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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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·, 

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

In re: AMDURA CORPORATION; AMDURA ) 

NATIONAL DISTRIBUTION COMPANY, ) 

formerly known as FOK; COAST AMERICA ) 

CORPORATION; COAST TO COAST ) 

HOLDINGS, INC.; COAST TO COAST STORES, ) 

INC.; INTERTRADE CARGO, INC., ) 

) 

Debtors, ) 

------------------------- ) 

AMDURA NATIONAL DISTRIBUTION ) 

COMPANY, formerly known as FOK, ) 

) 

Plaintiff- Appellant, ) 

) 

V. ) 

) 

AMDURA CORPORATION, INC., ) 

) 

Defendant - Appellee. ) 

No. 94-1292 

ualtedftal L E D tesco...., Tenth c· or Apn'""'·~ •rcuit ,._.., 

FEB 05 7996 

PA1'RJcK Fis 

Cleric 'liER 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 93-B-2044) 

Steven E. Abelman, Berryhill, Cage and North, Denver, Colorado (Albert Solochek, Howard, 

Solochek & Weber, Milwaukee, Wisconsin with him on the briefs) for the appellant. 

David M. Bennett, Thompson & Knight, Dallas, Texas (James R. Prince, Thompson & Knight, 

Dallas, Texas and Merrie Margolin Kippur, McKenna & Cuneo, Denver, Colorado with him on 

the brief) for the appellee. 

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Before LOGAN and HENRY, Circuit Judges, and ELLISON,* District Judge. 

HENRY, Circuit Judge. 

The sole issue in this bankruptcy appeal is the ownership of funds deposited by a 

subsidiary into a parent corporation's cash management bank account. We affirm summary 

judgment for the parent. 

Background 

Amdura National Distribution Company (Andco) was a hardware distributor, one of three 

wholly owned subsidiaries of Amdura Corporation (Amdura), which was a holding company 

with few assets of its own. Amdura's other subsidiaries were The Crosby Group, Inc., and The 

Harris Waste Management Group, Inc. Amdura provided management, accounting, and financial 

services to its subsidiaries. 

As part of its cash management system, Am dura took the receipts of its subsidiaries each 

day, concentrated them in a single account (the "concentration account") held solely in its name, 

and then paid the subsidiaries' expenses from that account. In Andco's case, money from 

Andco's customers went into lockbox accounts held solely in Andco's name. The banks where 

these accounts were located were under standing instructions to transfer the entire contents of the 

lockbox account to Amdura's concentration account each day. The other subsidiaries also used a 

* Honorable James 0. Ellison, Senior District Judge, United States District Court for the 

Northern District of Oklahoma, sitting by designation. 

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similar arrangement to transfer their receipts to the Amdura account. Thus, the receipts from 

Andco were commingled with the daily receipts from the other subsidiaries, although Amdura 

kept records of how much each subsidiary deposited and how much was spent on the operating 

expenses of each subsidiary. Amdura recorded all monies received in the concentration account 

from a lockbox account as a debt owed by Amdura to the subsidiaries; monies expended from the 

concentration account on behalf of a subsidiary were recorded as a debt owed by the subsidiary 

to Amdura. On any given business day, the balance owed by Amdura to a subsidiary (and vice 

versa) would therefore increase or decrease depending upon whether the amounts transferred 

from the subsidiary to the concentration account were greater or less than the amounts Amdura 

advanced on behalf of that subsidiary. 

This arrangement gave Amdura complete control over the funds in the concentration 

account. Amdura paid its subsidiaries' obligations without regard to how much cash a particular 

subsidiary had deposited into the account. Additionally, Amdura used the account for its own 

deposits and withdrawals, and all interest accrued on the account went to Amdura. 

