United States Court of Appeals

For the First Circuit

Nos. 02-1962, 02-1963

LAURIE DAVIS a/k/a LAURIE DAVIS COX,

Appellant, Cross-Appellee,

v.

THOMAS COX,

Debtor-Appellee, Cross-Appellant.

CROSS-APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. George Z. Singal, U.S. District Judge]

Before

 Howard, Circuit Judge,

Campbell and Cyr, Senior Circuit Judges.

Michael J. Pearce with whom Joshua R. Dow and Michael J.

Pearce & Associates, LLC were on brief for appellant, crossappellee.

George J. Marcus and Regan M. Hornney with whom Jennie L.

Clegg and Marcus, Clegg & Mistretta, P.A. were on brief for crossappellant, debtor-appellee.

January 15, 2004
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CAMPBELL, Senior Circuit Judge. These appeals challenge

the bankruptcy court's resolution of an issue at the intersection

of federal bankruptcy and Maine family law. 

Sometime after his wife, appellant Laurie Davis, had sued

him for divorce in the Maine state district court, Thomas Cox, the

cross-appellant, filed for bankruptcy in the United States

Bankruptcy Court for the District of Maine. Subsequently the state

court allowed the divorce and divided the couple's marital property.

As one part of the property disposition, the court awarded to Davis

most of an Individual Retirement Account ("the Advest IRA") owned

by Cox. The court also directed that sums being held in escrow

pursuant to its prior order be used to pay the couple's taxes and

other debts. 

Davis then sought permission from the bankruptcy court

to execute the divorce court's division of the marital property.

The bankruptcy court, however, refused to let Davis recover against

the Advest IRA. It ruled that because the Advest IRA was in Cox's

name when Cox petitioned for bankruptcy, it became the property of

his bankruptcy estate, hence was not subject to the later judgment

of the divorce court. Instead, the divorce court's disposition

relative to the IRA gave Davis merely a general unsecured claim for

the relevant amount against the bankruptcy estate. Regarding the

sums held in escrow, the bankruptcy court ruled that these could be

disbursed according to the divorce judgment. The bankruptcy court
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concluded that the state court's order placing the funds in escrow

had acted as a lien, effective at the time of bankruptcy, against

those funds.

Davis and Cox both appeal from these orders of the

bankruptcy court. While we affirm the bankruptcy court's decision

on the escrow property, we reverse the court's decision as to the

Advest IRA and remand for further proceedings consistent with this

opinion. 

I. BACKGROUND

Laurie Davis and Thomas Cox were married on August 17,

1985. They have two minor children, ages 14 and 12. After the

marriage, Davis was a homemaker and, for sometime, Cox was a

successful commercial attorney. Since 1997, however, Cox has been

classified as totally disabled with bipolar disorder. 

On November 4, 1998, Davis filed for divorce in Maine's

state district court. Upon commencement of the divorce action, the

court was required by Maine law to issue, and did issue, a

preliminary injunction enjoining either spouse from "transferring,

encumbering, concealing, selling or otherwise disposing of property

of either or both of the parties, except in the usual course of

business or for the necessities of life." Me. Rev. Stat. Ann. tit.

19-A, § 903(1)(B)(1)(2000). The preliminary injunction was meant

to keep intact, until ultimate division by the court, the divorcing

couple's "marital property," a term Maine law describes as including
1Cox also maintained another IRA at Fleet Bank valued at

approximately $1,500. Davis sent a letter to Fleet Bank advising

it of the divorce proceedings. The Fleet Bank IRA is not at issue

in this appeal.

2By the time the divorce decree was issued, the IRA's value

had risen to approximately $90,000. 

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(with certain exceptions) all property acquired by either party

subsequent to the marriage -- property that, upon divorce, is

equitably divided by the court between the divorcing pair

irrespective of in whose name it was held. Id. at § 953(3). Davis

also filed a notice of lis pendens in the Cumberland County Registry

of Deeds giving notice of the pending divorce relative to any real

estate transactions. Id. at § 953(6). In addition, Davis sent a

letter to Advest, the entity maintaining an individual retirement

account held in Cox's name, advising it of the pending divorce and

the preliminary injunction.1 The Advest IRA, valued at

approximately $65,000 at the commencement of the divorce

proceeding,2 was titled in Cox's name only. 

Despite the preliminary injunction, Cox withdrew funds

from the Advest IRA and disposed of other marital assets in

violation of the restrictions contained in the injunction. When

Davis brought Cox's conduct to the divorce court's attention, it

entered an interim order on May 24, 1999, providing among other

things that "neither party may draw down funds from the IRA's or

from other liquid or semi-liquid assets, whether or not
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characterized as for the necessities of life, without either prior

written approval from the other party or order of the court." Cox

ignored this order also and continued to make withdrawals from the

IRA without Davis's prior approval or the court's order.

To avoid further dissipation of the marital assets, the

Maine district court also ordered the parties' attorneys, Martin

Ridge and Pamela Lawrason, to hold in escrow with their respective

firms certain funds belonging to Cox and Davis. Those funds were

not to be moved, used, or transferred absent a court order. Ms.

Lawrason placed the funds in a separate interest bearing account

("Lawrason Account") and Mr. Ridge held the funds in his firm's

trust account ("Ridge Account").

