Jubber v. Ruiz (In Re Ruiz)
455 B.R. 745
10th Cir. BAP2011Background
- Debtors filed a Chapter 7 petition on April 24, 2010 and wrote four pre-petition checks totaling about $3,000 from a Zions Bank checking account.
- The four checks were not honored before filing but cleared within four days after filing, depleting the account.
- Debtors schedules disclosed the Zions account with a $10.02 balance, though the actual balance on filing was $3,764.99.
- The Trustee learned pre-petition checks had not cleared at filing and moved for turnover of the post-petition funds.
- The bankruptcy court denied turnover, holding the funds in the account were not property of the estate but a bank debt to the Debtors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether funds in the checking account on filing were property of the estate | Jubber: funds in account are estate property | Ruiz: only the bank’s promise to pay is estate property | Funds in the account are property of the estate |
| Whether Debtors had possession, custody, or control during the case | Jubber: Debtors controlled funds during case | Ruiz: no possession/custody, but control matters | Control during the case satisfies turnover under §542(a) |
| Whether Trustee is entitled to turnover of the funds under §542(a) | Jubber: turnover from debtors to trustee | Ruiz: cannot compel turnover from Debtors for funds not in their possession | Trustee entitled to turnover of $3,524.99 (amount sought) |
Key Cases Cited
- Citizens Bank of Md. v. Strumpf, 516 U.S. 16 (1995) (bank promise to pay—distinguishes from setoff in stay context; not controlling on §541)
- In re Pyatt, 486 F.3d 423 (8th Cir. 2007) (current possession not required; control during case suffices (policy concern about double recovery))
- In re Majors, 330 B.R. 880 (10th Cir. BAP 2005) (turnover extends to property held at any time during the case; current possession not required)
- In re Spencer, 362 B.R. 489 (2006) (trustee may seek turnover where property was within estate during the case)
- In re USA Diversified Prods., Inc., 100 F.3d 53 (7th Cir. 1996) (possession, custody, or control during case standard for turnover)
- Beaman v. Vandeventer Black, LLP (In re Shearin), 224 F.3d 353 (4th Cir. 2000) (recognizes turnover scope beyond current possession)