Norman Seck

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
Norman Seck,
Debtor. 	No. 7 - 05-21255 - SS
MEMORANDUM OPINION ON ABANDONMENT
This case was filed as a voluntary Chapter 7 proceeding on
October 12, 2005. 	Yvette J. Gonzales was appointed Trustee. 	The
first meeting of creditors was conducted and concluded on
December 6, 2005. 	Debtor’s discharge entered on February 13,
2006. 	The Trustee filed her Trustee’s Report of No Distribution
and Notice of Abandonment of Assets (“Trustee’s Report”) on March
1, 2006. 	A review of the docket indicates that the Trustee did
not previously abandon any individual assets of the estate. 	On
March 2, 2006, the Court entered a Final Decree and closed the
case.
On March 15, 2006, creditor Thomas H. Lee filed a Motion to
Reopen the case, alleging that it had been closed improvidently
because ten days had not expired from the Trustee’s Report to
case closing; he claims that he wished to object to abandonment
of an asset. 	A copy of the proposed objection to Trustee’s
Report was attached to the Motion to Reopen. 	In his Motion to
Reopen he also alleges that before the Trustee’s Report was
filed, he had been in negotiations with the Trustee regarding the
asset. 	No party alleges that the case was closed in error, or
that the Trustee committed excusable neglect in filing the
Trustee’s Report.
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The asset in question is a possible avoidance action
disclosed by the Debtor on his Statement of Financial Affairs, at
questions 4, 6, and 10. 	Debtor transferred a 30% interest in
Mesa Finance of Taos, Inc. to Tommy A. Tafoya on August 30, 2005
to settle two pending lawsuits.
On March 21, 2006 the Court entered an Order Granting the
Motion to Reopen the Case and the United States Trustee
reappointed Yvette J. Gonzales as trustee. 	On May 22, 2006, the
Trustee filed a “Withdrawal of Report of No Distribution,”
stating that there had been an objection to abandonment and that
she has received an offer to purchase estate assets (presumably
the avoidance action.) 	Also on May 22, 2006, the Debtor filed a
Memorandum of Law concerning the issue of abandonment, arguing
that the Trustee’s Report acted as an abandonment of the
avoidance action and that it cannot now be unabandoned. 	The
Court requested briefs on the Debtor’s standing to object. 	On
September 2, 2006 creditors Thomas Lee and Mesa Financial of Taos
filed a brief (doc 25), to which the Debtor responded on
September 28, 2006 (doc 26).
This is a core proceeding concerning administration of the
estate. 	28 U.S.C. § 157(b)(2)(A).
Section 554, “Abandonment of property of the estate”,
provides as follows:
(a) After notice and a hearing, the trustee may abandon
any property of the estate that is burdensome to the
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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(1) of this title not
otherwise administered at the time of the closing of a
case is abandoned to the debtor and administered for
purposes of section 350 of this title.
(d) Unless the court orders otherwise, property of the
estate that is not abandoned under this section and
that is not administered in the case remains property
of the estate.
Section 554 therefore contemplates abandonments occurring during
the case (subsections 554(a) and (b)) and abandonment that occurs
when the case is closed (subsection 554(c)).
The Section 341 Meeting notice filed in this case, which is
standard for all District of New Mexico cases, states:
Abandonment
Unless a request for notice is filed and served upon
the trustee by a party in interest within 15 days after
the date of mailing of this notice, the trustee may
abandon any property deemed burdensome or of
inconsequential value to the estate without further
notice.
This language allows a trustee to effect an abandonment under
section 554(a) without notice and hearing if no requests were
filed. 	In contrast, section 554(c) requires no notice or
hearing; the abandonment happens as a matter of law when the case
is closed. 	A review of the docket in this case shows that no
creditor requested notice of abandonment.
