoff was not created by title 11 since section 553 merely preserves some setoff rights otherwise existing under non-bankruptcy law. (See Citizens Bank of Maryland v. Strumpf, supra, 516 U.S. at p. 18.) "Actions which do not depend on the bankruptcy laws for their existence and which could proceed in another court are not core proceedings. [Citation.]" (In re Gardner, supra, 913 F.2d at p. 1518.) Any assertion that Del Charro's claim of setoff was a core proceeding or that state courts are deprived of jurisdiction over these civil proceedings in regard to the issue of setoff is not well taken.

Nevertheless, Heron contends that the trial court lacked jurisdiction to adjudicate the setoff issue, relying upon two 9th Circuit Court of Appeals cases: In re McGhan (9th Cir. 2002) 288 F.3d 1172 and In re Gruntz (9th Cir. 2000) 202 F.3d 1074 (en banc). Neither case involved circumstances or issues similar to the present case.

In In re Gruntz, supra, 202 F.3d 1074, a Chapter 11 debtor unsuccessfully requested the bankruptcy court to void state criminal prosecutions for his willful failure to pay child support (Pen. Code, § 270) on the basis that they violated the statutory automatic stay (§ 362). (Id. at p. 1077.) The Ninth Circuit framed the issues as "(1) whether a state court modification of the bankruptcy automatic stay binds federal courts; and (2) whether the automatic stay enjoins a criminal prosecution for the willful failure to pay . . . ." (Ibid.)

In Gruntz, supra, 202 F.3d 1074 the Ninth Circuit held among other things: "[F]ederal courts are not bound by state court modifications of the automatic stay." (Id. at p. 1077, see also p. 1087.) The court made clear: "[B]ankruptcy courts have the ultimate authority to determine the scope of the automatic stay imposed by 11 U.S.C. § 362(a), subject to federal appellate review. A state does not have the power to modify or dissolve the automatic stay." (Id. at p. 1087.)

In In re McGhan, supra, 288 F.3d 1172, McGhan, who had obtained a discharge in bankruptcy, unsuccessfully moved the bankruptcy court to reopen his bankruptcy case to review a state court's decision. (Id. at at pp. 1175-1177.) A state court had allowed Rutz, who was McGhan's stepson, to proceed with a civil action alleging sexual molestation against McGhan upon determining that Rutz, although listed as a creditor in the earlier Chapter 7 proceedings, had received inadequate notice because he had been a minor at the time and notice had gone to his mother. (Ibid.) The Ninth Circuit considered whether the state court had jurisdiction to adjudicate the adequacy of notice in the bankruptcy proceeding and to modify the bankruptcy court's orders discharging the stepson's claim and permanently enjoining him from collecting on the debt. (Id. at pp. 1175, 1178-1181.)

Relying primarily on Gruntz, the Ninth Circuit concluded the state court lacked jurisdiction to adjudicate the adequacy of the notice received by the stepson and lacked authority to modify the bankruptcy court's orders. (In re McGhan, supra, 288 F.3d at pp. 1175, 1180.) The court explained: "Gruntz bars state court intrusions on all 'bankruptcy court orders' (or other 'core' bankruptcy proceedings) [citation], not just the automatic stay." (Id. at p. 1179.) It stated that "a state court also lacks authority to modify or dissolve a discharge order or the § 524 discharge injunction." (Ibid., fn. omitted.) However, the Ninth Circuit clarified that it was not holding "that a state court is divested of all jurisdiction to construe or determine the applicability of a discharge order when discharge in bankruptcy is raised as a defense to a state cause of action filed in state court by a listed creditor. See Pavelich, 229 B.R. at 783 (holding that 'state courts have the power to construe the discharge and determine whether a particular debt is or is not within the discharge' because 'discharge in bankruptcy is a recognized defense under state law')." (In re McGhan, supra, 288 F.3d at p. 1180.)

