Menu    3 ABR 472 
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA


Case No. A93-00005-HAR
In Chapter 7

In re ALFRED J. FERRARA and GLORIA J. FERRARA,

Debtor(s)      

ADV PROC NO A93-00005-001-HAR
(BANCAP No. 94-3014)

 

MEMORANDUM DECISION FOR JULY 29, 1994, OMNIBUS HEARING

WILLIAM M. BARSTOW, III, Trustee

Plaintiff(s)     

v.

ALFRED J. FERRARA, GLORIA J. FERRARA, DENNIS FERRARA, individually and as Trustee of the KAE Family Housing Trust, THE KAE FAMILY HOUSING TRUST, and ALASKA VALUATION SERVICES, INC.,

Defendants(s)     



Contents Page
    INTRODUCTION
473
  1.  Motion by Barstow to Establish Restatement (2nd) of Trust 156 as Law of Case Regarding Self-Settled Trusts473
  2.  Motion by Barstow for Summary Judgment for All Assets of the KAE Family Housing Trust475
  3.  Motion by Barstow for Dismissal of Affirmative Defense of Statute of Limitations490
  4.  Motion by 's Dennis J. Ferrara and The KAE Family Housing Trust for Partial Summary Judgment; and Request for Acceptance of Late Filed Affidavit of Dennis Ferrara in Support of Dennis Ferrara's and The KAE Family Housing Trust's Motion for Partial Summary Judgment491
  5.  Motion by Barstow for Summary Judgment for Trustee's Avoidance of Preferential Transfers of Arizona Property491
  6.  Motion by Barstow to Compel Debtors to Turnover 11116 Shady Lane493
  TOP    3 ABR 473 
 7.  Motion by Barstow to Compel Debtors to Turnover Cash, Personal Property, and Insurance499
  8.   Motion by Barstow to Compel Production of Files from the Attorneys for the Estate of Roy Russell, filed 07/08/94499
  9.  Motion by Barstow to Compel Alfred and Gloria Ferrara to Comply with Discovery Requests, filed 07/08/94499
  10.  Motion by Barstow to Compel Dennis Ferrara to Respond to Second Requests for Production Propounded to Dennis499
  11.  Joint Motion by 's The KAE Family Housing Trust, Dennis Ferrara, Alfred & Gloria Ferrara, and Alaska Valuation Services to Extend Time to File Expert Witness Reports (DE#135); and Motion by Alfred & Gloria Ferrara for Extension of Time To File Expert Witness Report (DE#138)499
  12.  Motion by The KAE Family Housing Trust to Retain Accountant Dan Laughlin, and Opposition by Barstow Thereto500
  13.  Motion by Barstow to Amend 's Witness List; 's Dennis Ferrara and The KAE Family Housing Trust's Statement of Limited Opposition to Amend Witness List; and Dennis Ferrara's Cross-Motion To Amend 's Witness List500
    CONCLUSION
500

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  TOP   INTRODUCTION - On July 29, 1994, I held a hearing on 13 motions in this case. The following outline is a memorandum decision regarding my ruling on all the matters. They are listed in the same sequence in which they appeared on the calendar.

  TOP   1. Motion by Barstow to Establish Restatement (2nd) of Trust 156 as Law of Case Regarding Self-Settled Trusts

    1.1 Ruling -

      The motion is GRANTED.

    1.2 Analysis -

      Although they disagree how it should apply in this adversary proceeding, the plaintiff bankruptcy trustee and defendants, KAE Family Housing Trust and Dennis Ferrara, all agree that § 156 of Restatement 2nd of Trusts should govern the types of self-settled spendthrift and discretionary trusts described in the §§ 156(1) and 156(2).

      The parties agree that the Supreme Court of the State of Alaska would adopt § 156 if a fact situation was presented involving these kinds of trusts.

        TOP    3 ABR 474 

      I also agree, and will use § 156 as a governing principal in ruling in this case to the extent it applies. See In re Kirkland, 915 F2d 1236, 1238 (9th Cir 1990), which holds:

      When interpreting state law, a federal court is bound by the decision of the highest state court. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir.1986), reh'g denied, op. modified, 810 F.2d 1517 (9th Cir.1987). In the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance. Id. at 1482; Molsbergen v. United States, 757 F.2d 1016, 1020 (9th Cir.1985), cert. dismissed, 473 U.S. 934, 106 S.Ct. 30, 87 L.Ed.2d 706 (1985). However, " 'in the absence of convincing evidence that the highest court of the state would decide differently,' " American Triticale, Inc. v. Nytco Services, Inc., 664 F.2d 1136, 1143 (9th Cir.1981) (quoting Stoner v. New York Life Ins. Co., 311 U.S. 464, 61 S.Ct. 336, 85 L.Ed. 284 (1940)), a federal court is obligated to follow the decisions of the state's intermediate courts. See id.

      Most of the cases I have reviewed on this subject (some of which are discussed in part 2 of this memorandum) have adopted § 156 of the Restatement (2d) of Trusts or its predecessor when a question arose in the area of self-settled spendthrift or discretionary trusts. Alaska probably would, too. § 156 provides:
      § 156. WHERE THE SETTLOR IS A BENEFICIARY

        (1) Where a person creates for his own benefit a trust with a provision restraining the voluntary or involuntary transfer of his interest, his transferee or creditors can reach his interest.

        (2) Where a person creates for his own benefit a trust for support or a discretionary trust, his transferee or creditors can reach the maximum amount which the trustee under the terms of the trust could pay to him or apply for his benefit.

      Comment "a" to the Restatement provides:

        Intention to defraud creditors not required. The rules stated in this Section are applicable   TOP    3 ABR 475  although the transfer is not a fraudulent conveyance. The interest of the settlor-beneficiary can be reached by subsequent creditors as well as by those who were creditors at the time of the creation of the trust, and it is immaterial that the settlor-beneficiary had no intention to defraud his creditors.

      Comment "e" provides:

        Discretionary trust for the settlor. Where by the terms of the trust a trustee is to pay the settlor or apply for his benefit as much of the income or principal as the trustee may in his discretion determine, his transferee or creditors can reach the maximum amount which the trustee could pay to him or apply for his benefit.

  TOP   2.  Motion by Barstow for Summary Judgment for All Assets of the KAE Family Housing Trust

    2.1 Ruling:

      Summary judgment will be GRANTED to Barstow that the KAE Family Housing Trust is a self-settled discretionary trust of the type described under § 156(2) of the Restatement (2nd) of Trusts.

      Despite any factual controversy about motive or intent with respect to the establishment of the trust, these are not material to the ruling. The trust agreement allows (although it certainly does not require) the trustee to distribute the trust assets entirely to the settlors, i.e. the debtors.

