# U nit edStates C ou rt o f App eal s For th e Firs t C ircu it

No. 09-9021 IN RE MICHELLE J. HANDY, Debtor.

CHRISTOPHER PARKER, Appellant,

v . MICHELLE J. HANDY, Appellee.

ON APPEAL FROM THE BANKRUPTCY APPELLATE PANEL

FOR THE FIRST CIRCUIT

Before Lynch, Chief Judge, Torruella and Howard, Circuit Judges.

Stanley Greenberg for appellant.

October 22, 2010-2- LYNCH, Chief Judge . Christopher Parker app e a l s from a Bankruptcy Appellate Panel (BAP) deci s i o n affirming a bankruptcy court order denying his motion for relief from stay. Parker's objective is to reopen a Maine state court pro c e e d i ng against Michelle J. Handy brought pursuant to Maine's versi o n of the Uniform Fraudulent Transfer Act (UFTA). Me. Rev. Stat. tit. 14, § 3571 et seq. During the state court proceeding, Handy filed for bankruptcy, staying Parker's state action against her.

Parker filed a motion in bankruptcy court for relief from stay. Handy received d i s c harge during a hearing, which included Parker's motion. At the time of discharge, Parker had obtained neither a favorable judgment from the state court, nor a lien against Handy's property. The bankruptcy court held that 11 U.S.C. § 524(a)(2) precludes Parker from pursuing his action against Handy, and the BAP affirmed. We affirm. I. Parker sued Handy i n a Maine state district court, alleg i n g t hat Handy purchased a residence with funds conveyed to her by her ex-husband in violation of the UFTA. He sought both money damages and the imposition of a constructive trust on the residence. Parker also filed a lis pendens, but he has abandoned the claim that this created a lien on the residence. The state court entered judgement for Handy, and Parker timel y a p p ealed to-3-

the Maine Supreme Judicial Court. His appeal was stayed when Handy filed for bankruptcy under Chapter 7.

Promulgated in 1984, the UFTA seeks "to protect the debtor's estate from being depleted to the prejudice of the debtor's unsecured credit o r s . " UFTA § 3, cmt. 2; In re Jackson, 459 F.3d 117, 121 n.3 (1st Cir. 2006). It forb i d s a d ebtor from making two types of transfers: (1) those "with actual intent to hinder, delay, or defraud any creditor" and (2) those in which the debtor does not receive a "reasonably equivalent value in exchange" in light of his financial circumstances. UFTA § 4(a).

In his state court action, Parker alleged t h at Handy received funds in a forbidden transfer of the first type. On or about Apr i l 1 0 , 2003, Parker obtained a judgment against Handy's ex-husband, Walter Loeman. Parker did not receive payment. He alleged t h a t while Handy and Loeman were still married, Handy purchased a r e s i dence with the assistance of $26,410.12 in funds from Loeman. Under the UFTA, the p r e sence of "actual intent" to defraud a creditor may be assessed in light of whether the transfer was to an "insider" like a "r e lative of the debtor." UFTA §§ 4(b)(1); 1(7)(i)(A).

With his state court appeal stayed, Parker filed a motion in bankruptcy court for relief from stay. Under 11 U.S.C. § 524(a)(2), a discharge from bankruptcy operates as an injunction against in personam claims against a debtor. Parker argued that-4-

h i s r equested relief in state court included an order of sale of Handy's residence and t h a t " [t]o this extent," his claim against Handy was a claim in rem. He asserted that Handy's discharge in bankruptcy would not affect this in rem claim even though he was an unsecured creditor. Handy filed an objection, arguing that as an unsecured creditor Parker did not hold an in rem claim for purposes of 11 U.S.C. § 524(a)(2).

The bankruptcy court denied Parker's motion. During the

course of the proceedings, Handy received a discharge. In an oral decision, the bankruptcy court held that Parker could not proceed against Handy's property beca u s e he did not have a claim in rem. It held that Parker had not established an interest in the property by either attachment or a provisional remedy. Parker's request for a constructive trust, it held, did not give rise to a cause of acti o n i n r e m . T h e b a n k r u p t c yc o u r t a l s o h e l dt h a t P a r k e r h ad failed to object to Handy's invocation of Maine's homestead exemption, and that as an unsecured creditor he could not pursue that exempt property.

