Opinion ID: 616444
Heading Depth: 2
Heading Rank: 2

Heading: The Corporate Bankruptcy Abandonment

Text: Donarumo and Murray Supply appeal the lower courts' determinations that claims against Donarumo held by the corporate bankruptcy estate were effectively abandoned by operation of law under 11 U.S.C. § 554(c). On appeal from a district court decision reviewing a bankruptcy court order, we review the bankruptcy court order directly, disturbing its factual findings only if clearly erroneous, while according de novo review to its conclusions of law. Spenlinhauer, 261 F.3d at 117. [A]ll legal or equitable interests of the debtor in property as of the commencement of bankruptcy, including causes of action, become property of the bankruptcy estate. 11 U.S.C. § 541(a)(1); DiMaio Family Pizza & Luncheonette, Inc. v. The Charter Oak Fire Ins. Co., 448 F.3d 460, 463 (1st Cir.2006). So long as the claims remain in the bankruptcy estate, the trustee `steps into the shoes of the debtor for the purposes of asserting or maintaining the debtor's causes of action[ ].' DiMaio, 448 F.3d at 463 (quoting In re Rare Coin Galleries, Inc., 862 F.2d 896, 901 (1st Cir.1988)). However, like any other property, claims that are disclosed by the debtor to the bankruptcy court may be abandoned by the trustee to the debtor. A debtor has a duty to disclose all assets to the bankruptcy court on a schedule, including legal claims. 11 U.S.C. § 521(a)(1); Graupner v. Town of Brookfield, 450 F.Supp.2d 119, 124 (D.Mass.2006). If an asset has been formally scheduled under § 521(a)(1) but has not been administered by the trustee when the estate is closed, the asset is abandoned to the debtor by operation of law. 11 U.S.C. § 554(c). [4] However, property that is neither administered nor abandoned (including property not properly scheduled that was never administered) remains property of the estate. 11 U.S.C. § 554(d). In this case, any of Drew's II's claims that were properly scheduled under § 521(a)(1) were abandoned by operation of law under § 554(c), but those claims that were not properly scheduled remain property of the estate under § 554(d). This would be an easy issue to decide if the Furlongs had listed every theory of recovery they intended to pursue against Donarumo, or had more broadly described their cause of action as claims arising from the sale of Drew's I, instead of scheduling Claims for Breach of Contract (Andrew Donarumo et al.). However, those are not the facts we have, and we are left with the task of addressing what level of detail is required for proper scheduling. While a legal claim that is totally unscheduled may not be abandoned by operation of law under § 554(c), Jeffrey v. Desmond, 70 F.3d 183, 186 (1st Cir.1995), a partially-scheduled claim requires a more careful inquiry into whether the requirements of § 521(a)(1) were met. Once an asset is referenced on a schedule, § 521(a)(1) does not specify the level of detail with which that asset must be described. See Furlong I, 437 B.R. at 718 (quoting Kuehn v. Cadle Co., No. 5:04-cv-432-Oc-10GRJ, 2007 WL 809656, at  (M.D.Fla. March 15, 2007)) (The statute does not provide any guidance as to the level of specificity required when listing assets on a bankruptcy schedule.) (alteration omitted); see also In re Mohring, 142 B.R. 389, 395 (Bankr.E.D.Ca.1992) (There are ... no bright-line rules for how much itemization and specificity is required on a bankruptcy schedule.), aff'd, 153 B.R. 601 (9th Cir. BAP 1993), aff'd, 24 F.3d 247 (9th Cir.1994). While a debtor has a duty to prepare schedules carefully, completely, and accurately, generally, an asset is adequately scheduled if its description exhibits reasonable particularization under the circumstances. In re Mohring, 142 B.R. at 394-95; see also Payne v. Wood, 775 F.2d 202, 205 (7th Cir.1985)(It would be silly to require a debtor to itemize every dish and fork....). As investigation is part of the Trustee's duties under § 704, see In re Bonner, 330 B.R. 880, 2005 WL 2136204, at  (6th Cir. BAP 2005); 11 U.S.C. § 704(a)(4), a debtor is required only to do enough itemizing to enable the trustee to determine whether to investigate further, Payne, 775 F.2d at 207. Here, the Trustee was not only on inquiry notice as to the extent of the asset, he was on actual notice. [5] The Trustee was able to conduct his investigation into the value of the claims with the help of the sixteen-count draft complaint before determining that it would not be cost-effective to pursue the claims. Further, the Bankruptcy Code does not require every component of a cause of action to be spelled out on a debtor's schedule. See Bonner, 330 B.R. 880, at  (where debtors scheduled Auto Accident Claim, it was common knowledge that a personal injury suit could arise out of the same underlying facts, and the trustee was on notice to investigate, satisfying the requirements of § 521); cf. Tilley v. Anixter, Inc., 332 B.R. 501, 510-11 (D.Conn.2005) (reasoning that the scheduling of one claim does not amount to the proper scheduling of another if the first claim does not put the trustee on inquiry notice to investigate the second). Here, the Furlongs described their claims with reasonable particularity and it is common knowledge that business tort claims and claims under Mass. Gen. Laws ch. 93A might arise out of the same underlying facts as a claim for breach of contract; [6] therefore, the Trustee was on inquiry notice to investigate the extent of the asset. Moreover, the Trustee, having actual knowledge of the contents of the draft complaint, was able to complete his investigation into the value of the claims before making the decision to abandon the claims from the estate. Therefore, all of Drew's II's claims against Donarumo were properly scheduled under § 521(a)(1) and were abandoned by operation of law under § 554(c) when the corporate bankruptcy case was closed.