After several unsuccessful attempts at an agreed

settlement, the parties requested the Maine district court to divide

the marital property. Id. at § 953(4). Pursuant to Maine statute,

the court is empowered to "set apart to each spouse the spouse's

property and shall divide the marital property in proportions the

court considers just after considering all relevant factors." Id.

at § 953(1).

The divorce action was initially set for trial on

February 28, 2000, but trial was postponed when Cox informed the

court that he was filing a bankruptcy petition later that day. When

the bankruptcy petition was not filed, the Maine district court

rescheduled the trial for April 5, 2000. The trial was delayed
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again, however, when, on that date, Cox filed with United States

Bankruptcy Court for the District of Maine a petition for bankruptcy

under Chapter 13 of the Bankruptcy Code. 11 U.S.C. § 301 (2000).

A stay under 11 U.S.C. § 362 automatically went into effect at this

time preventing the state court from proceeding with the trial. But

on June 1, 2000, the bankruptcy court in response to Davis's motion,

relieved her from the automatic stay to the extent necessary for her

to continue with the divorce in state court. In its order, the

bankruptcy court noted that the state court divorce action was

virtually ready to be tried, that it involved state law issues as

to which the state court has special and everyday expertise not

requiring the expertise of the bankruptcy court, and that the estate

and creditors were protected by Trustee Fessenden's appearance in

the divorce action. The court further stated that relief from stay

was not granted to implement any property settlement issues absent

its further order.

Fessenden, the trustee for the bankruptcy estate, filed

a memorandum in the divorce proceeding setting forth "the trustee's

position on the bankruptcy issues in the pending divorce." The

trustee's position was not unlike that now asserted by Davis, that

the Maine district court would determine the ownership rights of the

marital property pursuant to state law and the state court's

disposition of the property would establish what is "property of the

debtor" and define the bankruptcy estate. The trustee recognized,
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however, that Maine law was unsettled "whether the eventual divorce

judgment creates property rights or declares those rights which

arose as of the filing of the divorce." (Emphasis in the original).

As a result, the trustee urged the state court "to take this

opportunity to address the fundamental issues of when divorcing

parties' property rights arise as a matter of state law" and

encouraged the court, if it needed guidance, to certify the question

to the Supreme Judicial Court of Maine. The court held a four-day

trial largely dealing with what disposition to make of marital

assets and debt. After the trial, but before the court's judgment

was issued, Cox, on October 30, 2000, converted his Chapter 13

petition to a Chapter 7 liquidation. 

On November 21, 2000, the Maine district court entered

its judgment. It granted the divorce, awarded parental rights to

Davis, and made detailed orders concerning care of the children.

Regarding disposition of the couple's property, the court inter alia

found that the Advest IRA account, by then valued at $90,000, was

a part of the couple's marital property. The court ordered that

$10,500 of the Advest IRA be paid for guardian ad litem fees amassed

during the divorce proceedings. It found it equitable to award

$65,250 from the Advest IRA account to Davis, holding that Cox "was

in contempt for violation of the preliminary injunction" and that

$65,250 was a proper "sanction" for the contempt. The court stated

that that sum "restores Plaintiff to the position she would have
3The court found that "[b]oth parties contributed to the

acquisition of the marital property, Defendant through his

successful law practice and Plaintiff through her employment

outside the home as well as her contribution as a homemaker."

Further noting that the court "has also given careful consideration

to the parties' respective economic circumstances at this time,"

the court awarded the Peaks Island residence to Davis, and a

substantial payment from his law firm to Cox. Cox was also given

other real estate. The court noted Cox's contention that he needed

the marital cash assets to pay bills and current expenses,

including psychiatry not covered by insurance. 

The court said that its property disposition "meets some of

that need while providing funds for payment of the parties' joint

tax liabilities and other joint debt." 

The court declined Davis's request that Cox be ordered to pay

her lump sum alimony, finding that because of Cox's disability and

present economic circumstances, he lacked the ability to pay lump

sum spousal support.

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enjoyed had Defendant not put these funds to his own use." In

making that and the other property dispositions in the divorce

judgment, the court recited that it had considered the factors set

forth in title 19-A, § 953 of the Maine Revised Statutes and found

the dispositions to be equitable.3 

The court also ordered that the Lawrason Account, valued

at approximately $36,000, be used to pay various tax debts. From

the $36,000 balance, $10,850 was earmarked to pay the taxes on

Cox's Advest IRA withdrawals, $10,210 was to pay for the couple's

federal and state income tax debt from 1985 and 1986, and the

balance was to be applied to a joint debt of the parties to Key

Bank. The Ridge Account balance was approximately $8,400, $6,600

of which was to be paid to Davis for the support of their minor
4Under 11 U.S.C. § 522, a debtor is allowed to declare certain

property as exempt from the bankruptcy estate. Once an exemption

becomes effective, the exempt property is generally not liable for

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children, and the balance to be applied toward the satisfaction of

their debt to Key Bank. 

Neither party appealed from the divorce court's property

division to a higher Maine court.

