                          In the
 United States Court of Appeals
              For the Seventh Circuit
                       ____________

No. 04-3229
BOBBY H. FOWLER,
                                           Debtor-Appellant,
                             v.

SCOTT F. SHADEL,
                                       Respondent-Appellee.

                       ____________
          Appeal from the United States District Court
              for the Western District of Wisconsin.
        No. 04-C-373-C—Barbara B. Crabb, Chief Judge.
                       ____________
   ARGUED JANUARY 19, 2005—DECIDED MARCH 15, 2005
                    ____________



  Before CUDAHY, MANION and EVANS, Circuit Judges.
  CUDAHY, Circuit Judge. This bankruptcy case requires us
to divine the elusive (and perhaps illusive) nature of an
equitable interest in corporate property possessed by a
debtor through his ownership of all the shares of capital
stock in a closely held corporation. While the parties’ con-
tentions and the district court’s conclusions have all ad-
dressed the general nature of an equitable interest in
corporate property, we also trace the changing aspects of
such an interest in the dynamics of bankruptcy. Finding
that the equitable interest in the property passed with the
shares from the debtor to the bankruptcy estate upon filing,
2                                                No. 04-3229

we hold that it could no longer be claimed by the debtor at
and after filing. We therefore AFFIRM the judgment of the
district court.


                              I.
  The debtor in this action, Bobby Fowler, is the sole stock-
holder of Fowler Trucking, Inc., and its sole employee. At
issue here is the status and disposition of two pieces of
property to which Fowler Trucking, Inc., holds title—a 1990
Mack CH truck and a 2000 Chevy Impala automobile.
Fowler drives the Mack truck for his livelihood and uses the
Impala as a personal vehicle. Without the truck, Fowler
claims that he would be unable to generate income.
   On December 29, 2003, Fowler filed for bankruptcy under
Chapter 7 of the United States Bankruptcy Code. Perhaps
motivated by a more generous homestead exemption, Fowler
elected to pass up the federal bankruptcy exemptions in
favor of those permitted under Wisconsin law. While he did
not claim his stock in Fowler Trucking, Inc., as exempt,
Fowler did exempt his interests in the Mack truck and
Chevy Impala owned by Fowler Trucking, Inc., pursuant to
certain subsections of Wis. Stat. § 815.18. The trustee then
filed an objection to this exemption that was sustained by
the bankruptcy court. That court determined that Fowler’s
interest in the corporation or its property was not such as
to give rise to an exemption of the corporate property. On
appeal, the district court affirmed the bankruptcy court,
holding that Fowler had no legal interest in the corpora-
tion’s property and thus, just like a stockholder in a publicly
traded corporation, could not treat corporate property as his
own for exemption purposes, without violating the princi-
ples of incorporation. The district court further reasoned
that, since Fowler had achieved certain advantages by
creating a corporation, such as protecting his own assets
from satisfaction of corporate debts, he had surrendered
No. 04-3229                                                 3

ownership of the corporate assets together with the right to
claim them as property exempt from inclusion in his own
bankruptcy estate. A debtor’s entitlement to a bankruptcy
exemption is a question of law to be reviewed de novo.
Matter of Yonikus, 996 F.2d 866, 868 (7th Cir. 1993).


                             II.
  On appeal, Fowler asserts that he has an equitable in-
terest in the assets of Fowler Trucking, Inc. since he is sole
shareholder, and that this equitable interest entitles him to
an exemption from the estate for the Mack truck and the
Chevy Impala that are assets of the corporation.
  Under 11 U.S.C. § 541(a)(1) (2005), a debtor’s bankruptcy
estate includes all his legal and equitable interests in
property as of the commencement of the bankruptcy case.
The nature and extent of the debtor’s interest in property is
governed by applicable state law. Under the state exemption
statute, Wis. Stat. § 815.18(3), there is no distinction
between legal and equitable interests in property; the
statute and its subsections merely state that the “debtor’s
interest in and right to receive” various types of property,
including business and farm property, consumer goods and
motor vehicles are exempt. See Wis. Stat. § 815.18(3)(b), (d),
and (g) (2005). The crux of Fowlers’s argument is that his
equitable interests in the motor vehicles as sole shareholder
are entitled to this Wisconsin exemption. As indicated, the
language of § 541(a) expressly includes in the estate
equitable interests in property. Thus, Fowler’s argument
based on the language of the Bankruptcy Code and the
language of the Wisconsin exemption statute seems sound
enough but closer examination reveals a fatal flaw.
  To say that shareholders in a corporation have an equit-
able interest in the property of the corporation is simply to
say that, if the corporation is liquidated (perhaps by decree
of a court of equity), the shareholders will become the legal
4                                                 No. 04-3229

