Kesler v. Wilkins (In re Fashion Bowling Lanes)
UNPUBLISHED
In a case involving two trust deeds on debtor's real property, payments made on the first trust deed by both debtor and the second trust deed holder, funds in a "reserve account" set up to cover taxes, assessments, and insurance on the property, foreclosure of the second trust deed, transfer of the foreclosed interest, and a sale in the bankruptcy of personal property relating to debtor's previous operation of a bowling alley, the court was required to determine the respective rights of the bankruptcy trustee and the transferees from the second trust deed holder to funds in the reserve account. The court held that the amount of money in the reserve account, on the date title to the real property transferred to second trust deed holder pursuant to the foreclosure, was personal property of the debtor, and was therefore estate property. However, taxes paid on the property for the year in which debtor lost title were prorated, based on the date on which ownership transferred, and that amount was subtracted from those funds, and a 3-year prospective insurance premium paid from the account prior to the change in ownership was also prorated, and was added to the amount that was considered to be estate property. The court also ruled that a personal property sale in the bankruptcy did not include the reserve account funds.