We do not read Gruntz or McGhan as holding that state courts lack jurisdiction to determine the applicability of a section 524 discharge injunction or to construe relevant federal bankruptcy law but rather that state courts may not modify or impair the statutory discharge injunction. The United States Supreme Court has stated in another context that state courts "possess the authority, absent a provision for exclusive federal jurisdiction, to render binding judicial decisions that rest on their own interpretations of federal law. [Citation.]" (ASARCO Inc. v. Kadish (1989) 490 U.S. 605, 617.) The authorities cited by Heron do not preclude California courts from exercising jurisdiction to determine the applicability and effect of the Kelleys' bankruptcy discharges and the statutory discharge injunction in this action. (See In re Coho Resources, Inc. (5th Cir. 2003) 345 F.3d 338, 345 ["[s]tate courts . . . routinely rule on the applicability of a bankruptcy stay or permanent injunction to state judicial proceedings"]; cf. In re Watson (Bankr. 9th Cir. 1996) 192 B.R. 739, 746 [after bankruptcy court lifted stay, allowing state court litigation to continue, state court had jurisdiction to rule on the applicability of discharge injunction].)

H. Claim of Setoff

Heron argues that even if this court concludes that the state court has jurisdiction to reach the issue of setoff, federal law governs under the federal preemption doctrine and precludes any setoff because "Del Charro cannot satisfy the criteria for a setoff set forth at section 553 of the Bankruptcy Code." Del Charro responds that state law, not section 553, controls the setoff dispute because the Bankruptcy Code does not attempt to preempt state law on issues of charging orders or setoff rights. Del Charro also argues that Heron's charging order lien is subject to Del Charro's claim of setoff even if section 553 applies because "[t]he charging order lien was obtained pre-petition and the Kelley debt to Del Charro was incurred pre-petition."

As previously explained, section 553 preserves, to the extent statutorily specified, the right of a creditor to offset a mutual debt owing by such creditor to the debtor if such a right exists under applicable non-bankruptcy law. (See 11 U.S.C. § 553(a); Citizens Bank of Maryland v. Strumpf, supra, 516 U.S. at p. 18; Newbery Corp. v. Fireman's Fund Ins. Co., supra, 95 F.3d at p. 1398.) "[N]o federal right of setoff is created by the Bankruptcy Code." (Citizens Bank of Maryland v. Strumpf, supra, 516 U.S. at p. 18.) Thus, the threshold question is whether Del Charro possesses a valid claim of setoff under California law.

Code of Civil Procedure section 431.70 describes the right of setoff: "Where cross-demands for money have existed between persons at any point in time when neither demand was barred by the statute of limitations, and an action is thereafter commenced by one such person, the other person may assert in the answer the defense of payment in that the two demands are compensated so far as they equal each other, notwithstanding that an independent action asserting the person's claim would at the time of filing the answer be barred by the statute of limitations. If the cross-demand would otherwise be barred by the statute of limitations, the relief accorded under this section shall not exceed the value of the relief granted to the other party." *fn18

In order to assert a setoff, cross-demands for money must have coexisted between the parties. (Code Civ. Proc, § 431.70; see Hauger v. Gates (1954) 42 Cal.2d 752, 755 [coexisting cross-demands]; Harrison v. Adams (1942) 20 Cal.2d 646, 649-650 [mutuality is essential to setoff and equity will look to the real parties in interest to determine whether demands are mutual], Kaye v. Metz (1921) 186 Cal. 42, 49 ["In order to warrant a setoff 'the debts must be mutual and the principle of mutuality requires that the debts should not only be due to and from the same person, but in the same capacity' "]; see also Jess v. Herrmann (1979) 26 Cal.3d 131, 137 [in the absence of some public policy limitation, "setoff procedure simply eliminates a superfluous exchange of money between the parties" and "merely reduces the exchange to a single transaction"].) Thus, for example, "where the judgment debtor's claim arises after the period for enforcement of the judgment has run, the judgment cannot be offset against the judgment debtor's claim; in this case, the demands have not 'existed between persons at any point in time when neither demand was barred by the statute of limitations' (15 Cal.L.Rev. Comm. Reports 2001)." (Cal. Law Rev. Com. com. 1982 Amendment, reprinted at 14A West's Ann. Code Civ. Proc. (2004 supp.) foll. § 431.70, p. 139.)

