619 F. App'x 779
10th Cir.2015Background
- Expert South sold undeveloped Tulsa property to LTF and agreed to perform site improvements; funds were placed with an independent escrow agent to secure performance.
- The escrow agreement allowed Expert South to recover portions of the escrow as it completed segmented work; no segment was completed when Expert South filed bankruptcy.
- LTF sued in bankruptcy court seeking a declaration that the escrowed funds were not property of Expert South’s bankruptcy estate; bankruptcy court granted summary judgment for LTF; the BAP affirmed in relevant part.
- Expert South argued the escrow funds were fully its legal and equitable property at the commencement of bankruptcy and thus part of the estate.
- The panel evaluated the issue under 11 U.S.C. § 541(a)(1), applying Oklahoma property law to determine the debtor’s interests at the bankruptcy’s outset.
- Expert South’s attempts to raise more nuanced theories and to obtain further discovery were rejected as forfeited or unsupported by the required Rule 56(d) affidavit.
Issues
| Issue | Plaintiff's Argument (Expert South) | Defendant's Argument (LTF) | Held |
|---|---|---|---|
| Whether escrow funds were fully part of debtor’s bankruptcy estate at commencement | Escrow funds were legally and equitably Expert South’s property and thus part of the estate | Funds were held by an escrow agent and subject to unsatisfied conditions; Expert South lacked an unqualified interest | Funds were not fully part of the estate at commencement because contingencies prevented an unqualified interest |
| Whether state law defines property interests for §541(a)(1) | Federal estate definition controls broadly | State property law (Oklahoma) governs existence/extent of debtor’s interests | Applied Oklahoma law to determine debtor’s contingent interest; federal law defers to state law per Butner |
| Whether Expert South forfeited alternative legal theories about contingent interests or later vesting | Argued in appellate briefing that contingent or derivative interests could still be estate property | Did not present those theories in bankruptcy court; forfeited | Forfeited; court declined to consider unraised theories on appeal |
| Whether bankruptcy court abused discretion by ruling on summary judgment before more discovery | Claimed additional discovery could develop arguments | Failed to file a compliant Rule 56(d) affidavit explaining needed discovery | No abuse: Expert South’s affidavit was inadequate; summary judgment ruling proper |
Key Cases Cited
- United States v. Whiting Pools, 462 U.S. 198 (Sup. Ct.) (bankruptcy estate includes a debtor’s legal and equitable interests)
- Butner v. United States, 440 U.S. 48 (Sup. Ct.) (state law defines property interests for bankruptcy estate)
- Marion Mach., Foundry & Supply Co. v. First Nat’l Bank & Trust Co. of Tulsa, 58 P.2d 900 (Okla. 1936) (Oklahoma precedent on escrow and conditional interests)
- Fouts v. Foudray, 120 P. 960 (Okla. 1912) (Oklahoma law on escrow and title transfer conditions)
- Dzikowski v. NASD Regulation, Inc. (In re Scanlon), 239 F.3d 1195 (11th Cir. 2001) (escrow funds not necessarily estate property where conditions unmet)
- Wilson v. United Sav. of Tex. (In re Missionary Baptist Found. of Am., Inc.), 792 F.2d 502 (5th Cir. 1986) (contingent estate interests may vest post-petition if conditions are satisfied)
- Richison v. Ernest Grp., Inc., 634 F.3d 1123 (10th Cir. 2011) (issues not presented below are forfeited on appeal)
- Pasternak v. Lear Petroleum Exploration, Inc., 790 F.2d 828 (10th Cir. 1986) (standards for delaying summary judgment for discovery under Rule 56(d))