In 1988, Amdura acquired Coast America Corporation and its subsidiaries (Coast). In 

order to obtain capital for the purchase, Amdura borrowed over $200,000,000 from a group of 

bank lenders led by Continental Bank, N.A. (the Bank Group). Amdura pledged as security its 

own accounts receivable, the accounts receivable of Andco and Coast, the cash in the 

concentration account, and Amdura's equity interest in Andco and Coast. 

On April 2, 1990, Amdura, Andco, and Coast filed bankruptcy petitions. (Neither Harris 

nor Crosby sought bankruptcy protection and continued to operate during the bankruptcy 

proceedings.) According to Amdura's ledger records, the concentration account contained 

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approximately $3,625,557.63 on the petition date, ofwhich $1,719,002.92 was derived from 

Andco. 

After the petition date, the debtors sought immediate bankruptcy court approval to use the 

funds in the concentration account, in which the Bank Group claimed a security interest, to pay 

the operating expenses of Amdura and its subsidiaries. On April 6, 1990, retroactively effective 

April 4, 1990, the bankruptcy court issued the first of several orders authorizing the debtors to 

use the concentration account funds to operate their respective businesses. In its order, the 

bankruptcy court specified that the use of one debtor's funds for the benefit of another should 

give rise to an account receivable owed by the benefitted entity: 

To the extent that Cash Collateral of AMDURA 

Corporation is used for the benefit of Subsidiary Non-Debtors, 

such use will give rise to an account(s) receivable owed by the 

Subsidiary Non-Debtors to AMDURA Corporation. To the extent 

that Cash Collateral is used by a debtor entity other than that entity 

which owns the Cash Collateral, such use will also give rise to an 

account(s) receivable owed by the debtor entity which used the 

Cash Collateral to the entity which owned the Cash Collateral. 

Aplee's Supp. App. at 2. The bankruptcy court allowed use of the funds only to the extent 

necessary to keep the subsidiaries in operation, devised a budget for such expenditures, and set 

an absolute limit for total expenditures. The court also granted the Bank Group a first and senior 

lien and security interest (plus an administrative priority claim) upon the post-petition accounts 

receivable of all the debtors to the extent that the value of the accounts receivable was 

diminished by their use in operating the businesses. 

At the same time, having learned of the bankruptcy petition, certain banks where Coast 

and Andco maintained lockbox accounts had begun to disregard these subsidiaries' orders to 

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transfer funds to the concentration account. On April 1 0, 1990, Amdura, Andco, and Coast filed 

an "emergency motion" to direct the banks to resume transfer of the funds. This motion asserted 

that approximately $2,800,000 of the cash collateral previously authorized for use had been 

frozen in the subsidiaries' lockbox accounts, although that amount was not broken down by 

subsidiary. The record is silent as to whether this motion was granted. However, Andco 

continued in business and did not establish a separate bank account until May 25, 1990, almost 

two months into the bankruptcy case. 

Upon further petitions by the debtors, the bankruptcy court issued further orders on April 

12, April18, and April25, authorizing continued use ofthe collateral for additional periods. The 

April 25 order provided that "none of the Cash Collateral of the Debtor may be utilized by the 

other debtors in these jointly administered cases or by the non-debtor subsidiaries of AMDURA 

Corporation." On May 17, the bankruptcy court issued another order authorizing continued use 

pending a final hearing. On May 23, the court issued a final order authorizing continued use 

indefinitely, contingent upon continued approval of the parties and fulfillment of reporting 

requirements by the debtors. 

Pursuant to the cash collateral orders, Amdura advanced approximately $1,670,000 for 

Andco's operating expenses within the first two months after the petition was filed. In May 

1990, Andco paid approximately the same amount back into the concentration account. 

In June 1991, the bankruptcy court approved a joint plan of reorganization with respect to 

Amdura. The court approved the plan with respect to Andco six months later, in January, 1992. 

Under the terms of the plan, the Bank Group was entitled to $4,000,000 of the money in the 

concentration account. The Bank Group settled with the debtors in agreements finalized on 

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February 26 (the Andco agreement) and March 9, 1992 (the Coast agreement). Under these 

agreements, Andco and Coast released their claims to the funds in the concentration account. 

