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RECOMMENDED FOR FULL-TEXT PUBLICATION 

Pursuant to Sixth Circuit I.O.P. 32.1(b) 

File Name: 15a0002p.06 

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT 

_________________ 

In re: SHELBYVILLE ROAD SHOPPES, LLC, 

Debtor. 

__________________________________________ 

WILLIAM W. LAWRENCE, as the Trustee for the 

Estate of Shelbyville Road Shoppes, LLC, 

Appellant, 

v. 

COMMONWEALTH OF KENTUCKY TRANSPORTATION 

CABINET, 

Appellee. 

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No. 14-5197 

Appeal from the United States District Court 

for the Western District of Kentucky at Louisville. 

No. 3:13-cv-00971—Charles R. Simpson III, District Judge. 

Argued: October 2, 2014 

Decided and Filed: January 5, 2015 

Before: GUY, ROGERS, and DONALD, Circuit Judges. 

_________________ 

COUNSEL 

ARGUED: Robert W. Adams, III, ADAMS LAW GROUP, Louisville, Kentucky, for 

Appellant. Bradley S. Salyer, MORGAN & POTTINGER, Louisville, KY, for Appellee. ON 

BRIEF: Robert W. Adams, III, ADAMS LAW GROUP, Louisville, Kentucky, for Appellant. 

Bradley S. Salyer, MORGAN & POTTINGER, Louisville, KY, for Appellee. 

>
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 2 

_________________ 

OPINION

_________________ 

 ROGERS, Circuit Judge. This case involves whether a Chapter 7 bankruptcy debtor’s 

trustee can bring into the bankruptcy estate a “good faith” deposit made by the debtor’s assignor 

with respect to a proposed real estate purchase from the Commonwealth of Kentucky. The 

trustee, William Lawrence, seeks the return of a good faith deposit paid by Eagle Development, 

LLC to the Commonwealth of Kentucky Transportation Cabinet as part of a Purchase Agreement 

for the purchase of land entered into on July 18, 2007. Eagle Development later assigned the 

Purchase Agreement to the debtor, Shelbyville Road Shoppes, LLC. Two days before the 

expiration of the Purchase Agreement’s closing period, the debtor voluntarily filed for Chapter 7 

relief, which led to the Agreement’s deemed rejection pursuant to 11 U.S.C. § 365(d)(1). The 

trustee subsequently requested return of the deposit in bankruptcy court, claiming that the deposit 

constituted “property” of the bankruptcy estate under 11 U.S.C. § 541, and was thus subject to 

turnover under 11 U.S.C. § 542. Both the bankruptcy court and the district court rejected the 

trustee’s turnover request. Because the debtor did not possess either a legal or an equitable 

property interest in the good faith deposit at the time the debtor filed a voluntary petition for 

Chapter 7 relief, the district court properly rejected the trustee’s turnover request. 

 On July 18, 2007, a “Purchase Agreement – Public Sale” was entered into between Eagle 

Development, LLC and the Commonwealth of Kentucky Transportation Cabinet, in which Eagle 

agreed to pay the sum of $4,812,874.65 to purchase certain property in Louisville, Kentucky 

owned by the Cabinet. Pursuant to the Agreement, Eagle paid a good faith deposit to the Cabinet 

in the sum of $962,574.93. The check was made payable to “KY STATE TREASURER.” It 

was later deposited into a non-interest bearing account maintained by the Kentucky Finance and 

Administration Cabinet. On August 8, 2007, the Agreement was assigned by Eagle to 

Shelbyville Road Shoppes, LLC, the bankruptcy debtor in this case. 

 The Agreement provides: 

As required by the terms of this sale, a good faith deposit is hereby made in the 

amount of $962,574.93 to be held in a special deposit trust fund by the 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 3 

Transportation Cabinet, Division of Right of Way & Utilities, pending the 

arrangement of a closing date to be no sooner than 60 days from the date written 

notice is given by Transportation Cabinet to Purchaser, unless otherwise agreed 

upon by the Purchaser and Transportation Cabinet, at which time, upon delivery 

of the deed, the balance of $3,850,299.72 will be due and payable. The 

conveyance will be by Special Warranty Deed. 

. . . The Purchaser agrees that the above mentioned good faith deposit will be 

forfeited to the Seller as liquidated damages is [sic] the Purchaser fails to 

consummate this sales transaction as agreed herein. 