Although encouraged to do so by the trustee in

bankruptcy, the Maine state district court said nothing about

whether "the eventual divorce judgment creates property rights or

declares those rights which arose as of filing of the divorce." See

supra. Nor did it seek direction on these questions from the

Supreme Judicial Court of Maine. Rather, noting the bankruptcy

court's recognition of "the special and everyday expertise of this

Court to address state law issues relative to the division of

marital property," the divorce court simply undertook to fulfill its

statutory role under § 953 and divide the marital property equitably

between the divorcing spouses. 

On March 26, 2001, Davis filed a motion in the federal

bankruptcy court requesting that the court issue an order (1)

granting her relief from the bankruptcy stay and (2) recognizing and

giving full force and effect to the state court's divorce judgment.

For purposes of the bankruptcy case, the parties stipulated that the

Advest IRA was entirely exempt pursuant to title 14, § 4422 of the

Maine Revised Statutes.4 The trustee filed a response to Davis's
any debt of the debtor that arose pre-petition. See id. at §

522(c). A debtor may choose to claim the exemptions listed in §

522(d) or those provided for under state law. Cox followed the

latter route, claiming exemption for the Advest IRA under title

14, section 4422(13)(E) of Maine law. As applicable to this case,

section 4422(13)(E) exempts from attachment an "individual

retirement account . . . to the extent reasonably necessary for the

support of the debtor and any dependent of the debtor." Id.

Section 4422(13) was amended by 2001 Me. Laws c. 306, §§ 1-5

effective September 21, 2001. It does not appear, however, that

this amendment applies here. See Steelstone Industries, Inc. v.

McCrum, 785 A.2d 1256, 1258, n.3 (2001) (concluding that amendment

did not apply although it became effective during pendency of

litigation). Even were the amendment applicable, its language

would not alter the exempt status of the Advest IRA.

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motion. There, he consented to the granting to Davis of relief from

the automatic stay, and he requested that the federal bankruptcy

court enter an order recognizing the state court divorce judgment

with the condition that the bankruptcy court refuse to adopt the

portion of the judgment which set aside $10,850 in the Lawrason

Account for tax obligations and, instead, order that those funds be

paid to him for the benefit of the bankruptcy estate.

Cox opposed Davis's motion seeking relief from the

bankruptcy stay in order to execute the divorce property judgment.

He argued that the Advest IRA had become the property of the

bankruptcy estate, leaving Davis with only a general unsecured claim

against the estate for the amount in the Advest IRA awarded her by

the divorce court. He also asserted that the escrowed funds could

not be used to pay down the mortgage owed to Key Bank. 

The bankruptcy court determined that, pursuant to Maine

law, the Advest IRA, to which Cox held legal title when he
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petitioned for bankruptcy, had by then become a part of the

bankruptcy estate. The court concluded that Davis's right to any

marital property held in Cox's name was contingent and did not vest

until the divorce judgment was handed down, an event occurring after

the bankruptcy petition had been filed. Davis v. Cox (In re Cox),

274 B.R. 13, 23 (Bankr. D. Me. 2002). By then, the Advest IRA,

owned by Cox, was under the jurisdiction of the bankruptcy court.

As a result, Davis acquired only a general, unsecured claim against

Cox's bankruptcy estate for the $62,250 interest in the IRA awarded

her by the Maine divorce court. Id. at 28. In reaching its

conclusion, the bankruptcy court noted that Maine's divorce statute

contained various specific remedies to protect the marital property,

most relevantly attachment. The court reasoned:

If a divorcing spouse's contingent rights to

a distribution of marital property from assets

held in the other's name can be protected by

attachment, it follows they are unprotected

without it (or its functional equivalent); .

. . if the pendency of a divorce does not, of

itself, disable a spouse from dealing with

property held in his or her name, it simply

cannot be that a Maine non-debtor spouse's

unsecured, undeclared rights to a potential

marital property distribution trump the

estate's rights at bankruptcy.

Id. (citations omitted).

As to the funds held in escrow, the bankruptcy court held

that the state court's pre-petition order placing the funds in

escrow operated effectively as an attachment of those funds. Id.

at 33. The state court order placed the funds in custodia legis,
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thereby securing Davis's claim pending entry of the divorce

judgment. Id. As a result, Davis's right to benefit from the

distribution of the escrow funds in accordance with the divorce

judgment was superior to the rights of the bankruptcy estate in the

funds. Id.

Ms. Davis and Cox both appealed from the bankruptcy

court's judgment to the district court. The district court affirmed

the bankruptcy court, adopting its opinion in all respects. 

II. DISCUSSION

A. Standard of Review

Under 28 U.S.C. § 158, appeals from the bankruptcy court

go directly either to the district court (as here) or else to a

federal bankruptcy appellate panel ("B.A.P."). Nonetheless, when

an appeal reaches us from one of these tribunals, this court focuses

-- especially, as here, where the district court has affirmed on the

basis of the bankruptcy court's findings and rationale -- on the

decision of the bankruptcy court. We examine that court's findings

of fact for clear error and afford de novo review to its conclusions

of law. See Groman v. Watman (In re Watman), 301 F.3d 3, 7 (1st

Cir. 2002); Martin v. Bajgar (In re Bajgar), 104 F.3d 495, 497 (1st

Cir. 1997).

