Pacific Mortgage and Investment Group, Ltd. v. Horn

In Pacific Mortgage and Investment Group, Ltd. v. Horn, 100 Md. App. 311, 319, 641 A.2d 913 (1994), Judge Cathell held squarely: While the bankruptcy was open, the estate was the owner of the suit. 11 U.S.C. 541(a)(1) provides that, an "estate is comprised of ... all legal or equitable interests of the debtor in property ...." The bankruptcy trustee is the proper party to bring an action for injury to a person's property while a bankruptcy case is open; the debtor does not have standing to bring a claim. In Pacific Mortgage v. Horn, 100 Md. App. at 319-20, Judge Cathell quoted from the Bankruptcy Code as it listed the exclusive three ways in which the property of a bankruptcy estate may be abandoned. Appellee contends, however, that the bankruptcy trustee abandoned this suit when the bankruptcy case closed, subsequent to the filing of this suit. 11 U.S.C. 554, "Abandonment of property of the estate," provides in part: (a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.(c) Unless the court orders otherwise, any property scheduled under section 521(a)(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor .... "Abandonment requires either a court order after a notice and a hearing or a failure to administer scheduled assets and a closing of the case." Behrens v. Woodhaven Ass'n, 87 B.R. 971, 973 n.1 (Bankr. N.D. Ill. 1988).In Pacific Mortgage, a potential law suit, temporarily in control of a trustee in bankruptcy, was held by this Court to have been abandoned by the trustee, through inaction, and to have revested in the debtor after his discharge from bankruptcy. Absolutely critical to our decision, however, was the fact that the cause of action had been "properly scheduled." Upon review of appellee's description and listing of this case in her bankruptcy schedule, we find that it was properly scheduled. Indeed, appellants do not argue to the contrary. When property is "scheduled as an asset of the estate for the benefit of creditors," the trustee, creditors and representatives of the estate are put on notice of its existence and the fact it is a claim in favor of the estate. "Where the trustee has knowledge that is sufficient to put him upon diligent inquiry as to the subject asset, the abandonment is held to have been knowingly made and hence is irrevocable."Starrett v. Starrett, 225 N.J. Super. 150, 541 A.2d 1119, 1123 (A.D. 1988). (100 Md. App. at 320.) Of secondary significance in Pacific Mortgage was the fact that "appellee paid her creditors in full" and that no purpose, therefore, would have been served by preventing the revesting of ownership of the law suit in the former debtor. Also, it is of no small significance that appellee paid her creditors in full. The trustee has a duty to protect the creditors. Since the creditors were paid in full, there would be no purpose for the trustee to assert and maintain control over this suit. We thus hold that the bankruptcy trustee did abandon this suit when the bankruptcy was closed. (100 Md. App. at 320-21.)