      Therefore, Barstow is entitled to reach most of the assets of the KAE trust to the extent they could have been distributed to the debtors. Still unsettled is the precise identification of these assets; there has been no briefing on the effect of Kim Anthony's contribution, appreciation of the trust assets, etc.

    2.2

      Factual Background: In 1989, Alfred and Gloria Ferrara were in financial difficulty due to the down-turn in the Alaska economy resulting from the decline in oil prices. The trustee has offered as evidence copies of letters that Mr. Ferrara had written to various creditors asking for relief by way of reduction of interest and payments on various obligations. He indicated to various creditors that he was in financial distress and that, if relief were not forthcoming, his only   TOP    3 ABR 476  alternative would be bankruptcy.

      On December 27, 1989, the Ferraras became the settlors of the "KAE Family Housing Trust". See, Docket Entry 18, Exhibit "A" for a copy of the trust agreement. The main stated purpose of the trust was to provide for housing for the Ferraras themselves, their three children, and the dependents of their three children.

      At the time, the children were all adults. Kimberly Anthony was 33, Alfred J. Ferrara, Jr. was 31, and Elizabeth A. Strong was almost 28. The debtors have four grandchildren; both Ms. Anthony and Ms. Strong have two children. The trust is providing housing at the present time for all these people, who in turn pay rent to the trust.

      Into the trust, the debtors transferred twelve different groups of assets. The assets included real property within and outside Alaska, the shares of stock in Alaska Valuation Services, Inc. (the Ferraras' appraisal business), stamp collections, cash, furnishings, and a promissory note. A table summarizing these items and their value appears below. The table is copied from the appendix to the December 27, 1989 trust agreement:

        TOP    3 ABR 477 
      SETTLOR TYPE OF PROPERTY DOLLAR VALUE OF GIFT
      1/H & W HARBOUR HEIGHTS CONDOMINIUM, Unit 1602 Harbour Heights, 2621 2nd Avenue, Seattle 130,000
      2/H & W NOTE FOR SALE OF GRANTS PASS PROPERTY,
      Grants Pass, Oregon
      10,000
      3/H & W ANCHORAGE RESIDENCE, 11116 Shady Lane,
      Anchorage, Alaska
      200,000
      4/H & W CASH 10,000
      5/H & W ONE-HALF INTEREST IN CONDO, Unit 314
      2731 S. Kehei Road, Maui, Hawaii
      78,050
      6/H & W ONE-HALF INTEREST IN CONDO, Unit 5-8
      Whittier Manor, Whittier, Alaska
      5,000
      7/H 2400 SHARES IN ALASKA VALUATION SERVICES, INC. 106,853
      8/W 2500 SHARES IN ALASKA VALUATION SERVICES, INC. 111,215
      9/H UNITED STATES, AUSTRIAN & WORLDWIDE STAMP COLLECTION 15,000
      10/W FRENCH & RUSSIAN STAMP COLLECTION 2,500
      11/W

      ASSIGNMENT OF CASH FROM RUSSELL ESTATE PROCEEDS 25,000
      12/H & W ALL INTEREST IN FURNISHINGS at 11116 Shady Lane, Anchorage, Alaska 25,000
        TOTAL CONTRIBUTED TO KAE FAMILY HOUSING TRUST
      718,618

      Alfred Ferrara's brother, Dennis Ferrara, was named as trustee. Dennis Ferrara is also involved in the appraisal business with Mr. Ferrara.

      Some time after the trust was formed, Kim Anthony conveyed her residence to the trust and was provided housing in another residence owned by the trust. Also, the trust has bought and sold real estate since its inception.

      Article V of the trust contains the dispositive provisions. The purpose is to provide for the housing needs of the beneficiaries. The trustee was to invest in one or more housing units. Ownership by the trust was preferred to   TOP    3 ABR 478  supplying housing need with rented space.

      Article V.3. provides for the discretionary provision for the settlors (the debtor) or any descendants of the settlors by using the principal and income of the trust in such manner as the trustee in his sole discretion determines. There are some general guidelines; the trustee is requested first to consider the housing needs of the older beneficiaries (the debtors) if all other factors are the same. The trustee also is to consider the financial needs of the beneficiaries, their standards of living, and their ability to provide for their own housing.

      Under Article V.3.b., the trustee, in his discretion, can terminate the provision of housing for any of the beneficiaries, except the settlors who are entitled to retain their present house.

      Article V.3.c. provides that the trustee, in his sole discretion, may distribute to any of the beneficiaries, other than settlors, the fee ownership of any housing unit or property owned by the trust. In other words, Dennis Ferrara could convey the entire trust away (except, possibly for the debtors' personal residence) to the Ferraras' children and grandchildren.

      Under Article XII.E.5., beginning at page 15 of the trust, it provides that the trustee is absolved from any mistakes from errors in judgment except for recklessness, actual fraud, or willful misconduct.

      Under the trustee's general powers article, Article XIII.U., concerning "Termination of Trust", the trustee may determine that the continuation of the trust would be uneconomical or impractical, or would otherwise be adverse to the best interest of the beneficiaries of the trust, and, in his discretion, terminate the trust by distribution of the remaining principal interest and accumulated income of the trust to the income beneficiaries of the trust at that time "in the same proportion that the beneficiaries are entitled to receive income when the trust terminates". If there is no   TOP    3 ABR 479  right to income fixed by the terms of the trust, distribution shall be by right of representation to the persons authorized in the trustee's discretion to receive distributions from the trust.

      Plaintiff submitted the affidavit of Carter Howard, an estate practitioner from Chicago, Illinois purporting to be an expert which says that all this boils down to the fact that, if he wants to, the trustee could in effect discontinue the trust and, under the terms of the trust agreement, pay everything to Alfred and Gloria Ferrara, the debtors, if they were alive then.

      Barstow's opening memorandum on this subject is at Docket Entry 106. The KAE Family Housing Trust filed an opposition (Docket Entry 146) pointing out that there are restrictions in the trust. For example, the property cannot be distributed by the trustee to the settlors while the trust is still in operation. Article V.A.3.a. and b.

      The trustee also points out that some of the assets, not identified in the table of twelve items, were put into the trust by other beneficiaries. For example, real property which was Kim Anthony's home was put into the trust, and she received the use of other housing assets in return.

      Dennis Ferrara and the KAE Family Housing Trust basically argue that a fair reading of the trust agreement indicates that the interest of the settlors is relatively minimal.

