Now Accepting New Clients!

Earnest money deposit on real estate sale not included in bankruptcy estate

The bankruptcy court properly rejected the Chapter 7 trustee's "turnover" request for a good faith deposit on a proposed real estate purchase that had been assigned to the debtor because the debtor did not possess either a legal or an equitable property interest in the deposit at the time it filed for bankruptcy. The debtor was assigned an agreement to purchase property (the Agreement) from the assignor's negotiations with the Commonwealth of Kentucky Transportation Cabinet (the Cabinet). The debtor filed for Chapter 7 relief two days before the expiration of the Agreement's closing period, and the Agreement was then deemed rejected under § 365(d)(1). The trustee later sought turnover of the good-faith purchase deposit under § 542. The court upheld the district court's affirmance of the bankruptcy court's dismissal because "'fundamental to the concept of "Turnover" is that the asset to be turned over must be property of the debtor's bankruptcy estate.'" When the debtor filed its voluntary Chapter 7 petition, it had "no 'present right' to possess the deposit, and thus, no legal or equitable interest in it. A bankruptcy estate is comprised of 'all legal or equitable interests of the debtor in property as of the commencement of the case.'" At the time the petition was filed, the debtor only had an interest "in the Agreement, not the deposit." The deposit, "as a stand-alone interest, was beyond the reach of rejection." Not only did the debtor lack a "contractual interest" in the deposit, the trustee could not prevail on his turnover request based on an "equitable interest" at the time the bankruptcy was filed. The court rejected the trustee's argument that the good faith deposit was subject to § 542 turnover because it was held in escrow, concluding that it was not held in escrow. The Agreement provided for the "delivery of the funds to the grantee - the Cabinet - as opposed to a third party[;]" therefore, under Kentucky law, the deposit was not held in escrow. The trustee's claim that the transaction for the sale of land between the debtor and the Cabinet was a "contract for deed" also failed "because both the Agreement and the parties' actions unambiguously show that the debtor never acquired an immediate right to use or possess the land prior to filing for Chapter 7 relief." Affirmed.

MICHIGAN REAL ESTATE 95: Property owners did not place a condition upon the delivery of the deed; rather, they delivered the deed to themselves.

When the delivery of a deed is contingent upon the happening of some future event, title to the subject property will not transfer to the grantee until the event has occurred. However, in this case A and J did not place a condition upon the delivery of the deed; rather, they delivered the deed to themselves, then deposited the deed with their attorney with the instruction to record the deed only upon the happening of a future event, thereby placing a condition only upon the recording of the deed.

MICHIGAN PROBATE 57: Brother granted permanent guardianship of siblings.

At a multiday hearing to address the extension of the guardianship, the eldest children, the mother’s relatives and friends, and school personnel testified regarding the mother’s care of the children, appellant’s treatment of and interaction with the children, and the eldest siblings’ role in aiding the mother to raise the children.

FAMILY LAW 88: The trial court found that the children did not have an established custodial environment with defendant because, before the separation, he did not have a large role in the children’s lives.

The trial court credited plaintiff’s testimony that, before the parties’ separation, defendant spent minimal time helping to care for the children, so its finding that the children would not have looked to defendant for guidance, discipline, the necessities of life, and parental comfort during that time was not against the great weight of the evidence.

REAL ESTATE 89: RM had not included any language in the deed providing that the property was a joint tenancy with full rights of survivorship, the property instead became a tenancy in common.

RM drafted the deed without seeking counsel and mistakenly believed that, if either she or FK died, the property would fully pass to the surviving tenant. FK’s will provided that if his wife predeceased him—which she did—the personal representative of his estate should sell any residual property that he owned and divide the cash proceeds equally among his surviving children.

FAMILY LAW 83: A trial court can terminate a parent’s rights and permit a stepparent to adopt a child.

A trial court has discretion to terminate a parent’s rights and permit a stepparent to adopt a child when the conditions of MCL 710.51(6) are met. MCL 710.51(6)(b) requires the petitioner to establish that the other parent had the ability to visit, contact, or communicate with the children, and substantially failed or neglected to do so for a period of two years.

Don't let a bad decision, unfair contract, or a messy divorce get in the way of a promising future!
Contact the experienced team at Aldrich Legal Services today to schedule your free initial
and secure reliable and trustworthy representation today!
Get the Help You Need From a Team You Can Truly Count On: (734) 404-3000