Coast released its claims entirely; Andco released its claims only up to $3,800,000, based on the 

balance in the account as ofNovember 29, 1991. On that date, the balance in the account was 

$4,847,875. 

Andco then filed this complaint in bankruptcy court on March 18, 1992. Relying on 11 

U.S.C. § 542, it sought turnover ofthe concentration account's remaining $1,047,875 and an 

injunction to prevent Amdura's use of that money to pay its creditors. It proceeded under two 

theories. First, it argued that it owned the funds outright. Second, it argued that for various 

reasons it was entitled to have a constructive trust imposed on the funds. 

The bankruptcy court declined to issue an injunction, and the district court denied leave 

to appeal on the issue. Amdura and Andco then filed cross-motions for summary judgment. The 

bankruptcy court held that there were no disputed material facts, that the funds were part of the 

Amdura estate, that Andco was not entitled to a constructive trust, and that Amdura was 

therefore entitled to summary judgment. The district court affirmed. See In re Arn.dura Corp., 

167 B.R. 640 (D. Colo. 1994). Andco now appeals. 

DISCUSSION 

Andco first argues that the bankruptcy court erred in granting summary judgment because 

Andco is entitled to the disputed funds in the concentration account--either because it owned the 

funds outright or because it is entitled to the funds under a constructive trust theory. We review 

the grant of summary judgment de novo, viewing the record in the light most favorable to the 

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nonmoving party. Dee.pwater Invs .. Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (lOth 

Cir. 1991). 

We begin, as did the district court, by noting that Andco must prove with clear and 

convincing evidence that the disputed funds are the property of Andco's bankruptcy estate. See 

Amdura, 167 B.R. at 644. We presume that deposits in a bank to the credit of a bankruptcy 

debtor belong to the entity in whose name the account is established. See 4 Collier on 

Bankruptcy~ 541.11, at 541-75 (15th ed. 1995). Andco urges that this presumption should not 

apply because Amdura treated 

contributions to the concentration account as belonging to Andco. In addition, Andco points to 

the language of the bankruptcy court's April25 order, which refers to the debtor subsidiaries' 

contributions as the cash collateral of those subsidiaries. 

In this case the concentration account was not only held exclusively in Amdura's name, 

but Amdura also possessed all other legally cognizable indicia of ownership. None of the money 

in the account was ever segregated; Amdura had, at least pre-petition, the right to spend the 

money entirely as it saw fit without concern for "whose money" it was spending; and Amdura in 

fact spent concentration account funds on its own obligations as well as those of the subsidiaries. 

Even if the parties' own characterization of the account were binding on this court, the record 

reveals no statements that controvert the existence of these rights of ownership. The same is true 

of the April25 bankruptcy order, which, although establishing a new regimen of controls on the 

account, did not purport to settle the ownership question. We conclude that Andco did not own 

outright any part of the concentration account. 

In the alternative, Andco advances three arguments in favor of imposing a constructive 

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trust on the disputed funds in the concentration account. First, Andco argues that Amdura was a 

mere agent for Andco. Second, Andco argues that Amdura abused a confidential relationship 

with Andco, resulting in unjust enrichment. Third, Andco argues that the "trust fund" doctrine 

should apply. None of these theories justifies reversal. 

Andco begins its agency argument by asserting that Amdura was in the habit of paying 

Andco's bills when Andco "instructed" it to do so. Andco concludes from this fact that Amdura's 

control over the concentration account was a "power . . . exercise[ d] solely for the benefit of an 

entity other than the debtor" so that the disputed funds are not part of Amdura's estate. See 11 

U .S.C. § 541 (b). Although it is conceivable that a parent corporation could be an agent of its 

wholly owned subsidiary, Andco has not shown that to be true in this case. The record reflects 

no evidence that Amdura was ever contractually or otherwise compelled to pay Andco's debts. 