California's current statutory setoff provisions emanate from 'the established principle in equity that either party to a transaction involving mutual debts and credits can strike a balance, holding himself owing or entitled only to the net difference. . . .' (Italics added.)" *fn19 (Jess v. Herrmann, supra, 26 Cal.3d at p. 142.) Code of Civil Procedure section 431.70 "does not create a substantive right to raise setoff as a defense to a claim for monetary relief, but merely describes the procedures to be followed in raising this defense. [Citations.]" (Granberry v. Islay Investments (1995) 9 Cal.4th 738, 744.)

The stipulated facts do not show that Heron was directly liable for the Kelleys' debt to Del Charro Properties, such as by being a cosigner on the promissory notes or a guarantor. (Cf. § 524, subd. (e) [generally, "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"]; cf. also Underhill v. Royal (9th Cir. 1985) 769 F.2d 1426, 1432 [bankruptcy court had no power to discharge liabilities of nondebtor, who was liable for violations of securities laws, in company's chapter 11 reorganization plan].) Accordingly, any right of setoff accruing to Del Charro against Heron must derive from a right against the Kelleys.

Assuming arguendo that Heron's demand for distributions under the charging order is subject to any right of setoff Del Charro Properties might have asserted against the Kelleys since Heron has no greater rights to distributions of Del Charro Properties' liquidated assets than had the Kelleys based on their partnership interests (see Ribero v. Callaway, supra, 87 Cal.App.2d at p. 138; cf. Corp. Code, § 15673 ["To the extent [of the debtor partner's limited partnership interest] so charged, the judgment creditor has only the rights of an assignee of the limited partnership interest"]), *fn20 setoff requires the existence of mutual demands for money between Del Charro and the Kelleys, something not evident from the stipulated facts.

According to those facts, "the Kelleys were indebted to Del Charro in the amount of at least $10 million as of March 30, 1990" and the Kelleys "made no payments on this debt after March 30, 1990." After the Kelleys' bankruptcy discharges, Del Charro Properties had no enforceable demand for money against the Kelleys based upon the Kelleys' discharged debt. (§ 524, subd. (a).)

The stipulated facts merely indicate that all Del Charro Properties' assets had been liquidated as of the date of the stipulation, September 12, 2002, but do not establish exactly when the process of liquidating and distributing Del Charro's assets commenced. Ignoring for sake of argument that the Kelleys made an absolute assignment of their interests in the partnership before they filed for bankruptcy, nothing in the stipulated facts shows that, before the Kelleys' bankruptcy discharges, any event had yet occurred that required Del Charro Properties to distribute its liquidated assets to those with an interest in the partnership. To the contrary, the chronology of stipulated facts indicates that Del Charro Properties' assets were not liquidated until after the bankruptcy discharges.

Del Charro suggests that the demand against the partnership's liquidated assets need not have matured while the partnership's demand for money existed against the Kelleys. California cases indicate otherwise. (See Safine v. Sinnott (1993) 15 Cal.App.4th 614, 618 [attorney malpractice claim matured and setoff permitted because that claim and attorney's action against former client for legal fees and costs coexisted at a point in time when neither was barred by the statute of limitations]; Erlich v. Superior Court of Los Angeles County (1965) 63 Cal.2d 551, 555 [it is "sufficient that the claim though unliquidated has matured"]; Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 764 [although seller was entitled to a set-off with respect to the matured payments, he had no right to a set-off as to payments that were not yet due under note from buyers]; see also Jones v. Mortimer (1946) 28 Cal.2d 627, 632-633 [cross-demands coexisted between California Mutual Building and Loan Association and a stockholder at time assessment against stockholders of the association became due and the stockholder's action against the association to recover for services rendered was pending].)

