(6th Cir. B.A.P. Dec. 4, 2014)
The Sixth Circuit B.A.P. affirms the bankruptcy court’s decision that certain insurance proceeds are property of the estate. The debtor’s property was damaged prepetition, resulting in an insurance claim being paid. The debtor was contractually obligated to turnover the proceeds to the mortgagee and did so. However, the claim check was never cashed. The mortgagee foreclosed on the property, and the debtor filed bankruptcy apparently to discharge the deficiency claim. The debtor was not aware that the claim check had not been cashed and did not schedule the check as an asset. When the debtor learned of the check, he sued in state court for a declaration that the check was solely payable to him. The bankruptcy was reopened so that the trustee could assert the estate’s interest in that action. The state court entered judgment in favor of the debtor, and the trustee then filed a complaint in the bankruptcy for turnover of the check. The court holds that the check was property of the estate, relying on the broad definition of property of the estate in 11 U.S.C. § 541. The proceeds were paid as a result of prepetition damage to the debtor’s property and thus were sufficiently rooted in the “pre-petition history” to be property of the estate. Opinion below.