Donarumo v. Furlong (In re Furlong)

Summarized by Guy Moss ,
14 years 4 months ago

Citation:

United States Court of Appeals for the First Circuit, Nos. 11-1364, 11-1386, November 1, 2011

Tag(s):

Ruling:

The Court ruled that related, multi-count causes of action are deemed effectively abandoned under Bankruptcy Code section 554(c) by virtue of being "scheduled" and not administered by the close of the case, where (i) they are itemized sufficiently to put a Chapter 7 trustee on inquiry notice to investigate further, or (ii) they are itemized in part and the trustee is put on actual notice of all by the delivery to him of a draft complaint. The Court also ruled that a trustee will be deemed to have effectively abandoned causes of action under Bankruptcy Code section 554(a) when his Notice of Intention to Abandon, while lacking specificity, is sufficiently clear and unequivocal as to his intention and no party in interest objects. Lastly, the Court ruled that the automatic stay, in a personal case, does not extend to the assets of a corporation in which the debtor owns all of the stock. Affirmed.

Procedural context:

Appeal from the U.S. District Court for the District of Massachusetts of rulings affirming rulings of the Bankruptcy Court that causes of action in both a corporate and personal Chapter 7 cases had been abandoned.

Facts:

Prepetition two individual debtors purchased the assets of a plumbing company and formed a new corporation. When that failed, all three filed Chapter 7 cases and identified on the Schedules "claims for breach of contract" against the former owner. The trustee learned about the causes of action, which went beyond mere breach of contract, in detail at the section 341 meeting and by receiving a draft complaint. The corporate bankruptcy closed without action by the trustee. In the personal bankruptcies the trustee filed a Notice of Intention to Abandon, alluding to the claims against the former owner. The former owner sought to buy the causes of action from the trustee, along with the corporate stock. The individual debtors filed a motion "to verify or compel" the abandonment of the causes of action, which they believed they owned at that point. The former owner contended that the causes of action had never been effectively abandoned in any of the cases, and therefore could be purchased.

Judge(s):

Lynch, Boudin and Stahl

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