Opinion ID: 588107
Heading Depth: 4
Heading Rank: 1

Heading: Consequences of Abandonment and the Relation Back Doctrine

Text: 11 Grant first contends that the government failed, as a matter of law, to establish that the Stobart prints were property belonging to the [chapter 7] estate. 18 U.S.C. § 152. Relying on the relation back doctrine developed under the Bankruptcy Act of 1867 (and its successor statutes) [hereinafter Bankruptcy Act], Grant contends that his conviction must be set aside in light of the trustee's post-concealment abandonment of the Stobart prints. According to Grant, the putative abandonment revested title in the same entity which held it at the commencement of the case and any interim concealment of the prints was nullified retroactively. 4 12 As Grant's relation back claim is raised for the first time on appeal, we review for plain error, see, e.g., United States v. Dietz, 950 F.2d 50, 55 (1st Cir.1991) (as a general rule, appellant may not switch horses mid-stream and raise new legal arguments not made the basis for objections in the district court), affording appellate relief only from  ' particularly egregious errors ... that seriously affect the fairness, integrity or public reputation of judicial proceedings.'  United States v. Griffin, 818 F.2d 97, 100 (1st Cir.) (quoting United States v. Young, 470 U.S. 1, 15, 105 S.Ct. 1038, 1046, 84 L.Ed.2d 1 (1985) (quoting United States v. Frady, 456 U.S. 152, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982))), cert. denied, 484 U.S. 844, 108 S.Ct. 137, 98 L.Ed.2d 94 (1987). 5 Assuming the trustee did abandon any interest of the chapter 7 estate in the Stobart prints allegedly concealed by Grant, a dubious proposition at best, see supra note 4, we conclude nonetheless that the doctrine of relation back is unavailing, as it is logically and legally inapposite to a criminal prosecution for concealing property belonging to [a chapter 7] estate arising under the Bankruptcy Code. 13 We note at the outset that the doctrine of relation back has been recognized in bankruptcy proceedings for more than a century, yet Grant has not cited to a criminal case in which the doctrine was applied. No less significantly, the doctrine originated within the very dissimilar framework of the Bankruptcy Act, and its application in relation to these chapter 7 proceedings under the Bankruptcy Code would serve none of the benign purposes for which it was fashioned. Rather, its extension to criminal proceedings for bankruptcy fraud arising out of a chapter 7 case would disserve the interests of justice which the relation back doctrine was designed to serve. See, e.g., Wallace v. Lawrence Warehouse Co., 338 F.2d 392, 394 n. 1 (9th Cir.1964) ([Relation back] is a fiction, and a fiction is but a convenient device, invented by courts to aid them in achieving a just result. It is not a categorical imperative, to be blindly followed to a result that is unjust.); Rosenblum v. Dingfelder, 111 F.2d 406, 409 (2d Cir.1940) (Relation back may be considered in the nature of a fiction which may be used if it fits the case at hand). 14 The bankruptcy doctrine of relation back was designed to assimilate the technical niceties of common law notions of title to the title vesting provisions of the Bankruptcy Act. See generally 4A James W. Moore, Collier on Bankruptcy pp 70.05, 70.42, at 69-75, 499-516 (14th ed. 1978) [hereinafter 4A Collier]. The technical rigidity of common law conceptions of title required that title at all times repose in some ascertainable person or entity. Id. at 73. Under the Bankruptcy Act, however, title to non-exempt property did not pass from the bankrupt by operation of law until the appointment and qualification of the trustee in bankruptcy, often weeks or months after the filing of the petition in bankruptcy. There being no alternative repository for the title of the bankrupt during the gap period preceding the qualification of the trustee in bankruptcy, the vesting mechanism of the doctrine of relation back became the fictional device whereby the trustee in bankruptcy acceded retroactively to the title held by the bankrupt as of the date of bankruptcy. 6 15 The relation back mechanism principally at issue in the present case--the title revesting mechanism--was designed to afford retroactive relief from random inequities visited upon third parties during the pre-abandonment period occasioned by the unsynchronized interaction between the title vesting scheme ordained under Bankruptcy Act § 70 and the appointment and qualification of the trustee in bankruptcy under Bankruptcy Act §§ 44(a), 45, 50(b) & (k), 11 U.S.C. §§ 72(a), 73, 78(b) & (k). 