## Facts

- Paul and Mary Clay filed a Chapter 7 petition in November 1997.
- Paul Clay worked as an insurance agent for multiple Farmers entities under an Agent Appointment Agreement that required ongoing personal performance and provided for commissions.
- The Agreement included a “Contract Value” payable only “upon termination,” calculated by a formula tied to (among other items) service commissions and policy counts during the six- or twelve-month period immediately preceding termination and the agent’s years of service at termination.
- The debtors scheduled a Contract Value of about $190,000 and scheduled a secured debt to a Farmers-affiliated credit union, assertedly secured by a lien on the Contract Value.
- Post-petition, the debtors continued operating under the Agreement; neither side terminated it, and the Chapter 7 trustee did not assume the Agreement within one year of the filing.
- More than twelve months after the petition date, the trustee demanded turnover from Farmers of the Contract Value (net of the secured claim), asserting it was estate property under 11 U.S.C. § 541 and subject to turnover under 11 U.S.C. § 542.
- Farmers opposed, arguing the Contract Value had not matured because the Agreement was not terminated and that the trustee could not force termination of a personal-services agreement to obtain the payment.

## Issues

1. Whether a termination payment (“Contract Value”) that becomes payable only upon termination of an executory personal-services agency agreement constitutes property of the estate under 11 U.S.C. § 541 when the agreement was not assumed and was never terminated.
2. Whether the trustee may compel termination of the personal-services agreement and require turnover of the termination payment under 11 U.S.C. § 542 despite the payment being contingent and unmatured.

## Decision

- The court held the Agent Appointment Agreement was an executory personal-services contract that the trustee could not assume.
- Because the Agreement was neither assumed nor terminated, the Contract Value never matured into a presently enforceable right.
- Any contingent estate interest in the Contract Value lapsed after twelve months when the contract remained unassumed and un-terminated.
- The Contract Value was not property of the estate subject to turnover, and § 542 did not authorize compelling Farmers to pay it.
- The trustee’s turnover request was denied.

## Legal Principles

- A trustee generally cannot assume an executory personal-services contract where performance depends on the debtor’s unique personal services and the counterparty’s reliance on that personal relationship.
- A right to payment triggered only by a future termination event is a contingent expectancy until the triggering event occurs; it is not a matured debt “payable on demand” for purposes of § 542(b).
- Turnover under § 542 is limited to estate property or matured, payable debts; it is not a mechanism to liquidate or collect disputed, unmatured, or contingent claims.
- A trustee may not obtain value from a nonassumable personal-services contract by forcing termination to trigger a termination payment, particularly where doing so would cut off the debtor’s ongoing post-petition livelihood.

## Conclusion

The bankruptcy court denied turnover because the Contract Value depended on termination of an unassumed executory personal-services agreement that was never terminated; the payment remained contingent and unmatured, and the trustee could not force termination or use § 542 to collect it as estate property.


In re Clay, 241 B.R. 534 (Bankr. N.D. Tex. 1999)