April 23, 2014

Tenth Circuit: Avoidance of Transfer to Bank Would Restore Bank’s Lien on Estate as Fully Secured Creditor

On Tuesday, April 15, 2014, the Tenth Circuit Court of Appeals issued its opinion in C.W. Mining Co. v. Bank of Utah.

In this bankruptcy matter, the Chapter 7 Trustee filed a complaint with the bankruptcy court seeking to recover a post-petition transfer to the Bank of Utah. C.W. Mining had deposited $362,000 with the bank in exchange for a certificate of deposit. C.W. Mining then was subject to an involuntary Chapter 11 proceeding, which was converted to a Chapter 7 proceeding. The bank then liquidated the certificate of deposit, which had a value of $383,099. The bank applied the proceeds to the balance owing on two of three promissory notes executed by C.W. Mining in favor of the Bank in 2005, 2006, and 2007. Although the bank knew of the bankruptcy proceeding, it did not inform the trustee, who learned of the transfer when the bank sold its rights on the third promissory note to a third-party seller and the seller sought recovery from the estate. The trustee commenced an adversary proceeding to recover $383,099 from the bank and the parties filed cross-motions for summary judgment.

The bankruptcy court awarded summary judgment to the bank, reasoning that avoidance would be pointless because a transfer to a fully secured creditor cannot be avoided under 11 U.S.C. § 549 without also reviving the secured creditor’s lien. The trustee failed to allege any injury from the bank’s transfer.

The trustee appealed to the Bankruptcy Appellate Panel, which affirmed the bankruptcy court’s judgment. He appealed again to the Tenth Circuit, but the Tenth Circuit affirmed the BAP, finding that the bankruptcy court’s decision was thorough, well-reasoned, and correct.

Tenth Circuit: In Consolidated Bankruptcy Appeal, One Case is Moot, Court Lacks Jurisdiction to Hear Other

The Tenth Circuit Court of Appeals published its opinion in Gordon v. Bank of America and Pahs v. Kiehl on Thursday, February 20, 2014.

After Pahs filed his appeal with this court, he and the Chapter 13 trustee agreed that Pahs would continue to make the payments required by the Chapter 13 plan while this appeal was pending. When Pahs failed to make those payments, one of his creditors moved for the dismissal of Pahs’ bankruptcy. After no one objected to the motion, the bankruptcy court granted it, dismissing Pahs’ bankruptcy. In light of that dismissal, the Tenth Circuit held it could no longer grant Pahs any relief and his appeal was therefore moot.

Regarding the Gordons’ appeal, The Tenth Circuit held it had no jurisdiction because it was not taken from a final appealable decision and the parties had not invoked any mechanism that might permit an interlocutory appeal.

Although the district court’s decision required the Gordons to use the model Chapter 13 plan without modification, they would be free to revise the substantive portion of their plan. And the bankruptcy court will have to give creditors notice of the new amended plan, permit time for any objections, and then conduct another confirmation hearing. All of which is to say, the district court remanded the Gordons’ case to the bankruptcy court for significant further proceedings. This did not constitute a final appealable decision, and the Tenth Circuit lacked jurisdiction to hear the appeal.

The Pahs’ appeal was DISMISSED as moot.

The Gordons’ appeal was DISMISSED for lack of jurisdiction.

Tenth Circuit: Issue Preclusion Does Not Apply in Bankruptcy Court to a Final Determination in District Court Where Party Waived Issue

The Tenth Circuit Court of Appeals published its opinion in In re Zwanziger on Tuesday, January 28, 2014.

James Hamilton and Richard Kus sued Wolfgang Zwanziger for fraud and violations of Oklahoma’s wage laws. A jury found Zwanziger liable and awarded Hamilton and Kus a combined sum of $573,000. Zwanziger appealed.

On appeal, the Tenth Circuit affirmed the jury’s verdict on liability but reversed on damages. Hamilton and Kus had failed to include damages for emotional distress in their final pretrial order, even though they listed such damages in their complaint. Thus, the Tenth Circuit concluded that the district court erred in instructing the jury to consider emotional distress damages. So the Tenth Circuit remanded to the district court to recalculate damages.