7 During the pre-abandonment period, the bankrupt was able to effect transfers to third parties who could be required by the trustee in bankruptcy to disgorge the property which was the subject of the transfer. See, e.g., Bankruptcy Act §§ 21(g), 70(d), 11 U.S.C. §§ 44(g), 110(d). In the event of an abandonment of the subject property by the trustee, the title revesting mechanism served to enable the interim transferee to assert the rights acquired by virtue of the interim transfer from the bankrupt. 16 The principal raison d'etre of the vesting mechanism no longer obtains under the Bankruptcy Code. The commencement of a voluntary chapter 7 case establishes a chapter 7 estate to which virtually all property interests of the debtor pass by operation of law. See Bankruptcy Code §§ 301, 302, 541(a), 11 U.S.C. §§ 301, 302, 541(a). The chapter 7 estate becomes the immediate repository for whatever title the debtor held at the commencement of the case, precluding the gap period which arose in proceedings under the Bankruptcy Act. Given the demise of the gap period, and the fact that title no longer vests in the trustee, the continuing vitality of the ancillary revesting mechanism is questionable as well. 8 Thus, the technical hurdles obstructing Grant's attempt to deploy a coherent relation back theory are insurmountable. 17 Perhaps more importantly, however, neither relation back mechanism was designed to insulate bankruptcy fraud, either in the bankruptcy proceeding itself or in any related criminal proceeding. Like other criminal statutes, section 152 is intended to deter the outlawed conduct. See, e.g., Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 423 (3d Cir.) (§ 152 intended to deter nondisclosure of assets), cert. denied, 488 U.S. 967, 109 S.Ct. 495, 102 L.Ed.2d 532 (1988); see also Stuhley v. Hyatt, 667 F.2d 807, 809 n. 3 (9th Cir.1982). Section 152 promotes efficient bankruptcy administration and an equitable allocation of the assets of debtor estates by criminalizing efforts to preempt a neutral and informed assessment by the trustee as to the status and value of the debtor's legal, equitable, and possessory interests in property at the commencement of the case. See United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir.1984) (It is a reasonable reading of 18 U.S.C. § 152 to conclude that the statute requires a bankrupt to disclose the existence of assets whose immediate status in bankruptcy is uncertain ... [e]ven if the asset is not ultimately determined to be property of the estate under the technical rules of the Federal Bankruptcy Code), cert. denied, 471 U.S. 1014, 105 S.Ct. 2016, 85 L.Ed.2d 299 (1985). If the debtor's schedules omit or camouflage an asset, the chapter 7 trustee is disabled from exercising an informed judgment as to whether the debtor had a sufficient legal, equitable, or possessory interest to permit and warrant its liquidation for the benefit of creditors. 18 The present case exemplifies a type of harm the bankruptcy fraud statute was designed to prevent. Although Grant vigorously argues that all the Stobart prints were abandoned by the trustee, their settlement agreement is more naturally interpreted as an abandonment of the two Stobart prints located and inventoried at the Grant residence, and not the five or six other Stobart prints allegedly removed on November 20, 1987. See supra note 4. It is sufficient to note that Grant's concealment of Stobart prints on November 20, 1987, put the trustee at a significant disadvantage in ascertaining the nature and value of the chapter 7 estate's interest in these prints. See In re Tarpley, 4 B.R. 145, 146 (Bankr.M.D.Tenn.1980) (abandonment revocable where trustee lacked knowledge or sufficient means of knowledge) (emphasis added). 19 The entire experience under the Bankruptcy Act reveals no recorded instance in which the doctrine of relation back was utilized to exonerate a bankrupt (or anyone else) from criminal responsibility for concealing property from a trustee in bankruptcy. The benign fiction that an abandonment reinstates the title the debtor held at the date of bankruptcy was designed to minimize injustice to third parties, not invite it. Similarly, as the doctrine of relation back lies in the realm of theoretics, its capacity to reform reality doubtless did not extend to undoing Grant's removal and concealment of the Stobart prints while they remained property of the chapter 7 estate, any more than an abandonment of property purposely ruined by fire could restore the premises, undo the arson, or exonerate the arsonist. 20