Jasper Stevens v. Robert Whitmore ( 2021 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE JASPER STEVENS and BRENDA No. 20-60044
LOUISE MURRAY STEVENS,
Debtors, BAP No.
19-1325
JASPER STEVENS; BRENDA LOUISE
MURRAY STEVENS, OPINION
Appellants,
v.
ROBERT S. WHITMORE, Chapter 7
Trustee,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Taylor, Faris, and Lafferty III, Bankruptcy Judges,
Presiding
Agued and Submitted September 2, 2021
Pasadena, California
Filed October 19, 2021
2 IN RE STEVENS
Before: Sandra S. Ikuta, Mark J. Bennett, and
Ryan D. Nelson, Circuit Judges
Opinion by Judge R. Nelson
SUMMARY *
Bankruptcy
The panel affirmed the Bankruptcy Appellate Panel’s
decision affirming the bankruptcy court’s approval of a
settlement of a state court lawsuit filed by debtors against
their mortgage servicing company.
While the state suit was pending, debtors filed for
bankruptcy. On a schedule that asked about claims against
third parties, they stated they had none. They listed the
mortgage servicing company as a non-priority creditor, and
they disclosed the state lawsuit in their Statement of
Financial Affairs. They also discussed the state lawsuit with
the bankruptcy trustee. The trustee determined there were
no scheduled assets that would benefit the estate, and the
bankruptcy court discharged the trustee and closed the case.
Later, the mortgage servicing company contacted the
bankruptcy trustee and offered to settle debtors’ claims in the
state lawsuit. The trustee was reappointed by the bankruptcy
court, took over the state lawsuit, settled it, and got the
settlement approved by both the state court and the
*
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
IN RE STEVENS 3
bankruptcy court. The settlement proceeds went to the
bankruptcy estate, not the debtors.
The panel held that, under 11 U.S.C. § 554(c), at the end
of bankruptcy proceedings, property that has not been
otherwise administered can generally be abandoned to the
debtor only if it has been “scheduled.” The panel held that
§ 554(c) requires property to be disclosed on a literal
schedule under 11 U.S.C. § 521(a). Thus, absent trustee or
court action, property disclosed only on a statement, such as
a Statement of Financial Affairs, cannot be abandoned under
§ 554(c). Because the debtors listed the state lawsuit only
on the Statement of Financial Affairs, and not on a schedule
pursuant to § 521(a), they did not meet the requirements of
§ 544(c), and thus their interest was not abandoned.
Accordingly, the bankruptcy court properly reappointed the
trustee and approved the settlement.
COUNSEL
Kellam M. Conover (argued), Mark A. Perry, and Suria M.
Bahadue, Gibson Dunn & Crutcher LLP, Washington, D.C.,
for Debtors-Appellants.
Douglas A. Plazak (argued), Reid & Hellyer, Riverside,
California, for Appellee.
Tara Twomey, National Consumer Bankruptcy Rights
Center, San Jose, California, for Amici Curiae National
Consumer Bankruptcy Rights Center and National
Association of Consumer Bankruptcy Attorneys.
4 IN RE STEVENS
OPINION
R. NELSON, Circuit Judge:
At the end of bankruptcy proceedings, property that has
not been otherwise administered can generally be abandoned
to the debtor only if it has been “scheduled.” 11 U.S.C.
§ 554(c). A neighboring provision, § 521(a), requires
debtors to file several schedules, as well as other statements.
In this case, we must decide whether “scheduled” requires
that property be listed on one of the literal schedules, or if
listing it on one of the other statements can suffice. We hold
that § 554(c) requires property to be disclosed on a literal
schedule, and thus that, absent Trustee or court action,
property disclosed only on a statement (e.g., the Statement
of Financial Affairs) cannot be abandoned under § 554(c).
I
The property in question is the Debtors’ interest in a state
lawsuit that they filed against their mortgage servicing
company. The lawsuit arose out of a conflict over the
Debtors’ mortgage and their efforts to refinance it. While
their case was ongoing, the Debtors voluntarily filed for
bankruptcy.
The issue here arose because the Debtors identified the
state lawsuit in some of their filings but not in others. On a
schedule that asked about claims against third parties, they
stated that they had none, even though the lawsuit was still
pending. See 11 U.S.C. § 521(a)(1)(B)(i); Official Form
106A/B, Schedule A/B: Property. And elsewhere on the
same schedule, they also said that they had no other
contingent or unliquidated claims.
