Parker v. Handy

United States Court of Appeals
For the First Circuit

No. 09-9021

IN RE MICHELLE J. HANDY,
Debtor.

CHRISTOPHER PARKER,

Appellant,

v.

MICHELLE J. HANDY,

Appellee.

ON APPEAL FROM THE BANKRUPTCY APPELLATE PANEL
FOR THE FIRST CIRCUIT

Before

Lynch, Chief Judge,
Torruella and Howard, Circuit Judges.

Stanley Greenberg for appellant.

October 22, 2010
 LYNCH, Chief Judge. Christopher Parker appeals from a

Bankruptcy Appellate Panel (BAP) decision affirming a bankruptcy

court order denying his motion for relief from stay. Parker's

objective is to reopen a Maine state court proceeding against

Michelle J. Handy brought pursuant to Maine's version of the

Uniform Fraudulent Transfer Act (UFTA). Me. Rev. Stat. tit. 14,

§ 3571 et seq. During the state court proceeding, Handy filed for

bankruptcy, staying Parker's state action against her.

Parker filed a motion in bankruptcy court for relief from

stay. Handy received discharge during a hearing, which included

Parker's motion. At the time of discharge, Parker had obtained

neither a favorable judgment from the state court, nor a lien

against Handy's property. The bankruptcy court held that 11 U.S.C.

§ 524(a)(2) precludes Parker from pursuing his action against

Handy, and the BAP affirmed. We affirm.

I.

Parker sued Handy in a Maine state district court,

alleging that Handy purchased a residence with funds conveyed to

her by her ex-husband in violation of the UFTA. He sought both

money damages and the imposition of a constructive trust on the

residence. Parker also filed a lis pendens, but he has abandoned

the claim that this created a lien on the residence. The state

court entered judgement for Handy, and Parker timely appealed to

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the Maine Supreme Judicial Court. His appeal was stayed when Handy

filed for bankruptcy under Chapter 7.

Promulgated in 1984, the UFTA seeks "to protect the

debtor's estate from being depleted to the prejudice of the

debtor's unsecured creditors." UFTA § 3, cmt. 2; In re Jackson,

459 F.3d 117, 121 n.3 (1st Cir. 2006). It forbids a debtor from

making two types of transfers: (1) those "with actual intent to

hinder, delay, or defraud any creditor" and (2) those in which the

debtor does not receive a "reasonably equivalent value in exchange"

in light of his financial circumstances. UFTA § 4(a).

In his state court action, Parker alleged that Handy

received funds in a forbidden transfer of the first type. On or

about April 10, 2003, Parker obtained a judgment against Handy's

ex-husband, Walter Loeman. Parker did not receive payment. He

alleged that while Handy and Loeman were still married, Handy

purchased a residence with the assistance of $26,410.12 in funds

from Loeman. Under the UFTA, the presence of "actual intent" to

defraud a creditor may be assessed in light of whether the transfer

was to an "insider" like a "relative of the debtor." UFTA

§§ 4(b)(1); 1(7)(i)(A).

With his state court appeal stayed, Parker filed a motion

in bankruptcy court for relief from stay. Under 11 U.S.C.

§ 524(a)(2), a discharge from bankruptcy operates as an injunction

against in personam claims against a debtor. Parker argued that

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his requested relief in state court included an order of sale of

Handy's residence and that "[t]o this extent," his claim against

Handy was a claim in rem. He asserted that Handy's discharge in

bankruptcy would not affect this in rem claim even though he was an

unsecured creditor. Handy filed an objection, arguing that as an

unsecured creditor Parker did not hold an in rem claim for purposes

of 11 U.S.C. § 524(a)(2).

The bankruptcy court denied Parker's motion. During the

course of the proceedings, Handy received a discharge. In an oral

decision, the bankruptcy court held that Parker could not proceed

against Handy's property because he did not have a claim in rem.

It held that Parker had not established an interest in the property

by either attachment or a provisional remedy. Parker's request for

a constructive trust, it held, did not give rise to a cause of

action in rem. The bankruptcy court also held that Parker had

failed to object to Handy's invocation of Maine's homestead

exemption, and that as an unsecured creditor he could not pursue

that exempt property.

The BAP affirmed, rejecting Parker's arguments that (1)

he held an in rem claim because he had sought a constructive trust

in his state court action, (2) he could pursue his claims post-

discharge even though he did not obtain an attachment prior to

bankruptcy, and (3) he did not need to object to Handy's homestead

claim. As to the first, the BAP reiterated the bankruptcy court's

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holding that a constructive trust is a remedy, not a status. As to

the second, it held that Parker cited no authority supporting his

contention that the Bankruptcy Code allows him to proceed post-

discharge. As to the third, the BAP held that Parker could not

proceed against the exempt property because he did not possess a

claim in rem.