    2.3

      Legal Analysis -

      The plaintiff's summary judgment argument does not rely on his fraudulent transfer claim, but is restricted to an application of § 156 of the Restatement (2nd) of Trusts. Under that section, a transfer may be reached by the creditors of the settlor of a self-settled trust when it is for the benefit of the settlor or the trustee has discretion to pay funds for the benefit of the settlor. The amount reachable in the event of a discretionary trust is the full amount which the trustee could have paid to the settlor. In this case, according to plaintiff's expert,   TOP    3 ABR 480  Carter Howard, Dennis Ferrara could have in effect paid the full amount over to the debtors by using his discretion while still acting in compliance with the terms of the trust. He could have terminated the trust and paid everything to the Ferraras under their right of representation.

      The parties have cited few, if any, cases applying § 156, other than to refer to one or two in the annotations to the rule. Therefore, I have done may own research and set forth some of the cases I have found in parts 2.4 through 2.11 of this memorandum. Some of the quotes are perhaps overly long. All except the case at part 2.11 favor Barstow's thesis.

    2.4

      Case Law: In Robbins v Webster (In re Robbins), 826 F2d 293 (4th Cir 1987), a spendthrift trust provided that the trustee could invade the corpus at the trustee's discretion, to the point of complete exhaustion, to provide for the care, maintenance, support, and welfare of the settlors or the survivor of them:
      . . . the settlors here explicitly retained a substantial interest in the corpus of the trust. The trustee was authorized to invade the corpus for the support and care of the settlors. The trustee's discretion was unfettered, but surely the trustee would recognize that his discretion should be exercised in favor of invasion of the corpus when the needs of the settlors warranted it. At least, to the extent of their needs, the corpus of the trust was available for the maintenance, care and enjoyment of the settlors.

      The general rule is stated in Restatement (Second) of Trusts § 156(2) (1957). The creditors of a settlor may reach the assets of a spendthrift trust to the maximum extent that the trustee might apply them for the use and benefit of the settlors. Under the terms of this trust, the trustee was authorized to apply the entire corpus for the support and maintenance of the settlors, and thus the entire corpus is subject to the claim of their creditors.

      One may wish to have one's cake and eat it, too, but the law need not bring the wish to fruition.

        TOP    3 ABR 481 

      The district court correctly concluded that the debtors could not exempt their interest in either the income or the corpus of this trust.

    2.5

      Case Law: Morris v Barash, 151 BR 900, 906-907 (Bankr CD Ill 1993), held:
      Because Debtor died after she filed for bankruptcy, Appellants assert that she did not have a present right to the funds. See Matter of Lyons, 957 F.2d 444 (7th Cir.1992). Appellants argument, however, ignores the principle that if a settlor creates a spendthrift trust for her own benefit, it is void as to existing or future creditors, and they can reach her interests under the trust. Matter of Witlin, 640 F.2d 661, 663 (5th Cir.1981). Additionally, in the trust in the case at bar, the trustee had discretion to pay Debtor such amounts from the principal as necessary to maintain Debtor's standard of living. Because the trustee was entitled to apply the entire corpus for the support of Debtor, the entire corpus was subject to the claims of creditors. In re Robbins, 826 F.2d 293 (4th Cir.1987); Restatement (Second) of Trusts § 156(2). See Farmers State Bank v. Janish, 410 N.W.2d 188 (S.D.1987) (Where a settlor is the beneficiary of the spendthrift trust, the spendthrift provision is ineffective against creditors who may reach the trust funds.).
    2.6 Case Law: Farmers State Bank v Janish, 410 NW2d 180, 189-90 (SD 1987), held that a spendthrift trust created by the beneficiary and other parties out of sums they received in settlement of personal injury action were open to garnishment by the beneficiary's creditors. The court said:

      2. TRUST WAS SUBJECT TO GARNISHMENT BY CREDITOR OF SETTLOR-BENEFICIARY

        [2] The trial court found the trust to be against public policy and the interest of Agnes in the trust to be garnishable. The validity of spendthrift trusts created by the settlor for the benefit of others has been recognized. In such cases, the trust is not open to garnishment by creditors of the beneficiary. But the majority rule is different where the settlor is also a beneficiary:

          1) Where a person creates for his own benefit a trust with a provision restraining the voluntary or involuntary transfer of his interest,   TOP    3 ABR 482  his transferee or creditors can reach his interest.

        Restatement of Trusts 2d, § 156. This rule controls even though the trust is a trust for support or a discretionary trust. Restatement of Trusts 2d, § 156(2). See §§ 154, 155. See also Bank of Dallas v. Republic Nat. Bank of Dallas, 540 S.W.2d 499 (Tex.Ct.App.1976); Bogert, Trusts and Trustees, 2d ed. rev., § 223, p. 438.

          [3] The funding of this trust came from the settlement proceeds which Agnes and her children received in satisfaction of their suits. The settlement agreement did not require that these proceeds be placed in trust. The creation of the trust, and the subsequent approval by the circuit court, was at the request of the Janish family. Although Agnes was only one of the settlors and beneficiaries, the trust agreement itself acknowledges that she holds a majority (81%) interest in the trust.

          Agnes claims that the purpose of the trust was to support the entire family and that there was no intent to defraud creditors of Agnes. She confuses the denomination of the trust as being against public policy with a finding of intent to defraud. As Comment a. to Restatement of Trusts 2d, § 156 states: "[I]t is immaterial that the settlor-beneficiary had no intention to defraud his creditors." It was not necessary for the court to find that Agnes and her children created this trust with the intent of avoiding her creditors; nor was it necessary to conclude that the trust was against public policy. It was only necessary that Agnes be a settlor and a beneficiary of this trust to render its spendthrift provisions ineffective against creditors, and allow them to reach her trust funds. [FN2] Restatement of Trusts 2d, § 156(1) and (2).

            FN2. Although not significant here because Agnes Janish's share in the trust is sufficient to satisfy this creditor's claim, it should be noted that only the interest of the debtor in the trust can be reached by her creditors.

    2.7

      Case Law: Ware v Gulda, 117 NE2d 137 (Mass 1954), held that a trust which was created by a settlor, naming the settlor as beneficiary and which gave trustee sole discretion as to making or withholding payments as to both principal and   TOP    3 ABR 483  income, did not preclude creditor from obtaining payment out of trust property.

    2.8

      Case Law: Greenwich Trust Co. v Tyson, 27 A2d 166, 172-74 (Sup Ct of Err CT 1942), held:

        [13][14] The trust before us is not a spendthrift trust but, by reason of the discretion reposed in the trustee as to the use of the income, it is a 'discretionary' trust. If in such a trust the settlor is the sole person entitled to the income, that income can be reached by his creditors. Griswold, op.cit., 481; Restatement, 1 Trusts, § 156(2). A provision in the trust instrument that the trustee might in his discretion withhold the income from the settlor and accumulate it would not in itself place the income beyond the reach of his creditors. Petty v. Moores Brook Sanitarium, 110 Va. 815, 817, 67 S.E. 355, 27 L.R.A.,N.S., 800, 19 Ann.Cas. 271, and see Warner v. Rice, 66 Md. 436, 443, 8 A. 84. We are brought, then, to the question of the effect of the provision that the trustee in his 'absolute discretion' might expend any part of the income for the support and maintenance of the wife of the settlor or the support, education and maintenance of a named son and of other children who might be born to him.