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Most cases rule that abandonment is irrevocable. 	See,
e.g., Killebrew v. Brewer (In re Killebrew), 888 F.2d 1516, 1520
(5 th Cir. 1989)(“The notion of easily revocable abandonment is
not in accord with case law on abandonment.”)(citing cases.);
Sherrell v. Fleet Bank of New York (In re Sherrell), 205 B.R. 20,
22 (Bankr. N.D. N.Y. 1997); 5 Lawrence P. King, Collier on
Bankruptcy ¶ 554.02[3] at 554-6 (15 th ed. Rev. 2006). 	Two
exceptions to this general rule are 1) if debtors have concealed
or failed to properly schedule assets, e.g., In re Suplinskas,
252 B.R. 293, 295 (Bankr. D. Conn. 2000)(“There is no
disagreement that an asset must be properly scheduled in order to
pass to the debtor through abandonment under 11 U.S.C. §
544(c).”), or 2) if the abandonment occurred through trustee or
court error and the facts are appropriate for Rule 60(b) relief,
e.g., Woods v. Kenan (In re Woods), 173 F.3d 770, 778 (10 th
Cir.), cert. denied, 528 U.S. 878 (1999)(“[W]e conclude that a
strict irrevocability rule does not properly account for
Fed.R.Bankr.P. 9024, which provides that Fed.R.Civ.P. applies,
with minor modifications, to all bankruptcy cases.”)(footnotes
omitted.) 	See also Russell v. Tadlock (In re Tadlock), 338 B.R.
436, 439 (10 th Cir. B.A.P. 2006)(Limiting Woods to its facts,
i.e., an inadvertent closure of the case initiated by the Court’s
urging while a sale was pending, and recognizing general rule
that abandonments are irrevocable.)
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In this case, the Debtor did schedule the asset. 	The
Trustee was aware of the asset, as evidenced by her negotiations
with Lee before she filed the Trustee’s Report. 	There is no
suggestion in the record that the case was prematurely closed, or
that the Trustee’s Report was submitted with excusable neglect.
Therefore, neither exception to the general rule that
abandonments are irrevocable are present. 	The asset was
abandoned intentionally and will remain so.
Thomas Lee and Mesa Financial of Taos raised the issue of
the Debtor’s standing to object to the reopening and attempted
unabandonment. 	The Court finds that it need not address this
issue because the situation implicates jurisdictional
considerations that moot the issue of Debtor’s standing.
Federal courts are courts of limited jurisdiction and before
deciding any issue a federal court must determine if the case is
properly within its subject matter jurisdiction. 	Wynn v. AC
Rochester, 273 F.3d 153, 157 (2 nd Cir. 2001). 	The parties cannot
confer jurisdiction, and lack of jurisdiction is non-waivable.
Id. 	Even if not raised by a party, the Court must determine
jurisdiction on its own motion. 	Dental Capital Leasing Corp. v.
Martinez (In re Martinez), 721 F.2d 252, 264 (9 th Cir. 1983).
See also Bankruptcy Rule 7012(h)(3) (“Whenever it appears by
suggestion of the parties or otherwise that the court lacks
jurisdiction of the subject matter, the court shall dismiss the
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action.”) 	In this case, the Court finds that it lost
jurisdiction over the avoidance action when it was abandoned.
When property is abandoned, it is removed from the
jurisdiction of the bankruptcy court. 	DeVore v. Marshack (In re
DeVore), 223 B.R. 193, 200 (9 th Cir. B.A.P. 1998); 5 Lawrence P.
King, Collier on Bankruptcy ¶ 554.02[3] at 554-7 (15 th ed. Rev.
2006). 	See also Brateman v. Brateman Bros., Inc. (In re Brateman
Bros., Inc.), 135 B.R. 853, 856 (Bankr. N.D. Ind. 1991)(If a
trustee abandons litigation, the court loses jurisdiction and
must dismiss or remand.) 	Cf. Gardner v. United States (In re
Gardner), 913 F.2d 1515, 1518 (10 th Cir. 1990)(“A bankruptcy
court has jurisdiction over disputes regarding alleged property
of the bankruptcy estate at the outset of the case. 	When
property leaves the bankruptcy estate, however, the bankruptcy
court’s jurisdiction typically lapses, and the property’s
relationship to the bankruptcy proceeding comes to an
end.”)(Citations omitted.)
In this case, when the Trustee abandoned the cause of
action, this Court lost jurisdiction over the potential
litigation. 	There is no point in allowing Trustee to make any
further efforts in pursuing liquidation of the asset. 	Therefore,
the Court will enter an Order re-closing this bankruptcy case.
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Honorable James S. Starzynski
United States Bankruptcy Judge
copies to:
Daniel J Behles
226-A Cynthia Loop NW
Albuquerque, NM 87114-1100
Stephen M Peterson
PO Box 2259
Ranchos de Taos, NM 87557-2259
Yvette Gonzales
Trustee
PO Box 1037
Placitas, NM 87043-1037
United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
Steve Mazer
2501 Yale SE, 2nd Flr.
Albuquerque, NM 87106
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