Sisters of Mercy Health Corp. v. First Bank of Whiting

STATON, Judge,

dissenting.

I dissent for these reasons:

The Majority has completely ignored 11 U.S.C. § 541 of the Bankruptcy Code. Section 541 provides in relevant part:

(a)The commencement of a case under Sections 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:

(1) Except as provided in subsections

(b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.

Sfc * * * * *

[c](2) A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title.

This means that the “restriction” being complained of by the Hospital, if one did exist, is part of the bankruptcy estate. It further means that the bankruptcy court is the proper forum for the Hospital to bring its claim along with all the other unsecured creditors. In re Esterson (1993), 150 B.R. 72 (Bkrtcy.M.D.Fla.)

I further dissent for the reason that the Lake County Superior Court does not have jurisdiction over this matter. Once a beneficiary of a spendthrift trust has filed for bankruptcy, the beneficiary’s legal or equitable right to reach the corpus pursuant to some “restriction” is part of the bankruptcy estate. The claimed “restriction” must be litigated in the bankruptcy court. In re Esterson, supra. See also IND.CODE 30-4-3-2 (1988).

Previous to this appeal, the Hospital tried to initiate proceedings supplemental. First Bank v. Sisters of Mercy Health Corp. (1989), Ind.App., 545 N.E.2d 1134 . The adverse judgment was affirmed by this Court. After being told by the bankruptcy judge that it would have to bring its action in the bankruptcy court, Hospital refused to participate in the bankruptcy proceedings. Instead, it waited until the bankruptcy proceedings were concluded and brought this action — to avoid being included with the other unsecured creditors. In Hospital’s first appeal, this Court stated:

*524 It is significant to note that the bankruptcy trustee filed a motion to lift the automatic stay to allow the Hospital’s proceeding in Indiana to continue. However, after a hearing, the bankruptcy court denied this motion finding ‘this matter should be heard in the bankruptcy court.’ As the bankruptcy court refused to lift the stay, all actions taken by the Hospital during the stay, which began June 8, 1987, to enforce its judgment against Clarice and the Trustee, as a garnishee-defendant in proceedings supplemental, violated the stay and are void.

Id. at 1139 .

Similarly, in the matter before us, all of the actions taken by the Hospital in the Lake Superior Court are void. Any legal or equitable interest of the debtor in bankruptcy to lift a “restriction” from the spendthrift trust was a part of the bankruptcy estate. If it existed, it existed for all unsecured creditors to share. If it is to be litigated, it must be litigated in the bankruptcy court having jurisdiction. For these reasons, I dissent.