B. Advest IRA

A debtor's estate in bankruptcy comprises all property in

which the debtor has "legal or equitable interests." 11 U.S.C. §
5As indicated in note 4, supra, inclusion of the Advest IRA in

the bankruptcy estate would not mean the IRA will go to Cox's

creditors. By the parties' stipulation, the Advest IRA is exempt

from Cox's creditors, being needed for his support and that of his

dependents. See n.4, supra. As a result, Cox himself will retain

the IRA notwithstanding his bankruptcy. The bankruptcy court

commented that "as the record presently appears, it seems unlikely

that [Mr. Cox's] attempt to exempt the IRA funds will fail." Cox,

274 B.R. at 31. As a result, the Maine divorce court's authority

to make an equitable division as between the spouses, and in

particular to award the lion's share of the IRA to Davis in

reparation for Cox's contempt of the court's preliminary

injunction, will be thwarted. Neither Cox's creditors nor Davis

will have access to the IRA. According to the bankruptcy court,

Davis is left with a general unsecured claim for $65,250 against

her former husband's bankruptcy estate, without recourse against

the IRA account. But see In re Perry, 131 B.R. 763, 767 (Bankr. D.

Mass. 1991) (concluding that right to equitable distribution under

Massachusetts divorce statute not a "claim" in bankruptcy). While

Cox will thus retain the IRA, the bankruptcy court will still have

under advisement the question whether Davis's $65,250 claim is

nondischargeable in bankruptcy, see 11 U.S.C. § 523(a)(6) and (15),

permitting her to pursue Cox even after his discharge in

bankruptcy. Cox's abject financial position, however, suggests

that nondischargeability may be difficult to obtain, id., and, even

if obtained, will likely be a fruitless remedy. The same can be

said as to Cox's claim against the bankruptcy estate. 

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541(a). The bankruptcy court -- concluding that Cox, as the owner

of the Advest IRA, would have held all legal and equitable interest

in it until the time of the divorce court's judgment awarding it to

Davis -- ruled that the Advest IRA became a part of the bankruptcy

estate when Cox petitioned for bankruptcy.5 At that time, the

divorce action was ongoing in the state court but that tribunal had

yet to issue its judgment determining inter alia how the marital

property was to be divided as between the two spouses. Accordingly,

the bankruptcy court believed that by the time of the state court's
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judgment the Advest IRA was no longer a marital asset available for

distribution by that court to Davis.

Ms. Davis disputes the above analysis. Her primary

thesis is that, after commencement of a divorce proceeding, Maine

law should be understood as providing to a non-owner spouse an

inchoate equitable interest in all marital assets separately owned

by the other spouse. Property in which the debtor-spouse holds

legal title does not, she notes, become property of the bankruptcy

estate "to the extent of any equitable interest in such property the

debtor does not hold." 11 U.S.C. § 541(d). Davis's inchoate equity

interest in the Advest IRA was, she argues, excluded from Cox's

bankruptcy estate by operation of § 541(d). When the divorce court

later entered its judgment granting the divorce and awarding a

portion of the Advest IRA to Davis, her inchoate equity in the IRA

became choate to the extent of the judgment, and the award took

effect, so she contends, free and clear of Cox's bankruptcy. As an

alternative to this theory, Davis argues that Cox should be deemed

to have held the Advest IRA upon a constructive trust for her

benefit prior to the bankruptcy, resulting in its provisional

exclusion from the bankruptcy estate until the divorce court's final

disposition of the marital property clarified what assets went to

Davis.
6While there is significant support along these lines for nondebtor spouses in situations like the present, such support is by

no means universal. Many other courts have embraced a rationale

similar to that of the bankruptcy court here. See, e.g., Anjum v.

Anjum, 288 B.R. 72, 76 (Bankr. S.D.N.Y. 2003); Lawrence v.

Lawrence, 237 B.R. 61, 79 (Bankr. D. N.J. 1999); In re Cole, 202

B.R. 356, 360 (Bankr. S.D.N.Y. 1996).

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A number of courts in divorce situations outside Maine

have adopted one or the other of the above theories.6 In respect to

the first, some courts infer from divorce laws not unlike Maine's

that, once a divorce proceeding has begun, the non-debtor spouse

acquires an inchoate equitable interest in all assets held in the

other spouse's name that form a part of the divisible marital

estate. See, e.g., White v. Bell (In re White), 212 B.R. 979, 982

(B.A.P. 10th Cir. 1997) (relying on Wyoming law to infer a species

of "co-ownership" in all marital property upon filing of divorce

petition); Roberge v. Roberge, 188 B.R. 366, 368-69 (E.D. Va. 1995),

aff'd, Roberge v. Buis, 95 F.3d 42 (4th Cir.) (unpublished)

(concluding under Florida law equitable rights vest upon the filing

of divorce petition). 

Other courts have premised a spouse's equitable rights in

marital property owned by the debtor spouse upon a theory of

constructive lien or constructive trust. See, e.g., Walston v.

Walston, 190 B.R. 66, 69-70 (E.D.N.C. 1995) (concluding "the fact

of a pending action for the inevitable distribution of specified

property should operate to create a constructive lien in favor of

the non-debtor spouse"); In re Perry, 131 B.R. 763, 767-68 (Bankr.
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D. Mass. 1991) (relying on constructive trust theory to exclude nondebtor spouse's undeclared interest in marital property from

bankruptcy estate). 