        The various situations which may be presented where a creditor of a beneficiary of such a trust is seeking to satisfy his claim out of the income of the trust have been collated and ably analyzed by Professor Griswold in his work before referred to. See particularly §§ 424 et seq., 436, 439 et seq. and 484. He points out that there is considerable conflict in the authorities in cases where the settlor is not one of the beneficiaries. § 439 et seq. He finds very few cases, however, which deal with the situation where the settlor is among the group to whom the trustee may pay or for whose benefit or support he may expend the income. §§ 484, 485. Of these cases, only four deal with the question without the qualification of other distinguishing elements. In Holmes v. Penney, 3 K. & J. 90, 103, 69 Eng.Rep.R. 1035, Johnston v. Zane's Trustees, 11 Grat. 552, 52 Va. 552, 570, and Roanes v. Archer, 4 Leigh 550, 31 Va. 550, 568, the interest of the settlor in the income was held in such a situation not to be subject to be taken for his debts, while in Bryan v. Knickerbacker, 1 Barb.Ch., N.Y., 409, 431, a contrary result was reached. None of these cases discuss the question at length, nor are they   TOP    3 ABR 484  particularly persuasive.

        [15][16] The outstanding factor in the situation is that, under a trust where the trustee has absolute discretion to pay the income or expend it for the settlor's benefit, the trustee could, even though he had a like discretion to expend it for others, still pay it all to the settlor. Such a trust opens the way to the evasion by the settlor of his just debts, although he may still have the full enjoyment of the income from his property. To subject it to the claims of the settlor's creditors does not deprive others to whom the trustee might pay the income of anything to which they are entitled of right; they could not compel the trustee to use any of the income for them. The public policy which subjects to the demands of a settlor's creditors the income of a trust which the trustee in his discretion may pay to the settlor applies no less to a case where the trustee might in his discretion pay or use the income for others. The trial court was correct in holding that the plaintiff was entitled to reach the income if necessary to satisfy its judgment, but was in error in holding that its rights were limited to so much only of that income as the trustee in his discretion deemed not to be required for the support, maintenance or education of the settlor's wife and children. [17][18] The fact that the provisions of the trust agreement are ineffective to protect the income of the trust from the claims of Tyson's creditors does not invalidate the trust as a whole or in itself destroy the remainder interests created. Egbert v. De Solms, 218 Pa. 207, 209, 67 A. 212; Mercantile Trust Co. v. Bergdorf & Goodman Co., 167 Md. 158, 166, 173 A. 31, 93 A.L.R. 1205; Low v. Carter, 21 N.H. 433, 435. Under the trust instrument, the rights of those designated to receive the remainder interest in the half of the principal continuing in the trust after the expiration of the first ten-year period were subject to two conditions. They would be defeated should the settlor be living at the expiration of that period and they might be defeated by virtue of the reservation to the settlor of the right, with the consent of the trustee, to amend or amplify the instrument, although not in such a manner as to change the provisions for the disposition of the principal or income prior to his death. Whether, under a trust such as the one before us, a creditor could reach the principal during the life of the settlor, we have now no occasion to decide. See Jones v. Clifton, 101 U.S. 225, 229, 25 L.Ed. 908; Fidelity   TOP    3 ABR 485  Trust Co. v. New York Finance Co., 3 Cir., 125 F. 275, 60 C.C.A. 189; Benedict v. Benedict, 261 Pa. 117, 104 A. 581; Ward v. Marie, 73 N.J.Eq. 510, 68 Atl. 1084; Mercantile Trust Co. v. Bergdorf & Goodman Co., supra; Crawford v. Langmaid, 171 Mass. 309, 50 N.E. 606; Griswold, op.cit., § 480; 19 Minn.L.Rev. 330; 48 Harv.L.Rev. 1197; Restatement, 1 Trusts, § 156, comment c. When Tyson died, the contingencies which might defeat the remainder interests could no longer happen, and those interests then became indefeasibly vested. Bates v. Spooner, 75 Conn. 501, 508, 54 A. 305; Thomas v. Castle, 76 Conn. 447, 451, 56 A. 854; Daskam v. Lockwood, 103 Conn. 54, 64, 130 A. 92. While we have found few cases dealing with a situation where the settlor of the trust, after reserving to himself the income for life, creates vested indefeasible interests, to take effect at his death, we have found none which subjects such interests to the demands of the settlor's creditors, and on principle there is no question that the creditors cannot reach those interests. Over them the settlor has no dominion, and his creditors have no more right to reach them than they would any interests in property formerly owned by him which has passed into the ownership of another. Bryan v. Knicker-backer, supra, 1 Barb.Ch., N.Y., 425; Griswold, op.cit., § 475; 1 Perry, Trusts, 7th Ed., p. 654.

    2.9

      Case Law: In re Jensen, 22 BR 942 (Bankr MD Fla 1982), held that, under Ohio law, where a debtor who was settlor of a spendthrift trust of which he and his wife were beneficiaries, restraint imposed by the dispenser of the trust was invalid and creditors of debtors could thus reach his interest. The court said at page 944:
      . . . The fact that the creator's interest is subject to the trustee's discretion does not affect this result. So, if the Trustee has absolute discretion to convey the fee or absolute interest to the creator of the trust, creditors of the creator can reach the entire interest. See, Griswold, Spendthrift Trusts Created in Whole or in Part for the Benefit of the settlor, 44 Harv.L.Rev. 203 (1930). The Restatement (Second) of Trusts § 156 incorporates this principle wherein it provides:

        (2) Where a person creates for his own benefit a trust for support or a discretionary trust, his transferee or   TOP    3 ABR 486  creditors can reach the maximum amount which the trustee under the terms of the trust could pay to him or apply for his benefit.
      Since the Trustee has the power to pay the trust income to the Debtor, and to invade the principal and pay it to the Debtor, then the creditors, present or future, have the right to reach the trust assets.

    2.10

      Case Law: See also Estate of Floyd G. Paxton, 86 TC 785 (1986)

    2.11

      Some Case Law More Favorable to Defendants: I have included this case because it treats what many other courts considered to be a type of self-settled trust in a liberal manner and concludes that it was a spendthrift trust and thus not reachable by the creditors through the bankruptcy trustee. This type of reasoning might be favorable to the KAE trust. Because the facts are different, however, I do not think this case in any way is controlling or binding on me in this adversary proceeding.

