In Re Jacobson

This appeal grows out of an adversary proceeding in Myrna Jacobson’s Chapter 7 bankruptcy proceedings. The bankruptcy trustee filed a complaint against Myrna and her husband, Donald Jacobson, claiming that certain money and property belonged to Myrna’s bankruptcy estate. The trustee sought turnover to the bankruptcy estate of certain proceeds from the sale of the Jacobsons’ homestead, a rental property held in Donald’s name, and income earned from the rental property. The bankruptcy court rejected all of the trustee’s claims. The Bankruptcy Appellate Panel affirmed. We have jurisdiction under 28 U.S.C. § 158 (d)(1).

We reverse in part and affirm in part. The proceeds from the homestead sale belong to Myrna’s bankruptcy estate. The rental property held in Donald’s name and the income from it do not.

I.

This case arises from nearly three decades of litigation between the Jacobsons and Myrna’s principal creditor, Larry Cunningham. In 1985, Cunningham sued the Jacobsons and their business partners in California state court for torts related to the construction and sale of a beach home in Orange County. The litigation dragged on for 10 years. In 1995, as a re-trial neared,…