But before the district court could recalculate damages, Zwanziger declared bankruptcy. Kus and William Clark, as trustee of Hamilton’s estate, (since Hamilton had also declared bankruptcy), then filed a complaint in bankruptcy court to determine how much of Zwanziger’s liability was not dischargeable. After reviewing both sides’ damages case, the bankruptcy court awarded Clark and Kus a combined sum of $181,300 in nondischargeable damages, $50,000 of which was for emotional distress. Zwanziger appealed to the Bankruptcy Appellate Panel (BAP), arguing that res judicata precluded the bankruptcy court from including damages for emotional distress. The BAP reversed. Clark and Kus appealed the BAP’s decision.

In this appeal, the Tenth Circuit considered a novel question: Does issue preclusion apply in bankruptcy court to a final determination in district court that a party waived an issue? The court concluded issue preclusion does not apply to the waiver finding here. In this case, issue preclusion does not apply because a finding that an issue of fact or law is waived is not a decision on the merits. Waiver as a general matter is a procedural determination that governs only the case in which it is made.

Therefore, the court REVERSED the judgment of the Bankruptcy Appellate Panel and REMANDED for the bankruptcy court to REINSTATE its order.

Tenth Circuit: Bankruptcy 11 U.S.C. § 363(m) Mootness Does not Apply to Purely Statutory Claim for Money Damages

The Tenth Circuit Court of Appeals published its opinion in In re C.W. Mining Co. on Wednesday, January 22, 2014.

These appeals arise from a Chapter 7 asset sale for the liquidating bankruptcy estate of C.W. Mining Co., a former coal mining operation in Emery County, Utah. The four appellants did business with C.W. Mining before its involuntary bankruptcy. They now claim various assets that the bankruptcy trustee, Kenneth A. Rushton, sold to an unrelated entity, Rhino Energy LLC. Under 11 U.S.C. § 363(m), the court cannot grant the appellants any relief that would affect the validity of Rushton’s sale to Rhino. The district court dismissed the appeals as moot because of this statute.

The Tenth Circuit affirmed the dismissal of all the appeals with the exception of Charles Reynolds’s appeal because he raised a statutory claim for relief that did not affect the validity of the sale. Reynolds and his family lived in the mine’s scale house. Reynolds opposed Rushton’s action to evict Reynolds and return the house to the bankruptcy estate by arguing he was the rightful owner of the house and counterclaiming under the Utah Occupying Claimant Statute (UOCS).

On appeal, Reynolds sought damages under UOCS of the value of improvements to the house, not undoing the sale to Rhino. Section 363(m) mootness does not apply to this claim, nor does equitable mootness because this is a purely statutory claim for money damages. The court reversed and remanded the dismissal of Reynolds’s claim.

Tenth Circuit: If Debtor Transfers More Than 15% of GAI to Qualified Organization, Trustee May Recover Entire Amount, Not Just Amount in Excess of 15%

The Tenth Circuit Court of Appeals published its opinion in Wadsworth v. The Word of Life Christian Center on Monday, December 16, 2013.

Debtors Lisa and Scott McGough filed for bankruptcy relief under Chapter 7 in 2009. During 2008, the McGoughs made contributions to the Word of Life Christian Center (the Center), totaling $3,478. During 2009, they made contributions to the Center totaling $1,280. Their taxable income for 2008 and 2009 was $6,800 and $7,487, respectively. They also received social security benefits in 2008 and 2009 totaling $22,036 and $23,164, respectively.

The Trustee filed an adversary proceeding against the Center seeking to recover the contributions made to it by the McGoughs under 11 U.S.C. §§ 548(a)(1)(B) and 550. Both parties filed motions for summary judgment. According to the Center, because the individual amounts of each contribution made by the McGoughs did not exceed 15% of their gross annual income (“GAI”), none were avoidable under the safe harbor provision of § 548(a)(2). The Trustee took the opposite view: the contributions must be considered in the aggregate and because the total contributions made by the McGoughs exceeded 15% of their GAI in those years, he could recover them in their entirety.

The bankruptcy court agreed with the Trustee in part: for purposes of the safe harbor provision of § 548(a)(2), a debtor’s contributions must be considered in their annual aggregate. However, it sided with the Center on the avoidance issue—if the contributions exceeded 15% of a debtor’s GAI, only the amount exceeding 15% is subject to avoidance. Thus, the Trustee’s recovery was limited to the amount of the contributions exceeding 15% of the McGoughs’ GAI. The Trustee appealed to the Bankruptcy Court of Appeals (BAP). Therefore, the only issue before the BAP was whether § 548(a)(2) allows a trustee to recover the entire amount of a charitable contribution if it exceeds 15% of GIA or only the amount in excess of 15%. The BAP agreed with the bankruptcy court—only the amount exceeding 15% was avoidable.

