Donarumo v. Furlong (In Re Furlong)
660 F.3d 81
1st Cir.2011Background
- Debtors filed Chapter 7 petitions for themselves and for Drew's II after the business failed (Dec 2006).
- Schedules listed claims against Donarumo with indeterminate value and Drew's II stock with unknown value.
- Trustee sought to pursue the claims but later sought abandonment due to cost; Notice to Abandon filed Nov 2007 for personal estate; corporate estate closed Dec 2007 with no assets to distribute.
- Stock of Drew's II was not abandoned in corporate case; corporate estate closed, stock remained in personal estate.
- Rights to the claims allegedly arising from the Drew's II purchase were later assigned back to the Furlongs and Drew's II through private transfers in 2010 without Trustee involvement.
- Bankruptcy court held: (i) corporate claims abandoned by operation of law under 11 U.S.C. § 554(c); (ii) personal claims abandoned under § 554(a); (iii) Drew's II stock remains property of personal estate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to appeal and cross-appeal | Furlongs contend Donarumo and Murray lack standing | Donarumo/Murray argue limited standing | All parties have standing to appeal/cross-appeal |
| Corporate bankruptcy abandonment under § 554(c) | Trustee properly abandoned all Drew's II claims | Claims were not properly scheduled/abandoned | Drew's II claims were properly scheduled and abandoned by operation of law under § 554(c) |
| Personal bankruptcy abandonment under § 554(a) | Trustee intended to abandon the state claims | Abandonment not clear from notice/records | Trustee's intent was clear; personal claims abandoned under § 554(a) |
| Automatic stay and transfer of Drew's II claims | Transfer violated Stay | Stay did not apply to corporate assets; directors’ actions not stay-violative | No automatic stay violation; stay did not extend to corporate assets and actions; transfer valid under circumstances |
| Status of Drew's II stock | Stock should be abandoned with the rest of the personal estate | Stock not properly abandoned | Drew's II stock remains property of the personal bankruptcy estate; not abandoned |
Key Cases Cited
- Jeffrey v. Desmond, 70 F.3d 183 (1st Cir. 1995) (trustee abandonment ability; level of specificity on schedules)
- Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d 116 (2d Cir. 2008) (clear and unequivocal intent to abandon; requirements of notice)
- Kreisler v. Goldberg, 478 F.3d 209 (4th Cir. 2007) (non-debtor corporation assets and automatic stay distinctions)
- In re Rare Coin Galleries, Inc., 862 F.2d 896 (1st Cir. 1988) (trustee steps into debtor's shoes for estate actions; abandonment context)