Opinion ID: 541385
Heading Depth: 2
Heading Rank: 2

Heading: Bankruptcy Trustee's Authority to Convey Dock System

Text: 25 The Bond Trustee contends that the debtor's lack of a property interest in the Dock System precluded the district court from exercising jurisdiction to approve the so called abandonment of the Dock System to Atlantic. Moreover, if the debtor had no interest in the Dock System, the Bankruptcy Trustee would have had nothing to abandon. 26 It is fundamental that the bankruptcy estate must have an interest in property as of the commencement of the case in order for the bankruptcy trustee to dispose of that interest. In re Continental Air Lines, Inc., 780 F.2d 1223, 1226 (5th Cir.1986) (Sec. 363(b) sale of assets outside the ordinary course of business is limited to assets of the estate). The bankruptcy estate consists only of the interests in property which the debtor had at the commencement of the case. Cross Electric, 664 F.2d 1218, 1220 (4th Cir.1981) (estate includes whatever property interests the debtor had at the commencement of the case); Jones, 768 F.2d 923, 927 (7th Cir.1985) (estate's rights in debtor's property limited to those rights had by debtor). Inherent in the concept of the bankruptcy estate is that the estate consists of the sum total of the debtor's property rights as of the commencement of the case, no more or no less. Moody v. Amoco Oil Co., 734 F.2d 1200, 1213 (7th Cir.1984). Consequently, in determining whether the bankruptcy trustee had the power to dispose of property, it is the Court's task to determine the nature and extent of the debtor's interest in property. 27 In examining the record, we are hard pressed to find that the Associates possessed a property interest in the Dock System which could have entitled the Bankruptcy Trustee to convey the Dock System to Atlantic. Section 3 of the Second Amendment to the Master Lease provides that: 28 The Authority shall acquire and construct a public marina (the Marina) to be operated at Patriot's Point and the Authority shall own the Marina as part of the Project.... The Marina ... shall remain the sole and exclusive property of the Authority, subject to the [Bondholders'] statutory lien and Trust Estate created to secure the Bonds. 29 Joint Appendix at 168 (emphasis added). This provision explicitly places ownership of the Marina, including the Dock System, in the hands of the Authority subject to a statutory lien in favor of the Bondholders. 30 The Bankruptcy Trustee argues that the Associates had an equitable interest arising by implication from its contractual assumption of the obligations, liabilities, and responsibilities of the Authority. Appellee's Brief at 23. It is significant that the Bankruptcy Trustee does not assert that the Associates' interest in the Dock System amounted to anything more than this equitable interest. As the Bankruptcy Trustee purportedly conveyed the entire Dock System to Atlantic, the Bankruptcy Trustee appears to argue that the Associates' equitable interest in the Dock System entitled him to convey the Dock System in its entirety. 31 However, this theory is wholly inconsistent with the concept of the bankruptcy estate and the Bankruptcy Trustee's rights with respect to estate property. Upon the commencement of the bankruptcy case, only the debtor's interest in property becomes property of the estate, and the estate's rights in the property are limited to the rights held by the debtor. Cross Electric, 664 F.2d at 1220; Jones, 768 F.2d at 927. The Bankruptcy Trustee may only dispose of the debtor's interest in property which the debtor had as of the commencement of the estate. Continental Air Lines, 780 F.2d at 1226. Yet, the Bankruptcy Trustee did not purport to abandon this equitable interest in the Dock System; rather, the Bankruptcy Trustee attempted to dispose of the Dock System in toto. It is axiomatic that the Bankruptcy Trustee may not convey an interest which is not part of the bankruptcy estate. To the extent that the Bankruptcy Trustee's abandonment of the Dock System was a disposition of an interest in property which was not part of the estate, it is void. 32 Accordingly, the Court reverses the district court's approval of the abandonment, and remands for a determination of the Bankruptcy Trustee's interest in the property, which he may properly convey as an asset of the estate.