490 B.R. 13
Bankr. E.D.N.Y.2013Background
- Debtor NFN Balgobin filed a Chapter 7 petition on January 5, 2011 and was discharged September 23, 2011.
- On Schedule B the Debtor listed a 2004 Cadillac Escalade as in his son’s possession and valued his interest at $0.
- The Vehicle is titled in the Debtor’s name but is physically in the possession of the Debtor’s son, Mark Balgobin.
- Trustee filed March 6, 2012 adversary seeking turnover of the Vehicle under §§ 541 and 542.
- The Debtor and his son contend the Debtor holds only legal title with an equitable interest belonging to the son, and that no express trust exists.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an express trust exists under NY law for the Vehicle | Trustee argues no express trust is proven | Debtor and Mark contend there is an unwritten trust; no writing | No express trust; writing required under NY law |
| Whether a constructive trust can be imposed in bankruptcy | Trustee argues constructiveness should be rejected to protect creditors | Defendant claims constructive trust is warranted to recognize equitable title | Constructive trust not warranted; no substantial reason to override estate interests |
| Whether a resulting or purchase-money resulting trust applies | Trustee argues no resulting trust; no express trust exists | Defendant relies on purchase-money resulting trust | No resulting or purchase-money resulting trust; NY abolishes purchase-money form absent exceptions |
| Whether the Trustee’s actions can justify a trust based on his conduct | Trustee acted to marshal estate assets | No injustice; trustee’s actions do not create a trust | No constructive trust based on trustee’s conduct in marshaling estate assets |
Key Cases Cited
- First Central Financial Corp. v. Cent. States, Southeast & Southwest Areas Pension Fund, 377 F.3d 209 (2d Cir. 2004) (constructive trust cautions in bankruptcy and fraud-rectifying vs. intent-enforcing remedies)
- In re Howard’s Appliance Corp., 874 F.2d 88 (2d Cir. 1989) (estate may include property held in trust; unjust enrichment principles apply)
- Foreman v. Foreman, 251 N.Y.237 (N.Y. 1929) (illustrates abuse of confidence in constructive trust context)
- Lane Bryant v. Vichele Tops (In re Vichele Tops, Inc.), 62 B.R. 788 (Bankr.E.D.N.Y. 1986) (discusses when a constructive trust arises before a court order)