792 F.2d 502 (5th Cir. 1986), 85-1422, Matter of Missionary Baptist Foundation of America, Inc.

Docket Nº:85-1422.
Citation:792 F.2d 502
Party Name:In the Matter of MISSIONARY BAPTIST FOUNDATION OF AMERICA INC., etc., et al., Debtor, Robert B. WILSON, Trustee, Plaintiff-Appellee, v. UNITED SAVINGS OF TEXAS, Defendant-Appellant.
Case Date:June 20, 1986
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 502

792 F.2d 502 (5th Cir. 1986)

In the Matter of MISSIONARY BAPTIST FOUNDATION OF AMERICA

INC., etc., et al., Debtor,

Robert B. WILSON, Trustee, Plaintiff-Appellee,

v.

UNITED SAVINGS OF TEXAS, Defendant-Appellant.

No. 85-1422.

United States Court of Appeals, Fifth Circuit

June 20, 1986

Page 503

Thomas J. Griffith, Ralph H. Brock, Lubbock, Tex., for defendant-appellant.

Richard Hubbert, Sims, Kidd, Hubbert & Wilson, Lubbock, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before WILLIAMS, GARWOOD, and JONES, Circuit Judges.

EDITH HOLLAN JONES, Circuit Judge:

United Savings of Texas ("United Savings") appeals the judgment of the district court, which in turn affirmed the bankruptcy court's award to the Trustee of a substantial portion of the funds in four escrow accounts. The accounts were originally created to satisfy certain obligations of a prior borrower in connection with the financing, by United Savings' predecessor, of the purchase of two nursing homes. Two principal issues are raised on appeal: whether the escrow funds were property of the debtor's estate pursuant to 11 U.S.C. Sec. 541, at the date of bankruptcy, and whether, when the Trustee sold the nursing homes covered by the original debt and was released from any obligation on the debt, the Trustee retained his rights in the escrow funds. Based on the facts of this case, we answer both questions in the affirmative and therefore AFFIRM the judgment of the district court.

I. FACTUAL BACKGROUND

The escrow agreements at issue originated in 1976, when the predecessor of United Savings, Parker Square Savings and Loan Association of Wichita Falls, Texas, issued its loan commitment to Truco Properties Inc. for two loans to finance Truco's purchase of the nursing homes. Two paragraphs in the commitment letter constitute the only written agreement concerning the establishment of the escrow accounts.

Truco opened the required reserve accounts and contributed the appropriate amount to each account with its monthly payments of principal and interest on each loan. In 1977, Truco sold the two nursing homes to Parkway Health Care, Inc., and on January 18, 1979, the homes were purchased by Associated Memorial Homes, a division of Missionary Baptist Foundation of America, Inc., the debtor in this case. The escrow accounts were transferred successively from Truco to Parkway and then to the debtor. From time to time, amounts were disbursed from the reserve and replacement escrow funds to reimburse the then-owner of the nursing homes for various capital expenditures. Each year, deposits in the tax and insurance escrow funds were disbursed to cover those expenses.

At each successive transfer of the property prior to the sale in question, the preceding borrowers and guarantors agreed to remain liable on the debt. Each successive transfer was styled as an assumption of

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the underlying indebtedness. United Savings' predecessor expressly consented to each successive transfer.

In October 1980, Missionary Baptist and its subsidiaries filed a petition for relief under Chapter 11 of Title 11, United States Code. Robert B. Wilson was immediately thereafter appointed Trustee. The debtor, through the Trustee, continued to operate the two nursing homes until April 30, 1982, when each of them was conveyed by the Trustee to Jewell Enterprises, a general partnership.

Jewell Enterprises assumed all loan obligations with United Savings, and the debtor was released from all loan obligations. 1 United Savings consented to the transfer of the properties, and in the agreement expressing its consent, language that would have effected a transfer of the escrow funds was crossed out by the parties. The conveyance by Missionary Baptist to Jewell, with the express reservation of the debtor's rights to the escrow funds, was duly noticed to the creditors of Missionary Baptist and approved by the bankruptcy court.

At the date of Jewell's purchase, the four escrow accounts totalled nearly $90,000, including approximately $46,000 in the tax and insurance accounts and $43,000 in the replacement and repair accounts. The Trustee continued to fund the escrow accounts during the bankruptcy, and no amounts were withdrawn for capital improvements. The Trustee brought this action in bankruptcy court seeking to have United Savings turn over the unexpended balance...

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