On July 13, 2009, the debtor and the Cabinet executed an addendum to the Agreement 

that, in pertinent part, extended the deadline for the “Purchaser to complete the acquisition of the 

subject property for one (1) year . . . in order to allow the Purchaser to seek any requested change 

in the current zoning of the property.” The addendum further provided for one additional sixmonth extension beyond the one year period, subject to the “approval and at the discretion of 

both the Purchaser and Seller.” 

 On January 11, 2011, two days before the expiration of the eighteen-month extension to 

close the transaction, the debtor filed a voluntary petition for Chapter 7 relief. William W. 

Lawrence was appointed as Chapter 7 trustee for the bankruptcy estate. 

 The trustee initiated proceedings in the bankruptcy court on May 23, 2012, seeking return 

of the good faith deposit from the Cabinet to the bankruptcy estate. Lawrence v. Ky. Transp. 

Cabinet (In re Shelbyville Rd. Shoppes, LLC), No. 11-30124, 2013 WL 2422669, at *1 (Bankr. 

W.D. Ky. June 3, 2013). The trustee “alleg[ed] causes of action against the Cabinet on four 

separate theories: Count I – Turnover of Property to the Estate pursuant to 11 U.S.C. §§ 541 and 

542; Count II – Fraud in the Inducement; Count III – Breach of Contract; and Count IV – 

Unenforceable Penalty.” Id. In response to the Cabinet’s motion for partial summary judgment 

on the pleadings, the bankruptcy court entered an order on February 21, 2013, granting the 

motions as to Counts II, III, and IV. Id.

The trustee filed a subsequent Motion for Partial Summary Judgment with respect to 

Count I. The bankruptcy court denied the motion and dismissed Count I. Id. at *1, *6. The 

bankruptcy court found that neither the terms of the Agreement nor applicable state law granted 

the debtor the right to have the good faith deposit returned. The court reasoned that since the 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 4 

debtor did not have “the right to obtain the Deposit” at any time “during the case up to the filing 

of the turnover action,” the trustee could not compel the Cabinet to turn over the deposit. Id. at 

*5. 

The trustee timely appealed the bankruptcy court’s dismissal to the district court, 

contending that the debtor possessed a sufficient legal and equitable property interest in the 

deposit to justify the trustee’s § 542 turnover demand. The district court affirmed the bankruptcy 

court’s dismissal, finding: (1) that the debtor had no right to possess or use the deposit prior to 

filing for Chapter 7 relief, and thus the trustee had no right to request turnover pursuant to § 542; 

(2) that the good faith deposit was not held in escrow; (3) that the transaction was not a contract 

for deed; and (4) that the debtor did not retain an equitable right to the deposit as a vendee. 

Lawrence v. Ky. Transp. Cabinet, No. 3:13CV-971-S, 2014 WL 297868, at *4−5 (W.D. Ky. Jan. 

27, 2014). 

This appeal followed. The trustee contends that the deemed rejection of the Agreement 

pursuant to § 365(d)(1)—a provision that relieved the debtor and the Cabinet from having to 

perform the Agreement’s then-executory portions—also eliminated, through the rejection of the 

then-executory forfeiture clause, any contractual rights the Cabinet had to the deposit. As a 

result, the debtor has the only legal or equitable property interest remaining in the deposit, and 

the trustee is therefore entitled to demand turnover of the deposit pursuant to § 542. 

 The trustee’s appeal fails because the trustee does not have a right to demand turnover of 

the deposit pursuant to 11 U.S.C. § 542. The deposit is not part of the bankruptcy estate under 

11 U.S.C. § 541. Section 542(a) provides: 

[A]n entity, other than a custodian, in possession, custody, or control, during the 

case, of property that the trustee may use, sell, or lease under section 363 of this 

title, or that the debtor may exempt under section 522 of this title, shall deliver to 

the trustee, and account for, such property or the value of such property. 

11 U.S.C. § 542(a). “[F]undamental to the concept of ‘Turnover’ is that the asset to be turned 

over must be property of the debtor’s bankruptcy estate.” French v. Johnson (In re Coomer), 

375 B.R. 800, 803−04 (Bankr. N.D. Ohio 2007) (internal citation omitted). “Section 542(a) is 

best viewed as an enabling provision, allowing the trustee to obtain possession of property only 

where the debtor otherwise had a right to possess the property.” Id. at 806 (emphasis added). “It 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 5 

is axiomatic that a trustee’s interests and rights in property are limited by and to the rights and 

interests of the debtor in that property.” Slone v. Vallo (In re Starr), No. 09-37457, 2011 Bankr. 

