Opinion ID: 4534281
Heading Depth: 2
Heading Rank: 1

Heading: Estate Property

Text: Appellant concedes that the Claim was property of the Illinois Bankruptcy estate. Although no formal order of abandonment was entered, the Bankruptcy Court held that sufficient evidence in the record supported a finding of abandonment by operation of law. In this appeal, Appellant argues that upon abandonment by the Illinois Bankruptcy trustee, the Claim reverted solely to his control and did not become part of the Missouri Bankruptcy estate. 16 We first turn to what constitutes “property of the estate.” It is defined broadly and includes “all legal or equitable interests of the debtor in property as of the commencement of the case,” and any “interest in property that the estate acquires after the commencement of the case.”17 It also includes contingent interests in property. 18 15 Lovald, 525 F.3d at 654 (citations and internal quotation omitted). 16 The parties agree that the Claim was abandoned in the Illinois Bankruptcy. 17 11 U.S.C. §§ 541(a)(1), (a)(7). 18 Longaker v. Boston Sci. Corp., 715 F.3d 658, 661 (8th Cir. 2013); Stoebner v. Wick (In re Wick), 276 F.3d 412, 415 (8th Cir. 2002); see Segal v. Rochelle, 382 -6- Property of the estate includes causes of action that a debtor could have brought at the time of filing a petition. 19 While Appellant asserts that he did not have a cause of action at the time he filed his bankruptcy cases because he did not regain his memory of the alleged assault until 2012, a cause of action is property of the estate even if a debtor was not aware of it. 20 Here, it is the alleged sexual assault that constitutes the cause of action, not the recovery of his memory. Thus, because the assault occurred many years prior to the filing of Appellant’s first bankruptcy case, it was a prepetition cause of action included in property of the estate. 21 U.S. 375, 379 (1966) (“To this end the term ‘property’ has been construed most generously and an interest is not outside its reach because it is novel or contingent or because enjoyment must be postponed.”); In re Carlton, 309 B.R. 67, 71 (Bankr. S.D. Fla. 2004) (“[Section 541(a)(1)] sweeps into the bankruptcy estate all interests held by the debtor-even future, non-possessory, contingent, speculative, and derivative interests.”). See generally Longaker v. Boston Sci. Corp., 872 F. Supp. 2d 816, 822 (D. Minn. 2012) (collecting cases). 19 Peoples v. Radloff (In re Peoples), 764 F.3d 817, 820 (8th Cir. 2014); Moratzka v. Morris (In re Senior Cottages of Am., LLC), 482 F.3d 997, 1001 (8th Cir. 2007); United States ex rel. Gebert v. Transp. Admin. Servs., 260 F.3d 909, 913 (8th Cir. 2001). 20 5 Collier on Bankruptcy ¶ 541.07 (16th ed. 2019) (providing that the estate includes even those causes of action of which the debtor was not aware of prior to the petition date); see Longaker, 715 F.3d at 661–62; see Segal, 382 U.S. at 379–80; Tyler v. DH Capital Mgmt., Inc., 736 F.3d 455, 461–62 (6th Cir. 2013) (collecting cases); Simmerman v. Ocwen Fin. & Mortg. Servs., Inc. (In re Simmerman), 563 B.R. 47, 54–55 (Bankr. S.D. Ohio 2011); In re Michael, 423 B.R. 323, 330 (Bankr. D. Idaho 2009); see also In re Alvarez, 224 F.3d 1273, 1276 n.7 (11th Cir. 2000) (“[A] cause of action can accrue for ownership purposes in a bankruptcy proceeding before the statute of limitations begins to run.”). 21 Longaker, 715 F.3d at 661–62; see Segal, 382 U.S. at 379–80; Tyler v. DH Capital Mgmt., Inc., 736 F.3d 455, 461–62 (6th Cir. 2013) (collecting cases); Simmerman v. Ocwen Fin. & Mortg. Servs., Inc. (In re Simmerman), 563 B.R. 47, 54–55 (Bankr. S.D. Ohio 2011). See supra notes 18–19. -7- Property of the estate remains in the estate until it is administered, abandoned, or when the case closes (if the property has been disclosed). 22 The Bankruptcy Court deemed the Claim abandoned in the Illinois Bankruptcy. 23 When property is abandoned under Section 554, control over that property is revested in the debtor or the party with the possessory interest in it as if the bankruptcy never happened. 24 Appellant argues the Claim could not have been part of the Missouri Bankruptcy estate when he filed his petition in 2009 because it was still property of the Illinois Bankruptcy estate. This is correct. However, at the time that Appellant filed the Missouri Bankruptcy, he had a contingent reversionary interest in the Claim, because it had not yet been administered and remained property of the estate in the Illinois Bankruptcy. 