Boisaubin v. Blackwell (In re Boisaubin), No. 19-6040
| Decision Date | 14 May 2020 |
| Docket Number | No. 19-6040 |
| Citation | 614 B.R. 557 |
| Parties | IN RE: Christopher L. BOISAUBIN, Debtor Christopher L. Boisaubin, Debtor-Appellant v. Robert J. Blackwell, Trustee-Appellee |
| Court | U.S. Bankruptcy Appellate Panel, Eighth Circuit |
Counsel who presented argument on behalf of the appellant was Kenneth Michael Chackes, of Saint Louis, MO. The following attorney(s) appeared on the appellant brief: Kenneth Michael Chackes, of Saint Louis, MO.
Counsel who presented argument on behalf of the appellee was Steven M. Wallace, of Glen Carbon, IL. The following attorney(s) appeared on the appellee brief: Steven M. Wallace, of Glen Carbon, IL., Steven Neal Beck, of O'Fallon, MO.
Before SALADINO, Chief Judge, NAIL, and SANBERG, Bankruptcy Judges.
Christopher L. Boisaubin ("Debtor" or "Appellant") appeals three orders entered by the Bankruptcy Court1 on November 18, 2019. The orders: 1) granted Trustee's Second Motion to Compromise Controversy; 2) denied an Agreed Motion to Seal; and 3) denied Debtor's Motion to Seal. Robert J. Blackwell is the appointed successor Chapter 7 Trustee of Appellant's Missouri Bankruptcy estate ("Trustee"). The orders relate to Trustee's settlement of Appellant's sexual assault claim (the "Claim") against the Marianist Province of the United States ("Marianist Province," and together with Trustee, the "Appellees."). The Claim had not been disclosed initially in Appellant's current and prior bankruptcy case filings.
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 158(b). For the reasons stated below, we affirm.
There are three separate cases involved in this appeal:
First, Appellant's Chapter 7 bankruptcy case (with his then-wife) filed on March 6, 1990, in the United States Bankruptcy Court for the Northern District of Illinois (the "Illinois Bankruptcy").2 Appellant received a discharge in August 1990, and the case was initially closed in October 1990.
Second, Appellant's instant Chapter 7 bankruptcy case filed on January 30, 2009 (the "Missouri Bankruptcy").3 The original Chapter 7 Trustee filed a Report of No Distribution on February 25, 2009, and Appellant received a discharge on April 28, 2009.
Third, Appellant's civil action pursing the Claim in Missouri state court filed on April 9, 2014 (the "State Court Action").4
The alleged perpetrator of the sexual assault, now deceased, was a member of the Marianist Province and faculty at Appellant's high school. The assault allegedly occurred in the early 1970s. Appellant asserted that due to his repressed memory of the assault, the statute of limitations on the Claim had not run under Missouri law at the time he filed the State Court Action.5
Appellant failed to disclose the Claim prior to the initial closing of either the Illinois Bankruptcy or Missouri Bankruptcy. Appellant disclosed these two bankruptcy cases in the State Court Action, and on May 18, 2017, Marianist Province filed a motion for summary judgment in that action for Appellant's lack of standing.
Appellant filed a motion to reopen this case on June 26, 2017, and a motion to reopen the Illinois Bankruptcy on July 17, 2017, in order to disclose the Claim. The Bankruptcy Court reopened this case on July 11, 2017, and appointed Trustee as the successor trustee on July 18, 2017. The Illinois Bankruptcy Court initially denied the motion to reopen,6 but subsequently granted it,7 and the Illinois Bankruptcy was reopened on December 1, 2017. On September 19, 2018, the trustee in the Illinois Bankruptcy filed a Report of No Distribution.
After the Illinois Bankruptcy trustee filed the Report of No Distribution, Trustee sought to settle the Claim in the Missouri Bankruptcy and on July 10, 2019, Trustee filed a motion to settle the Claim in this appeal (the "Proposed Settlement"). No creditor objected to the Proposed Settlement, but Appellant opposed the motion. On August 13, 2019, the Bankruptcy Court held a hearing on the Proposed Settlement where, for the first time, Appellant argued that the Claim is not property of the Missouri Bankruptcy estate.
After the hearing on the Proposed Settlement was held, but before an order was entered, Marianist Province and Appellant submitted motions to file documents under seal that they believed were related to damages for the alleged sexual assault. The parties filed an Agreed Motion to Seal on August 23, 2019, and Appellant filed a separate Motion to Seal on August 24, 2019.
On November 18, 2019, the Bankruptcy Court entered orders approving the Proposed Settlement and denying both motions to file under seal.
Briefly, in the order approving the Proposed Settlement, the Bankruptcy Court held that the Claim is property of the Missouri Bankruptcy estate under 11 U.S.C. § 541, and applied the Lovald factors to hold that the Proposed Settlement was in the best interest of the estate and fell within the range of reasonableness.8 The orders denying the motions to file under seal held that the motions were overbroad,9 procedurally defective,10 and that most of the documents to be submitted were either part of the public record or had previously been filed with the Bankruptcy Court. Further, the parties had failed to argue that the documents were not given appropriate weight by Trustee in settling the Claim.
Appellant timely appealed the Bankruptcy Court's orders, filing his Notice of Appeal on November 27, 2019. The Panel held oral argument on April 3, 2020.
The issues on appeal are: 1) whether the Bankruptcy Court erred in finding that the Claim is property of the Missouri Bankruptcy estate; 2) whether the Bankruptcy Court erred in approving the Proposed Settlement; and 3) whether the Bankruptcy Court erred in denying the motions to file under seal.
We review the Bankruptcy Court's conclusions of law de novo .11 Whether property is included in the bankruptcy estate is a question of law.12
We review the Bankruptcy Court's approval of the Proposed Settlement for plain error or abuse of discretion.13 We also review its orders denying the motions to file under seal for an abuse of discretion.14 An abuse of discretion occurs "if the court bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence."15 We turn first to the approval of the Proposed Settlement.
The primary issue here is whether the Claim is property of the Missouri Bankruptcy estate. The Bankruptcy Court held that upon abandonment in the Illinois Bankruptcy, the Claim reverted back to Appellant as of the petition date for the Illinois Bankruptcy pursuant to 11 U.S.C. § 554. Thus, when Appellant filed the Missouri Bankruptcy in 2009, the Claim was property of the estate.
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
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
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 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. Klien-Swanson , 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,...
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