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Nebel v. Warfield

United States District Court, D. Arizona

June 8, 2017

Mark Louis Nebel and Amy Lee Nebel, Appellants,
Lawrence J. Warfield, Chapter 7 Trustee, Appellee.


          Honorable G. Murray Snow United States District Judge

         Pending before the Court is an appeal, by Debtors Mark Louis Nebel and Amy Lee Nebel, of an order by the United States Bankruptcy Court granting Trustee Lawrence J. Warfield's Motion to Compel Debtor to Turnover Estate Property. After reviewing the pleadings and record excerpts submitted for purposes of this appeal, the Court affirms the Bankruptcy Court's order as discussed below.


         Debtors filed for Chapter 7 bankruptcy on April 29, 2015. Prior to the petition date, Debtors made several payments related to an upcoming ballet course in North Carolina, which their seventeen-year-old daughter was to attend in June and July of 2015. Trustee filed a Motion to Compel Debtor to Turnover Estate Property on November 18, 2015. As relevant here, the Trustee sought turnover of two things: (1) the equivalent value of the payments related to the ballet course, and (2) 25% of the Debtors' interest in the paid time off (“PTO”) each had accrued at their respective places of employment as of the petition date.

         A hearing was held on May 2, 2016, and the Bankruptcy Court granted the Trustee's Motion. In an Amended Post Hearing Order Directing Turnover of Property, issued on July 5, 2016, the Bankruptcy Court clarified its ruling. With respect to the ballet course, Debtors were to “immediately turn over the equivalent value of the Tickets, Ballet Tickets, and Workshop in the amount of $3, 491.20”; with respect to the PTO, Debtors were to “turn over twenty-five percent (25%) of the net value of the Estate's pro-rata interest in paid time off in the aggregate amount of $2, 297.57 as the Debtors use the paid time off.” (Doc. 1 at 7.) Debtors moved for reconsideration, which motion the Bankruptcy Court denied on October 4, 2016. Debtors filed a Notice of Appeal on October 12, 2016, and the matter was assigned to this Court. The matter is now fully briefed. (Docs. 5, 7, 8.)


         I. Legal Standard

         Under 28 U.S.C. § 158(a)(1), the Court has jurisdiction over appeals from “final judgments, orders, and decrees” of bankruptcy judges. The Court reviews a bankruptcy court's findings of fact for clear error and its conclusions of law and of mixed questions of law and fact de novo. In re Icenhower, 757 F.3d 1044, 1049 (9th Cir. 2014); see Fed. R. Bankr. P. 8013 (“Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.”). The clearly erroneous standard requires the Court to accept the bankruptcy court's findings of facts unless “the court is left with the definite and firm conviction that a mistake has been committed by the bankruptcy judge.” See Latman v. Burdette, 366 F.3d 774, 781 (9th Cir. 2004). The Court must review the evidence on record in the light most favorable to the prevailing party. Lozier v. Auto Owners Ins. Co., 951 F.2d 251, 253 (9th Cir. 1991).

         II. Analysis

         a. Ballet Payments The bankruptcy estate formed upon the filing of a Chapter 7 action comprises “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11. U.S.C. § 541(a)(1). The scope of the estate is broad and includes both tangible and intangible property. United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05 (1983).

         Here, Debtors made three payments related to the ballet course in the month prior to the petition. First, on March 29, 2015, Debtors purchased airline tickets for $511.20. (Doc. 5-1 at 11.) Second, on April 5, 2015, Debtors paid $800.00, representing half of the ballet course's tuition. (Doc. 5-1 at 14.) Finally, on April 10, 2015, Debtors paid $2, 180.00 for the cost of room and board. (Doc. 5-1 at 15.) Thus, as of the date of the petition, Debtors had exchanged $3, 491.20 of their money for the right to fly on an airplane and attend a ballet course-services that would be used by their minor daughter after the petition. They thus had a property interest in the tickets and the course.

         The parties dispute whether the tickets and the course were refundable and/or transferable, but as the Bankruptcy Court correctly concluded, all of the payments created property interests to which the estate was entitled regardless of their transferability.[1] The Bankruptcy Court for the District of Arizona has previously addressed a case where a trustee sought turnover of the equivalent value of a tax credit, which the debtor had earned but not yet received at the time of the petition. See In re Nichols, 309 B.R. 41 (Bankr. D. Ariz. 2004). The court held that the value of the tax credit must be turned over, even though it could not be liquidated or transferred:

Nothing in § 541 requires that the debtor's interest be immediately capable of being liquidated into cash in order to constitute property of the estate. To the contrary, § 541(c)(1) provides that such debtor's interests become property of the estate even though they could not be liquidated and transferred by the debtor under applicable nonbankruptcy law. Moreover, § 542(a) [governing turnover] is not limited to property that the debtor can transfer in kind to ...

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