In re Winburn
| Decision Date | 06 October 1993 |
| Docket Number | Bankruptcy No. 87-00165. |
| Parties | In re O.A. WINBURN, Jr., Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Florida |
D. Andrew Vloedman, III, Gainesville, FL, for debtor.
Sharon Sperling, Gainesville, FL, Trustee.
Order Denying Debtor's Motion to Vacate Order Reopening the Estate
THIS CAUSE is before the Court on the Motion of O.A. Winburn, Jr. (the "Debtor"), for Rehearing of the Order Granting the Motion of U.S. Trustee (the "Trustee") to Reopen the Chapter 7 Estate. At the hearing on the Debtor's motion, the Court granted leave to the parties to file a memoranda of law as to what evidence the Court could appropriately consider in deciding whether cause existed to reopen the Chapter 7 estate pursuant to 11 U.S.C. § 350(b). At issue is whether there are assets of the estate to be administered. The Court, having now reviewed and considered the pleadings and other documents in the file, finds that there is an asset of the estate to be administered. Accordingly, the Court's order reopening the case stands.
The facts are not in dispute. The Debtor was a dairy farmer whose herd was allegedly infected with brucellosis by cattle leased from Borg-Warner. Because of the infection the herd was subsequently sold for slaughter. A suit was then commenced against Borg-Warner for its alleged infection of the Debtor's herd.1 On July 28, 1982, after unsuccessful attempts at getting more cattle and other proceeds to restart the dairy farm, the Debtor filed for relief under Chapter 11 of the Bankruptcy Code. The cause of action against Borg-Warner was listed as an asset in the Chapter 11 proceeding. The Chapter 11 case was dismissed on June 18, 1984, after the Court determined there was no reasonable prospect of reorganization and that dismissal would be in the best interest of creditors of the estate.
On August 10, 1987, after foreclosure judgments were entered against the Debtor, and with no prospect of repaying his debts, the Debtor filed a pro-se Voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code. The creditors in the Chapter 7 are primarily the same creditors who were in the Debtor's prior Chapter 11 proceeding. At the time the petition was filed the Debtor was still the plaintiff in the pending lawsuit against Borg-Warner. However, the Debtor did not list the cause of action on the schedule of assets and liabilities, nor was the cause of action referred to in the statement of financial affairs. Almost a year after filing the petition, the Debtor amended his statement of financial affairs to include the lawsuit against Borg-Warner.2 The Debtor did not amend the schedule of assets and liabilities to include the lawsuit. On July 28, 1988, the Trustee filed a "Report of Trustee in No-Asset Case", and the case was subsequently closed when this Bankruptcy Court approved the Trustee's report on August 4, 1988.
On June 26, 1992, a jury returned a verdict in favor of the Debtor against Borg-Warner, and awarded approximately 2.5 million dollars in compensatory and punitive damages. On October 14, 1992, the U.S. Trustee filed a Motion to Reopen the Case Without a Hearing, which this Court granted on October 19, 1992. The Debtor subsequently filed a Motion for Rehearing as to the Order Granting the Trustee's Motion Reopening the Case and a memorandum in support of the motion. The Court, on May 28, 1993, by Order Establishing Remaining Issues and Scheduling Discovery, requested the parties file memoranda of law.
The Debtor argues, based on pre-Code practice, that the cause of action is abandoned by operation of law if the Trustee knew of the cause of action at the issuance of the no-asset report. Thus, the Debtor argues the Court should hear evidence on the Trustee's knowledge of the cause of action at the time he issued the no-asset report. The Trustee, on the other hand, argues an asset may only be abandoned under 11 U.S.C. § 554(c) if it has been explicitly scheduled as an asset on the statement of assets and liabilities as required by § 521(1). Thus, if the asset was not scheduled as required under § 521(1), it cannot abandoned by operation of law under § 554(c).
The Bankruptcy Code provides guidelines in determining whether or not an asset is abandoned. Under 11 U.S.C. § 554 an asset may be formally abandoned under subsection (a) or (b) or abandoned by operation of law under subsection (c). If an asset is not abandoned under subsection (a), (b) or (c) it remains property of the estate according to subsection (d).
Section 554 provides:
Section 521(1) further provides in part:
The debtor shall — (1) file a list of creditors, and unless the court orders otherwise, a schedule of assets and liabilities, a schedule of current income and current expenditures, and a statement of the debtor\'s financial affairs.
The Debtor does not contend that the Borg-Warner cause of action was formally abandoned under § 554(a) or (b). Accordingly, this case addresses abandonment by operation of law pursuant to § 554(c) which, in turn, is predicated on compliance with § 521(1).
In analyzing a bankruptcy statute, the Court must begin with the language of the statute itself. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989). If the language of the statute is plain, "the sole function of the courts is to enforce it according to its terms." Id.
Sections 554(c) and 521(1) are clear and unambiguous. Reading the 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. In re Medley, 29 B.R. 84, 86 (Bankr.M.D.Tenn.1983). 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. Id. Whether the trustee or any creditor knew about the asset is irrelevant. In order for an asset of the estate to be abandoned to the Debtor by operation of law, the Debtor must first comply with the code. Because the Debtor did not list the cause of action against Borg-Warner on the schedule of assets and liabilities, it was not abandoned by operation of law and remains property of the estate under 11 U.S.C. § 554(d).
Cases which have...
To continue reading
Request your trial