The sole question on appeal was a narrow one: If a restricted debtor transfers more than 15% of his GAI to a qualified religious or charitable organization, may the trustee avoid the entire annual transfer or only the portion exceeding 15%? The bankruptcy court and Bankruptcy Court of Appeals (BAP) said circumstances here only permitted the trustee to avoid the portion of the transfer exceeding 15%. The issue presented was a matter of first impression in the Tenth Circuit.

The Tenth Circuit agreed with the Trustee’s argument: § 548(a)(2) is unambiguous and clearly provides a safe harbor from the trustee’s avoidance power only if the “transfer” does not exceed 15% of GAI. Thus the converse must also be true—if the “transfer” exceeds 15% of GAI, then the “transfer”—meaning the entire transfer—is subject to avoidance. Had Congress intended for only the portion of the transfer exceeding 15% of GAI to be subject to avoidance, it would have added limiting language to that effect.  It did not.


Tenth Circuit: Debt to Former Spouse That Arose In Connection with a Separation Agreement Nondischargeable in Bankruptcy

The Tenth Circuit Court of Appeals published its opinion in Taylor v. Taylor on Monday, December 9, 2013.

As part of Eloisa and Matthew Taylor’s divorce, a Virginia circuit court ordered Matthew to pay $2,500 per month to Eloisa as spousal support. The payments were to continue until the remarriage of Eloisa and the final decree also stated that the spousal support obligation was governed by Va. Code § 20-109. Four years later, Matthew moved to terminate spousal support in the Virginia circuit court, arguing that Eloisa had been living with a man for the past two years and that the two were in a marriage-like relationship. Matthew claimed that Eloisa’s cohabitation should result in the termination of his spousal support obligation under the divorce decree pursuant to Va. Code § 20-109. The Virginia circuit court agreed with Matthew and retroactively terminated his spousal support obligation. The court ordered Eloisa to repay $40,660.59 in overpaid spousal support payments, plus $10,000.00 for Matthew’s attorney fees incurred in prosecuting the motion for termination. Accordingly, the Virginia circuit court entered a judgment against Eloisa for $50,660.59.

Eloisa filed for bankruptcy under Chapter 7. Matthew filed a complaint objecting to the dischargeability of the $50,660.59 judgment, alleging that the overpayment debt was not dischargeable under 11 U.S.C. § 523(a)(15) as it constituted a debt to a former spouse incurred by the debtor “in connection with a separation agreement.” He also argued that the overpayment debt constituted a “domestic support obligation” under 11 U.S.C. § 523(a)(5).

On appeal, the BAP affirmed the bankruptcy court’s ruling that the overpayment debt was not a “domestic support obligation” under § 523(a)(5), as well as the bankruptcy court’s ruling that the overpayment debt did qualify for an exception from discharge under § 523(a)(15). Finally, the BAP ruled that neither it nor the bankruptcy court had authority to award attorney fees under the Marital Settlement Agreement’s (MSA) fee-shifting agreement.

Eloisa appealed the bankruptcy court’s summary judgment ruling that the overpayment debt is nondischargeable under § 523(a)(15); Matthew cross-appealed the bankruptcy court’s dismissal of his § 523(a)(5) claim and the BAP’s ruling on attorney fees.

The Tenth Circuit first analyzed the plain language of 11 U.S.C. § 523(a)(5) and held that to qualify as a “domestic support obligation” under that section, the debt must be in the nature of support to the creditor-spouse. As this was not the case here, the court affirmed the bankruptcy court ruling on that basis.

Next, the court analyzed whether the debt to Matthew was nevertheless nondischargeable under § 523(a)(15). Pursuant to § 523(a)(15)’s plain and unambiguous language, the overpayment debt qualified as a nondischargeable debt: the debt arose as a result of a judgment against a spouse, Eloisa, in favor of her former spouse, Matthew, by the Virginia circuit court “in connection with a separation agreement [or] divorce decree.”

