Professional Documents
Culture Documents
Unpublished
Unpublished
Unpublished
No. 09-2344
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh.
Terrence W. Boyle,
District Judge. (4:09-cv-00087-BO)
Argued:
Decided:
Before MOTZ and WYNN, Circuit Judges, and Ronald Lee GILMAN,
Senior Circuit Judge of the United States Court of Appeals for
the Sixth Circuit, sitting by designation.
case
requires
us
to
determine
whether
debtors
that they were; on appeal, the district court ruled that they
were
not.
For
the
reasons
explained
below,
we
believe
the
not
part
of
his
bankruptcy
estate,
and
consequently
we
I.
By a trust instrument dated November 23, 1976, Gertrude S.
Stroehmann created a trust (the 1976 trust) for the benefit of
her two children and their issue.
was first divided into two equal shares: one for the benefit of
Harold Stroehmann, Jr. (Harold, Jr.) and his issue, and one
for the benefit of David Stroehmann, Sr. (David, Sr.), and his
issue.
shares
for
the
benefit
of
his
two
children,
J.
Kathryn
The only
shall continue until the death of the last to die of Harold, Jr.
and David, Sr..
Article
income
of
any
trust
shall
not
be
subject
to
assignment,
otherwise
encumbered
by
be
such
voluntarily
or
beneficiary.
involuntarily
alienated
The
the
value
of
or
debtors
Will directed that the residue of the estate be divided into two
equal shares to be held in trust.
David,
are
mandates
the
that
trustees
the
of
trustee
the
make
4
Will
Trust.
distributions
The
of
Will
all
trust
the
net
income
of
installments.
grandchilds
It
further
share
states
in
that
at
least
trustee
has
quarterly
absolute
The
of
forty-five
years
old.
If
grandchild
dies
before
person
other
than
the
grandchild
for
whom
held . . . .
David, Jr. was born on March 2, 1965 and reached the age of
principal
of
the
trust,
and
all
future
income
order,
the
bankruptcy
court
recognized
the
Later in
latter
two
disbursements
trustees,
and
(2)
of
the
principal
future
at
the
right
to
discretion
receive
of
the
mandatory
dismiss
principal
as
to
the
distributions
debtors
during
right
the
to
life
receive
of
the
income
trust. 3
and
The
the
debtor
that
is
property
of
the
bankruptcy
estate.
12, 2009.
During
the
course
of
the
proceedings,
Plaintiff
learned
that the debtor was the beneficiary of another trust, the Will
trust (discussed above).
Plaintiff
filed
an
amended
complaint
on
February
2,
2009,
declaring
that
the
debtors
interest
amended
complaint
and
filed
in
both
trusts
is
motion
for
summary
judgment.
In an order entered on March 30, 2009, the bankruptcy court
referred to its previous order regarding only the 1976 trust and
recognized that [t]his is the same issue previously determined
in
this
case,
agreement.
court
only
with
relation
to
different
trust
granted
Plaintiff
summary
judgment
insofar
as
the
Defendants
summary
judgment
to
the
extent
that
the
reversed
debtors
future
the
bankruptcy
remainder
court,
interest
in
The district
concluding
the
that
principal
N.A.
v.
Levin,
419
B.R.
297,
303
(E.D.N.C.
of
the
the
Wachovia
2009).
II.
Initially we address a question of justiciability raised by
Defendants.
dismissed
Defendants
as
moot
since
argue
that
this
provisions
in
appeal
both
should
trusts
be
permit
for
the
plaintiff,
should
court
the
to
grant
plaintiff
effective
prevail
on
relief
the
to
the
merits,
the
Cent. Transp., Inc., 841 F.2d 92, 95-96 (4th Cir. 1988).
The
Article
IIIs
case
or
controversy
language.
Townes
v.
Jarvis, 577 F.3d 543, 554 (4th Cir. 2009) (quotation marks and
brackets omitted), cert. denied, 130 S. Ct. 1883 (2010).
claim
is
not
moot,
however,
as
long
as
the
parties
have
In re Balt.
Emergency Servs. II, Corp., 432 F.3d 557, 560 n.* (4th Cir.
2005).