Accordingly, the stipulated facts do not establish that "cross-demands for money" ever co-existed between Del Charro Properties and the Kelleys as required for setoff under California law. Since we have concluded that Del Charro Properties had no right to setoff against the Kelleys that could have been asserted against Heron under California law, we need not determine whether the statutory requirements of section 553 for setoff were satisfied.

Even assuming arguendo that the claim of setoff was properly before the court on Del Charro's motion for summary judgment, *fn21 the burden did not shift to Heron to show a triable issue of material fact (§ 437c, subd. (p)) since Del Charro failed to present facts showing that cross-demands for money coexisted at any point in time. Del Charro failed to establish that it was entitled to a judgment as a matter of law (§ 437c, subd. (c)).

Heron was not required to present facts in support of its summary judgment motion showing that Del Charro Properties had no right to setoff since this was not a theory pled by Del Charro. (See Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1424 [moving party "not bound to address unpleaded issues in its motion for summary judgment"].) "[S]ummary judgment cannot be denied on a ground not raised by the pleadings. [Citations.]" (Bostrom v. County of San Bernardino, supra, 35 Cal.App.4th at p. 1663.) Moreover, as previously stated, the chronology of stipulated facts indicate that the Kelleys received their bankruptcy discharges sometime before the liquidation of Del Charro Properties' assets. Del Charro did not produce evidence showing a triable issue of material fact remained as to the existence of mutual demands for money between the partnership and the Kelleys. (§ 437c, subd. (p).)

Consequently, the trial court properly granted summary judgment in favor of Heron. *fn22

II. Attorneys' Fees

Heron appeals from the trial court's postjudgment order denying the request for attorneys' fees in the amount of $83,396 (incurred from April 2001 through December 2002) and additional fees incurred after December 31, 2002. (Code Civ. Proc., § 904.1, subd. (a)(2).) Heron had asserted that an award of attorneys' fees was proper under Code of Civil Procedure sections 685.070, subdivision (a)(6), and 685.040, which allows a judgment creditor to recover attorneys' fees as a cost of enforcing a judgment as specified.

Heron reasoned that attorneys' fees were warranted because the Kelleys' promissory note included an attorneys' fee clause, the Kelley judgment included an award of attorneys' fees, and the attorneys' fees incurred in these declaratory relief actions were incurred to enforce the charging order, which was obtained to enforce the underlying judgment against the Kelleys. On appeal, Heron reiterates its arguments below and contends that Del Charro cannot avoid attorneys' fees by characterizing its action as one for declaratory relief or by bringing a new action rather than litigating "the matter in the original Kelley action."

Del Charro contends that it did not bring the declaratory relief action to enforce the Heron judgment against the Kelleys, there was no contract between Heron and Del Charro providing for attorneys' fees, Del Charro was not a defendant in the Kelley action and is not a judgment debtor to Heron, and Del Charro "brought this action solely to determine its own obligations as between Heron's charging order claim against the former Kelley partnership interests and its obligation to make distributions to the Del Charro limited partners at the time of liquidation." Del Charro also maintains that the issue of attorneys' fees is moot if this court reverses the judgment.

Code of Civil Procedure section § 685.070 provides in pertinent part: "(a) The judgment creditor may claim under this section the following costs of enforcing a judgment: . . . [] (6) Attorney's fees, if allowed by Section 685.040." Code of Civil Procedure section 685.040 states: "The judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment. Attorney's fees incurred in enforcing a judgment are not included in costs collectible under this title unless otherwise provided by law. Attorney's fees incurred in enforcing a judgment are included as costs collectible under this title if the underlying judgment includes an award of attorney's fees to the judgment creditor pursuant to subparagraph (A) of paragraph (10) of subdivision (a) of Section 1033.5." (Italics added.) Code of Civil Procedure section 1033.5, subdivision (a), provides in pertinent part: "(a) The following items are allowable as costs under Section 1032: . . . [] (10) Attorney fees, when authorized by any of the following: [] (A) Contract."

