Kentucky Trustee Could Not Sell Property Held as Tenants in Common Under Code § 363(h) to sell co-owned property free of co-owner’s interest

The Chapter 7 trustee did not establish the right under Code § 363(h) to sell, free of the interest held by the debtor’s niece, 125.8 acres of undeveloped real property co-owned by the debtor and his niece as tenants in common. While the third and fourth elements of § 363(h) were satisfied, § 363(h)(1) was not, as conclusory testimony by a witness who had merely conducted a “drive by” inspection of the property, and who testified that he did not have knowledge of the topography of the property, was insufficient to establish that partition of the property was “impracticable,” nor could the trustee rely on a presumption of indivisibility under Kentucky law, as the matter was governed by federal law. Moreover, the trustee did not establish that § 363(h)(2), requiring that “sale of the estate’s undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co-owners,” was satisfied, where the limited valuation testimony showed only that sale of the debtor’s undivided interest might yield $31,250, while a sale of the debtor’s partitioned interest might yield $37,750; a difference of only $6,500 was insufficient to satisfy § 363(h)(2).

In re Brown, 504 B.R. 446 (Bankr. E.D. Ky., Jan. 2, 2014)

(case no. 6:12-bk-61023; adv. proc. no. 6:13-ap-6019) (Bankruptcy Judge Gregory R. Schaaf)