Opinion ID: 541990
Heading Depth: 2
Heading Rank: 2

Heading: Income Distribution

Text: 14 The bankruptcy court found that distributions from the trusts made to the debtor within 180 days following the filing of the bankruptcy petition are part of the bankruptcy estate. In re Newman, 88 B.R. at 193. The district court reversed, finding that 11 U.S.C. Sec. 541(a)(5)(A), which includes as property of the estate interests derived from a bequest, devise, or inheritance, is inapplicable to the income payments. 15 The trustee in bankruptcy begins his appeal on this issue with a waiver argument. The trustee asserts that the debtor waived his argument by conceding in a pleading before the bankruptcy court that the Bankruptcy Code would not protect such distributions. Where an issue is sufficiently addressed in the record created in bankruptcy proceedings, a district court may in its discretion resolve that issue in its review of a properly appealed final order of the bankruptcy court. See In re Air Conditioning, Inc. of Stuart, 845 F.2d 293, 299 (11th Cir.1988), certiorari denied sub nom. First Interstate Credit Alliance, Inc. v. American Bank of Martin Co., --- U.S. ----, 109 S.Ct. 557, 102 L.Ed.2d 584 (1988); In re Pizza of Hawaii, Inc., 761 F.2d 1374, 1379 (9th Cir.1985). The trustee in bankruptcy here does not argue that either the bankruptcy court or the district court denied him an opportunity to develop a factual record on the question of income distribution. The district court did not abuse its discretion in addressing this issue. 16 The district court did not err in holding that trust income payments made during the 180-day period were neither a bequest, devise, nor an inheritance under 11 U.S.C. Sec. 541(a)(5)(A). The Fifth Circuit has stated in passing, without providing analysis, that such payments would qualify as bequests. In the Matter of Moody, 837 F.2d 719, 723 n. 12 (1988). 3 Yet the federal courts must use state law to determine what constitutes a bequest, devise, or inheritance under the relevant provision. See Thornton v. Scarborough, 348 F.2d 17, 20 (5th Cir.1965) (addressing Section 70(a) of the Bankruptcy Act of 1898, the predecessor to Section 541(a)), modified on other grounds, 349 F.2d 1023 (1965); In re Surowitz, 94 B.R. 438, 439 (E.D.Mich.1988). 17 The trusts at issue were executed and administered in Missouri. It does not appear that the courts of Missouri have ever characterized an inter vivos spendthrift trust, or the payments out of such a trust, as a bequest. It would be somewhat surprising if they had, since, as the district court in this case noted, a bequest is defined as a gift by will. In re Newman, 99 B.R. at 884. Missouri usage is consistent with this definition. See, e.g., Mamoulian v. St. Louis University, 732 S.W.2d 512 (Mo.1987) (en banc ); Gannon v. Albright, 183 Mo. 238, 81 S.W. 1162, 1163 (1904); Watson v. Watson, 110 Mo. 164, 19 S.W. 543, 544 (1892). Missouri does not distinguish between the corpus or income payments of a spendthrift trust in any way relevant to this issue. See Mo.Ann.Stat. Sec. 456.080 (Vernon 1989) (giving force to restraints on the transfer of beneficial interests in a trust without distinction between corpus and income payments); McNeal v. Bonnel, 412 S.W.2d 167, 170 (Mo.1967) (per curiam adoption of special commissioner's opinion) (defining spendthrift trust as restriction on either income or principal). 18 The Fifth Circuit stated that applying the 180-day recovery provision would be consistent with the theory of the spendthrift trust because once trust income is paid to the beneficiary the income so paid is no longer subject to the protection of the spendthrift provisions in the trust. In re Moody, 837 F.2d at 723 (citations omitted). While that may be true as an original matter, it ignores the exclusive structure of 11 U.S.C. Sec. 541(a)(5); Congress listed the specific interests to be included as property of the estate. Those interests do not include a category into which an inter vivos spendthrift trust may fit. 4 The decision of Congress to enumerate specific exclusions creates a presumption that cases not included in that list of exclusions are subject to the statute. See Matter of Cash Currency Exchange, Inc., 762 F.2d 542, 552 (7th Cir.1985) (applying maxim expressio unius est exclusio alterius to provision of Bankruptcy Code), certiorari denied sub nom. Fryzel v. Cash Currency, 474 U.S. 904, 106 S.Ct. 233, 88 L.Ed.2d 232. Similarly, the decision of Congress to list certain interests without introducing them with the words includes or including creates a presumption that those are the sole interests covered. See 11 U.S.C. Sec. 102(3). 19 Payments made to the debtor from the trusts during the 180 days following the filing of the bankruptcy action are not interests held by the debtor at the commencement of the case, as specified in 11 U.S.C. Sec. 541(a)(1), nor would they qualify as interests by bequest, devise, or inheritance, as specified in 11 U.S.C. Sec. 541(a)(5).