owners of the corporate property (and a sole shareholder
will become the sole owner of that property). In Wisconsin,
the concept of a shareholder’s equitable interest in corpo-
rate property is confirmed by an old case, Button v.
Hoffman. See Button v. Hoffman, 20 N.W. 667, 668 (1884)
(“A conveyance of all the capital stock to a purchaser gives
to such purchaser only an equitable interest in the property
to carry on business under the act of incorporation and in
the corporate name, and the corporation is still the legal
owner of the same.”).
   Here, Fowler could presumably have become the legal
owner of the vehicles by dissolving the corporation before
filing for bankruptcy and could then have claimed the
Wisconsin exemption. However, by filing for bankruptcy
first, Fowler’s shares of stock passed at the time of filing to
the bankruptcy estate and became property of the trustee,
who thereby acquired the equitable interest in the corporate
property.1 At that point in time Fowler could no longer claim
an exemption based on his claim to an equitable interest in
the corporate property because the equitable interest was
attached to the shares of stock, which had passed to the
trustee. To say that at bankruptcy Fowler could retain an
equitable interest in corporate vehicles is to say that upon
a subsequent liquidation of the corporation, Fowler would
have obtained some legal interest in them as against the
trustee. This is impossible. As the owner of the shares in
bankruptcy, the trustee could liquidate the corporation and
obtain legal ownership of the corporate vehicles, which is


1
  The trustee has control over property in the bankruptcy estate
for which no exemption is taken, and may exercise the powers
that accompany that control. Under 11 U.S.C. § 704 (2005), the
trustee must “collect and reduce to money the property of the
estate for which such trustee serves . . . .” Moreover, under 11
U.S.C. § 363(b)(1) (2005), the trustee may, after notice and a
hearing, use, sell, or lease estate property.
No. 04-3229                                                 5

another way of saying that the trustee then possessed the
(entire) equitable interest in the property. Thus, Fowler
could claim an equitable interest only as the owner of the
shares—a status that ended at bankruptcy.
  The corporate assets of Fowler Trucking, Inc. are not prop-
erty of the debtor and therefore cannot become property of
Fowler’s bankruptcy estate. Hence, the question of an
exemption does not arise. See 2 COLLIER ON BANKRUPTCY, §
101.30[3], pg. 101-96 (15th ed. rev.) (stating that “while the
individual’s interest in the partnership or corporation
(which could be 100%) would be property of the estate, the
assets of the partnership or corporation would not be.”);
GINSBERG AND MARTIN ON BANKRUPTCY § 5.01[B] (stating
that “the interest in question [an interest included in the
estate] must be the debtor’s property. For example, if the
debtor owns shares in a corporation, the shares become part
of the estate; the assets of the corporation do not.”).
  Bankruptcy courts confronted with this question in other
contexts have also held that corporate assets cannot become
part of the bankruptcy estate of the debtor shareholder. In
re Murray, 147 B.R. 688, 690 (Bankr. E.D. Va. 1992) (deny-
ing the debtor’s motion to enforce an automatic stay because
property owned by corporations of which debtor’s husband
was sole shareholder was not property of the bankruptcy
estate because the debtor’s equitable interests did not run
to the property but only to the stock, and thus there was no
present property interest); In re Russell, 121 B.R. 16, 17
(Bankr. W.D. Ark. 1990) (stating that “[a] corporation has
a separate legal existence from its shareholders, and the
corporation, not its shareholders, owns the corporate assets
and owes the corporate debts.”); In re Normandin, 106 B.R.
14, 16 (Bankr. D. Mass. 1989) (holding that Chapter 13
debtor shareholder was not entitled to a partition sale of a
corporation in which he owned stock because ownership of
capital stock did not extend to ownership of corporate
assets).
6                                              No. 04-3229

  Finally, it is noteworthy that, although Fowler could have
exempted his shareholder interest in Fowler Trucking, Inc.,
under the federal “wild card” exemption found in 11 U.S.C.
§ 522(d)(5), he instead elected to use exemptions permitted
under Wisconsin law, presumably to take advantage of a
more generous homestead exemption. Therefore, Fowler’s
unexempted stock and whatever interests attached to it
were conveyed to the bankruptcy estate, and thus to the
trustee.


                            III.
  We follow in the footsteps of the bankruptcy court and the
district court in expressing our sympathy to Fowler for the
consequences of this holding, which will apparently deprive
him of the use of the truck by which he generates most of
his income. This result apparently could have been avoided
by liquidating the corporation before filing for bankruptcy.
As the matter stands now, we cannot breath life into an
equitable interest that followed the shares of stock, and so
must AFFIRM the holding of the district court.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit




                   USCA-02-C-0072—3-15-05
