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Mrozek v. Intra Financial Corp.6/9/2005
), and likewise property that has been scheduled, § 521(l), but "not otherwise administered at the time of the closing of a case." § 554(c).
Morlan v. Universal Guar. Life Ins. Co., 298 F.3d 609, 618 (7th Cir. 2002). Morlan explains the requirements for abandonment of a claim as: (1) notice and hearing; (2) property of the estate that is burdensome to the estate or is of inconsequential value or benefit to the estate; (3) property that has been scheduled; but (4) not otherwise administered at the time of closing of the bankruptcy estate. Id. at 618. PMI's claim against Mrozek meets these parameters.
On March 27, 1996, PMI's bankruptcy trustee, Randi L. Osberg, gave notice in a report filed with the court that there were "no assets in the estate" that were not "either inconsequential in value or burdensome to the estate." Trustee Osberg stated further, "This report shall be considered as an abandonment of all scheduled property of the bankruptcy estate." PMI's claim against Mallery was "scheduled" in the estate, as PMI had listed it as a claim in its filings with an "unknown" value, but the trustee had not administered it. 11 U.S.C. § 554(l). On November 26, 1996, a final decree was entered that concluded PMI's bankruptcy action.
When a bankruptcy trustee abandons a scheduled claim, it reverts to the debtor, as PMI's claim did under 11 U.S.C. § 554(c). As the United States Court of Appeals for the Tenth Circuit recently explained: "Property abandoned under [§ 554] ceases to be part of the estate. . . . It reverts to the debtor and stands as if no bankruptcy petition was filed." Dewsnup v. Timm, 908 F.2d 588, 590 (10th Cir. 1990) (citing Brown v. O'Keefe, 300 U.S. 598, 602 (1937)). "Following abandonment, 'whoever had the possessory right to the property at the filing of bankruptcy again reacquires that right.'" Dewsnup, 908 F.2d at 590 (citation omitted). This is also the view of the Seventh Circuit, which has explained, "the effect of a trustee's abandoning a claim is to revest the ownership of it in the debtor." Morlan, 298 F.3d at 617 (citing Koch Refining v. Farmers Union Cent. Exch., Inc., 831 F.2d 1339, 1346 n.9 (7th Cir. 1987)); Catalano v. Commissioner, 279 F.3d 682, 685 (9th Cir. 2002); Miller v. Generale Bank Nederland, N.V., 217 F.3d 74, 76 (2d Cir. 2000).
The court of appeals did not accord merit to PMI's abandonment argument. It reasoned that the cases cited by PMI, Roberts v. Pearce Construction Co., 624 So. 2d 1009 (Ala. 1993) and Barletta v. Tedeschi, 121 B.R. 669 (N.D.N.Y. 1990), were standing cases, and therefore unsupportive of PMI's abandonment argument. The court of appeals relied heavily on Bank of Lafayette v. Baudoin, 981 F.2d 736 (5th Cir. 1993). We conclude its reliance is misplaced.
Abandonment did not occur in Baudoin. First, according to the opinion, the claim at issue was never "scheduled" in the bankruptcy . Baudoin, 981 F.2d at 739 n.4. The court reasoned:
e do not consider the Baudoins' earlier mentioned, vague reference to 'Any possible claim against creditor for actions taken against debtors prior to bankruptcy proceeding' in their schedule of assets a sufficient scheduling of their claim against the Bank . . . .
Id. If a claim has not been scheduled under 11 U.S.C. 521(l) in the bankruptcy , it cannot meet the criteria that 11 U.S.C. 554(c) requires as a precondition for abandonment. Morlan, 298 F.3d at 618. Second, the trustee did not give notice of intent to abandon the claim. Baudoin, 981 F.2d at 739 n.4. The court reasoned, " professed intent [by the trustee] to abandon cannot constitute abandonment, as 11 U.S.C. § 554(a) requires notice and a hearing prior to abandonment." Id.
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