The BAP affirmed, rejecting Parker's arguments that (1) he held an in rem claim because he had sought a constructive trust in his state cour t a c t i o n , (2) he could pursue his claims postdischarge even though he did not obtain an attachment prior to bankruptcy, and (3) he did not need to object to Handy's homestead claim. As to the first, the BAP reiterated the bankruptcy court'sHandy has failed to appear or file a brief on appeal. We 1 allowed Parker's attorney to present oral argument, nonetheless. -5- holding that a constructive trust is a remedy, not a status. As to the second, it held that Parker cited no authority supporting his contenti o n that the Bankruptcy Code allows him to proceed postdischarge. As to the third, the BAP held that Parker could not proceed against the exempt property because he did not possess a claim in rem. II.

This court reviews appeal s f r o m the BAP under the same standards of review as the BAP reviews appeals from the bankruptcy court. We review the bankruptcy court's legal conclusions de novo

1 and its factual findings for clear error. Fed R. Bankr. P. 7052 cmt. 11; In re Marrama, 430 F.3d 474, 477 (1st Cir. 2005). Parker raises the same purely legal questions before us that he raised before the BAP.

Parker first asserts that his state court action included a cause of action in rem against Handy's residence. He argues that claims under the UFTA sound in rem and that an action that seeks to impose a constructive trust is an in rem action. In making this claim, Parker relies upon Pennoyer v. Neff, 95 U.S. 714 (1877), for the proposition that an action may confer in rem jurisdiction on a court even in the absence of a pre-judgment attachment of the property in question. Id. at 724 (citing Boswell's Lessee v. Otis,A prelimin a r y s eizure is unnecessary in suits that 2 concern a valid lien. Roller v. Holly, 176 U.S. 398, 405 (1900). -6- 50 U.S. (9 How.) 336 (1850)). He cites no Maine law in support of his argument.

In Pennoyer, the Supreme Court held that an action in rem may proceed when the property is brought under the court's control either by "seizure or some equivalent a ct." 95 U.S. at 727. Subsequent d e cisions have held that a court may not exercise jurisdiction over an action quasi in rem absent an attachment or garnishment. Pennington v. Fourth Nat'l Bank, 243 U.S. 269, 272 (1917). In actions purely in re m , h o w e v e r, it appears that the rule in Pennoyer still applies. 4A Wright & Miller, Federal Practice and Procedure § 1070, at 292 (3d ed. 2002). 2

It does not follow that Parker has stated a claim in rem. He concedes that he did not obtain a lien, attachment, or provisional remedy. He does not argue that the state district court exercised control over Handy's residence. Parker argues only that he c a n m a intain an in rem claim because he requested a constructive trust.

No Maine case supports this argument and our view, like that of the BAP, is that Parker's request for a constructive trust did not of itself give rise to a cause of action in rem. Constructive trusts are not substantive rights that confer a cause of action; they a re remedial devices employed by courts once-7-

liability is found and where equity requires. See Yavuz v. 61 MM, Ltd., 576 F.3d 1166, 1176 (10th Cir. 2009); Mayo v. Hartford Life Ins. Co., 354 F.3d 400, 409 (5th Cir. 2004). Without more, Parker cannot transform a request for a remedy in rem into a cause of action in rem. It follows that before Handy's bankruptcy petition, Parker's unsuccessful claims against Handy were only in personam.

Next, Parker asserts that h e m ay pursue his fraudulent conveyance claims post-discharge. He makes two related arguments,one summarily. First, Parker claims that he retains a prebankruptcy claim in rem that survives the ban k r u ptcy discharge injunction under 11 U.S.C. § 524. Second, relying on a Massachusetts bankruptcy decision, In re Palumbo, 353 B.R. 37 (Bankr. D . M a s s. 2006), Parker claims that an unsecured creditor may pursue a fraudulent conveyance claim against a debtor's property post-discharge consistent with 11 U.S.C. § 524.

Both of t h e s e claims fail. Parker's first claim fails because he did not hold an in rem c l a im pre-discharge. Parker's second claim is not properly before this court. He did not raise it before the bankruptcy court, so he may not raise it on appeal. Fish Mkt. Nominee Corp. v. Pelofsky 72 F.3d 4, 6 (1st Cir. 1995). In any event, this claim is doubly waived because Parker also failed to adequately present it on appeal. United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990). Palumbo does not bind us,-8-

a n d P arker makes no argument as to why an unsecured creditor may proceed post-discharge consistent with 11 U.S.C. § 524(a)(2).

Finally, Parker asserts that the bankruptcy court erred in holding that he was obliged to object to Handy's claim of a homestead exemption. Because Parker does not possess a claim in rem against Handy's residence, this claim is also not properly before us. III.

The j u dgment of the Bankruptcy Appellate Panel is affirmed.