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Newsome Research Binder

Newsome Research Binder

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Published by Cj Crowell

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Published by: Cj Crowell on Nov 05, 2011
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In re Cutter, 398 B.R. 6, 19-20 (9th Cir. BAP 2008)

1. Property which the debtor transferred to a self-settled trust became property of the estate.

“While California law recognizes the validity of spendthrift trusts, any spendthrift provisions are

invalid when the settlor is a beneficiary.”

2. “If. . .the trust agreement allows the debtor-beneficiary to exercise control over and reach

trust property contributed by others, the estate is entitled to the maximum amount that the trust

could pay or distribute to the debtor-beneficiary.

In re Commercial Money Centers, Inc., 392 B.R. 814, 830f (9th Cir. BAP 2008)

Debtor did not hold equipment lease payments in a constructive trust.

In re Sale Guaranty Corporation, 220 B.R. 660 (9th Cir. B.A.P. 1998), aff’d, 199 F.3d 1375 (9th

Cir. 2000)

Trustee of tax-deferred sale “accommodator” could not avoid resulting trust in favor of

property owners who retained obvious ownership of property pending sale. Elements of express

trust discussed.

In re Coupon Clearing Services, Inc., 113 F.3d 1091 (9th Cir. 1997)

Creditor’s failure to establish agency or trust relationship with debtor supports summary

judgment for another creditor with perfected security interest

In re Ehrle, 189 B.R. 771 (9th Cir. 1995)

Kraus v. Willow Park Public Golf Course, 73 Cal. App.3d 354, 140 Cal. Rptr. 744(Cal. App. 1977)

In California, to impose a constructive trust, there must exist s res, the plaintiff must have

right so the res, and the defendant must have gained the res by “fraud, accident, mistake, undue

influence, violation of the trust or other wrongful act.”

In re Advent Mgmt. Corp., 178 B.R. 480 (9th Cir. B.A.P. 1995), aff’d 104 F.3d 293 (9th Cir. 1997)

Complete review of constructive trust law in California

In re Markair, Inc., 172 B.R. 638 (9th Cir. B.A.P. 1994)

Unsecured creditor who fixed debtor’s engine not entitled to receive insurance proceeds in

connection with engine damage as constructive trust without showing entitlement ahead of other


Inchoate right to constructive trust is comparable to an unperfected security interest

Under normal principle of trust, if a trustee transfers trust property to a third party, the third

party holds that property free of trust unless the trustee committed a BREACH of trust in conveying

the property. Restatement (Second) of Trusts §283 (1959); IV Austin W. Scott & William F.

Fratcher, The Law of Trusts §283 (4th ed. 1989). Thus, absent a BREACH of trust, when a trustee

enters into a contract with a third party, any trust funds transferred to that third party in

consideration of the contract are transferred free of trust unless the contract provides that the

transferred funds shall be held in trust.

In re Goldberg, 168 B.R. 382 (9th Cir. B.A.P. 1994)

Constructive trust imposed on property (cash used to buy home) that mistakenly came into

debtor’s hands. Need only show wrongful acquisition and unjust enrichment, not fraud. Strict


tracing of assets not required where no creditor will be harmed.

In re Golden Triangle Capital, Inc., 171 B.R. 79 (9th Cir. B.A.P. 1994)

In re Unicom Computer Corp., 13 F.3d 321 (9th Cir. 1994)

California law provides for the imposition of a constructive trust in a situation involving

simple negligence on the part of a debtor who wrongfully detains another’s property. See Cal. Civ.

Code §§2223, 2224; Toys “R” Us, Inc., v. Esgro,Inc. (In re Esgro, Inc.), 645 F.2d 794, 797 (9th

Cir. 1981); GHK Assoc.. v. Mayer Group, Inc., 224 Cal. App. 3d 856, 878, 274 Cal Rptr, 168, 182

(1990); 11 B.E. Witkin, Summary of California Law: Trusts §§305(2), 306(2) (9th Cir. ed. 1990).

CHoPP Computer Corp. v. U.S., 5 F.3d 1344 (9th Cir. 1993), cert. denied, 513 U.S. 811 (1994)

Imposition of a constructive trust upon a wrongful taking does not automatically award

equitable title to the party nor does it defeat a third party judgment lienholder’s prior rights in the


In re Jordan, 914 F.2d 197 (9th Cir. 1990)

Reversing the Bankruptcy Appellate Panel judgment affirming the bankruptcy court, the

court of appeals held that a trust containing restrictions against the reach of creditors created to

compensate a debtor for the release of a personal injury claim, was not a spendthrift trust excludable

from the bankrupt’s estate.

In re Foam Systems, 92 B.R. 406 (9th Cir. B.A.P. 1988), aff’d, 893 F.2d 1338 (9th Cir. 1990)

See also In re Golden Triangle Capital, Inc., 171 B.R. 79 (9th Cir. B.A.P. 1994) Definition

statute of frauds express and resulting trusts under California law.

In re Teichman, 774 F.2d 1395, 1399 (9th Cir. 1985)

Under California law, the elements of trust include “a competent trustor, an intention on the

part of the trustor to create a trust, a trustee, an estate conveyed to the trustee, and acceptance of the

trust the by trustee, a beneficiary, a legal purpose and a legal term.”


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