In re Terry, Bankruptcy No. 85-20003

• Decision Date: 22 January 1986
• Docket Number: 85-2020A.,Bankruptcy No. 85-20003
• Citation: 56 BR 713
• Parties: In re Elizabeth A. TERRY, Debtor. Louis A. RYEN, as Trustee in Bankruptcy, Plaintiff v. Elizabeth A. TERRY and Bertha Terry, Defendants.
• Court: U.S. Bankruptcy Court — Western District of New York

56 B.R. 713 (1986)

In re Elizabeth A. TERRY, Debtor.

Louis A. RYEN, as Trustee in Bankruptcy, Plaintiff v. Elizabeth A. TERRY and Bertha Terry, Defendants.

Bankruptcy Nos. 85-20003, 85-2020A.

United States Bankruptcy Court, W.D. New York.

January 22, 1986.

Lacy, Katzen, Ryen & Mittleman by: David D. MacKnight, Rochester, N.Y., for trustee.

William G. Madigan, Bath, N.Y., for debtor.

George V. Cook by William O'Brien, Syracuse, N.Y., for Beneficial Finance.

MEMORANDUM AND DECISION

EDWARD D. HAYES, Bankruptcy Judge.

This adversary proceeding was commenced by the filing of a complaint by the trustee, Louis A. Ryen. The complaint alleges that the debtor, Elizabeth A. Terry, received, subsequent to the filing of her petition for relief, approximately $51,000 as settlement for an action which was pending prior to her filing. The trustee is seeking immediate possession of the proceeds of the settlement under 11 U.S.C. § 542(a).

The facts leading up to this adversary proceeding are as follows. On January 2, 1985, the debtor filed her petition and most of the appropriate required documentation. On January 16, 1985, the debtor's Schedule of Current Income and Expenditures was filed with this Court. The Schedule of Current Income included under the heading "Other monthly income" a reference to "Disability settlement pending unsure as to amount or form such settlement will take — Workers Comp." At that point in time, the above statement located within the Schedule of Current Income and Expenditures was the only reference to an action or possible settlement of that action within the debtor's file.

On or about February 8, 1985, the debtor received the proceeds of a $51,000 settlement, less attorney's fees of $6,630. The settlement stemmed from a petition filed by the debtor which requested the Commonwealth of Virginia, its agencies, or its subdivisions, to provide a lump sum payment in lieu of bi-monthly workers compensation payments which were being received by the debtor because of a June, 1979 industrial accident. Twenty-five thousand dollars of the settlement was immediately converted into treasury bills listing the debtor as the owner of the funds pursuant to the settlement agreement. The remaining amount of approximately $19,000 was received by Elizabeth Terry while she was temporarily in Florida.

Soon after receiving the approximately $19,000, the debtor sent the funds to her mother, Bertha Terry, in New York. The debtor allegedly transferred those funds to her mother for safe keeping because she did not have a bank account in New York. A stipulation entered into by the attorneys for the debtor and for the trustee states that Elizabeth Terry retained a beneficial interest in the approximately $19,000, but Bertha Terry held legal title to those funds which were deposited into a bank account solely in the mother's name. It has also been stipulated that no trust or other similar agreement was reduced to writing and no oral trust or similar agreement was made except that there was a general understanding that the funds would be available for the debtor's use, if and when needed. Bertha Terry has neither objected to the aforementioned stipulation nor has she made any claim as to being the owner of the funds in question.

On February 22, 1985, a meeting of creditors was held. At that meeting, the trustee and an attorney for a creditor inquired as to the status of the workers compensation action. The debtor testified as to the settlement and fully disclosed all relevant facts.

Less than one week after the meeting of creditors, the trustee filed this adversary proceeding. The trustee also sought and received an order from this Court staying and enjoining Elizabeth Terry and Bertha Terry from selling, giving away, encumbering, or in any other manner dealing with or transferring bonds, cash or bank accounts in the...