IN RE STEVENS 5
On the other hand, the Debtors disclosed their mortgage
itself: they listed the mortgage servicing company as a non-
priority creditor. And they even disclosed the state lawsuit,
although, importantly, only in the Statement of Financial
Affairs (“SOFA,” the filing under § 521(a)(1)(B)(iii)), and
not in any of the schedules (separate filings under
§ 521(a)(1)(B)(i) and (ii)).
The Debtors also discussed the state lawsuit with the
bankruptcy Trustee. He requested the litigation documents,
which the Debtors sent him. After reviewing these
documents, the Trustee certified that the estate “ha[d] been
fully administered” and contained “no property available for
distribution.” The Trustee also determined “that there were
no scheduled assets which would benefit [the] estate” and
confirmed that he “made a diligent inquiry into the financial
affairs of the debtor(s).” The bankruptcy court then
discharged the Trustee and closed the case.
A couple of years later, after the Debtors had continued
actively litigating their state lawsuit, the opposing party in
that suit—the mortgage servicing company—contacted the
bankruptcy Trustee directly. The company offered to settle
the Debtors’ claims for about ten times less money than the
Debtors sought. The company asked the Trustee to reopen
the bankruptcy case so that he could be reappointed, take
over the state lawsuit, and settle it quickly. The Trustee was
reappointed by the bankruptcy court, took over the state
lawsuit, settled it, and got the settlement approved by both
the state court and the bankruptcy court. Because the state
lawsuit had not been abandoned (according to the
bankruptcy court), the bankruptcy estate got the proceeds
from the settlement, not the Debtors.
The Debtors appealed the bankruptcy court’s approval of
the settlement to the Bankruptcy Appellate Panel (“BAP”).
6 IN RE STEVENS
It affirmed. In re Stevens, 617 B.R. 328 (B.A.P. 9th Cir.
2020). The BAP held that the word “scheduled” in § 554(c)
“refers only to assets listed in a debtor’s Schedules” (defined
as “the schedule of assets and liabilities” under 11 U.S.C.
§ 521(a)(1)(B)(i)), that the state lawsuit had not been listed
on a schedule, and thus that the Debtors’ interest in the state
lawsuit had not been abandoned under § 554(c). Id. at 332–
34. The BAP observed that “the majority of courts
considering the issue have taken the strict approach,” and it
followed “the majority’s plain language reading of
§ 554(c).” Id. at 331–32. It also reasoned that its “narrow
reading of § 554(c) is consistent with sound bankruptcy
policies and reasonable expectations for a debtor’s
performance of statutory duties.” Id. at 333.
II
We have jurisdiction to consider appeals from final
decisions of the BAP under 28 U.S.C. § 158(d)(1). We
review the BAP’s statutory interpretation de novo. In re
Boyajian, 564 F.3d 1088, 1090 (9th Cir. 2009).
III
In bankruptcy, “[a]bandonment is a term of art with
special meaning.” Catalano v. C.I.R., 279 F.3d 682, 685 (9th
Cir. 2002) (quotation marks omitted). Abandonment “is the
formal relinquishment of the property at issue from the
bankruptcy estate.” Id. Unless property is abandoned, it
“continues to belong to the bankruptcy estate and [does] not
revert to” the Debtors. Cusano v. Klein, 264 F.3d 936, 945–
46 (9th Cir. 2001); see also 11 U.S.C. § 554(d).
IN RE STEVENS 7
Absent circumstances not relevant here, 1 before it can be
abandoned under § 554(c), property must be “scheduled
under section 521(a)(1).” So the issue here is whether the
state lawsuit was scheduled under that section.
Section 521(a)(1) mandates that debtors file several
documents. As relevant here, it requires multiple schedules
(in § 521(a)(1)(B)(i)–(ii)), as well as several other kinds of
statements (in § 521(a)(1)(B)(iii), (v)–(vi)).
Courts have interpreted “scheduled” in two ways.
Several bankruptcy courts and a district court have held that
to be scheduled, property needs to be included on the
“schedule of assets and liabilities.” 2 11 U.S.C.
§ 521(a)(1)(B)(i). 3 Others have held that to be scheduled,
property just needs to be included on any one of the statutory
filings from § 521(a), whether that filing is called a schedule
or something else. 4 But, so far, no federal court of appeals
has taken a side in a published opinion. See, e.g., Ashmore
v. CGI Grp., Inc., 923 F.3d 260, 282 (2d Cir. 2019) (“We
therefore leave for another day the question of whether an
1
Property can also be abandoned if the Trustee or the court acts
directly. 11 U.S.C. § 554(a), (b). But the Debtors did not argue that the
property was abandoned under § 554(a) or (b).
