In re Medley
| Citation | 29 BR 84 |
| Decision Date | 28 January 1983 |
| Docket Number | Bankruptcy No. 381-03597. |
| Parties | In re John Lemuel MEDLEY and Helen Louise Medley, Debtors. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Middle District of Tennessee |
Robert H. Waldschmidt, Nashville, Tenn., Trustee.
Donald J. Serkin, Nashville, Tenn., for debtors.
This matter is before the court on the debtors' objection to the trustee's administration of assets in this reopened bankruptcy estate and on the debtors' application to amend Schedule B-4 of their bankruptcy petition to claim as exempt a federal income tax refund in the amount of $1,346.00. Upon consideration of the evidence presented at the hearing, stipulations, briefs of the parties and the entire record, this court concludes that the debtors' objection to the trustee's administration of assets and the debtors' application to amend their exemption schedules should be denied.
The facts in this case are basically undisputed. The debtors John and Helen Medley filed a voluntary Chapter 7 petition in this court on November 12, 1981. The debtors did not list any potential tax refund as an asset of their estate under either Schedule B-2 or Schedule B-3. Nor did the debtors claim an exemption in any tax refund under Schedule B-4. The debtors did note, in response to a series of questions propounded in their Statement of Schedules and Affairs, that they had received a tax refund of $485.00 in 1980. In answer to the question of what tax refunds they were currently entitled to, the debtors stated with some ambiguity that in
The debtors' meeting of creditors was subsequently set on January 4, 1982. The order and notice issued for the meeting of creditors expressly stated that "Unless the court extends the time, any objections to the claims of the debtor of exempt property must be filed no later than 15 days after the meeting of creditors." The debtors failed to appear at their scheduled meeting of creditors and, after a hearing at which the debtors sufficiently explained their absence, the debtors were permitted to attend their meeting of creditors on February 8, 1982.
The trustee submitted his report that this was a no asset case on February 8, 1982. The report specifically stated that, "any property listed in the debtor's schedules of assets will be deemed abandoned" once the report is accepted by the court. The debtors were granted a discharge from this court on March 16, 1982. The court approved the trustee's report of no assets and closed this case on April 15, 1982.
On May 14, 1982, the trustee filed an application to reopen this case for the purpose of administering a tax refund check in the amount of $1,346.00. On May 27, 1982, the court granted the trustee's application and reappointed Robert H. Waldschmidt as trustee in this case. The court also issued an order and notice of assets to all creditors in this case on June 11, 1982.
The debtors had previously filed an objection to the trustee's report of assets on May 27, 1982. The debtors alleged that, when this case was originally closed, the trustee effectively abandoned any interest he possessed in the debtors' income tax refund and therefore this property interest properly revested in the debtors.
The debtors also submitted on June 7, 1982, an application to amend their exemption schedules to claim the income tax refund check as exempt. On June 8, 1982, the trustee filed an objection to the debtors' application to amend, essentially contending this amendment was untimely filed.
The court initially concludes that the trustee has not abandoned any interest he possesses in the debtors' joint income tax refund for 1981. The party seeking to prove abandonment has the burden of proof. Stanolind Oil & Gas Co. v. Logan, 92 F.2d 28, 31 (5th Cir.1937) cert. denied 302 U.S. 763, 58 S.Ct. 409, 82 L.Ed. 592 and 303 U.S. 636, 58 S.Ct. 522, 82 L.Ed. 1097. The debtors in this case assert that, even though they failed to list the tax refund as an asset of their estate, the trustee was given notice of this potential asset by the debtors' responses to questions in their statement of financial affairs. The debtors further claim that, by virtue of this information, the trustee had at least constructive notice of the asset and thereafter abandoned any interest in the asset when he filed his no asset report and the court closed this case.
The debtors' analysis could arguably have had some validity under case law interpreting the former Bankruptcy Act. Judge Paul E. Jennings, writing for this court in a case decided under the Bankruptcy Act, concluded that abandonment would be knowingly made and irrevocable if the trustee acquired such knowledge during the administration of the case that was "certainly sufficient to put him upon diligent inquiry as to the transaction." LaRoche v. Tarpley, 4 B.R. 145, 146 (Bkrtcy.M.D.Tenn.1980); quoting Webb v. Raleigh Hardware Co., 54 F.2d 1065, 1067 (4th Cir.1932).
This court does not have to address the factual question as to the trustee's knowledge, however, since the enactment of § 554 of the Bankruptcy Code clarifies those instances in which abandonment of property of the estate occurs. 11 U.S.C. § 554 (West 1979) states:
Section 554(c) explicitly provides that only property that is scheduled under § 521(1) is deemed abandoned after the case is closed. Section 521(1) requires a debtor to file a list of creditors, a schedule of assets and liabilities, and a statement of the debtor's financial affairs.1 Reading these two sections together leads to the undeniable conclusion that the word "scheduled" in § 554(c) connotes a listing of the asset in the debtor's schedule of assets and liabilities. If the debtor fails to list an asset of the estate in his schedules and this property is not administered before the case is closed, then the asset is not deemed abandoned under § 554(c). See Wallace v. Enriquez, 22 B.R. 934, 7 C.B.C.2d (MB) 263, 265 (Bkrtcy.D.Neb.1982); In re Sutton, 10 B.R. 737, 740 (Bkrtcy.E.D.Va.1981); In re Peninsula Roofing & Sheet Metal, Inc., 9 B.R. 257, 260 (Bkrtcy.W.D.Mich.1981); L. King, 4 Collier on Bankruptcy ¶ 554.02-¶ 554.03, at 554-10 to 554-12 (15th ed. 1982); 2 Norton Bankruptcy Law and Practice § 39.04 (1981). Such property therefore remains property of the estate under § 554(d). Section 554 and 521(1) act in concert to relieve the trustee from the burden of conducting a rigorous search of the debtor's records to discover assets of the estate by providing him with a ready schedule of the debtor's property interests.
Since the debtors in this case did not list their 1981 income tax refund in their schedule of assets, the trustee has not relinquished any interest he possesses in this refund pursuant to § 554 and may reopen the case to administer this asset of the...
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