LEXIS 947, at *11−12 (Bankr. S.D. Ohio 2011). 

 Here, the deposit is not part of the debtor’s bankruptcy estate because at the time the 

debtor filed a voluntary petition for Chapter 7 relief, the debtor 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.” 

11 U.S.C. § 541(a)(1) (emphasis added). Though courts broadly construe the term “interests,” 

“[t]he majority of lower courts that have considered whether a trustee can compel the turnover of 

funds where a debtor has no present right to the funds have prohibited the turnover because the 

trustee’s claim to estate property is no greater than the debtor’s claim at the time of filing.” 

Lyons v. St. Emps. Ret. Sys. of Ill. (In re Lyons), 957 F.2d 444, 445 (7th Cir. 1992) (internal 

citations omitted) (emphasis added). As the bankruptcy court noted in Lauria v. Titan Sec. Ltd. 

(In re Lauria), 243 B.R. 705 (Bankr. N.D. Ill. 2000), “if the debtor does not have the right to 

possess or use the property at the commencement of a case, a turnover action cannot be used to 

acquire such rights.” Id. at 709. 

 On January 11, 2011, the date the debtor filed for Chapter 7 relief, the debtor’s sole 

property interest was in the Agreement, not the deposit. The debtor had a present interest in an 

executory contract, an interest that, upon payment of the balance owed, afforded the debtor the 

right to own specified property. Pursuant to the terms of the Agreement, the debtor also retained 

a limited, conditional interest in a credit of the deposit towards the balance of the purchase price 

at closing. The debtor would forfeit any interest in the deposit as liquidated damages upon 

failure to consummate the property sale. 

 The debtor did not retain a stand-alone interest in the deposit itself. The deposit had been 

made to secure the Agreement. Once the Agreement had been secured, therefore, the debtor’s 

remaining interests in the deposit were limited solely to those prescribed by the terms of the 

Agreement, which did not set forth any circumstances under which the debtor would have had a 

right to a refund of the deposit prior to filing the bankruptcy petition. Because the debtor had no 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 6 

right to possess the deposit as of January 11, 2011, the deposit did not constitute property of the 

estate subject to turnover. 

 Numerous cases illustrate that trustees may not use bankruptcy proceedings to seek 

turnover of property that the debtor had no right to possess at the filing of the petition. For 

instance, in Lyons, a debtor claimed an exemption of her State Employees’ Retirement System 

(“SERS”) contributions in her Chapter 7 bankruptcy petition. In re Lyons, 957 F.2d at 445. 

Employees were permitted to withdraw their contributions “only upon termination of 

employment, retirement, or disability.” Id. The trustee filed a complaint in the bankruptcy court 

seeking turnover of the debtor’s contributions pursuant to § 542. Id. The Seventh Circuit held 

that “[e]ven if Lyons’ contributions to SERS are property of her estate, she has no right to a 

distribution of the funds until her termination of employment, retirement or disability. 

Therefore, because Lyons has no present right to withdraw her contributions, neither does the 

Trustee.” Id. at 445−46 (emphasis added). The bankruptcy court in In re Coomer similarly 

rejected the trustee’s turnover request for the debtor’s residential security deposit because the 

debtor’s “‘interest’ in the funds held by the Defendant, as security, included no present right of 

possession.” 375 B.R. at 805−06. 

 This analysis is similar to that of the bankruptcy court in In re Westfields Apartments, 

LLC, No. 08-12573, 2010 WL 2179622, at *1 (Bankr. S.D. Ga. 2010). The debtor in that case 

entered into an agreement with Georgia Heritage to purchase property in Augusta, Georgia. 

Pursuant to the Sales Contract and numerous addenda, the debtor then deposited $175,000 in 

earnest money with sales broker Blanchard and Calhoun Real Estate Company. Id. at *2. In a 

subsequent addendum to the contract, the debtor further agreed that should the debtor terminate 

the agreement or fail to close by the specified date, the nonrefundable deposit would be 

forfeited.1

 Id. at *2, *5. The debtor then filed for Chapter 11 bankruptcy one day before the 

 1

In language similar to the forfeiture clause in the trustee’s case here, the addendum provided: 

On or before October 15, 2008, Purchaser shall either give Seller written notice of his [sic] 

election to terminate this agreement, in which event the $175,000 in nonrefundable deposits shall 

be paid over to Seller and neither party shall have any further obligation under the Sales Contract, 

or Purchaser shall commit to close the purchase of the Property on or before November 15, 2008. 