On the facts of this case, we conclude that, under Maine

law, Davis did indeed possess at bankruptcy an equitable interest

in the Advest IRA such as prevented it, by virtue of 11 U.S.C. §

541(d), from becoming at that moment a part of Cox's bankruptcy

estate. In reaching this result, we proceed narrowly on the

remedial theory of constructive trust. We need not decide, and

indeed think it inappropriate for a federal court to decide without

first seeking more specific guidance from Maine's Supreme Judicial

Court, whether Maine law, broadly applied, gives to non-owner

spouses in ordinary circumstances after commencement of a divorce

case, but before entry of judgment, an inchoate equitable interest

in marital assets owned by the owner spouse. Such a general holding

would have profound implications for Maine's law of creditors'

rights in a variety of factual situations different from the

present. As the issue is one of first impression in Maine, Maine's

highest court rather than a federal court should be the first to

plough such new territory.

The special equities favoring Davis on the facts of this

particular case are, however, compelling. The state divorce court's

award of most of the Advest IRA to Davis was granted, following a

four-day trial, expressly in order to restore her to the position
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she would have been in had not Cox misapplied marital assets to his

own use in disobedience of the court's preliminary injunction and

the interim order -- a pattern of misconduct that commenced well

before Cox filed for bankruptcy. Because of Cox's disability and

support needs, attachment of the IRA does not appear to have been

an option open to Davis prior to bankruptcy. 14 M.R.S. §

4422(13)(E). See note 4, supra. The Maine court ultimately found

Cox in contempt and, as a remedy, ordered payment to Davis of

$65,250 from the Advest IRA, a remedy that will have meaning if

Davis had an equitable interest in the Advest IRA prior to Cox's

filing of his petition for bankruptcy but not otherwise. On the

present facts, especially given Cox's contemptuous behavior before

the filing for bankruptcy, we think a Maine court, applying Maine

law, would in these circumstances rule that, by the time he filed

for bankruptcy, Cox held the Advest IRA upon a constructive trust

for his spouse, Davis, subject to the divorce court's ultimate

determination of its ownership.

We begin our analysis by looking at Maine law as

presently reflected in its divorce statute, and in the opinions of

its Supreme Judicial Court. Butner v. United States, 440 U.S. 48,

54 (1979) (stating that what constitutes a legal or equitable

interest for bankruptcy purposes turns on state law). 
7The Maine statute directs the court to look at three factors:

(1) the contribution of each spouse to the acquisition of the

marital property, including the contribution of a spouse as

homemaker; (2) the value of the property set apart to each spouse;

and (3) the economic circumstances of each spouse at the time the

division of property is to become effective. Id. at § 953(1).

When dividing marital property, courts have also taken into account

a spouse's "economic misconduct" during the pendency of divorce

proceedings, specifically the unauthorized diminution of marital

property. See Williams v. Williams, 706 A.2d 1038, 1040 (Me.

1998).

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1. Maine's Statutory Law

Maine's divorce law embodies major revisions adopted in

1972 by the Maine legislature. See Zillert v. Zillert, 395 A.2d

1152, 1154-55 (Me. 1978). The primary goal of these modifications

was to ensure that, upon divorce, each spouse receives an equitable

share of the so-called "marital property." See Fournier v.

Fournier, 376 A.2d 100, 102 (Me. 1977). Under Maine's statute, the

divorce court is directed and authorized to divide the marital

property as equity demands, taking into account the various factors

set forth in Me. Rev. Stat. Ann. tit. 19-A, § 953(1).7 The

legislature broadly defined "marital property" to encompass "all

property acquired by either spouse subsequent to the marriage . . .

regardless of whether title is held individually or by the spouse

in some form of co-ownership." Id. at § 953(3). According to

Maine's Supreme Judicial Court, this statutory definition reflects

the central premise on which the statute was founded: that marriage

is a partnership in which two individuals combine their efforts into
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a single enterprise. See Long v. Long, 697 A.2d 1317, 1320 (Me.

1997). With this premise in mind, courts, when determining a "just"

division of marital property are to take into account not only a

spouse's monetary contributions but the non-monetary ones made

during a marriage such as being the primary caretaker for the

children. See Me. Rev. Stat. Ann. tit. 19-A, § 953(1); Carter v.

Carter, 419 A.2d 1018, 1020-21 (Me. 1980). 

To help ensure the preservation of the marital assets for

equitable distribution, the Maine legislature provided that when a

petition for divorce is filed, a standard preliminary injunction

will issue, preventing either spouse, during the course of the

divorce proceeding, from "transferring, encumbering, selling, or

otherwise disposing of the property of either or both of the

parties, except in the usual course of business or for the

necessities of life." Me. Rev. Stat. Ann. tit. 19-A, §

903(1)(B)(1). The divorce statute also authorizes the "[a]ttachment

of real or personal property or trustee process." Id. at § 903(5);

Liberty v. Liberty, 769 A.2d 845, 846 (Me. 2001). The statutory

direction for issuance of a preliminary injunction during pendency

of the divorce proceeding, as well as the provisions for attachment

and other specified remedies, reflect a clear legislative intent to

prevent divorcing spouses from disposing unfairly pendente lite of

marital assets that, upon divorce, the court must inevitably

determine belong in equity to one or the other of them. Such
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assets, as already noted, include ones that are owned in the

individual name of one or the other spouse. That such statutory

restrictions come into existence upon the institution of a divorce

proceeding indicates the Maine legislature's expectation that the

filing of a divorce case -- and not just the entry of judgment at

the end of the case -- will significantly affect each spouse's

property rights. 