II.

This court reviews appeals from the BAP under the same

standards of review as the BAP reviews appeals from the bankruptcy

court.1 We review the bankruptcy court's legal conclusions de novo

and its factual findings for clear error. Fed R. Bankr. P. 7052

cmt. 11; In re Marrama, 430 F.3d 474, 477 (1st Cir. 2005). Parker

raises the same purely legal questions before us that he raised

before the BAP.

Parker first asserts that his state court action included

a cause of action in rem against Handy's residence. He argues that

claims under the UFTA sound in rem and that an action that seeks to

impose a constructive trust is an in rem action. In making this

claim, Parker relies upon Pennoyer v. Neff, 95 U.S. 714 (1877), for

the proposition that an action may confer in rem jurisdiction on a

court even in the absence of a pre-judgment attachment of the

property in question. Id. at 724 (citing Boswell's Lessee v. Otis,

1
Handy has failed to appear or file a brief on appeal. We
allowed Parker's attorney to present oral argument, nonetheless.

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50 U.S. (9 How.) 336 (1850)). He cites no Maine law in support of

his argument.

In Pennoyer, the Supreme Court held that an action in rem

may proceed when the property is brought under the court's control

either by "seizure or some equivalent act." 95 U.S. at 727.

Subsequent decisions have held that a court may not exercise

jurisdiction over an action quasi in rem absent an attachment or

garnishment. Pennington v. Fourth Nat'l Bank, 243 U.S. 269, 272

(1917). In actions purely in rem, however, it appears that the

rule in Pennoyer still applies. 4A Wright & Miller, Federal

Practice and Procedure § 1070, at 292 (3d ed. 2002).2

It does not follow that Parker has stated a claim in rem.

He concedes that he did not obtain a lien, attachment, or

provisional remedy. He does not argue that the state district

court exercised control over Handy's residence. Parker argues only

that he can maintain an in rem claim because he requested a

constructive trust.

No Maine case supports this argument and our view, like

that of the BAP, is that Parker's request for a constructive trust

did not of itself give rise to a cause of action in rem.

Constructive trusts are not substantive rights that confer a cause

of action; they are remedial devices employed by courts once

2
A preliminary seizure is unnecessary in suits that
concern a valid lien. Roller v. Holly, 176 U.S. 398, 405 (1900).

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liability is found and where equity requires. See Yavuz v. 61 MM,

Ltd., 576 F.3d 1166, 1176 (10th Cir. 2009); Mayo v. Hartford Life

Ins. Co., 354 F.3d 400, 409 (5th Cir. 2004). Without more, Parker

cannot transform a request for a remedy in rem into a cause of

action in rem. It follows that before Handy's bankruptcy petition,

Parker's unsuccessful claims against Handy were only in personam.

Next, Parker asserts that he may pursue his fraudulent

conveyance claims post-discharge. He makes two related arguments,

one summarily. First, Parker claims that he retains a pre-

bankruptcy claim in rem that survives the bankruptcy discharge

injunction under 11 U.S.C. § 524. Second, relying on a

Massachusetts bankruptcy decision, In re Palumbo, 353 B.R. 37

(Bankr. D. Mass. 2006), Parker claims that an unsecured creditor

may pursue a fraudulent conveyance claim against a debtor's

property post-discharge consistent with 11 U.S.C. § 524.

Both of these claims fail. Parker's first claim fails

because he did not hold an in rem claim pre-discharge. Parker's

second claim is not properly before this court. He did not raise

it before the bankruptcy court, so he may not raise it on appeal.

Fish Mkt. Nominee Corp. v. Pelofsky 72 F.3d 4, 6 (1st Cir. 1995).

In any event, this claim is doubly waived because Parker also

failed to adequately present it on appeal. United States v.

Zannino, 895 F.2d 1, 17 (1st Cir. 1990). Palumbo does not bind us,

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and Parker makes no argument as to why an unsecured creditor may

proceed post-discharge consistent with 11 U.S.C. § 524(a)(2).

Finally, Parker asserts that the bankruptcy court erred

in holding that he was obliged to object to Handy's claim of a

homestead exemption. Because Parker does not possess a claim in

rem against Handy's residence, this claim is also not properly

before us.

III.

The judgment of the Bankruptcy Appellate Panel is

affirmed.

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