      The case is In re Kincaid, 917 F2d 1162 (9th Cir 1990), in which the court held that the employee's share of 401(k)-ERISA plan was not property of the estate because it was a valid spendthrift trust under state law, even though the debtor had access to it by quitting, retirement, loans, etc. At that time, before Patterson v Shumate, 112 SCt 2242 (1992), the 9th Circuit and many other circuit courts believed only state spendthrift trust law was available to remove property from the estate pursuant to § 541((c)(2) of the Bankruptcy Code, and that the federal ERISA anti-alienation provisions were not available to remove the trust from the estate. Patterson v Shumate changed this.

      In any event, the court said in Kincaid at page 1166-68:

      B. The Plan is a Spendthrift Trust.
        [5] It is well settled law in both Oregon and Massachusetts [FN2] that a settlor cannot create a spendthrift trust for his own benefit. See In re Cates, 73 B.R. 874, 875 (Bankr.D.Or.1987); State Street Bank and Trust Comp. v. Reiser, 7 Mass.App.
          TOP    3 ABR 487  633, 389 N.E.2d 768, 771 (1979). Thus, the threshold inquiry in determining whether a plan is a spendthrift trust is whether the plan is self-settled.

          FN2. The Plan specifically provides that it is to be governed by the laws of Massachusetts. However, the BAP questioned whether Massachusetts had a substantial relationship to the parties or the transaction, and whether Oregon law should instead be applied. The BAP did not resolve this dispute, since it found that under either state's law, the Plan would not be considered a spendthrift trust. Kincaid, 96 B.R. at 1018. Similarly, we do not have to determine which law applies since there is no conflict between the two states' laws.
      [6] Some courts have held that a plan is self-settled if an employee voluntarily participates in the plan. See Cates, 73 B.R. at 876 n. 3 (the settlor is the "[o]ne who furnishes the consideration (res) necessary for the creation of the trust"); In re Sanders, 89 B.R. 266, 270 (Bankr.S.D.Ga.1988) (court found self-settled trust where employee "voluntarily chose to participate thereby adopting the plan as his own"). That per se rule elevates form over substance given the variety of plans that exist in this area.

      This is a case in point. Section 2.05 of the Plan expressly defines a participant as "an Employee who has made contributions to the Plan...." The Plan also states that an employee's participation in the Plan is voluntary. However, it cannot be disputed that a sine qua non of this type of plan is that the employee does not have the right to the funds contributed to the Plan at any time prior to their contribution. That is to say, the employee does not receive those funds and then choose whether to contribute them to the Plan. When the employee does agree to be a part of the Plan, it is only future (not past earned) compensation that is reduced. Moreover, the amount contributed never belongs to the employee; it comes directly from the employer. Indeed, once Kincaid had contracted with the Company for a lower salary, she had no right to a greater amount. She could not obtain the higher amount directly. It is true that the employer agreed to contribute a like amount to the trust. However, she was no more entitled to immediate receipt of that money than she would have been had she simply agreed to work   TOP    3 ABR 488  for less for other reasons. We, therefore, hold that the trust was not self-settled.

      The fact that the trust is not self-settled does not necessarily mean that it is a spendthrift trust. Courts also focus on "the amount of 'dominion and control' exercised by the debtor over the trust property" in deciding whether the plan sets up a spendthrift trust. [FN3] Kaplan, 97 B.R. at 577 (court found no spendthrift trust where employee was integrally involved in the decision-making process of the plan and was not restricted from drawing on the account). Cf. In re West, 81 B.R. 22, 25-26 (9th Cir. BAP 1987) (court found spendthrift trust where debtor had no direct control over any aspect of the plan and had very restricted access to the account). The administrator claims that this Plan is a spendthrift trust because it was created and is controlled by the Company, not the employee.

        FN3. This is so because implicit in the term "spendthrift" is the notion that the distribution of the trust is controlled by someone other than the beneficiary of the trust. Compare Perabo v. Gallagher, 241 Mass. 207, 135 N.E. 113 (1922); West, 81 B.R. at 25-26, with State Street Trust Co. v. Kissel, 302 Mass. 328, 19 N.E.2d 25 (1939); Barnard v. Stone, 159 Mass. 224, 34 N.E. 272 (1893).

      The Plan was clearly created by and is administered by the Company. Kincaid's control over her interest in the Plan is also severely limited. Under the Plan, Kincaid is entitled to distribution of her interest in the Plan upon death, attainment of age 59 1/2, disability, retirement, termination of employment or termination of the plan. Kincaid can only obtain funds from the Plan prior to the occurrence of one of these events pursuant to the loan or hardship provisions. Kincaid's access to funds through those provisions is solely within the discretion of the administrator. [7] Courts have disagreed as to whether the ability to gain access to an entire vested interest by the termination of employment is sufficient to destroy the spendthrift character of a plan. Some courts have determined that since the provision enables a debtor, by voluntary action, to invade the corpus of the trust, it is not a true spendthrift trust. See, e.g., In re Sildorff, 96 B.R. 859, 863 (C.D.Ill.1989); Sanders, 89 B.R. at 270. Others have determined that the   TOP    3 ABR 489  ramifications of having to quit one's job in order to gain access to the corpus of the trust are sufficient to prevent the use and abuse of the access as a means of sheltering assets. See, e.g., Goff, 706 F.2d at 589; Hysick, 90 B.R. at 775; West, 81 B.R. at 25. We adopt the latter position. While it is true that termination of one's job is often in one's own hands, it would be a rather drastic step to take for the purpose of obtaining funds in the Plan. Indeed, one reason employers create these plans is to offer employees incentives not to quit. Thus, from the vantage point of the trust, this is much more like other random or unpurposive events which can affect the debtor. We find that this provision is not, by itself, sufficient to destroy the spendthrift character of the trust.

      [8] Courts are also divided on the question of whether the insertion of a loan provision, a hardship provision, or both in a trust destroys its spendthrift character. If the loan does not have to be repaid with interest, but is instead treated as a premature distribution of part of the corpus, then courts have been less willing to treat a plan as a spendthrift trust. See, e.g. Sildorff, 96 B.R. at 864. However, where the administrator is not obligated to make the loan and the loan has to be repaid with interest, courts have found that the fact that a plan contains a loan provision does not destroy its spendthrift character. See, e.g., Hysick, 90 B.R. at 776-77; West, 81 B.R. at 25.

      In this case, the Plan allows Kincaid to borrow against her account. However, it requires that she repay the loan with interest, and specifically provides that "[t]his provision shall not be used as a means of distributing benefits before they otherwise become payable." Also, her ability to obtain the loan is solely within the discretion of the administrator. Thus, the Plan is easily distinguishable from plans in which the employee has unrestricted access to the corpus through use of a loan provision. See e.g., Alagna, 107 B.R. at 306; Kaplan, 97 B.R. at 578.

