## Facts

- On January 21, 1982, Joel S. Hochman, MD, and his wife filed a voluntary Chapter 11 petition and served as debtors-in-possession.
- The case was later transferred to New Mexico.
- In early 1983, while the Chapter 11 case was pending, Dr. Hochman invented a medical device (the “Tamponator”) and filed a patent application.
- On May 3, 1984, after creditor motions, the bankruptcy court converted the case to Chapter 7.
- In 1984, Dr. Hochman entered into two licensing agreements granting rights to license, manufacture, use, sell, and commercialize the device in exchange for an initial license fee plus continuing royalties.
- In May 1985, after conversion to Chapter 7, Dr. Hochman obtained a patent for the device.
- In July 1988, three scheduled creditors filed an adversary complaint objecting to discharge under 11 U.S.C. § 727, alleging concealment and misappropriation of estate assets.
- After a five-day trial, the bankruptcy court found the Hochmans intentionally concealed (among other things) rents and the proceeds/patent and license fees related to the Tamponator, denied discharge, and ruled the device, patent, and licensing income were property of the estate.
- The district court affirmed. On appeal to the Tenth Circuit, the Hochmans challenged only the determination that the device, patent, and related income were part of the bankruptcy estate.

## Issues

1. In a case converted from Chapter 11 to Chapter 7, is the “property of the estate” determined by the original Chapter 11 filing date (order for relief) or by the later conversion date under 11 U.S.C. §§ 348(a) and 541?
2. Are a debtor’s invention created during the Chapter 11 case, a patent issued after conversion, and payments due under related license agreements property of the Chapter 7 estate?

## Decision

- The Tenth Circuit affirmed the district court’s judgment affirming the bankruptcy court.
- Conversion from Chapter 11 to Chapter 7 did not change the petition date, the commencement of the case, or the order for relief; the estate was not redefined as of the conversion date.
- The Tamponator invention, the patent, and the income due under the licensing agreements were properly treated as property of the bankruptcy estate.
- Because these rights and payments belonged to the estate, the lower courts did not err in treating concealment of the Tamponator-related proceeds as concealment of estate property in the § 727 discharge litigation.

## Legal Principles

- Under 11 U.S.C. § 348(a), conversion of a bankruptcy case does not change the date of the filing of the petition, the commencement of the case, or the order for relief.
- Under 11 U.S.C. § 541, property of the estate includes the debtor’s legal and equitable interests that become part of the estate at the case’s start, as well as specified categories such as proceeds, profits, and other interests tied to estate property.
- Intellectual-property interests arising during a Chapter 11 case—when the debtor is a debtor-in-possession—may be treated as estate property in the later-converted Chapter 7 case, and later-issued patents and license payments may be treated as interests or proceeds derived from that property.
- A debtor’s concealment of property that belongs to the estate can support denial of discharge under 11 U.S.C. § 727.

## Conclusion

The Tenth Circuit held that converting the Hochmans’ bankruptcy from Chapter 11 to Chapter 7 did not reset the date for determining estate property, and that Dr. Hochman’s Tamponator invention developed during the Chapter 11 case—together with the later-issued patent and the license fees and royalties due under related agreements—belonged to the bankruptcy estate, supporting the denial of discharge based on concealment of those assets.


Patrick A. Casey, PA v. Joel S. Hochman, MD, 963 F.2d 1347 (1992)