Defendant-Appellant Affiliated Computer Systems, Inc. (ACS) appeals from a judgment of the district court, affirming a holding of the bankruptcy court that $50,000 in ACS’s possession was property of the bankruptcy estate of the debtor, Douglas M. Kemp, a former employee of ACS, as of the date of Kemp’s filing for bankruptcy, and thus was subject to turnover to Kemp’s trustee, Plaintiff-Appellee Daniel J. Sherman (the Trustee). Cоncluding as a matter of law that the money was not held in escrow and that it was property in which Kemp had an ownership interest at the time that he declared bankruptcy, we affirm the district court’s ruling.
I
FACTS AND PROCEEDINGS
Kemp was employed by ACS in 1989 as its Vice President for Corporate Development. His compensation consisted of a salary plus commissions earned from Kemp’s efforts in arranging acquisitions of other сompanies by ACS. The employment agreement between Kemp and ACS, setting out the schedule of percentages to be used in determining Kemp’s commissions, provided that the amount of commission paid to Kemp could nevertheless vary from the commission calculated under the schedule if the facts of a particular transaction justified deviation. Under the agreement, Darwin Deason, the CEO оf ACS, was required to approve any deviation from the commission schedule.
In November 1989, Kemp assisted in ACS’s acquisition of OBS Companies, Inc. (OBS), and Deason authorized the payment of $170,000 to Kemp as his total net commission on that transaction. The next month, Atkinson Associates, Inc. (Atkinson) sued ACS, seeking recovery of commissions allegedly due to Atkinson from ACS in connection with the OBS acquisition. Atkinson claimed that Kemр had orally committed ACS to pay a 2% commission to Atkinson for its services in connection with the OBS acquisition.
In a subsequent transaction wholly unrelated to OBS or Atkinson, Kemp assisted ACS in acquiring a substantial interest in Dataplex, Inc. (Dataplex) in January 1990. Deason authorized the payment of $200,000 to Kemp as his commission on the Dataplex transaction but, in addition to standard with-holdings, ACS retained $50,000 of this amount pending the settlement or adjudication of the Atkinson lawsuit. Kemp signed ACS’s letter of April 3, 1990, which informed him that ACS had authorized a $200,000 commission on the Dataplex transaction and was withholding $50,000 of that amount until the results of the Atkinson lawsuit were determined.
More than three months later, on June 11, 1990, Kemp filed a voluntary petition under Chapter 7 of the Bankruptcy Code. After Sherman was appointed trustee for Kemp’s bankruptcy estate, he institutеd an adversary proceeding in bankruptcy court, seeking a turnover of the $50,000 from ACS. The bankruptcy court, trying the case on stipulated facts, found that the $50,000 was property of the estate at the time that Kemp filed for bankruptcy, and the court entered an order for turnover of those funds to the Trustee. On appeal, the district court affirmed the judgment of the bankruptcy court, finding that (1) the Trustee had satisfiеd his
II
ANALYSIS
We review a bankruptcy court’s findings of fact under the clearly erroneous standard, which calls for reversal only if, considering all the evidence, we are left with the definite and firm conviction that a mistake has been made.
ACS asserts that the Trustee has no right to turnover of the $50,000, insisting that those funds were held in escrow as a contingency and that Kemp did not have a vested interest in the funds at the time he filed for bankruptcy. ACS argues alternatively that, as it had discretionary authority to increase or decrease Kemp’s commission as calсulated from the schedule, Kemp did not have any interest in the $50,000 at the time he filed for bankruptcy because ACS had not yet released this money to him. After examining the transactions related to the $50,000 at issue, we conclude that neither of ACS’s contentions has merit.
Section 541(a)(1)
In opposing turnover of the $50,000, ACS relies on several cases in which bankruptcy courts have found that money held in an escrow account was not property of the debt- or’s estate. All of those cases, however, involved true escrow accounts that were created by bona fide, legally valid escrow agreements.
We look to state law — here Texas— to determine whether an escrow agreement existed: The answer to that question determines the parties’ respective rights to the $50,000 held by ACS.
The documents purporting to explain ACS’s reason for withholding the $50,-000 рortion of Kemp’s Dataplex commission say nothing other than that ACS was retaining that money pending settlement or adjudication of the Atkinson lawsuit. As the bankruptcy court observed, these documents specify absolutely no terms or conditions that must be fulfilled before the funds may be delivered to ACS or Kemp or anyone else. More importantly, there is no evidence of any agreement specifying how the fund would be applied upon resolution of the Atkinson lawsuit, whether by settlement or judgment. Kemp’s signature on ACS’s letter of April 3, 1990, which advised him that $50,000 of his earned commission was being withheld, did not somehow convert that withholding into an escrow agreement. Kemp did not affirmatively deposit his $50,000 with a neutral third party (or even with ACS for that matter); ACS just withheld it from him and kept the money in its own account, thereby acting as both stakeholder and claimant. That ACS (and Kemp, mirroring ACS) labeled the withholding as a “contingency” and as an “escrow fund” in various writings does not change the essential nature of the money as property in which Kemp had an ownership interest, regardless of whether his ownership might have been subject to divestment in the future if the outcome of the Atkinson lawsuit were to prove unfavorable to ACS.
Agreeing with the finding that here no escrow agreement was сreated between Kemp and ACS, we concur in the bankruptcy court’s observation that the Eighth Circuit’s ruling in In re Newcomb,
In contrast, our Texas law analysis of the escrow agreement in In re Missionary Baptist Foundation of America, Inc.
