In re Williams
| Decision Date | 25 April 2012 |
| Docket Number | Case No.: 11-05226 |
| Parties | In re: RICHARD CHAD WILLIAMS, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Alabama |
ORDER DENYING THE TRUSTEE'S REQUESTED RELIEF ON MOTION TO
DETERMINE THE ESTATE'S INTEREST IN CERTAIN PROPERY
D. Parker Sweet, Chapter 7 Trustee, Mobile, Alabama
C. Michael Smith and Suzanne Paul, Attorneys for the Debtor, Mobile, Alabama
This case is before the Court on the Trustee's motion to determine the estate's interest in certain property. The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Order of Reference of the District Court. The Court has the authority to enter a final order pursuant to 28 U.S.C. § 157(b)(2). For the reasons detailed below, the relief requested by the Trustee in his motion is due to be DENIED.
The Debtor filed for Chapter 7 bankruptcy relief on December 29, 2011. The Debtor's bankruptcy filing was, in part, the product of the failure of his family construction business. The Debtor testified that he personally guaranteed several loans for the now-defunct business. In response to Question 14 of his Statement of Financial Affairs the Debtor represented that he "held (or controlled) for another person" the following assets: (1) several pieces of personal property owned by his wife, Julia Marco Williams ("Julia"), and their three young children, (2) funds in two brokerage accounts at Stifel Nicolaus owned by Julia, and (3) a homeplace owned by Julia located at 717 Wynncliff Drive, Mobile, Alabama (the "Wynncliff Drive home"). The personal property consisted primarily of household furnishings located at the Wynncliff Drivehome. The evidence shows that the household furnishings were given to Julia and her children by her parents as gifts years before the Debtor's bankruptcy. Both the Debtor and Julia testified that they were not purchased for the Debtor's benefit.
Several years prior to the Debtor's bankruptcy filing, in June 2005, Julia's father and mother passed away, with her father predeceasing her mother by three months. Julia was named the personal representative of her father and mother's probate estates. She testified that the probate process was costly, tedious, and frustrating. It was clear to the Court that the passing of Julia's parents was very hard on her.
Julia received an inheritance from her parents. Specifically, in January of 2006, she received two Stifel Nicolaus brokerage accounts totaling roughly $65,000 and was deeded her parent's home located at 9425 Private Road #166 a/k/a 2800-A Greer Road, Theodore, Alabama (the "Private Road home"). Before that time, the Debtor and Julia owned a home together at Darby Creek in Mobile, Alabama. However, after her father's death in 2005, Julia, the Debtor, and their children (collectively, the "Williams") moved into the Private Road home in order to care for her ailing mother. Julia and the Debtor sold the Darby Creek residence in November 2005. The Darby Creek property was subject to a mortgage and they realized no profit from the sale beyond their initial down payment. The Williams lived at the Private Road home until 2009.
On February 19, 2009, Julia sold the Private Road home for $522,946.60. The closing check was made payable to Julia alone. Julia used the funds obtained from the sale to purchase the Wynncliff Drive home for $560,000. She used her inheritance to pay the difference between the sale price of the Private Road home and the Wynncliff Drive home. The Williams currently call the Wynncliff Drive home their residence. The Debtor did not contribute any funds to the purchase of either home. The Wynncliff Drive home is free and clear of liens. The deed to theWyncliff Drive home named Julia and the Debtor as joint tenants with rights of survivorship. Julia and the Debtor testified that the Debtor was added to the deed for survivorship purposes only. Julia specifically testified that she did not intend to give an interest in the home to the Debtor; rather, she wanted the home to pass to her husband for the benefit of their children only in the event of her unexpected death. Julia's financial advisor suggested the joint tenancy relationship. Julia and the Debtor both testified that they were not familiar with other legal methods of effectuating Julia's intent to create survivorship rights. The Wynncliff Drive home is currently valued at $500,900 according to the Mobile County Revenue Commissioner.
The Stifel Nicolaus accounts were originally titled at UBS Financial Services in the name of Julia's mother, but were transferred to her mother's probate estate and were subsequently retitled in the name of the Debtor and Julia as joint tenants with rights of survivorship. Julia testified that, like with the Wynncliff Drive home, she included the Debtor on the Stifel Nicolaus accounts for survivorship purposes only, not as a gift. She hoped that in the event of her untimely death that her assets would pass to her husband, for the benefit of their children, without going through probate. The Debtor and Julia testified that the money in the Stifel Nicolaus accounts is not used for the day-to-day expenses of the family. Instead, Julia testified that the money would be saved for the future benefit of the Williams' children.
The Trustee filed this action asserting that the Debtor's undivided one-half interest in the Stifel Nicolaus accounts and the Wynncliff Drive home are property of the estate and subject to collection for the benefit of creditors. The Trustee also submitted that the Debtor possessed an ownership interest in the home furnishings detailed in Question 14 of the Debtor's Statement of Financial Affairs. However, after considering the testimony of the Debtor and his wife, the Trustee abandoned his argument regarding the home furnishings. In opposition, the Debtorargues that the assets listed in Question 14 are not property of the estate because the Debtor merely possesses bare legal title to those assets pursuant to a resulting trust for the benefit of Julia. Further, as to the Stifel Nicolaus accounts, the Debtor argues that the Alabama Uniform Mulitple-Person Accounts Act dictates the same result.
The issue in this case is whether the Debtor possesses an interest in specific property owned by his wife that the Trustee may collect on behalf of the bankruptcy estate. Bankruptcy courts look to state law to determine debtors' interest in property. Butner v. United States, 440 U.S. 48, 54 (1979). Without the benefit of the facts and circumstances of this case, it appears on its face that the Debtor possesses an undivided one-half interest with rights of survivorship in the Stifel Nicolaus accounts and the Wynncliff Drive home.1 However, Alabama law recognizes the existence of the resulting trust. McClellan v. Pennington, 895 So. 2d 892 (Ala. 2004). The Alabama Court of Civil Appeals recently detailed the well-settled principle of the resulting trust in Smith v. Smith, 6 So. 3d 534, 540 (Ala. Civ. App. 2008):
A resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest in the property.
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