2
See, e.g., In re Winburn, 167 B.R. 673, 676 (Bankr. N.D. Fla.
1993); In re McCoy, 139 B.R. 430, 432 (Bankr. S.D. Ohio 1991); In re
Fossey, 119 B.R. 268, 272 (D. Utah 1990).
3
Income would be scheduled on a different schedule, under
§ 521(a)(1)(B)(ii), but this case concerns property, not income.
4
See Bird v. Hart, 616 B.R. 826, 829 (D. Utah 2020); United States
ex rel. Fortenberry v. Holloway Grp., Inc., 515 B.R. 827, 829 (W.D.
Okla. 2014); West v. Jeppesen (In re Krachun), No. 15-2016, 2015 WL
4910241, at *6 (Bankr. D. Utah Aug. 14, 2015).
8 IN RE STEVENS
asset disclosed to the bankruptcy court orally and on a
SOFA, but not on a Schedule B, is abandoned to the
debtor.”); but see id. at 282 n.16 (noting that the Second
Circuit, in an unpublished summary order, found that
disclosure orally and on a SOFA “would not lead to
abandonment by operation of law” under § 554(c)).
We reject the Debtors’ “any filing” reading. Instead, we
hold that, absent Trustee or court action, to be abandoned
under § 554(c), property must be scheduled on a schedule,
not just listed on the SOFA.
A
Because “our inquiry begins with the statutory text, and
ends there as well if the text is unambiguous,” we start with
the text of the Bankruptcy Code. BedRoc Ltd., LLC v.
United States, 541 U.S. 176, 183 (2004) (plurality opinion).
And we read its words in context. See City of Chicago,
Illinois v. Fulton, 141 S. Ct. 585, 590 (2021). Applying
these interpretive rules to the statutory text, property listed
only on the SOFA is not “scheduled” and thus, absent
Trustee or court action, cannot be abandoned under § 554(c).
The Bankruptcy Code does not define “scheduled.” See
11 U.S.C. § 101 (definitions). “When terms used in a statute
are undefined, we give them their ordinary meaning.”
Asgrow Seed Co. v. Winterboer, 513 U.S. 179, 187 (1995).
And we look to the ordinary meaning of the term when
Congress enacted the statute. See Perrin v. United States,
444 U.S. 37, 42 (1979).
Congress enacted § 554(c) in 1978, Bankruptcy Reform
Act of 1978, Pub. L. No. 95-598, § 554, 92 Stat. 2549, 2603
(1978), and dictionaries from that time offered consistent
definitions of “scheduled.” Webster’s defined “scheduled”
IN RE STEVENS 9
as “to place or include in a schedule” or “to make a schedule
of.” Webster’s New World Dictionary 1272 (1972). And
the Oxford Compact defined the verb “schedule” to mean
“[t]o enter in a schedule or list.” Oxford Compact
Dictionary 203 (1971). These dictionary definitions show
that the ordinary meaning of “scheduled” was to include
something on a literal schedule. That ordinary meaning,
taken with § 554(c)’s explicit cross-reference to § 521(a)(1),
which itself also uses the noun “schedule,” compels us to
construe “scheduled” narrowly.
Our interpretation is bolstered by the “established canon
of construction that similar language contained within the
same section of a statute must be accorded a consistent
meaning.” Nat’l Credit Union Admin. v. First Nat’l Bank &
Tr. Co., 522 U.S. 479, 501 (1998). Section 554(c) refers to
§ 521(a)(1), which itself uses the nearly identical term
“schedule.” Because the one section refers to the other, for
purposes of statutory interpretation, we read them together.
See United States v. Morton, 467 U.S. 822, 828 (1984).
When we read a statute as a whole and see that it uses
nearly identical terms in different places, we give those
terms similar meanings. “Scheduled” is a verb, and
“schedule” is a noun (as used in § 521(a)(1), anyway), but
they share the same root. And the Supreme Court has noted
that different grammatical forms of the same word “typically
reflect the meaning of” one another. Cf. FCC v. AT&T Inc.,
562 U.S. 397, 402 (2011) (construing “person” and
“personal”). “Where . . . Congress uses similar statutory
language . . . in two adjoining provisions, it normally intends
similar interpretations.” Nijhawan v. Holder, 557 U.S. 29,
39 (2009). There’s simply nothing about these words or the
surrounding context to imply that Congress wanted them to
mean different things.