The Missionary escrow’s implicit contingency was that the debtor could not claim the escrowed funds if the debtor remained liable on the loan. As the debtor was released from its loan obligations, the escrow’s contingency — continuing liability on the loan— ceased to exist prior to the debtor’s filing for bankruptcy, removing the impediment to the debtor’s ownership and right to possession of the funds remaining in escrow and leading us to conclude that the esсrow funds were property of the debtor’s estate.
Even if we were to assume arguendo that Kemp’s assent to ACS’s withholding of the $50,000 could somehow be deemed to have creаted an escrow agreement, we would still be persuaded by our decision in Missionary that the $50,000 was property of Kemp’s estate. For the putative escrow’s contingency — resolution of the Atkinson lawsuit — had not been fulfilled at the time that Kemp filed for bankruptcy protection.
We also reject ACS’s alternative argument — clearly hindsight rationalization— that it was exercising its discretionary authority to set the amоunt of Kemp’s total commission in derogation of the percentage schedule when ACS “deducted” the $50,000 from the total amount due. ACS’s unilateral action in withholding the $50,000 for its own assurance pending the outcome of the Atkinson lawsuit did not affect the status of those funds as Kemp’s pre-petition earned income; neither did that action by ACS magically transmogrify Kemp’s ownership interest in his earnings into a contingenсy. Again, the OBS transaction, which generated the Atkinson lawsuit, and the Dataplex transaction,
As a general rule bankruptcy estates enjoy the same rights that the debtor held immediately prior to the filing of bankruptcy.
As the resolution of the Atkinson lawsuit occurred after Kemp’s filing, it had no post hoc effect on the inclusion of the $50,000 in the bankrupt estate. Kemp’s bankruptcy filing created an estate as of that date, and Kemp was no longer possessed of any authоrity to transfer or otherwise deal with property of that estate. As a result, Kemp’s post-petition action of executing a letter agreement on December 17,1990, purporting to release the $50,000 to ACS after ACS settled with Atkinson, was void as a matter of law and has no bearing on the instant action. Indeed, when — more than six months after the bankruptcy filing — Kemp thus attempted to “authorize” ACS to apply the $50,000 to the Atkinson lawsuit settlement, those monies had long since become part of the estate. Kemp had no legal power to transfer the funds; in fact, his effort to do so was a technical violation of the automatic stay affecting all estate property.
In withholding a portion of its employee’s rightfully earned commission, ACS appears to have been trying to avoid the need to file a lawsuit against Kemp (or to implead him in the Atkinson suit) for indemnity or contribution in the event ACS was ultimately found hable to Atkinson. But ACS was at most a potential unsecured creditor of Kemp’s as a result of his purported civil misdeed vis-a-vis Atkinson in the OBS transaction, completely unrelated to the Da-taplex transaction which generated the commission here at issue. Obvious to us is the fact that ACS did not factor in the possibility of Kеmp’s bankruptcy when it appropriated his $50,000. And ACS never bothered to file a proof of claim in Kemp’s bankruptcy proceedings once they were commenced. ACS failed either to have Kemp place his $50,000
Ill
CONCLUSION
We agree with the bankruptcy court’s holding that the $50,000 withheld by ACS from Kemp’s earned commission was, at the timе of Kemp’s filing, property of the bankruptcy estate and was thus required to be turned over to the Trustee pursuant to 11 U.S.C. § 542(a). Accordingly, the district court’s affirmance of the bankruptcy court’s judgment is
AFFIRMED.
Notes
. See Haber Oil Co. v. Swinehart,
. See In re Texas Gen. Petroleum Corp.,
. See In re Allison,
. Unless otherwise indicated, all statutory citations refer to the United States Bankruptcy Code, 11 U.S.C. § 101-1330 (1992).
. 11 U.S.C. § 541(a)(1).
. See Haber Oil Co. v. Swinehart,
. 11 U.S.C. § 542(a) states, "an entity ... in possession, custody, or control, ... of property that the trustee may use, sell, or lease under section 363 of this title ... shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate."
. See, e.g., In re Dolphin Titan Int'l Inc.,
. See In re All Chemical Isotope Enrichment, Inc.,
. See Butner v. United States,
. See Johnson v. Freytag,
.
. See id. at 625-27.
. See id.
.
. See id. at 505-06.
. See id. at 506.
. See id. In finding that the funds were property of the estate, we relied on In re Flannery,
. See id. at 504-06.
. C.f. In re Keene Corp.,
. See Bank of Marin v. England,
. See 11 U.S.C. § 362(a)(3) (automatic stay bars act to obtain possession of property of estate); 11 U.S.C. § 362(a)(6) (automatic stay prohibits any act to recover a pre-petition claim against debt- or). A trustee may also avoid any unauthorized transfer of property of the estate thаt occurs after filing. See 11 U.S.C. § 549(a)(1), (a)(2)(B). See also In re Shapiro,
. In contending that the district court erroneously shifted the burden of proof to it, ACS argues that the doctrine of setoff is inapplicable because 1) as Kemp never had any interest in the $50,000, he had no claim that could be set off against ACS and 2) as the Trustee failed to prove that the $50,000 was property of the estate to begin with, the burden of proof never shifted to ACS. ACS's assertions are unavailing given our disposition of the instant case, and we reject its contention that the burden of proof was erroneously shifted. Moreover, the issue whether ACS proved a right of setoff was not raised in the bankruptcy court, which tried the instant case on stipulated facts, and therefore was not appealed to the district court. Thus we need not, and therefore do not, address that issue.