In re Delfosse

• Citation: 442 B.R. 481
• Decision Date: 09 December 2010
• Docket Number: Adversary No. 10–06063.,Bankruptcy No. 10–60888.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia
• Parties: In re Claude M. DELFOSSE, and Genevieve J. DelFosse, Debtor.Branch Bank & Trust Company, Plaintiffv.Claude M. DelFosse, and Genevieve J. DelFosse, Defendant.

442 B.R. 481

In re Claude M. DELFOSSE, and Genevieve J. DelFosse, Debtor.Branch Bank & Trust Company, Plaintiff
v.
Claude M. DelFosse, and Genevieve J. DelFosse, Defendant.

Bankruptcy No. 10–60888.

Adversary No. 10–06063.

United States Bankruptcy Court, W.D. Virginia,Lynchburg Division.

Dec. 9, 2010.

[442 B.R. 482]

Stephen E. Scarce, Parker, Pollard, Wilton & Peaden, P.C., Richmond, VA, for Plaintiff.C. Connor Crook, Boyle, Bain, Reback & Slayton, Marshall Moore Slayton, Esq., Charlottesville, VA, for Defendant.

ORDER ROSS W. KRUMM, Bankruptcy Judge.

The matter before the Court for decision involves the complaint by Branch Banking & Trust Company (hereafter “BB & T”) and the Debtors' answer to the complaint. Although there are numerous issues contained in the complaint and answer, this Order seeks to decide the narrow question of whether a certain parcel of real property consisting of approximately 318.35 acres in Nelson County, Virginia, assigned a Tax Map Parcel # 24–A–25 (hereafter the “Property”) is property of the estate under

[442 B.R. 483]

11 U.S.C. § 541(a)(1). Both parties have submitted their briefs and memoranda of law in support of their positions and the matter is now ripe for decision. Accordingly, the Court makes the following facts and conclusions of law.

Facts

On June 6, 2001, the Debtors executed a Trust Agreement which established the Claude M. DelFosse Living Trust (hereafter the “Trust Agreement”). The Debtors are the co-trustees of the Claude M. DelFosse Living Trust (hereafter the “Trust”). Pursuant to Article Two, Section 3, Claude DelFosse is the primary beneficiary of the Trust. Pursuant to Article Two, Section 3, Genevieve DelFosse and the dependent children of Debtor Claude DelFosse are the first residuary beneficiaries of the Trust.

The Debtors, acting as trustees for the Trust, acquired fee simple legal title to the Property pursuant to a deed dated April 11, 2002, and recorded in the land records of the Circuit Court of Nelson County, Virginia on April 15, 2002 as Instrument # 020001812 from Blue Ridge Lumber, a Virginia general partnership (hereafter the “Trust Deed–In”).

Discussion Jurisdiction

This is a core proceeding over which this Court has jurisdiction pursuant to 28 U.S.C. § 157(b). This action is further properly brought before the Court as an adversary proceeding pursuant to Rule 7001(2) of the Federal Rules of Bankruptcy Procedure as a complaint to determine the validity of a lien and/or other interests in property.

Virginia Law Governs This Dispute

Tidewater Fin. Co. v. Moffett (In re Moffett), 356 F.3d 518, 521 (4th Cir.2004) (citing Butner v. United States, 440 U.S. 48, 54–55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) (superseded by statute on other grounds)) holds that “while federal law defines in broad fashion what property interests are included within the bankruptcy estate, state law determines the nature and existence of a debtor's rights.” Accordingly, the Court will apply Virginia law to the question of whether the Trust is a Virginia land trust or a revocable living trust.

Construction of Trust Agreements

In order to determine whether the Trust is a Virginia land trust, as BB & T asserts, or a revocable living trust, as the Debtors assert, the Court must first look to the language of the Trust. Harbour v. SunTrust Bank, 278 Va. 514, 519–20, 685 S.E.2d 838, 841 (2009) holds

In considering the language of a trust agreement, the intent of the grantor controls. Huaman v. Aquino, 272 Va. 170, 174, 630 S.E.2d 293, 296 (2006); Clark v. Strother, 238 Va. 533, 539–40, 385 S.E.2d 578, 581 (1989). We initially ascertain the grantor's intent by reviewing the language that the grantor used in the trust instrument. Huaman, 272 Va. at 174, 630 S.E.2d at 296; McKinsey v. Cullingsworth, 175 Va. 411, 414–15, 9 S.E.2d 315, 316 (1940). If that language is clear and unambiguous, we will not resort to rules of construction, and we will not consider the grantor's apparent reasoning or motivation in choosing the particular language employed. See Schmidt v....