Sender v. Werth (In re Werth)

Case Type:
Consumer
Case Status:
Affirmed
Citation:
CO-16-022 (10th Circuit, May 08,2017) Not Published
Tag(s):
Ruling:
Property transferred from a trust to debtor individually prior to the petition date became property of the bankruptcy estate and the proceeds from the postpetition sale of that property were subject to turnover to the trustee.
Procedural context:
The bankruptcy court entered judgment in favor of trustee in adversary proceeding to determine that certain property was property of the estate and for turnover of the proceeds from the sale of the property. The 10th Circuit BAP reviewed findings of fact for clear error and conclusions of law de novo. Mixed questions of law and fact are reviewed under the de novo or clearly erroneous standards, depending on whether the mixed question involves primarily the consideration of legal principles or a factual inquiry. The 10th Circuit affirmed.
Facts:
Debtor's husband purchased a one-third share (with his brother and father also each purchasing a one-third share) in beachfront property in Guaymas, Sonora, Mexico (the “Property”). Under the Mexican constitution, foreign nationals cannot own property within fifty kilometers of the border or shoreline. Thus, they bought the Property through a trust (the “Mexican Trust”) with each owning a one-third interest in the Mexican Trust. Before his death, debtor’s husband created a trust (the “Trust”) and his interest in the Mexican Trust became property of that Trust. Upon his death, the property in the Trust was distributed to a Marital Trust in which debtor was the sole beneficiary and a Family Trust. The interest in the Mexican Trust was to be distributed to the Family Trust although no documentation was done to effectuate this transfer in the public records of Mexico. Two years later, an intestacy proceeding was commenced in Mexico and the interest in the Mexican Trust was distributed to debtor individually. The Property was sold netting approximately $52,000.00 for debtor. Debtor testified that she never intended to have the interest in the Mexican Trust transferred to her individually and thus, held only bare legal title. The bankruptcy court found that since debtor never attempted to correct the public records in Mexico or Colorado, she was the owner of the interest in the Mexican Trust on the petition date and thus, it became property of the estate.
Judge(s):
Karlin, Jacobvitz, Mosier (Jacobvitz)

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