      [9] In addition, Kincaid may gain access to the corpus through the hardship provision. Again, this provision is discretionary and limited to specific sets of circumstances. The restrictive nature of Kincaid's access to the corpus through this provision is evidenced by the administrator's denial of her hardship petition in this case. Thus, this section does not destroy the spendthrift   TOP    3 ABR 490  character of the Plan.

      [10] It is true that the Plan does not create the most restrictive spendthrift trust imaginable. However, the degree of the employee's control is far less than that of the employees in most of the cases where protection has not been found. The restrictions are sufficiently obstructive to create a spendthrift trust, and, therefore, we hold that the Plan is a spendthrift trust. We are confirmed in this position by the knowledge that it attenuates the clash between ERISA and bankruptcy law, and thus helps prevent our legal system from becoming a mere farrago of unrelated provisions.

      Since the Plan is a spendthrift trust, Kincaid's interest in the Plan is not property of the estate.

    I have criticized some of the reasoning in Kincaid in In re Jury, Case No. A89-00314-HAR, reported in 2 ABR 278, 281-283 (Bankr D AK 1992) (order dated February 20, 1992).

    2.12

      Conclusion: The case law seems almost unanimous in applying § 156(2) of the Restatement to override a self-settled discretionary trust in order to protect creditors of the settlor. At oral argument, I suggested that there were probably cases which distinguish or modify the strict application of § 156(2). For example, when the settlor is unlikely to draw down the benefits, the trustee is unquestionably impartial, and there are standards to guide the trustee favoring non-settlor beneficiaries.

      To my surprise, the parties cited no cases to me in their briefs dealing with the nuances of the application of § 156(2). If the KAE trust or Dennis Ferrara are aware of such case law, it is incumbent on them to bring it to the court's attention by a motion to reconsider. Otherwise, the ruling will stand.

  TOP   3.  Motion by Barstow for Dismissal of Affirmative Defense of Statute of Limitations

    3.1
      Ruling: Barstow's adversary proceeding for avoidance of certain transfers by the debtors was timely. The motion for dismissal on the basis of untimeliness is DENIED.

    3.2

      Analysis: The plaintiff, William Barstow, is the chapter 7   TOP    3 ABR 491  bankruptcy trustee appointed in the debtors' case. He brought this adversary proceeding within 2 years of his appointment, and thus complies with § 546(a)(1) of the Bankruptcy Code requiring such suits within 2 years of appointment.

      Nonetheless, Dennis Ferrara and the KAE trust allege that the trustee's fraudulent transfer actions are time barred because the time to sue expired prior to the filing of the bankruptcy case in 1993.

      The fraudulent conveyance action by the trustee was brought under § 544(b) of the Bankruptcy Code, incorporating AS 34.40.010 et seq.

      The court will follow the March 12, 1992, ruling of District Judge Singleton in Battley v Stanton, Case No. A91-0161-Civil, United States District Court for the District of Alaska, in which he indicated that the 6-year statute of limitations applied. A copy of the opinion is attached to Docket Entry 129, entitled Errata.

      Judge Singleton ruled in Battley v Stanton, in which a bankruptcy trustee was alleging fraudulent transfer under the provisions of AS 34.40 and § 544(b) of the Bankruptcy Code, that the 6-year period provided by AS 09.10.050 was the appropriate statute of limitation, and rejected the use of the 2-year period provided by AS 09.10.070. Thus, the trustee's fraudulent transfer action is timely.

  TOP   4.  Motion by 's Dennis J. Ferrara and The KAE Family Housing Trust for Partial Summary Judgment; and Request for Acceptance of Late Filed Affidavit of Dennis Ferrara in Support of Dennis Ferrara's and The KAE Family Housing Trust's Motion for Partial Summary Judgment

    4.1
      Ruling: The motion for summary judgment is DENIED. The motion for use of a late filed affidavit is GRANTED.

    4.2

      Analysis: Pursuant to the court's oral ruling on July 29, 1994, there are disputed material fact issues which make summary judgment unavailable for this motion. FRCivP 56.

  TOP   5.  Motion by Barstow for Summary Judgment for Trustee's Avoidance of Preferential Transfers of Arizona Property

    5.1
      Ruling: Summary judgment is DENIED on Barstow's preference claim against Alaska Valuation Services, Inc. (AVSI).

      TOP    3 ABR 492  5.2

      Facts: The debtors conveyed two lots in Arizona worth $45,000 to AVSI, debtors' appraisal company. Barstow seeks to recover them under § 547 of the Bankruptcy Code.

      There is no dispute that the transfer was for an antecedent debt to AVSI, and that the transfer was perfected within 1 year of the bankruptcy in early 1993. There is also no dispute that AVSI was an "insider" in the bankruptcy sense pursuant to §101(31) of the bankruptcy code, thus allowing the trustee to avoid a transfer made within one year of the bankruptcy petition.

      To show insolvency of the debtors at the time of the transfer, Barstow offers some letters Alfred Ferrara wrote to various creditors pleading grave financial pressure and some financial statements purported to be the Ferraras which show a negative net worth at about the time of the transfers.

      The Ferraras (or, really, AVSI) counter that Alfred Ferrara's alleged admissions regarding his finanical condition do not bind AVSI. His financial statements were not admissible, according to AVSI, because no foundation was laid to show where they came from. The letters are attacked because they do not purport to be financial statements and could be viewed as Alfred's attempt to negotiate better deals with his creditors without accurately showing his financial condition.

      Barstow has also filed an affidavit of a CPA, Fred Strand, indicating the debtor was insolvent, but offers little backup information on how he reached this conclusion. Also, it was filed just before the summary judgment argument and did not allow the other side sufficient time to review or rebut.

    5.3

      Analysis: At oral argument, I indicated that I would probably deny this motion.

      To establish insolvency under § 547(b)(3) of the Bankruptcy Code, Barstow has presented copies of letters and financial statements purportedly of the Ferraras without specifically identifying where they came from and that they were acknowledged by Alfred Ferrara as his own. I do not know   TOP    3 ABR 493  if they were acknowledged or explained by the Ferraras. This information may have been addressed in other motions or elsewhere in the record, but I should not have to search it out if it exists. Thus, there is a failure to present competent, admissible evidence. FRCivP 56(e); Beyene v Coleman Securities Services, Inc., 854 F2d 1179, 1181-82 (9th Cir 1988).

