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FILED

JUL 10 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. AZ-14-1496-JuKiPa

)

CARRIE MARGARET NEIDORF, ) Bk. No. 2:08-bk-08600-MCW

)

Debtor. )

______________________________)

)

ROBERT A. MacKENZIE, Chapter )

7 Trustee, )

)

Appellant, )

)

v. ) O P I N I O N

)

CARRIE MARGARET NEIDORF, )

)

Appellee. )

______________________________)

Argued and Submitted on June 19, 2015

at Phoenix, Arizona

Filed - July 10, 2015

Appeal from the United States Bankruptcy Court

for the District of Arizona

Honorable Madeleine C. Wanslee, Bankruptcy Judge, Presiding

_________________________

Appearances: Michael Paul Lane, Lane & Nash, P.C. argued for

appellant Robert A. MacKenzie; Kenneth L. Neeley,

Neeley Law Firm, PLC, argued for appellee Carrie

Margaret Neidorf.

_________________________

Before: JURY, KIRSCHER, and PAPPAS, Bankruptcy Judges.
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JURY, Bankruptcy Judge:

Chapter 71 debtor Carrie Margaret Neidorf (Debtor)

scheduled her real property (Residence) as an asset of her

estate. There was no equity in the property. Postpetition, the

lender obtained an unopposed relief from stay order and

foreclosed on the property. Years after the foreclosure, but

while her bankruptcy case was still open, Debtor received a

postpetition payment in the amount of $31,250 (Foreclosure

Payment). The payment was made to Debtor pursuant to a national

settlement between banking regulators and certain financial

institutions, including Bank of America (B of A). Debtor

disclosed her receipt of the Foreclosure Payment to Robert A.

MacKenzie, the chapter 7 trustee (Trustee). Trustee then filed

a Motion to Compel Debtor to Turnover Estate Property (Turnover

Motion), asserting that the Foreclosure Payment was property of

the estate under § 541(a)(7). The bankruptcy court denied his

motion, and this appeal followed. For the reasons discussed

below, we AFFIRM.

I. FACTS

The underlying facts are undisputed. Debtor filed her

chapter 7 petition on July 12, 2008. In Schedule A, Debtor

listed her Residence located in Phoenix with a value of

$350,000, subject to liens totaling $454,200. In Schedule C,

1 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 and

“Rule” references are to the Federal Rules of Bankruptcy

Procedure.

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Debtor claimed an exemption in the property for $150,000 under

Ariz. Rev. Stat. § 33-1101(A). In Schedule D, Debtor showed the

property was encumbered by three liens, including a first

position deed of trust in favor of Countrywide Home Loans, Inc.

(Countrywide).

Countrywide obtained an unopposed order granting relief

from the automatic stay with respect to the Residence on

September 29, 2008. Countrywide’s interest in the deed of trust

was assigned to B of A sometime in 2008 as part of a

merger/acquisition.

Debtor received a § 727 discharge on October 21, 2008.

Debtor’s Residence was sold at a foreclosure sale on

July 14, 2009.

Trustee filed a Notice of Trustee’s Final Report and

Application for Compensation on November 14, 2013. The

bankruptcy court entered an order approving payment for

administrative fees and expenses on December 19, 2013, but the

case was never closed.2

Almost six years after her case was filed, Debtor disclosed

to Trustee that she had received the Foreclosure Payment. On

April 15, 2014, Trustee filed the Turnover Motion contending

that the payment was property of the estate under § 541(a)(7).

At the May 13, 2014 hearing, the bankruptcy court took the

matter under submission. On September 30, 2014, the bankruptcy

court issued its findings of fact and conclusions of law and

entered the order denying Trustee’s Turnover Motion. Trustee

2 Trustee kept the estate open while he was collecting on

an unsecured note.

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timely appealed from that order.

II. JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(E). We have jurisdiction under 28 U.S.C.

§ 158.

III. ISSUE

Did the bankruptcy court err by determining that the

Foreclosure Payment was not property of Debtor’s estate?