The bankruptcy court nevertheless took the view that by

providing only for a preliminary injunction, attachment and certain

other specific remedies, the Maine legislature indicated a wish to

deny to a non-owner spouse any other unstated remedies, including

equitable ones. We do not think this necessarily follows.

Enactment of these particular remedies also betrayed a more general

legislative intent, once divorce proceedings had begun, to shelter

and sequester marital assets for the benefit of both spouses until

the court could effect their just division. The Maine statute goes

on to state that "[t]he remedies provided in this subsection for

enforcement of a preliminary injunction are in addition to any other

civil or criminal remedies available, including civil contempt of

court." Me. Rev. Stat. Ann. tit. 19-A, § 903(3)(C). The statutory

language and scheme are thus compatible with -- indeed, strongly

suggest -- legislative approval of supplemental measures that a

court might find reasonable and necessary to achieve the goal of

safeguarding the marital estate until it can be properly divided.
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The Supreme Judicial Court of Maine has expressly stated that "the

divorce court's power to divide marital property includes powers

necessary to render effective the power to divide." Baker v. Baker,

444 A.2d 982, 986 (Me. 1982).

The matter of supplementary equitable remedies takes on

special significance here where the property at issue (i.e. the

Advest IRA) was apparently exempted by Maine law from attachment,

although it also formed a part of the marital property that the

Maine court ultimately could and did award to Davis. Under Maine

law, an IRA is exempt from attachment "to the extent reasonably

necessary" for the support of a debtor and his dependents. See Me.

Rev. Stat. Ann. tit. 14, § 4422(13)(E). Steelstone Indus., Inc.,

785 A.2d at 1258-1259. Relying on the same statute, the parties

have stipulated to the Advest IRA's exempt status in bankruptcy, and

the bankruptcy court relevantly noted that the "'reasonably

necessary' needs of Cox and his family would seem to be

substantial." Cox, 274 B.R. at 31 n.29. Thus, any attempt by Davis

to have protected her interest in the Advest IRA by attaching it

would likely have been futile. Davis did attempt diligently if

unsuccessfully in other ways to protect her interest, by obtaining

a court order tightening the injunction after Cox violated the

previously worded one, and by sending a letter to Advest, the entity

maintaining the IRA, advising it of the pending divorce and the

terms of the injunction. 
-22-

Ultimately, the divorce court, after having the benefit

of a four-day trial during which it reviewed exhaustively the

circumstances and relationship of the two divorcing spouses, awarded

to Davis a substantial interest in the Advest IRA as compensation

for Cox's contempt of the court's preliminary injunction. This

award was part of the court's comprehensive division of the total

marital property as between the divorcing spouses. In the course

of these proceedings the court was fully informed of Cox's

disability and support needs as well as Davis's conflicting needs

and claims, and the needs of their children. No appeal from the

divorce court's property division was taken either by Cox or Davis.

The question now at hand, therefore, is whether that division will

be given effect or whether, in some part, it will be skewed to

Davis's detriment, allowing Cox to regain all of the Advest IRA

notwithstanding his violation of the preliminary injunction and

contrary to the considered judgment of the court most familiar with

the equities as between both parties. 

To be sure, it can be argued that Cox's ability, by

virtue of bankruptcy, to regain the Advest IRA merely reflects the

application under federal bankruptcy law of an exemption for the

debtor's support needs derived from a Maine state statute. Me. Rev.

Stat. Ann. tit. 14 § 4422(13)(E); see note 4, supra. But the

disposition of marital property made by the state divorce judge took

into comprehensive account the equities as between the divorcing
-23-

parties, including Cox's needs insofar as they could properly be

accommodated. That disposition, rather than the narrower support

provision of § 4422(13)(E), reflected Maine's final application of

its own law. 

2. Maine Case Law

Cox nonetheless argues that Maine case law supports his

position that, until the actual division of the marital property is

decided by a divorce court's judgment, each spouse wholly owns his

or her separately owned property even if forming a part of the

marital estate. Cox bases this argument on Maine cases interpreting

spousal property rights where, however, divorce was neither

contemplated nor in process. We do not find those cases dispositive

here. 

As already pointed out, the legislature's provision for

a preliminary injunction and other protective remedies once a

divorce case is filed indicate a legislative intent to constrain the

free disposition of marital property during the period after divorce

proceedings begin. See Plourde v. Plourde, 678 A.2d 1032, 1035-36

(Me. 1996) (commenting that the mandatory preliminary injunction is

designed to maintain the status quo and prevent the diminution of

marital property prior to final judgment). Thus we reject Cox's

suggestion that the freedom of an owner spouse to deal with

separately-owned marital assets after commencement of divorce

proceedings is no more limited than it ever was before. The Maine
-24-

case law cited by Cox deals with situations not involving divorce.

