Wayne Drewes v. Daryl Lee Vote ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 01-2203
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In re: Daryl Lee Vote, *
*
Debtor. *
*
_____________________ * Appeal from the United States
* District Court for the
Wayne Drewes, as Bankruptcy Trustee, * District of North Dakota.
*
Appellant, *
*
v. *
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Daryl Lee Vote, *
*
Appellee. *
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Submitted: December 10, 2001
Filed: January 16, 2002
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Before WOLLMAN, Chief Judge, MURPHY, Circuit Judge, and FENNER,1 District
Judge.
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WOLLMAN, Chief Judge.
1
The Honorable Gary A. Fenner, United States District Judge for the Western
District of Missouri, sitting by designation.
Wayne Drewes, in his capacity as bankruptcy trustee (the trustee), appeals the
decision of the Eighth Circuit Bankruptcy Appellate Panel affirming the bankruptcy
court’s2 ruling that Daryl Lee Vote may retain payments made to him under two farm
loss compensation programs. In re Vote, 261 B.R. 439, 444 (B.A.P. 8th Cir. 2001).
We affirm.
I.
Vote, a North Dakota farmer, did not plant a crop in 1999 because the soil was
saturated. On September 7, 1999, Vote filed a Chapter 7 bankruptcy petition. On
October 22, 1999, Congress passed the Omnibus Consolidated Appropriations Act,
2000, Pub. L. No. 106-113 (the Appropriations Act), which funded the Market Loss
Assistance Payment program (MLAP) and the Crop Disaster Program (CDP)
(collectively, the payments). Congress enacted the MLAP and the CDP to
compensate farmers for 1999 losses related to crop disasters. Between November
1999 and April 2000, Vote received a total of $33,238 in payments. It is from the
denial of his motion to compel Vote to turn over those payments that the trustee
appeals.
II.
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 158(d). Our
standard of review is the same as that applied by the bankruptcy appellate panel, i.e.,
we review the bankruptcy court’s factual findings for clear error and its conclusions
of law de novo. In re Papio Keno Club, Inc., 262 F.3d 725, 728 (8th Cir. 2001); In
re Popkin & Stern, 223 F.3d 764, 765 (8th Cir. 2000). “Whether property is included
in the bankruptcy estate is a question of law.” In re Cent. Ark. Broad., 68 F.3d 213,
2
The Honorable William A. Hill, United States Bankruptcy Judge for the
District of North Dakota.
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214 (8th Cir. 1995) (citing In re Da-Sota Elevator Co., 939 F.2d 654, 654-55 (8th Cir.
1991)).
Title 11 of the United States Code, Section 541(a)(1) states: “The
commencement of a case . . . creates an estate. Such estate is comprised of all the
following property, wherever located and by whomever held: (1) [A]ll legal or
equitable interests of the debtor in property as of the commencement of the case.”
The question, then, is whether Vote had a legal or equitable interest in the payments
at the time he filed his petition.
The trustee argues that under the holding in Segal v. Rochelle, 382 U.S. 375
(1966), the payments are property of the estate. In Segal, the Court held that the
debtor had an existing interest in a tax refund and found that the debtor’s interest in
a loss carryback under the tax code was “sufficiently rooted in the pre-bankruptcy
past” to be included as property of the estate. Id. at 380. Segal is distinguishable,
however, for unlike the Appropriations Act in the present case, the law authorizing
the tax refund predated the bankruptcy filing. Thus, the Segal debtor possessed an
existing interest at the time of filing, whereas Vote had a mere hope that his losses
might generate revenue in the future.
To find for the trustee on the basis that the payments were “sufficiently rooted”
would allow the trustee to assert more rights than Vote had at the commencement of
his case. The legislative history of the 1978 Bankruptcy Code makes clear that
despite the broad scope of § 541, it “is not intended to expend [sic] the debtor’s rights
against others more than they exist at the commencement of the case.” S. Rep. No.
95-989, at 82 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5868.
The trustee cites a number of cases that follow the rule in Segal. In each of
those cases, however, there existed a readily discernable legal interest at the time of
filing. Some arose from statutes, some from contracts, and some from lawsuits, but
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all conferred upon the debtors interests with some potential value, even though those
interests may have been only contingent. In contrast, before Congress passed the
Appropriations Act, Vote had no interest of any kind.
A recent decision from the Ninth Circuit supports our interpretation of §
541(a)(1). In Sliney v. Battley (In re Schmitz), 270 F.3d 1254, 1258-59 (9th Cir.
2001), the Ninth Circuit found that the profits from a debtor’s sale of his fishing
quotas were not property of the bankruptcy estate. The debtor had filed a bankruptcy
petition more than one year before the promulgation of regulations that entitled him
to fishing quota rights based on his pre-filing catch history. The court found that
“[o]n the date that Schmitz filed his petition, he might have had a hope, a wish and
a prayer that the Secretary would eventually implement the plan then under
consideration. However, . . . as of the date of the petition, Schmitz’s 1988-1990
catch history had no value.” Id. at 1258. In concluding that Schmitz’s expectations
did “not rise to the level of property,” the Ninth Circuit quoted with approval the
bankruptcy appellate panel’s decision in the instant case. Id.
The trustee urges us to consider this case under § 541(a)(6) and (7) as well as
§ 541(a)(1). The (a)(6) argument was not raised in the bankruptcy court, however,
and we will not consider it for the first time on appeal.
The bankruptcy appellate panel found that the trustee had abandoned his
argument under (a)(7). While it is not clear from the record that this is true, the
trustee’s argument fails in any event. Subsection (a)(7) states that “[a]ny interest in
property that the estate acquires after the commencement of the case” becomes
property of the estate. The trustee has not shown how the bankruptcy estate acquired
an interest in the payments. Cf. Stoebner v. Wick (In re Wick), No. 01-1312, slip op.
at 5 (8th Cir. Jan. 9, 2002) (proceeds from stock options that matured post-petition
come into estate under § 541(a)(6) because options were property of estate under §
541(a)(1) even though unvested and contingent). Under the trustee’s approach, the
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losses themselves must have been part of the estate. For the losses to come into the
estate, the trustee must be able to bring them in under § 541. We have found no case
in which a pure loss with no attendant potential benefit was included as property of
the estate. Thus, we conclude that the payments are not an after-acquired interest of
the estate.
The judgment is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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