IV. STANDARDS OF REVIEW

Whether property is included in a bankruptcy estate is a

question of law subject to de novo review. Cisneros v. Kim

(In re Kim), 257 B.R. 680, 684 (9th Cir. BAP 2000).

We may affirm the bankruptcy court’s decision on any ground

supported by the record. Olsen v. Zerbetz (In re Olsen), 36

F.3d 71, 73 (9th Cir. 1994).

V. DISCUSSION

Section 541(a)(7) makes property of the estate any interest

in property that the estate (not the debtor) acquires after the

petition date. “Congress enacted § 541(a)(7) to clarify its

intention that § 541 be an all-embracing definition and to

ensure that property interests created with or by property of

the estate are themselves property of the estate.” TMT

Procurement Corp. v. Vantage Drilling Co. (In re TMT Procurement

Corp.), 764 F.3d 512, 524-25 (5th Cir. 2014); H.R. REP. 95-595,

549, reprinted in 1978 U.S.C.C.A.N. 5963, 6455 & 6523-24. 

Stated differently, for the after-acquired interest to be

considered property of the estate under § 541(a)(7), the

interest (1) must be created with or by property of the estate;

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(2) acquired in the estate’s normal course of business; or (3)

otherwise be traceable to or arise out of any prepetition

interest included in the bankruptcy estate. See Id. at 525. 

The party seeking to include property in the estate bears the

burden of showing that the item is property of the estate. 

Seaver v. Klein–Swanson (In re Klein–Swanson), 488 B.R. 628, 633

(8th Cir. BAP 2013).

Here, Trustee has not shown how the bankruptcy estate

acquired an interest in the postpetition Foreclosure Payment. 

The payment was neither created with or by property of the

estate nor can it be said that the payment is traceable to or

arose out of any prepetition interest included in the bankruptcy

estate. The fact that Debtor’s Residence became property of the

estate, in and of itself, does not support the inclusion of the

Foreclosure Payment as after-acquired property under

§ 541(a)(7). Rather, Debtor became entitled to the payment only

as a result of qualifying events occurring after her bankruptcy

filing.

Debtor’s legal right to, or interest in, the Foreclosure

Payment was as a “borrower,” and did not arise until April 13,

2011, when B of A, acting through its Board of Directors, and

the Comptroller of the Currency (Comptroller) entered into a

consent order (2011 Consent Order).3 The Comptroller and B of A

3 Attached to Debtor’s response to Trustee’s Turnover

Motion was a letter which included her payment check. That

letter said that B of A had entered into the agreement described

above and gave a website address where additional information

about the agreement could be found. The bankruptcy court

apparently went to the website identified in the letter to

(continued...)

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entered into an Amendment to the Consent Order dated

February 28, 2013 (2013 ACO), which required B of A to make a

$1,127,453.261 cash payment to a Qualified Settlement Fund

(QSF). Under the 2013 ACO, only borrowers who had a pending or

completed foreclosure on their primary residence any time from

January 1, 2009, to December 31, 2010, were eligible to receive

distributions from the QSF. In other words, it was the

postpetition 2011 Consent Order and 2013 ACO which created the

rights and remedies for the specified class of borrowers.

Seen in this light, that the estate had an interest in

Debtor’s Residence is not enough. Nowhere has Trustee shown how

the estate obtained an interest in the Foreclosure Payment

itself when the qualifying events giving rise to Debtor’s legal

rights to the payment all occurred postpetition and were held

solely by the borrowers. See Drewes v. Vote (In re Vote), 276

F.3d 1024 (8th Cir. 2002). The payment is thus not an afteracquired interest of the estate. Therefore, we agree with the

bankruptcy court’s legal conclusion that the postpetition

Foreclosure Payment received by Debtor was not property of her

estate.

VI. CONCLUSION

Having found no error, we AFFIRM.

3(...continued)

obtain additional information about the national settlement and

the terms of the Consent Order. Although the Consent Order was

not part of the record in the bankruptcy court, the parties

verified at oral argument that they had no objection to the

bankruptcy court’s sua sponte examination of the Consent Order

or its amendment. Like the bankruptcy court, we have also

reviewed them.

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