Those cases merely hold that where a divorce is not involved,

marital property that is individually held may be disposed of at

will by either spouse. See Long, 697 A.2d at 1321 (noting that

"[t]he 'marital property' designation grants no present rights [of

the non-owner spouse] in the property during the marriage"). In

other words, a non-owner spouse does not, absent a divorce

situation, acquire by virtue of the marital relationship alone an

interest, beneficial or otherwise, in the owner-spouse's property.

Id. 

The Supreme Judicial Court of Maine has never decided

whether, once a divorce proceeding has begun, a non-owner spouse

holds an equity interest in marital property held by an owner

spouse. As already indicated, however, the creation of specific

protective remedies during the divorce proceeding reflects a

legislative intent that marital assets be sheltered and preserved

during that period. Moreover, the aims of Maine's modernized

divorce law are at odds with the view that, during divorce

proceedings, a non-owner spouse is without some interest in the

marital property that is soon to be divided at the end of the

proceeding. The Long court noted that previously at common law

"marriage did not create rights to property held during the

marriage, and a spouse could acquire an interest in the property of

the other only by dower or courtesy right on the death of the
8While one possible reading of the Long court's "on divorce"

phraseology could be that a non-owner spouse's interest only arises

-25-

other." 697 A.2d at 1320. To avoid the inequities at common law,

the court pointed out that the Maine legislature adopted the "shared

enterprise or partnership theory" of marriage. Id. Under this

theory, the Court wrote, the statute provides "a mechanism for

identifying marital property, creates for spouses a right to an

equitable share of marital property, and empowers the court to

equitably divide the property." Id. at 1321. The court went on to

discuss the status of property held in the name of one spouse. 

Thus property held in the name of one spouse

may still be treated as "marital property."

The "marital property" designation grants no

present rights in the property during the

marriage but, on divorce, the court must

divide all marital property "as the court

deems just" granting an equitable share to

each spouse.

Id. (emphasis supplied); see also Szelenyi v. Miller, 564 A.2d 768,

770 (Me. 1989) (stating that the "marital property" designation does

not affect property rights "in which a divorce or legal separation

is neither pending nor contemplated") (emphasis supplied); Fournier,

376 A.2d at 102 ("The Act does not prevent married persons from

owning property separately during marriage and disposing of it in

any fashion either of them may choose, assuming neither a separation

nor a divorce intervenes.") (emphasis supplied) (citing In re

Questions Submitted by the United States District Court in Imel v.

United States, 517 P.2d 1331, 1335 (Colo. 1974)).8
upon the issuance of the final judgment granting divorce and

dividing the property, the other cited decisions of the Maine

Supreme Judicial Court use broader language leaving open precisely

when and how the partnership rights are to be implemented once

divorce proceedings are underway.

-26-

A spouse, therefore, holds property subject to the nonowner spouse's "right to equitable distribution" upon divorce.

Salenius v. Salenius, 654 A.2d 426, 429 (Me. 1995). It logically

follows that after a divorce proceeding has commenced the Maine

courts will afford such reasonable protection as may be required to

ensure that a non-owner spouse's rights to equitable distribution

are not thwarted by the owner spouse prior to the time the court can

issue its decree dividing the property. According to the Supreme

Judicial Court of Maine, the Maine courts "are vested with the

general power as well as duty to deal with all marital property."

Bryant v. Bryant, 411 A.2d 391, 393 (Me. 1980). 

3. Equitable Relief

In the present case, none of the legal remedies

specifically provided under Maine law sufficed to have prevented

Davis's interest in the IRA from being included in her husband's

bankruptcy estate. While the mandatory preliminary injunction

forbad Cox's improper inter-meddling with the Advest IRA, it did not

expressly establish a lien in Davis's favor; and it does not appear

that had she attempted in advance of bankruptcy to attach the Advest

IRA that she could have done so given the statutory exemption now

claimed by Cox. See supra. In the bankruptcy court's view, this
-27-

absence of any express legal remedy confirms a legislative desire

to leave Davis without recourse. As a result, her former husband

will, insofar as appears, take the Advest IRA in spite of the fact

that the divorce court has determined, after an extensive trial and

full consideration of the equities, that, in equity, this marital

asset belongs, in large part, to her. Ironically, the husband's

creditors will receive no benefit from this outcome; indeed, they

will be worse off in that their claims will now be diluted by

Davis's. Only Cox personally will benefit, winning in bankruptcy

what he lost in the divorce court.

We do not believe that either Maine law or federal

bankruptcy law, which relies here upon Maine property law, warrants

such a result. The Maine legislature has provided that all marital

assets be equitably divided by the divorce court's judgment, and we

may assume that the divorce court here acted properly and within its

authority in awarding the lion's share of the Advest IRA to Davis,

no appeal from its judgment having been taken. Moreover, the award

was rendered specifically to remedy Cox's pre-bankruptcy contempt

of the court's statutory injunction. For that award to be

essentially nullified, leaving the Advest IRA in the hands of

Davis's ex-spouse, is to reject the obvious intentions of the Maine
9As previously noted, while Maine's own attachment statute and

ultimately the bankruptcy statute exempt property reasonably

necessary for the owner's support, the Maine divorce court's

property division, made after a lengthy trial, reflects the state's

most complete and sensitive reading of the equities as between Cox

and Davis, including Cox's appropriate needs. That decision,

rather than the narrower rule set out in Me. Rev. Stat. Ann. Tit.