25 When the trustee chose not to administer the Claim in 22 Property abandoned by the trustee or on request of a party in interest is no longer property of the estate. 11 U.S.C. §§ 554(a)–(b). Property scheduled by a debtor and not otherwise administered is abandoned at the close of the case. Id. § 554(c). Unadministered property that was unscheduled and, therefore, not abandoned under Section 544(c) remains property of the estate. Id. § 544(d); see 5 Collier on Bankruptcy ¶ 554.01 (16th ed. 2019). 23 Here, the Claim was not disclosed initially in either the Illinois Bankruptcy or Missouri Bankruptcy. After the two bankruptcy cases were reopened, the Claim was scheduled in both cases. 24 Although a debtor is usually the party with the possessory interest, in some instances it may be some other party. 5 Collier on Bankruptcy ¶ 554.02[3] (16th ed. 2019) (citing the legislative history of Section 554); e.g., Dewsnup v. Timm (In re Dewsnup), 908 F.2d 588, 590 (10th Cir. 1990), aff’d, 502 U.S. 410 (1992); In re Malden Mills Indus., Inc., 303 B.R. 688, 700 (B.A.P. 1st. Cir. 2004) (citing the legislative history of Section 554); In re Flintkote Co., 486 B.R. 99, 121 (Bankr. D. Del. 2012); In re BH S & B Holdings LLC, 435 B.R. 153, 161 (Bankr. S.D.N.Y. 2010); see Brown v. O’Keefe, 300 U.S. 598, 602 (1937). 25 A reversionary interest is “any future interest left in a transferor or his successor in interest,” and arises when the grantor “transfers less than his entire interest” and it is “either certain or possible that [the grantor] will retake the -8- the Illinois Bankruptcy, however, it revested in the entity that held the contingent reversionary interest in the Claim—here, the Missouri Bankruptcy estate. 26 At oral argument, Appellant agreed that contingent interests may be part of the bankruptcy estate, but argued that the Claim here was subject to the complete discretion of the Illinois Bankruptcy trustee and thus could not become property of the Missouri Bankruptcy estate. In support, Appellant cited Seaver v. KleinSwanson, which held that a debtor had no legal interest in potential future bonuses because the employer had complete discretion in awarding bonuses and had not decided whether to grant bonuses at the time of the bankruptcy petition filing. 27 There, the debtor had nothing more than a hope for a bonus. 28 Seaver is inapplicable here because Appellant had a legal property interest in the Claim, a contingent reversionary interest, at the time he filed the Missouri Bankruptcy regardless of whether the Illinois Bankruptcy trustee decided to pursue it. 29 Finally, Appellant argues that the Bankruptcy Court erred by stating that the Claim was abandoned nunc pro tunc under Section 554. At oral argument, Appellant transferred interest at a future date.” Marvin M. Brandt Revocable Tr. v. United States., 572 U.S. 93, 105 n.4 (2014) (citing Restatement (First) of Property § 154(1) (1936)). 26 Contingent, reversionary interests in property are considered property of the estate under Section 541(a). See In re Graves, 609 F.3d 1153, 1156–57 (10th Cir. 2010) (collecting cases). 27 Seaver v. Klien-Swanson (In re Klien-Swanson), 488 B.R. 628, 633 (B.A.P. 8th Cir. 2013). 28 Id. at 635; see Drewes v. Vote (In re Vote), 276 F.3d 1024, 1026–27 (8th Cir. 2002) (distinguishing between an existing, contingent interest with some potential value, and a mere hope). 29 See Gebert, 260 F.3d at 913; 5 Collier on Bankruptcy ¶ 541.07 (16th ed. 2019). -9- cited the recent United States Supreme Court decision rejecting the improper use of nunc pro tunc orders in Roman Catholic Archdiocese of San Juan, Puerto Rico v. Acevedo Feliciano for support. 30 We disagree with Appellant’s argument. The Supreme Court’s opinion was referring to those orders that attempted to create a fact in the past, rather than a true nunc pro tunc order, which corrects a mistake in the record to make the record accurately reflect a past event that had actually occurred. As the Supreme Court stated: “[n]unc pro tunc orders are not some Orwellian vehicle for revisionist history—creating ‘facts’ that never occurred in fact.” 31 Rather, a “true” nunc pro tunc order is one that corrects the record to “reflect the reality of what has already occurred.” 32 Here, there was neither a correction of the record nor the creation of facts. There was simply an application of the Bankruptcy Code’s revesting upon abandonment as of the date of the filing of a petition pursuant to Section 554, as discussed above. Appellant’s argument has no merit. We hold that the Bankruptcy Court did not err in determining that the Claim is property of the Missouri Bankruptcy estate.