In re Killebrew, Bankruptcy No. 8500309JC
| Decision Date | 14 September 1988 |
| Docket Number | Adv. No. 870157JC.,Bankruptcy No. 8500309JC |
| Parties | In re Mack L. KILLEBREW and Delores B. Killebrew. Mack L. KILLEBREW and Delores B. Killebrew v. Charles A. BREWER, Trustee. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Mississippi |
Timothy Gowan, Jackson, Miss., for debtors.
Charles A. Brewer, Jackson, Miss., trustee.
There came for hearing the Amended Complaint to Turn Over Assets to Debtors filed by Mack L. Killebrew and Delores B. Killebrew, the Debtors in this Chapter 7 proceeding. Having considered the pleadings, the memoranda submitted by counsel, and the testimony presented at the hearing, the Court is of the opinion that the relief sought by the debtors in the Amended Complaint should be denied and that the $83,932.85 being held by the trustee is property of the debtors' estate which should be administered and distributed according to law.
One of the debtors, Mack L. Killebrew, was named as a beneficiary in the testamentary trust established in the Last Will and Testament of John Arthur Killebrew, Sr., dated January 23, 1982. The testator died on July 2, 1982. The debtors filed for relief under Chapter 7 of the Bankruptcy Code on February 27, 1985. The first meeting of creditors was held on April 16, 1985. An agreed order abandoning the real property which is the subject of this controversy was executed on April 26, 1985. The debtors received their discharge in this Chapter 7 proceeding July 2, 1985. On or about May 18, 1987, the real property which is the subject of this complaint was sold by the testamentary trustee to John Arthur Killebrew, Jr., the brother of the debtor herein, Mack L. Killebrew. Said brother was also a co-beneficiary under the aforesaid trust. By order of this Court dated July 31, 1987, the First National Bank of Holmes County turned over to the trustee, Charles A. Brewer, the sum of $83,932.85. This money is the subject of the amended complaint filed by the debtors.
Under the terms of the testamentary trust certain farm land located in Holmes County, Mississippi, comprised the corpus. The net rental income from this land was to be used by the trustee to satisfy any federal or state estate taxes due and owing on the testator's estate. Any remaining funds held by the trustee were to be distributed, solely in the discretion of the trustee, in equal shares to the testator's four children, John Arthur Killebrew, Jr., Betty Sue Killebrew Mitchell, James Robert Killebrew, and the co-debtor herein, Mack Leon Killebrew.
The terms of the trust further provided for the sale of the property with the proceeds from the sale to be divided among the aforesaid beneficiaries. If any of the primary beneficiaries died before the property was sold and the trustee distributed the sale proceeds, the trustee was to distribute the deceased child's share per stirpes. Upon completion of the distribution, the trust terminated.
On March 8, 1984, the debtor, Mack L. Killebrew, executed an assignment of his interest in the trust in favor of Guaranty Bank and Trust Company in consideration for a loan of $50,000.00. This assignment was made prior to the sale of the property. Said debtor executed a security agreement in favor of Guaranty Bank and Trust Company specifically assigning his interest in the trust as security for the loan.
As set forth hereinabove, the debtors filed for relief under Chapter 7 of the Bankruptcy Code on February 27, 1985. Mack L. Killebrew did list his interest in the trust in his schedules. However, he showed no value of that interest.
The debtor's explanation was that he considered it a contingent interest and not really an asset of his estate, and takes the position that because it was a contingent interest, it had no value. As set forth hereinafter, the Court disagrees with this position.
At the first meeting of creditors, an attending creditor questioned the value of the trust. The debtor indicated that there was no equity in the property. Pursuant to representations made to the trustee by the debtor, Mack L. Killebrew, that no equity existed in the property, the trustee abandoned the property on or about May 24, 1985. The debtors were granted a discharge on July 2, 1985. For reasons unknown to the Court, this Chapter 7 proceeding has never been closed. Therefore, this is not a case involving the reopening of a Chapter 7 proceeding after its closing. This proceeding also does not involve any attempt by the trustee to revoke the discharge granted to the debtors.
On or about May 18, 1987, the land was sold in accordance with the terms of the trust for $600,000.00. The net share of the proceeds due to the co-debtor, Mack L. Killebrew, totalled $83,932.85.
As stated above, this Court entered its order on July 31, 1987, directing that said $83,932.85 be turned over to the trustee, Charles A. Brewer, for proper administration in this Chapter 7 proceeding subject to the claims of the debtors or other interested parties. The trustee in this case claims that these proceeds are property of the estate and should be duly administered as such. The debtors claim:
1. That the case should not be reopened approximately two (2) years after the discharge was granted;
2. The property that the trustee now seeks to claim for the estate was fully revealed to him at the time the discharge was granted and that he specifically abandoned it;
3. The property was not part of the bankrupt's estate because all that was possessed by Mack L. Killebrew at the time he filed for bankruptcy was a contingent interest in the property which would vest should he live until the date the property was to be sold and the proceeds distributed; and
4. That because of this contingent interest the debtor's interest in the property was not assignable nor reachable by his creditors under the applicable law and thus under the ...
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