      The Ferraras raised a legal argument which Barstow did not address. That is, can AVSI be stuck with the admissions of Alfred Ferrara (assuming they are admissions of insolvency for the sake of argument)? See Fed Rule Evid 801. Although this is a legal issue and summary judgment might be appropriate, I will not grant summary judgment until it is briefed for me by the movant.

      There is only a cursory attempt by Barstow to show that AVSI would receive more because of the transfer than it would have under chapter 7 without it. § 547(b)5). Some cases say that this is a mechanical test, and if there is not going to be a 100% payoff to unsecured creditors, a preferential transfer to one of them would allow that person to automatically receive more than he or she would in a chapter 7 case. § 547(b)(5). On the other hand, other cases say that an analysis of the actual facts, hypothesizing a chapter 7 distribution, must be made. See In re Lewis W. Shurtleff, Inc., 778 F2d 1416, 1420-21 (9th Cir 1985) and In re LCO Enterprises, 12 F3d 938, 941 (9th Cir 1993) to appreciate some of the analytical complexities which can creep into what would seem like a simple mathematical exercise.

      Barstow offered little analysis along these lines and so summary judgment is not warranted. When the movant does not establish the absence of a genuine issue of fact, summary judgment must be denied, even if no opposing evidentiary matter is presented. Luckett v. Bethlehem Steel Corp., 618 F.2d 1373, 1383 (10th Cir, 1980).

  TOP   6.  Motion by Barstow to Compel Debtors to Turnover 11116 Shady Lane

    6.1
      Ruling: The motion for turnover is DENIED, but the court will   TOP    3 ABR 494  GRANT it in the form of an order entered pursuant to FRCivP 56(d) that the December 9, 1978, "codicil" of Roy Russell is ineffective to vary Russell's October 12, 1972, last will.

      The property in Russell's estate at the time of his death included the Shady Lane home. Under the will, a one-half share of that home devolved to Gloria Ferrara. Dennis Ferrara, her brother-in-law and Russell's step-son, got the other half. She quit-claimed her interest in Shady Lane to the KAE Family Housing Trust in about December, 1989.

      Therefore, the court rules, pursuant to FRCivP 56(d) and FRBP 7056, that the material facts stated in the preceeding two paragraphs exist without substantial controversy. The exact extent of Gloria's property interest is more ambiguous, given the possible interest of Dennis Ferrara as an equal beneficiary under the Russell will and must be developed at trial and is in good faith controverted.

    6.2

      Facts: Trustee, William Barstow, moved to compel the debtors to turnover a residence at 11116 Shady Lane, Anchorage, Alaska, to the bankruptcy estate. Although the court will deny the relief requested, the motion addressed an important issue in this case which the court can resolve.

      The debtors live at 11116 Shady Lane. The home was constructed by Roy Russell, Alfred Ferrara's stepfather and Gloria's father-in-law. The trustee alleges it is worth between $300,000.00 to $500,000.00.

      In the will of Roy Russell dated October 17, 1972, he left his property to be divided between Dennis Ferrara and Gloria Ferrara. This would have included the Shady Lane house as it existed at the time of Roy's death on February 12, 1981.

      There is the copy of a document dated December 9, 1978, which debtors argue is a codicil to the will, however. The codicil has never been probated and was apparently only recently remembered by the debtors. Only a copy is available. It gives the debtors only a life interest in the Shady Lane residence, with the remainder to the debtors' heirs. See,   TOP    3 ABR 495  Exhibits 4 and 5 to Docket Entry 104 (KAE's motion for partial summary judgment) for a copy of the will and codicil.

      In December of 1989, the debtors established the KAE Family Housing Trust. The facts regarding this are more extensively discussed in Part 2.2 of the memorandum. I am uncertain why Gloria was able to convey the entire property to the KAE trust as opposed to one-half interest.

      There apparently has been no formal distribution from the Roy Russell estate which was probated in Anchorage in 1981. Gloria is the personal representative of that estate.

      The trustee argues that by right of devolution the property is equitably owned by Gloria and, when it ultimately is conveyed to her by the Roy Russell estate, it will become part of her bankruptcy estate, thus priming the KAE Family Housing Trust.

      The trust and Dennis Ferrara, on the other hand, argue that the codicil prevails, and the property under the codicil gave a life estate to the debtors and the remainder to the heirs of the debtors. They argue, apparently, that the conveyance to the KAE Family Housing Trust is an appropriate implementation of this provision of the codicil.

    6.3

      Analysis: The issue is whether the will of Roy Russell prevails or whether a codicil dated December 12, 1978, of Roy Russell prevails. I find that the will prevails and the codicil is time barred from effecting title to 11116 Shady Lane.

      The KAE Family Housing Trust argues that, notwithstanding the failure to probate the codicil in the existing probate of the Roy Russell estate, it can be used to establish title. The KAE trust cites AS 13.16.010 which provides:

      Sec. 13.16.010 Necessity of order of probate for will.

      Except as provided in AS 13.16.680, to be effective to prove the transfer of any property or to nominate an executor, a will must be declared to be valid by an order of informal probate by the registrar, or an adjudication of probate by the court, except that a duly executed and unrevoked   TOP    3 ABR 496  will which has not been probated may be admitted as evidence of a devise if

        (1) no court proceeding concerning the succession or administration of the estate has occurred, and

        (2) either the devisee or the successors and assigns of the devisee possessed the property devised in accordance with the provisions of the will, or the property devised was not possessed or claimed by anyone by virtue of the decedent's title during the time period for testacy proceedings.

      KAE argues that the property has been in the possession of the Ferraras for years, and therefore the codicil can be used to establish that ownership of the property should be a life estate for the debtors with the remainder interest to the heirs of the debtors. This alleged interest, apparently, has been passed to the KAE trust.

      AS 13.16.010, however, is not available at this late date to vary the distribution set out in the probated will. The Official Comment to the Uniform Laws Annotated 1983 version of the Uniform Probated Code § 3-102 which is similar to AS 13.16.010 is:

      The requirement of probate stated here and the limitations on probate provided in 3-108 mean that questions as to testacy may be eliminated simply by the running of time. Under these sections, an informally probated will cannot be questioned after the later of three years from the decedent's death or one year from the probate whether or not an executor was appointed, or, if an executor was appointed, without regard to whether the estate has been distributed. If the decedent is believed to have died without a will, the running of three years from death bars probate of a late-discovered will and so makes the assumption of intestacy conclusive.