The court affirmed the bankruptcy court’s rulings and the BAP’s ruling that Matthew is not entitled to attorney fees under the MSA.

Colorado Court of Appeals: Bankruptcy Court Order Effectively Precludes Determination of “Successor Entity” for Unemployment Insurance Purposes

The Colorado Court of Appeals issued its opinion in Ouray Sportswear, LLC v. Industrial Claim Appeals Office on Thursday, October 24, 2013.

Unemployment Insurance—Bankruptcy—Successor Entity.

Petitioner Ouray Sportswear, LLC (employer) sought review of a final order of the Industrial Claim Appeals Office (Panel). The order was set aside.

In April 2007, Ski Country Imports, Inc. and Ouray Sportswear Wyoming, Inc. (collectively, debtor) filed for bankruptcy. As part of the bankruptcy proceeding, employer, through a related entity called Jalex Holdings, LLC (Jalex), purchased substantially all of debtor’s assets. In May 2007, the U.S. Bankruptcy Court for the District of Colorado issued an order approving Jalex’s purchase of debtor’s assets. The order expressly provided that the purchase was free and clear of any and all liens, claims, charges, and encumbrances.

In June 2012, a deputy for the Colorado Department of Labor and Employment (Department) issued a liability determination concluding that debtor’s entire unemployment insurance account (which included the unpaid premiums) would transfer to employer because employer was a successor entity to debtor under CRS § 8-76-104(1)(a). The hearing officer affirmed the deputy’ ruling, and the Panel affirmed a hearing officer’s decision that employer is a “successor” entity for unemployment taxation purposes under § 8-76-104(1)(a), because it purchased substantially all of the assets of two businesses.

Employer contended that the Panel erred in affirming the hearing officer’s determination that it is a successor entity under § 8-76-104(1)(a). The bankruptcy court’s order effectively precluded the Department and the Panel from treating employer as a statutory successor entity. Therefore, the Panel’s order holding that employer is a successor entity to debtor under § 8-76-104(l)(a) conflicts with, and is therefore preempted by, the bankruptcy court’s prior order issued pursuant to 11 USC § 363(f). Consequently the Panel’s order was set aside.

Summary and full case available here.

Tenth Circuit: Attorney Fee Award in Bankruptcy Case Reversed

The Tenth Circuit Court of Appeals published its opinion in Market Center East Retail Prop. v. Lurie on Thursday, September 19, 2013.

Debtor-Appellant Market Center East Retail Property, Inc. (“Market Center”) appealed from the Bankruptcy Appellate Panel (“BAP”), which affirmed the bankruptcy court’s award of attorney fees to Appellees Barak Lurie and his firm, Lurie & Park (collectively “Lurie”). Lurie was Market Center’s attorney in completing the sale of a retail shopping center to Lowe’s Home Center (“Lowe’s”). The bankruptcy court awarded Lurie $350,752.06 in attorney’s fees. The BAP affirmed.

Market Center raised three issues on appeal: 1) whether the bankruptcy court’s and the BAP’s construction of 11 U.S.C. § 330 to permit the bankruptcy court, in its discretion, to award a contingent fee, rather than determining a fee based on the lodestar, is consistent with the language and intent of 11 U.S.C. § 330 and with the case law construing 11 U.S.C. § 330; 2) whether both the bankruptcy court and the BAP erred as a matter of law in concluding that the factors listed in 11 U.S.C. § 330(a)(3) for determining a reasonable attorney’s fee in a bankruptcy proceeding are a “non-exclusive list” of factors which the bankruptcy court is free to consider, or not consider, in its discretion; and 3) whether Congress intended that 11 U.S.C. § 330(a)(3) be construed consistently with the case law for determining a “reasonable attorney’s fee” under the federal fee-shifting statutes such as 42 U.S.C. § 1988.

In the Tenth Circuit, the adjusted lodestar approach is used to calculate reasonable attorney fees under 11 U.S.C. § 330(a). “The lodestar analysis takes into account each of the factors specifically mentioned in § 330(a)(3) plus additional relevant factors,” including the twelve Johnson factors. The court held that “in determining reasonable attorney’s fees pursuant to § 330, the lodestar amount may be enhanced or adjusted downward based on the § 330 factors and the Johnson factors.”