In the present case, Defendants argue that provisions of
the trusts permit the trustees to disburse the entire principal
prior to the termination of the trusts.
It follows, according
Defendants conclude
Indeed,
provisions
that
obtaining redress.
they
claim
prevent
Plaintiff
from
trusts,
the
case
is
not
rendered
moot
by
the
mere
See In re Smith,
debtors
remainder
interest
was
transferable
in
bankruptcy).
Plaintiff observes in reply that the Will trust has already
terminated, and the debtors remainder interest in that trust is
now identifiable.
continue
to
dispute
the
debtors
Insofar as the
entitlement
to
his
moot.
560 n.*.
III.
We
turn
now
to
the
merits
of
Plaintiffs
appeal.
We
In re Merry-Go-Round
Thus, we
Id.; see also In re French, 499 F.3d 345, 351 (4th Cir.
2007).
A.
The
bankruptcy
estate
includes
all
legal
or
equitable
11 U.S.C. 541(a)(1).
One
beneficial
interest
of
the
debtor
in
trust
that
is
case
under
bankruptcy
this
court
title.
and
the
11
U.S.C.
district
court
541(c)(2).
agreed
that
The
this
See Patterson
Pennsylvania law
both
voluntary
and
assignee
of
Stat.
the
Ann.
(West 2006).
creditor
Cons.
of
interest.
Pa.
transfer
beneficiarys
here,
20
involuntary
7742(a)
beneficiary
of
Id. at
courts
construe[]
spendthrift
provisions
12
It allows
B.
In this case, Plaintiff argues that the bankruptcy court
correctly ruled that the debtors remainder interests in both
trusts
are
property
of
the
bankruptcy
estate.
Plaintiff
and
therefore
Plaintiff
contends,
interests
in
the
not
part
however,
corpus
of
that
of
the
the
the
bankruptcy
estate.
debtors
remainder
are
similarly
trusts
not
protected.
Plaintiff relies on Ginsburg v. Hilsdorf, 30 Pa. D. & C.2d
384
(1962).
Pennsylvania
three
trusts
In
Ginsburg,
considered
might
be
the
Court
whether
the
attached
in
of
Common
defendants
light
of
Id. at 390.
Pleas
of
interests
in
the
spendthrift
The defendants in
13
Id. at
the
settlors
beneficiary.
intended
to
protect
only
the
income
Ginsburg
court
Id. at 395.
distinguished
other,
more
expansive,
The
The
Ginsburg
court
also
distinguished
the
spendthrift
the trustee to pay the income to the settlors widow for life,
and
thereafter
to
the
defendant,
who
Id. at 231.
also
held
remainder
beneficiaries
hereunder
or
conveyance
liable
or
to
any
anticipation
charge,
encumbrance,
assignment,
Id. at 232.
by
them.
Id.
Plaintiff asserts
in
trusts
are
therefore
not
subject
to
the
of
any
beneficiary
in
the
corpus
or
income
of
any
shares
and
interests
in
my
estate
and
any
property
the
spendthrift
provision
in
Ginsburg,
the
Thus,
provisions
the
trusts.
spendthrift
They
provisions
are
therefore
distinguished
more
by
analogous
Ginsburg
to
the
than
the
102
Pitts.
L.
J.
at
231.
The
court
held
that
the
16
Id. at
C.
Plaintiff next argues that this Court should join those
courts
that
have
held
debtors
remainder
interest
in
2003);
In
re
173
Crandall,
B.R.
836
(Bankr.
D.
Conn.
district
contrary
to
court
her
relied
position,
on
Pennsylvania
bankruptcy
but
argues
the
that
courts
cases
that
does
not
support
the
bankruptcy
courts
conclusion
life
of
the
trust);
In
re
201
Blanchard,
B.R.
at
126
certain
beneficiary,
trustee,
income
and
despite
the
because
they
principal
claims
were
of
directly
his
protected
by
to
Chapter
a
the
7
valid
trust
bankruptcy
spendthrift
provision).
The issue is thus not whether we should choose to follow
one line of cases or another.
case,
that
means
we
apply
18
11 U.S.C. 541(c)(2).
Pennsylvania
law.
In
Under
For the
Id.
The
determination
of
the
district
court
is
consequently
AFFIRMED.
19