      The exceptions to the section (other than the exception relevant to small estates) are not intended to accommodate cases of late-discovered wills. Rather, they are designed to make the probate requirement inapplicable where circumstances led survivors of a decedent to believe that there was no point to probating a will of which they may have had knowledge. If any will was probated within three years of death, or   TOP    3 ABR 497  if letters of administration were issued in this period, the exceptions to the section are inapplicable. If there has been no proceeding in probate, persons seeking to establish title by an unprobated will must show, with reference to the estate they claim, either that it has been possessed by those to whom it was devised or that it has been unknown to the decedent's heirs or devisees and not possessed by any. It is to be noted, also, that devisees who are able to claim under one of the exceptions to this section may not obtain probate of the will or administration of the estate to assist them in their efforts to obtain the estate in question. The exceptions are to a rule which bars admission of a will into evidence, rather than to the section barring late probate and late appointment of personal representatives. Still, the exceptions should serve to prevent two "hard" cases which can be imagined readily. In one, a surviving spouse fails to seek probate of a will, giving her the entire estate of the decedent because she is informed or believes that all of her husband's property was held by them jointly, with right of survivorship. Later, it is discovered that she was mistaken as to the nature of her husband's title. The other case involves a devisee who sees no point to securing probate of a will in his favor because he is unaware of any estate. Subsequently, valuable rights of the decedent are discovered. [emphasis added]

      Barstow argues that AS 13.16.040 is the controlling statute. There is a three-year statute of limitations on admitting a will to probate. The statute provides in pertinent part:

      Sec. 13.16.040 Probate, testacy and appointment proceedings; ultimate time limit.

      No informal probate or appointment proceeding or formal testacy or appointment proceeding, other than a proceeding to probate a will previously probated at the testator's domicile and appointment proceedings relating to an estate in which there has been a prior appointment, may be commenced more than three years after the decedent's death, except (1) if a previous proceeding was dismissed because of doubt about the fact of the decedent's death, appropriate probate, appointment or testacy proceedings may be maintained at any time thereafter upon a finding that the decedent's death occurred before the initiation of the previous   TOP    3 ABR 498  proceeding and the applicant or petitioner has not delayed unduly in initiating the subsequent proceeding; (2) appropriate probate, appointment or testacy proceedings may be maintained in relation to the estate of an absent, disappeared or missing person for whose estate a conservator has been appointed, at any time within three years after the conservator becomes able to establish the death of the protected person; and (3) a proceeding to contest an informally probated will and to secure appointment of the person with legal priority for appointment in the event the contest is successful, may be commenced within the later of 12 months from the informal probate or three years from the decedent's death. These limitations do not apply to proceedings to construe probated wills or determine heirs of an intestate. In cases under (1) or (2) of this section, the date on which a testacy or appointment proceeding is properly commenced shall be considered to be the date of the decedent's death for purposes of other limitations provisions of AS 13.06 -- AS 13.36 which relate to the date of death.

      The time to probate the codicil has expired. Thus, the will prevails and the codicil does not.

      Even if the personal representative (Gloria) has not issued her personal representative's deed to the Shady Lane property, equitable title has devolved under the will. AS 13.16.005 provides, in part, that:

      Upon the death of a person, that person's real and personal property devolves to the persons to whom it is devised by the last will
    6.4
      Conclusion: Thus, I feel it is appropriate to deny the motion asking for a turnover of the Shady Lane property. There are too many unanswered questions, such as the interest of Dennis Ferrara, if any. An order pursuant to FRCivP 56(d) can, however, be entered establishing the disallowance of the codicil.

      In any event, the turnover claim may be academic to some degree in light of my holding in sections 1 and 2 of this memorandum decision that the property conveyed to the KAE Family Housing Trust by the settlors, which includes the Shady Lane residence, is property of the estate reachable by the trustee.

  TOP     TOP    3 ABR 499  7.  Motion by Barstow to Compel Debtors to Turnover Cash, Personal Property, and Insurance

    7.1
      Ruling: Pursuant to the oral ruling on July 29, 1994, the motion will not be granted in its requested form, but debtors will be required to amend their schedules by Wednesday, August 10, 1994 to include these items. The debtors can then amend their claims of exemptions by Monday, August 22, 1994. If an exemption is not claimed, the property will be subject to turnover. Mr. Givens is to lodge an order on this motion.

    7.2

      Furnishings: With respect to the furnishings, Barstow can arrange for a viewing to determine if he wants to continue to pursue turnover. If the debtors refuse to cooperate or the matter needs further factual clarification as to what furnishings actually are involved, a further hearing can be scheduled.

      7.3 Severance: It would be appropriate to sever this matter from the adversary proceeding and handle it in the main case.

  TOP   8.  Motion by Barstow to Compel Production of Files from the Attorneys for the Estate of Roy Russell, filed 07/08/94

    8.1
      Ruling: GRANTED. Plaintiff is to lodge an order.

    8.2
      Compromise: As a concession for the court granting the right to file an amended witness list (the 13th motion discussed in this memorandum), Gloria Ferrara has agreed to waive the attorney-client privilege regarding her representation by Ashburn & Mason, attorney for her as executrix of the Roy Russell Estate.

  TOP   9.  Motion by Barstow to Compel Alfred and Gloria Ferrara to Comply with Discovery Requests, filed 07/08/94

    9.1
      Ruling: After hearing argument, the court GRANTED the motion subject to modifications. Plaintiff is to lodge an order.

  TOP   10.  Motion by Barstow to Compel Dennis Ferrara to Respond to Second Requests for Production Propounded to Dennis

    10.1
      Ruling: After hearing, the court GRANTED the motion subject to modifications. Plaintiff is to lodge an order.

  TOP   11.  Joint Motion by 's The KAE Family Housing Trust, Dennis Ferrara, Alfred & Gloria Ferrara, and Alaska Valuation Services to Extend Time to File Expert Witness Reports (DE#135); and Motion by Alfred & Gloria Ferrara for Extension of Time To File Expert Witness Report (DE#138)

  TOP    3 ABR 500 
    11.1
      Ruling: GRANTED. Mr. Artus was to give Bankston & McCollum Jeff Blake's title opinion on July 29, 1994, if possible.

  TOP   12.  Motion by The KAE Family Housing Trust to Retain Accountant Dan Laughlin, and Opposition by Barstow Thereto

    12.1
      Ruling: Continued to the trial date on August 29, 1994, at 9:00 a.m.

  TOP   13.  Motion by Barstow to Amend 's Witness List; 's Dennis Ferrara and The KAE Family Housing Trust's Statement of Limited Opposition to Amend Witness List; and Dennis Ferrara's Cross-Motion To Amend 's Witness List

    13.1
      Ruling: GRANTED. Plaintiff to lodge an order.

  TOP   CONCLUSION - Appropriate orders will be signed for each of the motions. These will not be final orders since the trial is yet to take place. I will prepare orders for the motions numbered 1, 2, and 6, and the others have been assigned to Jon Givens to lodge.

    DATED: August 2, 1994
                HERBERT A. ROSS
                Bankruptcy Judge