Code of Civil Procedure section 685.070 further provides in pertinent part: "(b) Before the judgment is fully satisfied but not later than two years after the costs have been incurred, the judgment creditor claiming costs under this section shall file a memorandum of costs with the court clerk and serve a copy on the judgment debtor. Service shall be made personally or by mail. The memorandum of costs shall be executed under oath by a person who has knowledge of the facts and shall state that to the person's best knowledge and belief the costs are correct, are reasonable and necessary, and have not been satisfied. [] (c) Within 10 days after the memorandum of costs is served on the judgment debtor, the judgment debtor may apply to the court on noticed motion to have the costs taxed by the court. The notice of motion shall be served on the judgment creditor. Service shall be made personally or by mail. The court shall make an order allowing or disallowing the costs to the extent justified under the circumstances of the case. [] (d) If no motion to tax costs is made within the time provided in subdivision (c), the costs claimed in the memorandum are allowed." *fn23 (Italics added.)

By noticed motion, which is made before a judgment is satisfied in full, but not later than two years after the costs have been incurred, and served on the judgment debtor, a judgment creditor may claim costs authorized by Code of Civil Procedure section 685.040 and costs that may be claimed under Code of Civil Procedure section 685.070. (Code Civ. Proc., § 685.080.) Code of Civil Procedure section 685.090, provides in pertinent part: "(a) Costs are added to and become a part of the judgment: [] (1) Upon the filing of an order allowing the costs pursuant to this chapter. [] (2) If a memorandum of costs is filed pursuant to Section 685.070 and no motion to tax is made, upon the expiration of the time for making the motion. . . . [] (b) The costs added to the judgment pursuant to this section are included in the principal amount of the judgment remaining unsatisfied."

"The amount required to satisfy a money judgment is the total amount of the judgment as entered or renewed with the following additions and subtractions: [] (a) The addition of costs added to the judgment pursuant to Section 685.090. [] (b) The addition of interest added to the judgment as it accrues pursuant to Sections 685.010 to 685.030, inclusive. [] (c) The subtraction of the amount of any partial satisfactions of the judgment. [] (d) The subtraction of the amount of any portion of the judgment that is no longer enforceable." (Code Civ. Proc., § 695.210.)

The Kelley judgment was not rendered against Del Charro and Del Charro is not the judgment debtor. When considered in the context of the statutory scheme, it is evident that the costs provided by Code of Civil Procedure sections 685.070, subdivision (a)(6), and 685.040 are recoverable only against the judgment debtor and not against a third party partnership that is merely subject to a charging order in order to reach a judgment debtor's partnership interest in order to satisfy a judgment against the individual partner and not against another partner who is not the judgment debtor. We disagree with Mussetter v. Lyke (1988) 10 F.Supp.2d 944, 966, which is cited by Heron, to the extent it might suggest a different result.

III. Disposition

The judgment is affirmed. The order denying attorneys' fees is affirmed. Appellants Del Charro, et al. shall bear the costs on the appeal from the judgment.

Appellants James R. Heron, et al. shall bear the costs on the appeal from the order denying attorney's fees.

WE CONCUR:

RUSHING, P. J.

PREMO, J.

Opinion Footnotes

*fn1 The pledge agreements were not submitted on the motions for summary judgment. Del Charro does not argue that it should prevail based upon such security interest.

*fn2 The order specified that the unpaid balance of the Kelley judgment then consisted of "$655,951.90 in judgment principal (including net allowed costs), plus $5,592.10 in accrued interest, as of March 21, 1990, plus an additional $179.67 in interest for every day after March 21, 1990."

