In re Ramirez
| Decision Date | 16 August 2017 |
| Docket Number | CASE NO: 16–50238 Jointly Administered Order,CASE NO: 15–50164 |
| Citation | 575 B.R. 159 |
| Parties | IN RE: Leon Oscar RAMIREZ Jr., Rosalinda Eckhardt, Debtors |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
Jesse Blanco, Jr, Attorney at Law, San Antonio, TX, for Debtor.
Hector Duran, U.S. Trustee, Stephen Douglas Statham, Office of US Trustee, Houston, TX, for U.S. Trustee.
The Court faces a unique issue of first impression in the instant case where it must determine the extent to which Debtors' interests in a probate estate should be considered as property of the bankruptcy estate. ECF No. 136 () (the "Objection ") see also ECF No. 140 (). This Court considers the pleadings and briefs filed by the parties prior to the Court's Order to jointly administer the two cases; the arguments presented at the hearings held on December 8, 2016, and May 4, 2017; all other evidence in the record; and relevant case law. For the reasons discussed herein, the Court finds that Debtors' interest in their father's probate estate constitutes an equitable interest under the Code and is therefore property of the bankruptcy estate, and, as such, the Internal Revenue Service's (the "IRS ") Objection should be overruled as to Debtors interests in property of the probate estate being property of the respective bankruptcy estates but sustained as to Debtors having personal liability for some portion or all of the estate taxes. The Court does not reach the merits of any further bases in the Objection and reserves ruling for a further hearing.
This Court makes the following Findings of Fact and Conclusions of Law pursuant to Fed. R. Bankr. P. 7052, which incorporates Fed. R. Civ. P. 52, and 9014. To the extent that any Finding of Fact constitutes a Conclusion of Law, it is adopted as such. To the extent that any Conclusion of Law constitutes a Finding of Fact, it is adopted as such. This Court made certain oral findings and conclusions on the record. This Memorandum Opinion supplements those findings and conclusions. If there is an inconsistency, this Memorandum Opinion controls.
On October 26, 2015, Leon Oscar Ramirez, Jr. ("Ramirez ") filed for bankruptcy under chapter 11, title 11 of the United States Bankruptcy Code.1 LR ECF No. 1.2 On December 4, 2016, Rosalinda Eckhardt ("Eckhardt "), Ramirez's sister, filed for bankruptcy under chapter 11, title 11 of the Code. RE ECF No. 1.3 In Schedule A, Ramirez and Eckhardt (collectively, "Debtors ") both listed the following real property which is "inherited from father":
LR ECF No. 1 at 6–9; RE ECF No. 9 at 1–8.
Schedule B indicates that Ramirez and Eckhardt inherited a half interest each in eleven vehicles from their father for a total value of $16,100.00. RE ECF No. 9 at 8–11; LR ECF Nos. 1 at 13–14, 100 at 4–5.
On November 6, 2015, the IRS filed its Proof of Claim in the amount of $69,169.24 of which $40,142.42 was for taxes in Ramirez's bankruptcy. LR Claim No. 1–1. However, on December 10, 2015, IRS amended its claim in the amount of $2,295,688.37, and then amended again on July 11, 2016, in the amount of $2,295,283.40, and finally amended again on March 22, 2017, in the amount of $2,307,058.52. LR Claim Nos. 3, 21, 23. The final claim filed by the IRS consists of $39,737.45 as a priority tax claim, $40,771.94 in general unsecured tax claims, and the amount of $2,226,549.13 designated as "Estate" taxes identified by Taxpayer ID Number xx–xxx–6042V secured by assets in Webb County, Texas and Zapata County, Texas. See generally LR Claim No. 23–1. The IRS also filed a claim in Eckhardt's case listing $2,268,271.64 as a secured claim for "Estate" taxes identified by Taxpayer ID Number xx–xxx–6042V secured by assets in Webb County, Texas and Zapata County, Texas, $35,000 as a priority claim for unpaid taxes, and $1,800 in general unsecured claim. See RE Claim No. 2–2 (). Debtors have not objected to the Proofs of Claim.
On May 23, 2016, Ramirez filed a Chapter 11 Plan of Reorganization that was amended on November 1, 2016, and then again on March 14, 2017, as a Jointly Administered Plan of Reorganization. LR ECF Nos. 88, 143, 171 (). Ramirez filed his Disclosure Statement on May 23, 2016, which was supplemented on May 24, 2016. LR ECF Nos. 87, 91. On September 12, 2016, the Court entered an order approving the Disclosure Statement. LR ECF No. 131.
On June 30, 2016, the IRS filed its Objection to Debtors' Plan of Reorganization that was later amended on October 23, 2016. LR ECF Nos. 112, 136. On December 8, 2016, the Court conducted a hearing on confirmation of Debtors' Plan. However, the Court abated confirmation upon Debtors' counsel's request. Additionally, the Court sua sponte ordered briefing on whether (1) the bankruptcy estate includes property of the probate estate of the Debtors' father; (2) the IRS is limited to collection of estate taxes through Ramirez's Plan; and (3) a chapter 11 bankruptcy is an appropriate mechanism for the payment of said estate taxes. Ramirez and the IRS both filed their briefs, respectively, on January 6, 2017, and February 4, 2017. LR ECF Nos. 154, 157.
On February 10, 2017, Debtors filed a Motion for Joint Administration of their respective cases on the basis of the interwoven nature of the probate estate, of which they are executor/executrix, its assets, and the estate tax liabilities due the IRS. LR ECF No.162; RE ECF Nos. 34 ( RE ECF No. 30). On March 9, 2017, the Court granted the respective Motions for Joint Administration and designated Ramirez's case to serve as the main case for all future filings. LR ECF No. 167; RE ECF No. 42.
On May 4, 2017, the Court conducted a hearing on International Bank of Commerce's Motion for Relief from Stay, which was filed on March 20, 2017, and Debtors' Motion for Use of Cash Collateral. LR ECF Nos. 176, 183; see also RE ECF No. 44. The Court did not grant either motion at the May 4, 2017 hearing, but did allow Debtors to continue their use of cash collateral pursuant to the budget previously submitted. See also LR ECF No. 195. On May 30, 2017, the Court entered an order abating all further hearings pending a ruling on the dispositive issue of whether the Debtors' inherited property is in fact property of their respective bankruptcy estates, which was taken under advisement. Id.
Briefing has now closed and the matter is ripe for consideration.
Section 541 of the Code defines property of the bankruptcy estate and is, in the instant case, augmented by 11 U.S.C. § 1115. Section 541, in relevant portion, states:
§ 541(a)(1), (5). Section 1115...
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