In re Figueira, Bankruptcy No. 91-42194-7.
| Decision Date | 30 December 1993 |
| Docket Number | Bankruptcy No. 91-42194-7. |
| Citation | 163 BR 192 |
| Parties | In re David Allen FIGUEIRA, Janis Stebley-Figueira, Debtors. |
| Court | U.S. Bankruptcy Court — District of Kansas |
Robert L. Baer, Trustee, Susan L. Mauch, Cosgrove, Webb & Oman, Topeka, KS, for trustee.
Michael E. Riling, Riling, Burkhead, Fairchild & Nitcher, Chartered, Lawrence, KS, for debtors.
This matter is before the Court on the trustee's motion to compel the debtors to turn over property of the estate and the debtors' resistance thereto.
The parties have agreed to the relevant facts. The debtors filed this case on October 23, 1991. The meeting of creditors was held pursuant to 11 U.S.C.A. § 341 on November 25, 1991, and the trustee asked the debtors to produce their bank statements for the 90 days before they filed for bankruptcy. They produced the records in February of 1992. The debtors were granted a discharge on March 16, 1992.
The debtors' schedules revealed that they had a bank account, and stated that the account had a zero balance. Although the debtors had written checks to creditors prepetition which would reduce the balance to zero once they had all been honored, the records for the account show that on the day they filed their petition, the actual balance was $1,055.13.1 Postpetition, their bank honored the prepetition checks and the balance was reduced to zero. None of the creditors received $600 or more of the petition-date balance.
The debtors signed their petition on October 21, 1991, a Monday, and counsel filed it two days later. The court file discloses that on October 25, the United States Trustee signed a document appointing the trustee on an interim basis and the document was filed on October 28. This appointment later became final since no other trustee was elected at the meeting of creditors. No one filed an objection to the debtors' discharge. By letter dated August 14, 1992, the trustee first asked the debtors to turn over the $1,055.13 that had been in their checking account on the date of their petition. On February 16, 1993, he filed the present motion, asking that the debtors be required to turn that amount over to him.
The debtors wrote a number of checks prepetition and, as a matter of good bookkeeping, deducted the amount of each check from their bank balance at the time they wrote it. This method of checkbook balancing should be greatly preferred over the all-too-common method of using an automated teller machine or speaking to a bank teller to determine the balance available for spending without allowing for outstanding checks. Unfortunately, in the circumstance of reporting a bank balance on a bankruptcy petition, the latter would be the more accurate method.
The trustee claims that, by virtue of 11 U.S.C.A. § 541(a)(1), the $1,055.13 became property of the estate upon the filing of the debtors' petition, and that the debtors had the duty, under § 521(4), to surrender the money to him. Thus, the trustee demands the debtors now fulfill that duty. The debtors respond that the money is no longer available to them since the bank honored their prepetition checks, and suggest the trustee should try to recover the money from the creditors who received it, on the grounds they violated the automatic stay and received voidable preferences. In addition, the debtors contend the relief sought by the trustee should be denied because: (1) the doctrine of laches bars it; (2) as the only asset of their bankruptcy estate, the money is not significant enough to administer and so should be abandoned; (3) a money judgment is not authorized under § 521; and (4) the debtors had no duty to stop payment on the checks and subject themselves to possible criminal or civil penalties. Neither side has cited any case law in support of any argument. The Court has been unable to locate any case addressing the trustee's ability to force debtors to turn over money that was in a bank account on the date of filing but was paid by the bank on prepetition checks, or to recover the amount from them later because they failed to turn it over.
Section 521(4) required the debtors to "surrender to the trustee all property of the estate and any recorded information, including books, documents, records and papers, relating to property of the estate." This is not generally interpreted to mean actual physical delivery; rather, a constructive delivery is made at the time the case is filed and physical delivery can be made, where suitable, on the trustee's request. See 3 Collier on Bankruptcy ¶ 521.11 at 521-54 (15th ed. 1993). Unquestionably, the debtors' bank account and any balance in it became property of the estate upon the filing of their petition. See 11 U.S.C.A. § 541(a)(1). What the trustee has overlooked, however, is that the bank account was not actual cash held by the bank for the benefit of the debtors, but simply a debt the bank owed them. The account became property of the estate, but that merely gave the estate, and, upon his appointment, the trustee, the right to seek payment from the bank. The trustee's theory would require debtors not only to surrender to him property they possessed on the filing date, but to collect all debts owed to them and then surrender those receipts to him as well. Nothing in the Bankruptcy Code or Rules requires debtors to do this. Instead, after the debtors disclosed the account's existence, the trustee had the ability to obtain any property of the estate that remained in the account. In fact, Federal Rule of Bankruptcy Procedure 2015(a)(4) requires the trustee to give notice of the case as soon as possible to any bank known to have deposits from the debtors.
The Court believes the debtors' duties with respect to bank accounts are specified by § 521(1) and Federal Rules of Bankruptcy Procedure 1007(b)(1) and 4002(3) rather than by § 521(4). Unless the court orders otherwise, debtors must file the schedule of assets and liabilities required by § 521(1) and Rule 1007(b)(1), and their assets would, of course, include any bank accounts. If they have not filed that schedule, Rule 4002(3) requires them to "inform the trustee immediately in writing of the name and address of every person holding money or property subject to the debtors' withdrawal or order"; this would obviously include bank accounts. The statute and rules do not require...
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