*fn3 A written document, entitled "Assignment of Rights to Partnership Distributions," indicated the assignment was made on June 24, 1991. It recites the following regarding consideration: "4. Consideration for Assignment. In consideration for the assignment hereunder, Assignors and HBK [Hare, Brewer, & Kelley, Inc.] shall receive consideration (the 'Consideration') with a face value of Two Million Dollars ($2,000,000), as follows: [] (a) All amounts paid to Heron West Santa Clara Associates by Assignee, Del Charro Partners or Gilroy Properties by reason of the lien of the Heron Charging Order on the Property will be credited towards the Consideration when paid to Heron; and [] (b) At such time as the Heron Charging Order has been fully released as to the Property, the then current amount of the HB & K Indebtedness to Assignee shall be reduced by the difference between $2,000,000 and the amount credited towards the Consideration under Section 4a above." The assignment provided: "As of the effective date of this Assignment, Assignors shall cease to be Limited Partners of Assignee."

*fn4 Section 727 of Title 11 of the United States Code provides in pertinent part: "(a) The court shall grant the debtor a discharge, unless-(1) the debtor is not an individual . . . ." "Partnerships and corporations may not discharge their debts in a liquidation proceeding under Chapter 7 of the [Bankruptcy] Code." (N.L.R.B. v. Better Bldg. Supply Corp. (9th Cir. 1988) 837 F.2d 377, 378.) A discharge under section 727, subdivision (a), generally "discharges the [Chapter 7] debtor from all debt that arose before the date of the order for relief . . . ." (§ 727, subd. (b).)

*fn5 The 1994 agreement recited that Del Charro Apartments limited partnership had been organized under California's Uniform Limited Partnership Act. (See Corp. Code, § 15501, et seq.) The agreement indicated that, by signing the agreement, the parties to the agreement elected to have the California Revised Limited Partnership Act (CRLPA) govern the partnership. (See Corp. Code, § 15611 et seq.)

*fn6 The parties explained in their stipulation: "As of March 30, 1990, the Kelleys' share of the ownership was less than 18 percent, but subsequent purchases of individual partners' interest by Del Charro increased the former Kelley share as well as the percentages owned by all of the remaining partners."

*fn7 All further unspecified references and all references to the Bankruptcy Code are to Title 11 of the United States Code.

*fn8 In March 1990, former Corporations Code section 15006, subdivision (2), provided in pertinent part: "[A]ny association formed under any other statute of this State . . . is not a partnership under this act, unless such association would have been a partnership in this State prior to the adoption of this act; but this act shall apply to limited . . . partnerships except insofar as the statutes relating to such partnerships are inconsistent herewith." (Stats. 1949, ch. 383, § 1, p. 675.) Corporations Code section 15522, subdivision (1), was "virtually identical" to former Corp. Code section 15028, subdivision (1). (Evans v. Galardi (1976) 16 Cal.3d 300, 310.) The Uniform Limited Partnership Act, which included Corporations Code section 15522, "became of no force or effect" on July 1, 1984 except as to then existing limited partnerships that did not elect to be governed by the Revised Limited Partnership Act. (Corp. Code, §§ 15533; 15711- 15712, 15714.)

*fn9 A "partner" within the meaning of CRLPA "means a limited or general partner." (Corp. Code, 15611, subd. (x).) A partner's interest in a limited partnership is personal property, which is assignable in whole or in part. (Corp. Code, §§ 15671, 15672, subd. (a).) "An assignment entitles the assignee to receive, to the extent assigned, the distributions and the allocations of income, gain, loss, deduction, credit, or similar item, to which the assignor would be entitled." (Corp. Code, § 15672, subd. (a).)

*fn10 See footnote 8 above.

*fn11 The definition of "creditor" includes an "entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor." (11 U.S.C. § 101, subd. (10)(A).) The definition of "claim" includes the "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed . . . ." (11 U.S.C. § 101, subd. (5)(A).) "Debt" "means liability on a claim." (11 U.S.C. § 101, subd. (11).) "Debtor" "means person or municipality concerning which a case under this title has been commenced." (11 U.S.C. § 101, subd. (13).)

*fn12 In Johnson, the court noted that "[section] 68(a) of the former Act . . . referred to mutual debts or mutual credits 'between the estate