The court also held that the bankruptcy court erred in assuming that it had discretion to disregard or to look outside the § 330(a)(3)/Johnson factors to evaluate the reasonableness of any attorney’s fee. It found that the bankruptcy court clearly erred in its analysis of the § 330(a)(3) factors and reversed the award of fees to Lurie and remanded for further proceedings.

Tenth Circuit: Failure to Disclose Pending Lawsuit to Bankruptcy Court Resulted in Dismissal of Suit Due to Judicial Estoppel

The Tenth Circuit Court of Appeals published its opinion in Queen v. TA Operating, LLC on Tuesday, August 20, 2013.

Plaintiffs Richard and Susan Queen (“Queens”) sued Defendant TA Operating, LLC (“TA”) in federal district court in Wyoming (“District Court Action”). They brought various claims against TA based on an injury Mr. Queen sustained when he slipped and fell in a parking lot operated by TA. During the course of the District Court Action, the Queens filed for Chapter 7 bankruptcy in California (“Bankruptcy Action”), but did not disclose the District Court Action in their bankruptcy filings. When TA discovered this failure, TA brought it to the attention of the trustee for the Bankruptcy Action (“Trustee”). The Queens subsequently amended their bankruptcy filings to include the District Court Action, but they provided an estimate of its value that was far below what they had indicated in the proceedings before the Wyoming district court, and they claimed that the lawsuit was entirely exempt. Subsequently, the Queens were granted a no-asset discharge in bankruptcy.

The district court granted summary judgment in favor of TA based on the doctrine of judicial estoppel because the Queens had not disclosed the lawsuit in their bankruptcy proceedings.

Because the Queens adopted an inconsistent position that was accepted by the bankruptcy court, and because the Queens would receive an unfair advantage if not estopped from pursuing the District Court Action, the Tenth Circuit held that it was not an abuse of discretion for the court to apply the doctrine of judicial estoppel and grant summary judgment in favor of TA. The court also rejected the Queens’ arguments of mistake and inadvertence, because the record showed that the Queens had knowledge of the claim and a motive to conceal it in their bankruptcy proceedings. The court affirmed the grant of summary judgment to TA.

New Study Examines Overlooked Process for Selecting Key Federal Judges

Quality Judges, an initiative of IAALS, the Institute for the Advancement of the American Legal System at the University of Denver, has just released A Credit to the Courts: The Selection, Appointment, and Reappointment Process for Bankruptcy Judges. This study provides the first in-depth examination of the process for selecting U.S. bankruptcy judges, highlighting the similarities and differences among the regional circuits.

Unlike other federal judges, bankruptcy judges are not appointed by the President and confirmed by the Senate. Since 1984, they have been chosen by the judges of the federal circuit in which they will serve. According to U.S. Judicial Conference regulations, the judicial council in each federal circuit may appoint a merit selection panel to review applications for bankruptcy judge vacancies and make recommendations regarding potential nominees to the council. But until now, no empirical study has explored whether the judicial councils use such panels, who serves on these panels, and how the panels’ screening processes work.

“Despite the number of cases processed in these high-volume courts, and their significance in the financial lives of individuals and businesses alike, very little was known about how the judges who preside over these courts come to be on the bench,” said Malia Reddick, Director of the Quality Judges Initiative at IAALS.

The IAALS study is based on interviews with 25 bankruptcy judges and 11 participants in the selection process—including circuit and district judges, bankruptcy practitioners, and academics, as well as questionnaires completed by the 12 regional circuit executives.

Researchers learned that the judicial council in every circuit uses a merit selection panel in screening applicants for bankruptcy judge vacancies, but these panels vary extensively in composition and operation. For instance, while merit selection panels in some circuits are composed only of judges, other circuits exclude judges from participating on these panels. Panels also range in size from three to nine members. Additional differences, as well as similarities, in bankruptcy judge selection processes across the circuits are highlighted in the report.

Participants were unanimous in praising the products of the selection process. As one now-chief bankruptcy judge who has been on the bench for more than two decades summed it up: “They generally pick the best person, and it truly is merit selection. I’m proud of the way bankruptcy judges are selected. To me it is the best merit selection process we have.”

Quality Judges is an initiative of IAALS dedicated to advancing empirically informed models for choosing, evaluating, and retaining judges that preserve impartiality and accountability.

IAALS, the Institute for the Advancement of the American Legal System at the University of Denver, is a national, independent research center dedicated to continuous improvement of the process and culture of the civil justice system.