If Purchaser fails to close the Purchase on or before November 15, 2008, then this Contract shall 

be terminated and the $175,000 in nonrefundable deposits shall be turned over to Seller. 

Id. at *2. 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 7 

final amended closing and the trustee sought classification of the earnest money held in escrow 

as property of the estate. Id. at *3, *5. 

 In concluding that the funds the debtor had deposited in escrow were not property of the 

estate, the Westfields court noted that “there were no circumstances under which the Debtor was 

entitled to distribution of the Funds under the Sales Contract . . . [a]s of the petition date.” Id. at 

*5. “[T]he Funds were to be paid over to Georgia Heritage regardless of whether the Sales 

Contract closed.” Id. As the bankruptcy court noted in the instant case, the Westfields court 

“distinguished the cases cited by the debtor which had held that escrow funds were property of 

the estate because, in those cases, those debtors had a right to return of the funds upon the 

occurrence of a condition specified in their respective contracts.” In re Shelbyville Rd. Shoppes, 

No. 11-30124, 2013 WL 2422669, at *5 (citing In re Westfields Apartments, No. 08-12573, 2010 

WL 2179622, at *5 n.7). 

 Here, like the sales contract in Westfields, the Agreement did not indicate any 

circumstances under which the debtor would be entitled to a refund of the deposit as of the 

petition date. Because the closing date had not yet arrived and neither party was yet in breach, 

the debtor’s interest in the deposit—an interest established by the terms of the Agreement—was 

limited to applying the funds to offset the purchase price. 

 It is true, as the trustee contends, that § 541 does not require that the property interest be 

immediately enforceable for that interest to become property of the bankruptcy estate. Courts 

permit turnover actions based on “future and nonpossessory interest[s] maintained by a debtor in 

property held by another.” In re Coomer, 375 B.R. at 804. However, the cases on which the 

trustee relies for the proposition that the scope of “property” under § 541(a) includes a debtor’s 

contingent, equitable, and non-possessory property interests are easily distinguished. For 

instance, in Segal v. Rochelle, 382 U.S. 375 (1966), the Supreme Court held that loss-carryback 

refund claims constituted “property” of a debtor’s bankruptcy estate. Id. at 381. The Court 

reasoned that even though the debtor would not have been able to immediately possess the 

refund, the interest was “sufficiently rooted in the pre-bankruptcy past” to permit its inclusion in 

the estate. Id. at 380; see also Booth v. Vaughan (In re Booth), 260 B.R. 281, 289 (B.A.P. 6th 

Cir. 2001). While in Segal the debtor’s interest in the loss-carryback refund arose, in part, due to 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 8 

taxes paid and operating income earned (or in this case, not earned) prior to the debtor’s filing 

for bankruptcy, here the trustee cannot point to any activity “sufficiently rooted in the prebankruptcy past” to justify inclusion of the deposit in the bankruptcy estate. 

 Similarly, in United States v. Whiting Pools, Inc., 462 U.S. 198 (1983), a trustee sought 

the turnover of property seized by a lien creditor prior to the debtor’s bankruptcy petition. Id. at 

200−01. The Court held that a trustee may compel turnover of such property even if, at the 

commencement of the bankruptcy proceedings, the debtor only retained a right of redemption. 

Id. at 209. A tax sale provision that “refer[red] to the debtor as the owner of the property after 

the seizure but prior to the sale,” proved crucial to the Court’s decision. Id. at 211. Unlike the 

debtor in Whiting Pools, who remained, by law, the owner of the seized property until its sale to 

a bona fide purchaser, the debtor here retained no similar ownership interests. And while the 

debtor in Whiting Pools could have obtained the property through legal process, the debtor in this 

case had no legal recourse pre-petition to obtain a refund of the deposit. 