The fact that Amdura usually did so is not enough to establish that its control over money from 

Andco was exercised solely for Andco's benefit. See Montano v. Land Title Guarantee Co., 778 

P.2d 328, 331 (Colo. Ct. App. 1989) (holding that there is no agency relationship where the 

alleged agent is not subject to the control of the alleged principal). 

Andco next contends that Amdura's confidential relationship with Andco justifies the 

imposition of a constructive trust. "A constructive trust is an equitable remedy devised to 

prevent unjust enrichment and compel restitution of property that in equity and good conscience 

does not belong to the Defendant." In re Western Urethanes. Inc., 61 B.R. 243, 245 (Bankr. D. 

Colo. 1986) (quoting In re Specialized Installers. Inc., 12 B.R. 546,553 (Bankr. D. Colo. 1981)). 

The bankruptcy court found that no confidential relationship existed. The district court 

concluded that a reasonable inference may be drawn that one existed, but that there was no unjust 

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enrichment or other abuse of the relationship to justify the imposition of a constructive trust. 

Amdura, 167 B.R. at 646. 

There is nothing in the record to support Andco's suggestion that the transfer oflockbox 

funds into the concentration account, at all other times a routine procedure, became on the eve of 

bankruptcy an attempt to plunder Andco's corporate assets. Nor is there evidence of other 

misbehavior on Amdura's part. In a similar case involving a cash management account held by a 

parent corporation, the Fifth Circuit has recently held that a constructive trust was not justified in 

the absence of actual fraud or breach of duty by the parent. In the Matter of Southmark Corp., 49 

F.3d 1111, 1118-19 (5th Cir. 1995) (applying Texas law). 

We look to state law--in this case, the law of Colorado--to determine when the 

constructive trust doctrine applies. See In re Woodcock, 45 F.3d 363, 366 (lOth Cir.) (noting 

that "property interests of the parties to a bankruptcy proceeding are 'created and defined by state 

law'") (quoting Buther v. United States, 440 U.S. 48, 54-55), cert. denied, 116 S. Ct. 97 (1995); 

In re Osborn, 24 F.3d 1199, 1203 (lOth Cir. 1994) (same); In re Lee, 126 B.R. 978,983 (Bkrtcy. 

S.D. Ohio 1991) (State law controls the determination of whether or not the estate has an interest 

in the property for which turnover is sought."). Colorado does not require actual fraud in order 

to impose a constructive trust. Western Urethanes, 61 B.R. at 246. However, some kind of 

abuse or unjust enrichment must be shown, Mancuso v. United Bank ofPueblo, 818 P.2d 732, 

737 (Colo. 1991) (en bane), and it is up to the plaintiff to show it,~ Pa~e v. Clark, 592 P.2d 

792, 798 (Colo. 1979) (en bane). Andco cannot meet that burden merely by imputing evil intent 

to a business arrangement in which it willingly participated and to which it did not object prior to 

filing for bankruptcy. We conclude that the imposition of a constructive trust would have 

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exceeded the limits of the bankruptcy court's equitable powers "by creating substantive rights 

that otherwise would not have existed." Southmark, 49 F .3d at 1116. 

Andco's third justification of a constructive trust is the trust fund doctrine. As enunciated 

in United States v. Van Diviner, 822 F.2d 960 (lOth Cir. 1987), 

Under the trust fund doctrine, the assets of an insolvent or 

dissolved corporation constitute a trust fund for the benefit of 

creditors, and an equitable action may be brought against a 

stockholder or distributee when the assets of the dissolved or 

insolvent corporation are distributed without affordin~ an 

opportunity for creditors to present and enforce claims. 

Id. at 965 (emphasis added.) Andco contends that it was the insolvent corporation whose assets 

Amdura "distributed" to itself pre-petition without affording Andco's creditors an opportunity to 

enforce their claims. 