Alli Gerkman is Director of Communications for IAALS, the Institute for the Advancement of the American Legal System at the University of Denver. IAALS is a national, independent research center dedicated to continuous improvement of the process and culture of the civil justice system.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Tenth Circuit: 11 U.S.C. § 362(a)(1) Does Not Stay Appeal from Tax Court

The Tenth Circuit published its opinion in Schoppe v. Commissioner of Internal Revenue on Thursday, March 28, 2013.

John H. Schoppe petitioned for review of a Tax Court decision finding him liable for tax deficiencies. While the case was proceeding, Mr. Schoppe filed a bankruptcy petition. That filing prompted the Tenth Circuit to request supplemental briefing from the parties on whether the automatic bankruptcy stay in 11 U.S.C. § 362(a)(1) would apply to this appeal.

The Tenth Circuit held that § 362(a)(1) did not stay the appeal. It was an open question in the Tenth Circuit whether a proceeding is initiated by the debtor when he files a petition in Tax Court or whether the Tax Court proceeding is a continuation of the proceeding initiated against the debtor when the Commissioner begins the administrative process of determining that there is a tax deficiency. The Tenth Circuit agreed with the four circuits that have applied a bright-line rule that a petition filed in Tax Court is an independent judicial proceeding initiated by the debtor, not the continuation of an administrative proceeding. Because the underlying case originated with Mr. Schoppe commencing a judicial proceeding in Tax Court, The Tenth Circuit concluded the automatic stay did not apply.

On the merits, Mr. Schoppe did not file timely federal tax returns for the years 2002 through 2007. The IRS sent Mr. Schoppe a notice of deficiency, determining his income tax deficiencies, as well as additional amounts for failing to file returns, failing to pay tax when due, and failing to pay estimated tax. The Tax Court sustained the IRS’s determination of the deficiencies, concluding that Mr. Schoppe failed to adequately substantiate deductions he claimed for business expenses. Mr. Schoppe appealed.

Finding no clear error, the Tenth Circuit agreed with Tax Court’s determination that Mr. Schoppe failed to substantiate his claimed business expenses.

Tax Court’s decision AFFIRMED.

Tenth Circuit: Allegedly Fraudulently Transferred Property is Not Part of the Bankruptcy Estate Until Recovered

The Tenth Circuit issued its opinion in Rajala v. Gardner on Tuesday, March 12, 2013.

Plaintiff-Appellant Eric Rajala, Trustee of the bankruptcy estate of Generation Resources Holding Company, LLC (GRHC), appeals from the district court’s order granting motions to distribute approximately $9 million held in escrow. This amount represents part of the purchase price of a wind power project allegedly developed by GRHC. In a nutshell, the Trustee claims that the Debtor, GRHC, has been left with $5 million in debt while the individual Defendants-Appellees and their affiliated entities received some $13 million in proceeds from the sale of several wind power projects, unburdened by the debt.

At issue was what constitutes property of the bankruptcy estate and whether allegedly fraudulently transferred property is subject to the Bankruptcy Code’s automatic stay before a trustee recovers the property through an avoidance action. The district court held that allegedly fraudulently transferred property is not part of the bankruptcy estate until recovered and therefore is beyond the reach of the automatic stay. The Trustee appealed.

Under 11 U.S.C. § 362(a)(3), the filing of a Chapter 7 bankruptcy petition automatically stays “any act to obtain possession of property of the estate . . . or to exercise control over property of the estate.” Section 541(a)(1) defines property of the estate to include “all legal or equitable interests of the debtor in property as of the commencement of the case,” and § 541(a)(3) also includes in the estate “[a]ny interest in property that the trustee recovers under section . . . 550.” Under § 550, a trustee may recover transferred property, “to the extent that a transfer is avoided under section . . . 548.” In turn, § 548 enables the trustee to avoid fraudulent transfers.

After reviewing a split among the circuits on this issue, the plain meaning of the statute led the Tenth Circuit to conclude that the bankruptcy estate does not include fraudulently transferred property until that property is recovered. Interpreting § 541(a)(1) to include fraudulently transferred property would render § 541(a)(3) meaningless with respect to property recovered in a fraudulent transfer action.

The Tenth Circuit held that fraudulently transferred property is not part of the bankruptcy estate until recovered.