 Ultimately, the debtor relinquished even the limited, contractual interest in a credit of the 

deposit upon the deemed rejection of the Agreement pursuant to 11 U.S.C. § 365(d)(1). Section 

365(d)(1) provides: 

In a case under chapter 7 of this title, if the trustee does not assume or reject an 

executory contract . . . of residential real property or of personal property of the 

debtor within 60 days after the order for relief, or within such additional time as 

the court, for cause, within such 60-day period, fixes, then such contract . . . is 

deemed rejected. 

In this case, the deemed rejection of the Agreement relieved the debtor and the Cabinet from 

having to perform the Agreement’s then-executory provisions: (1) payment of the closing 

balance by the debtor and (2) conveyance by the Cabinet of the property deed to the debtor. 

Rejection, after all, prevents the contracting creditor from requiring “the bankrupt estate to 

specifically perform the then executory portions of the contract.” Leasing Serv. Corp. v. First 

Tenn. Bank Nat’l Ass’n, 826 F.2d 434, 436 (6th Cir. 1987). 

 The trustee, however, further contends that the deemed rejection eliminated the forfeiture 

clause, the only provision that granted the Cabinet an interest in the deposit at the time the debtor 

filed for Chapter 7 relief. But by rejecting the Agreement, the trustee also rejected the provision 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 9 

that provided the debtor’s only limited, contingent interest in the deposit—a credit towards the 

purchase balance. Because a trustee cannot “accept part of an unseverable executory contract 

[while] reject[ing] that portion of no benefit to the estate,” Walker v. Goodwin (In re Meadows), 

39 B.R. 538, 540 (Bankr. W.D. Ky. 1984), upon rejection of the Agreement, both the debtor and 

the Cabinet lost their interests in the deposit as provided by the terms of the Agreement. 

 Unlike the debtor, however, the Cabinet retained a stand-alone interest in the deposit 

based on an already executed transaction—the initial payment of the deposit. Rejection does not 

require “the reversal or undoing of already executed provisions” because § 365 “does not have 

any impact upon the executed portions of a contract.” In re Exec. Tech. Data Sys., 79 B.R. 276, 

282 (Bankr. E.D. Mich. 1987). The payment of the deposit, which paid for the risk of the 

debtor’s non-performance and reserved for the debtor the sole right to purchase the land, may be 

characterized as non-executory—a point conceded by the trustee—because neither party had 

future performance obligations related to the deposit itself. Consequently, the deposit, as a 

stand-alone interest, was beyond the reach of rejection. Section 365, including its provision for 

rejection, “addresses only future performance obligations of the parties.” Id. The trustee, 

therefore, is not entitled to a “reversal” or “undoing” of the payment. 

 Though the trustee does not have a legal, contractual interest in the deposit, he could still 

prevail on his § 542 turnover request if the debtor possessed an equitable interest in the deposit at 

the commencement of the bankruptcy proceeding. The Cabinet’s failure to deliver the deed postpetition, however, created no such equitable interest. Because the closing date had not yet 

arrived, both the debtor and the Cabinet were performing parties at the time the debtor filed for 

Chapter 7 relief. Consequently, the trustee cannot seek return of the debtor’s good faith deposit 

based on the Cabinet’s failure to deliver title post-petition. 

 Kentucky law provides that a vendor who is unable to render good title through no fault 

of his own may be required to return to the vendee any consideration previously paid. Kramer v. 

Mobley, 216 S.W.2d 930, 933 (Ky. 1949). Likewise, “a party to an agreement to purchase 

property who has advanced money in part performance . . . and then refuses to [conclude] the 

agreement, the other party being ready and willing to perform[,] . . . is not entitled to recover his 

part of the money so advanced.” Ward Real Estate v. Childers, 3 S.W.2d 601, 602 (Ky. 1928). 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 10 

 In arguing for an equitable remedy, the trustee incorrectly calculates the parties’ 

performance at different time periods, an approach that would give unjust advantage to the 

debtor. The trustee argues that prior to, and at the time of, filing the bankruptcy petition, the 

debtor was a performing party. After the bankruptcy petition was filed and the contract was 

deemed rejected, the Cabinet could no longer close on the sale due to the bankruptcy proceeding. 

Thus, even though the Cabinet’s inability to close the transaction was through no fault of its own, 

the debtor, as the performing party, was entitled to return of consideration paid as an equitable 

remedy. 

