Opinion
Bankruptcy No. 99-31487, Chapter 7.
October 4, 2000.
MEMORANDUM AND ORDER
By motion filed October 16, 2000, Wayne Drewes, the chapter 7 trustee, seeks turnover of various postpetition payments received by the Debtor pursuant to certain federal agricultural assistance programs. in particular, the following payments are the subject of the trustee's motion for turnover: (1) $11,632.00 paid to the Debtor on November 3, 1999, pursuant to the 1999 Market Loss Assistance Program; (2) $10,866.00 paid to the Debtor on February 9, 2000, pursuant to the 1999 Crop Disaster Program; and (3) $10,740.00 paid to the Debtor on April 7, 2000, also pursuant to the 1999 Crop Disaster Program. The trustee contends that the postpetition payments described above are property of the bankruptcy estate pursuant to 11 U.S.C. § 541 (a)(7). The Debtor contends that the payments at issue are not part of the bankruptcy estate because he had no right to receive them at the time of his bankruptcy filing. The Court agrees with the Debtor.
1.
The parties have stipulated to the following facts. In 1999, the Debtor was engaged in a farming operation in rural North Dakota. On September 7, 1999, the Debtor filed a chapter 7 bankruptcy petition. On October 22, 1999, federal legislation was passed which provided funding for two agricultural assistance programs known as the Market Loss Assistance Program and the Crop Disaster Program. As a result, the Debtor received three agricultural assistance payments from the federal government pursuant to the foregoing programs. The Market Loss Assistance Program payment in the amount of $11,632.00 was received by the Debtor on November 3, 1999. The first Crop Disaster Program payment in the amount of $10,866.00 was received by the Debtor on February 9, 2000. The second Crop Disaster Program payment in the amount of $10,740.00 was received by the Debtor on April 7, 2000. All three of these payments were premised on granting farmers relief from losses sustained during the 1999 crop year. The Debtor's right to payment under the Market Loss Assistance Program arose automatically once the federal legislation enacting that program was passed. The Farm Service Agency computed the amount of the Market Loss Assistance Program payment that the Debtor was entitled to using information that it already had on hand and sent the Debtor an unsolicited check. To receive the Crop Disaster Program payments at issue, the Debtor was required to do nothing more than sign up for the Crop Disaster Program, which he did on February 1, 2000.
2.
The bankruptcy estate consists of all legal or equitable interests of the Debtor in property as of commencement of the case. 11 U.S.C. § 541 (a)(l) (emphasis added). The bankruptcy estate also includes any interest in property that the estate subsequently acquires after the commencement of the case. 11 U.S.C. § 541 (a)(7) (emphasis added). There is a distinction between property acquired postpetition by the bankruptcy estate as opposed to property acquired postpetition by the Debtor. See In re Doemling, 116 B.R. 48, 49-50 (Bankr. W.D. Pa. 1990) aff'd 127 B.R. 954 (W.D.Pa. 1991); In the Matter of Brannan, 40 B.R. 20, 22-25 (Bankr. N.D. Ga. 1984). A property interest acquired postpetition qualifies as property of the bankruptcy estate under section 541 (a)(7) of the Bankruptcy Code only if that property interest "is traceable to (or arises out of) some prepetition property interest which already is included in the bankruptcy estate." Doemling, 116 B.R. at 50. Thus, most property that a debtor might acquire in his or her individual capacity after commencement of the bankruptcy case does not become part of the bankruptcy estate and is not subject to the claims of prepetition creditors. In re Girard, 98 B.R. 685, 687 (Bankr. D.Vt. 1989).
11 U.S.C. § 541 (a)(5) sets out an exception to this general rule for certain types of property obtained by a debtor within 180 days after the debtor's bankruptcy petition is filed. However, none of the government payments at issue in this case qualify as one of the types of property to which this section applies.
In support of the proposition that the postpetition payments at issue belong to the bankruptcy estate, the trustee cites Drewes v. Lesmeister (In re Lesmeister, 242 B.R. 920 (Bankr. D.N.D. 1999). However,Lesmeister does not support the proposition advanced by the trustee because it is distinguishable on its facts from the case at bar. InLesmeister, the debtors' crop loss occurred prepetition, and the federal legislation which created agricultural relief payments for that crop loss had also been enacted prepetition. Thus, in Lesmeister, the debtors had a right to receive the government agricultural relief payments at issue before they filed their bankruptcy petition, and this Court ruled that their right to receive those payments became part of the bankruptcy estate upon commencement of their case.
The case at bar presents a different set of circumstances. In this case, when the Debtor filed his bankruptcy petition, he had no present right to receive the agricultural relief payments at issue because the federal legislation which created those payments had not yet been passed. Thus, no right to receive the government payments at issue became part of the Debtor's bankruptcy estate because that right did not exist at the time the Debtor's bankruptcy petition was filed. Similarly, the unreported decision of In re Bates, Case No. 5-88-287 (Bankr. D. Minn. 1990), which was cited as further support for the trustee's position, essentially mirrors the facts of Lesmeister and does not suggest a different result. See also Mercantile Bank v. Norville (In re Norville), 248 B.R. 127 (Bankr. C.D.Ill. 2000) (same).
The trustee also relies upon United States v. Thomas (In re Thomas), 91 B.R. 731 (N.D. Tex. 1988) for the proposition that the right to receive agricultural relief payments from the federal government belongs to a debtor's bankruptcy estate even if that right did not exist at the time of the debtor's bankruptcy filing. The Thomas case is directly on point. Much like the case at bar, the debtor in the Thomas case filed his bankruptcy petition before the federal legislation enacting the agricultural relief program at issue in Thomas was passed. However,Thomas does not support the proposition advanced by the trustee. Although the Thomas court initially ruled that the right to receive agricultural relief payments that arose postpetition in favor of the debtor was property of the bankruptcy estate, that judgment was later amended inUnited States v. Thomas (In re Thomas), 93 B.R. 475 (N.D.Tex. 1988). The amended judgment in the Thomas case recognized that the bankruptcy estate includes only the property rights and interests that the debtor has at the time of filing. Accordingly, the Thomas court amended its judgment to clarify that the postpetition agricultural relief payments at issue in that case were payable to the debtor rather than the chapter 7 trustee. Therefore, the Thomas case contradicts the trustee's position in the case at bar, and the trustee's argument must fail.
3.
Based on the foregoing, the trustee's motion for turnover is hereby DENIED in all respects.