10 IN RE STEVENS
Thus, given the ordinary meaning of “scheduled” and the
statutory context, we must give “schedule” and “scheduled”
similar meanings: scheduled means included on a schedule.
A neighboring provision further bolsters our reading.
Section 523(a)(3) also uses the word “scheduled” and, just
like § 554(c), cross-references § 521(a)(1). And, usefully
for our purposes, § 523(a)(3) distinguishes between
“list[ing]” and “schedul[ing].” “Undoubtedly, there is a
natural presumption that identical words used in different
parts of the same act are intended to have the same
meaning.” Atl. Cleaners & Dyers, Inc. v. United States,
286 U.S. 427, 433 (1932). If we adopted the Debtors’
reading, then “scheduled” would either mean something
different in § 554(c) than it does in § 523(a)(3), violating the
canon that identical words are presumed to have the same
meaning, see Atl. Cleaners & Dyers, Inc., 286 U.S. at 433,
or “scheduled” in § 523(a)(3) would mean the same thing as
“listed,” violating the canon against surplusage, see
Microsoft Corp. v. i4i Ltd. P’ship, 564 U.S. 91, 106 (2011).
Our reading avoids these interpretive difficulties.
Our reading also finds support in the broader Bankruptcy
Code scheme. The Federal Rules of Bankruptcy Procedure
routinely distinguish between the bankruptcy petition itself,
bankruptcy schedules, the SOFA, and other documents. See,
e.g., Fed. R. Bankr. P. 1007. The Debtors’ reading fails to
account for the Rules’ use of these different terms.
B
The Debtors argue that we should rely on the common
law understanding of abandonment to conclude that property
is not abandoned when the Trustee knows about it. See, e.g.,
In re Webb, 54 F.2d 1065, 1067 (4th Cir. 1932). But
Congress enacted the Bankruptcy Code, and we cannot
IN RE STEVENS 11
disregard its plain language. See Connecticut Nat’l Bank v.
Germain, 503 U.S. 249, 253–54 (1992). We hold that
abandonment under § 554(c) requires listing on a schedule,
as we have defined it here, and that anything else (e.g., actual
knowledge of the trustee, ad hoc oral disclosures, discussion
at the § 341 meeting of creditors) is not enough. “The law
is abundantly clear that the burden is on the debtors to list
the asset and/or amend their schedules, and that in order for
property to be abandoned . . . the debtor must formally
schedule” it. Jeffrey v. Desmond, 70 F.3d 183, 186 (1st Cir.
1995). No matter what the common law said before § 554(c)
was enacted, “[i]t is not enough that the trustee learns of the
property through other means; the property must be
scheduled.” Vreugdenhill v. Navistar Int’l Transp. Corp.,
950 F.2d 524, 526 (8th Cir. 1991).
IV
We conclude that property listed only on the SOFA,
§ 521(a)(1)(B)(iii), is not “scheduled,” and thus without
Trustee or court action, cannot be abandoned under § 554(c).
We acknowledge that the Debtors’ failure to list the state
lawsuit on a schedule may have been an inadvertent
oversight, but given the statute’s plain text, we cannot
consider equitable arguments. The Debtors could have
amended their schedules “as a matter of course at any time
before the case . . . closed.” Fed. R. Bankr. P. 1009(a). But
they didn’t. Our task is to interpret the Bankruptcy Code,
“not to balance the equities.” Zachary v. California Bank &
Tr., 811 F.3d 1191, 1199 (9th Cir. 2016). Any “equitable
powers remain in the bankruptcy courts . . . and can only be
exercised within the confines of the Bankruptcy Code.”
Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206
(1988). The Supreme Court has made this abundantly clear.
See Law v. Siegel, 571 U.S. 415, 421 (2014) (“[I]n exercising
12 IN RE STEVENS
. . . statutory and inherent powers, a bankruptcy court may
not contravene specific statutory provisions.”).
Because the Debtors listed the state lawsuit only on the
SOFA, and not on a schedule, pursuant to 11 U.S.C.
§ 521(a)(1)(B)(i) and (ii), they did not meet the requirements
of § 554(c), and thus their interest was not abandoned.
AFFIRMED.