In re Seely

MEMORANDUM DECISION DENYING TRUSTEE’S MOTION FOR TURNOVER OF PROPERTY OF ESTATE AND SURCHARGE OF DEBTORS’ EXEMPT ASSETS

Chapter 7 trustee John J. Menchaca (the “Trustee”) moved for turnover of $113,802.13 from debtors James Grove Seely, III and Gabriela Paul (jointly, the “Debtors”), representing $58,259.16 in nonexempt cash that was on hand as of the petition date (the “Prepetition Cash”) plus an additional $55,542.98 in nonexempt cash that the Debtors received during the pen-dency of this bankruptcy case (the “Post-petition Cash”). The trustee based his request for turnover on the contention that these funds were improperly expended without an order of this Court. 1 As the funds expended no longer remain in the Debtors’ possession, the Trustee sought an order surcharging proceeds of a personal injury settlement that were paid to Debtors’ former counsel, Thomas E. Kent, to be held in trust pending further order of this Court (the “Exempt Funds”).

For the reasons set forth below, the Court finds that the Trustee failed to establish that any portion of the Prepetition Cash or the Postpetition Cash was improperly expended, 2 and, therefore, that his motion for turnover and to…