- AP No. CC-13-1571-DTaSp (B.A.P. 9th Cir., September 29, 2014) (NOT FOR PUBLICATION)
- The B.A.P. AFFIRMED the bankruptcy court’s dismissal of the Plaintiff’s adversary proceeding against the Defendants. Only a trustee, can pursue claims on behalf of a bankruptcy estate. For a debtor to have standing to pursue claims in an adversary proceeding, the debtor—not the estate—must own the claims. Causes of action are included in the estate as of commencement, and remain there unless formally abandoned. Section 554 provides three avenues of abandonment: (a) upon motion of the trustee; (b) upon motion of a party in interest including the debtor; or (c) upon closure of the case. Here, the claims asserted by the Plaintiff in the adversary proceeding are property of the estate and: (a) the trustee made no motion to abandon; (b) the Plaintiff did move to abandon, but the motion has not been set for a hearing or ruled upon; and (c) the case remains open. Therefore, the bankruptcy court correctly ruled that the estate did not abandon standing and only the claims asserted by the Plaintiff could only have been raised by the trustee. The Plaintiff also argued a right to raise these claims as his own agent or as a creditor. The B.A.P. disposed of these arguments noting that an agent for the debtor has no more standing than the debtor, and creditors do not have standing to raise these claims.
- Procedural context:
- The B.A.P. treated the Plaintiffs premature notice of appeal as timely, and considered the appeal on the briefs. The B.A.P. reviewed the bankruptcy court’s decision to dismiss and issues regarding the Plaintiff’s standing de novo, and the underlying facts for clear error.
- In 2006, Plaintiff’s wife obtained a mortgage documented by a promissory note and secured by a deed of trust on residential property, which she later transferred to herself and Plaintiff as joint tenants. In 2009, a notice of default was recorded against the Property. A foreclosure sale was scheduled, but not held, in 2011. In 2012, Plaintiff and his wife commenced an action in state court to quiet title and for declaratory and injunctive relief. Defendants removed the lawsuit to federal district court. The court dismissed the lawsuit with prejudice, and was not appealed. In January 2013, Plaintiff filed under chapter 7 and the trustee filed a “no asset” report. In June 2013, Plaintiff filed an adversary proceeding seeking to quiet title to the Property and for injunctive relief and damages. Defendants moved to dismiss on the basis that Plaintiff lacked standing to pursue the claims, as the estate had not abandoned the Property or related claims. Plaintiff argued his title in the Property afforded him standing. The bankruptcy court dismissed the adversary proceeding ruling that a chapter 7 trustee is the only party with standing to bring such claims, unless the claims are formally abandoned under § 554. Subsequently, in November 2013, the Plaintiff moved to compel abandonment of the Property. No hearing has been set nor action taken on the motion to abandon, and the case remains open.
- Dunn, Taylor, and Spraker, U.S. Bankruptcy Appellate Panel Judges
3082 in the system
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