The parties disagree over whether state law or federal law controls the question of 

whether the trust fund doctrine should apply. We need not reach that issue. The trust fund 

doctrine applies, if at all, only where creditors do not otherwise have an opportunity to enforce 

their claims against the insolvent corporation. See id. In this case, Amdura's bankruptcy 

proceeding gave Andco the chance to recover the disputed funds as an unsecured creditor, and 

Andco's own bankruptcy proceeding gave Andco's creditors a chance to present and enforce their 

claims against Andco. While this arrangement may result in Andco's creditors receiving less 

than all of the disputed funds, it still constitutes an opportunity for those creditors to "present and 

enforce" their claims.2 Thus, the trust fund doctrine does not apply. 

2 This result is obviously more favorable to Amdura' s creditors than to Andco' s. It is 

the nature of bankruptcies to result in hardship even as they seek to fairly allocate scarce assets 

under the law in order to reflect policies accepted by Congress. Here, because Amdura wholly 

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Andco finally contends that a genuine dispute existed, precluding summary judgment, as 

to the location of at least some of the disputed funds on the date the bankruptcy petition was 

filed. In support of its claim, Andco points to the April 10 emergency motion filed by Andco, 

Amdura, and Coast. The allegations contained in that motion, if true, establish that there were 

funds in Andco's lockbox accounts after the petition date. As we have noted, we are unable to 

determine from the record whether this motion was granted. However, if the bankruptcy court 

granted the motion, then the funds in Andco' s lockbox accounts would have ended up in the 

concentration account after the petition date. Andco also points to testimony by Ed Rand, a 

former Amdura executive, indicating that some of the cash identified as Amdura's on the petition 

date was cash that had not yet been transferred to Amdura from the subsidiaries. Moreover, as 

noted above, Andco did not open its own money management account for over two months after 

the petition date, but continued to do business. Construing all this evidence in Andco's favor, it 

must be concluded that some of the monies in the concentration account were transferred there 

after the petition date. Andco argues that any such postpetition transfer of its funds should be 

voidable, and that a hearing is necessary to determine the amount of such transfers. 

The district court held that Andco had effectively conceded the question of the size of the 

concentration account on the petition date by using Amdura's figures in its motion for summary 

judgment. The district court reasoned further that once ownership of the concentration account 

was established, the amount of money in the account on the petition date became irrelevant. 

Amdura, 167 B.R. at 644. This latter conclusion, which Andco describes as "bizarre," in fact 

owned Andco and because Andco cannot avail itself of the equitable remedies it seeks, this result 

is compelled. 

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accurately reflects the reality of the financial relations between Andco and Amdura. 

To the extent that postpetition transfers from Andco to Amdura did occur, they appear to 

have been no more than a continuation of the routine transactions necessitated by the cash 

management system the companies had adopted. A debtor in possession under Chapter 11 is 

generally authorized to continue operating its business. See 11 U.S.C. §§ 363(c)(l), 1107, 1108; 

Las Vegas Ice & Cold Storage Co. v. Far W. Bank, 893 F.2d 1182, 1188 (lOth Cir. 1990). The 

freedom to continue operation includes the freedom to obtain unsecured credit and to incur 

unsecured debt in the ordinary course of business. 11 U.S.C. § 364(a); Las Vegas Ice, 893 F.2d 

at 1188. The emergency motion itself, to which Andco was a party, describes the requested 

transfers as consonant with standing instructions regarding the lockbox accounts. Nor is there 

any suggestion that either Andco or Amdura effected the transfers in order to prejudice the rights 

of their creditors. We therefore conclude that on these facts any postpetition transfers did not 

"transcend[] the day-to-day affairs" of either Andco or Amdura, see In re Buyer's Club Markets. 

Inc., 5 F.3d 455,458 (lOth Cir. 1993), and hold that summary judgment for Amdura on this issue 

is appropriate. 

We therefore AFFIRM the judgment of the district court. 

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