 If the trustee were to view both of the parties’ performances at the same time, the trustee 

would find that either (1) both of the parties were performing prior to the initiation of bankruptcy 

proceedings, the relevant time period under § 541, or (2) after filing for Chapter 7 relief and 

rejecting the contract, the debtor—not the Cabinet—was in breach.2 Therefore, the trustee 

cannot show that the debtor had an equitable interest in the deposit either prior to or after filing 

for relief. Because the debtor retained no legal or equitable interest in the deposit itself, and lost 

any limited interest in the deposit provided by the Agreement upon its deemed rejection, the 

good faith deposit is not property of the debtor’s estate subject to § 542 turnover. 

 The trustee also contends that because the good faith deposit is held in escrow, it is 

subject to § 542 turnover. However, the good faith deposit is not held in escrow because the 

Agreement contemplated delivery of the funds to the grantee—the Cabinet—as opposed to a 

third party. The Agreement provided that the “good faith deposit” would be “held in a special 

deposit trust fund by the Transportation Cabinet, Division of Right of Way & Utilities, pending 

the arrangement of a closing date . . .” To create an escrow, “the deposit of the instrument in 

pursuance of such [an escrow agreement] must be absolute and beyond control of the depositor.” 

Fisk v. Peoples Liberty Bank & Trust Co., 570 S.W.2d 657, 659 (Ky. Ct. App. 1978) (citing 30A 

C.J.S. Escrows § 2 at 968) (emphasis added). “[T]he delivery must be to a stranger, and courts 

uniformly hold that a delivery to the grantee is an absolute delivery, and the title passes despite 

any agreement between them that the deed shall be effective only upon specified conditions.” 

 2

11 U.S.C. § 365(g)(1) provides: “[T]he rejection of an executory contract or unexpired lease of the debtor 

constitutes a breach of such contract or lease—(1) if such contract or lease has not been assumed under this section 

or under a plan confirmed under chapter 9, 11, 12, or 13 of this title, immediately before the date of the filing of the 

petition.” 11 U.S.C. § 365(g)(1) (emphasis added). 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 11 

City Nat’l Bank of Cairo, Ill. v. Anderson, 225 S.W. 361, 362 (Ky. 1920) (emphasis added); see 

also Home Ins. Co. of N.Y. v. Wilson, 275 S.W. 691, 693 (Ky. 1925). 

 The trustee contends that the Kentucky Finance and Administration Cabinet’s control 

over the deposit account proves that the funds were, in fact, deposited with a third party, and thus 

are currently held in escrow. This argument, however, fails for two reasons. First, the Kentucky 

Finance and Administration Cabinet is not a third party. As the Cabinet explained, 

the Transportation Cabinet and the Kentucky Finance and Administration Cabinet 

are not separate parties. . . . [T]he Cabinet and the Finance Cabinet are each part 

of the Commonwealth of Kentucky, serving distinct functions of the executive 

branch. . . . Funds collected by the state and representing state money are 

required to be deposited in state depositories. 

Appellee’s Br. at 37–38 (citing Ky. Rev. Stat. Ann. § 41.070 (West 2014)). 

 Second, even if this Court were to accept the trustee’s contention as true, the deposit still 

cannot be classified as held in escrow because the parties never created an escrow agreement. 

The Purchase Agreement did not clearly establish that a particular condition had to occur before 

the Cabinet would be entitled to the deposit, and it did not afford the debtor any right to a refund. 

To create an escrow, “the parties must actually and validly contract with respect thereto” and 

“the escrow agreement should be clear and definite.” Fisk, 570 S.W.2d at 659 (internal citation 

omitted). Ultimately, “[t]he contract must be so complete that it only remains for the grantee or 

other person to perform the condition, or the event to happen, to give the instrument effect.” Id.

(internal citation omitted). 

 Finally, the trustee’s contention that the transaction for the sale of land between the 

debtor and the Cabinet was a contract for deed is also meritless. The transaction was not a 

contract for deed 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. “A contract for deed is a contract for the purchase and sale of real estate under which 

the purchaser acquires the immediate right to possession of the real estate and the vendor defers 

delivery of a deed until a later time to secure all or part of the purchase price.” Restatement 

(Third) of Property: Mortgages § 3.4(a) (1997) (emphasis added). “Courts should not readily 

convert an earnest money contract into a contract for deed.” Id. § 3.4 cmt. a. 
No. 14-5197 Lawrence v. Commonwealth of Kentucky Page 12 

 The judgment of the district court is AFFIRMED.