14, § 4422(13)(E) is the proper guide to Maine law here, and the

one to which Maine's courts would give effect in the present

circumstances.

-28-

legislature that the divorce court's equitable division here be

dispositive as between the divorcing spouses.9 

To be sure, the issue is ultimately one of federal

bankruptcy law, but federal bankruptcy law makes the question of

what property to include in Cox's bankruptcy estate dependent upon

state law, and we think a Maine court would rule, on these facts,

that, prior to bankruptcy, Cox held the Advest IRA upon a

constructive trust for Davis. See infra. This is not a case where

it can be said that Davis has failed to avail herself in a timely

fashion of an available legal attachment remedy that could have

sheltered her interest in the marital property from inclusion in

Cox's bankruptcy estate. Nor is it a case involving creditor

interests other than such as may be said to exist between the

divorcing couple themselves, Davis and Cox. The question under the

federal bankruptcy law is whether Davis held, under state law, a

viable equitable interest of her own in the Advest IRA at the time

of the bankruptcy petition. See Butner, 440 U.S. at 54. On all

these facts, we believe she did.
-29-

We think a Maine court would hold, in these facts and

circumstances, that at the time of bankruptcy, Cox held the Advest

IRA upon a constructive trust for Davis, with the precise scope of

her beneficial interest to be ultimately determined by the divorce

court. We believe that the existence of this equitable interest

sufficed under section 541(d) of the Bankruptcy Code to remove the

Advest IRA from Cox's bankruptcy estate, subject to final

disposition by the Maine divorce court. It is commonplace that

where legal remedies are inadequate, they may be supplemented by

appropriate equitable ones. See Stanton v. Trustees of St. Joseph

College, 233 A.2d 718, 723-24 (Me. 1967). We find the legal

remedies inadequate here. 

Our dissenting colleague speculates that Davis could

conceivably achieve some measure of future relief if, for example,

the bankruptcy court were to be prevailed upon to treat her claim

for $65,250 as nondischargeable. But even so the likelihood of

meaningful relief, having in mind the costs of further litigation

in the bankruptcy arena and Cox's intransigence, seems slight at

best. We are far less optimistic than our dissenting colleague that

relitigation of the divorce equities in a federal bankruptcy

tribunal would provide succor to Davis.

Constructive and resulting trusts are traditional

constructs utilized by courts, including those in Maine, to avoid

unjust enrichment and other forms of injustice that would result
-30-

from allowing the legal owner to benefit from the property. See

Thomas v. Fales, 577 A.2d 1181, 1183 (Me. 1990); see also In re

Questions Submitted by the United States District Court in Imel v.

United States, 517 P.2d 1331, 1335 (Colo. 1974) ("Upon and after

filing the [divorce] action the rights of the wife are analogous to

those of a wife who can establish a resulting trust . . . .") cited

in Fournier, 376 A.2d at 102. For marital property like the Advest

IRA, to pass through Cox's bankruptcy estate so as ultimately to

frustrate the decree of the Maine divorce court and benefit Cox

exclusively at the expense of his former spouse and in derogation

of the divorce decree, is the very sort of inequity such devices

have been utilized to prevent. Here, following Cox's violation of

the statutory injunction, the Maine court issued on May 24, 2999,

prior to bankruptcy, a further express order forbidding him to draw

down the IRA's and other liquid assets -- an order he also proceeded

to violate. 

Since our decision hinges, in particular, upon the

existence of the pre-bankruptcy orders, Cox's disobedience then, and

the fact the $65,250 IRA award was to redress the loss to Davis

caused by that misconduct, our decision can be said to rest upon the

remedial theory of constructive trust. See Restatement of

Restitution § 160 et seq. (1937). But the concept of resulting

trust is analogous also.
-31-

The creation of a resulting trust protects those who

contribute toward the acquisition of property against the prospect

of losing it to a second party who took title in the transaction.

See Restatement (Second) of Trusts § 440 (1959). The party for whom

the resulting trust is created need not have made a monetary

contribution to acquire the property -- any contribution of services

or property may entitle her to a beneficial interest in the

property. See id. at § 455. Thus, it is appropriate to find a

trust analogous to a resulting trust in favor of a spouse who may

subsequently be found by the divorce court to have contributed

money, property, or services during the course of a marriage and,

as a consequence, to be equitably entitled to receive all or part

of the property upon division. Baker, 444 A.2d at 985; see

generally Restatement (Second) of Trusts §§ 442-43 & 455 (1959).

The Supreme Judicial Court of Maine has been willing, albeit on

different facts, to impose a resulting trust in the context of the

distribution of non-marital property. See Grishman v. Grishman, 407

A.2d 9, 12 n.7 (Me. 1979); see generally Restatement (Second) of

Trusts § 440 et seq. (1959). That it would be willing to protect

a spouse's interest in marital property in these circumstances seems

only reasonable. In any event, Cox's contemptuous misuse of marital

assets prior to bankruptcy, including those from the Advest IRA

itself, in defiance of the court's injunction, warrants the finding
10See, e.g., White v. Bell (In re White), 212 B.R. 979, 983

(B.A.P. 10th Cir. 1997) ("Thus, where the divorce is pending when

the bankruptcy petition is filed, the divorcing spouses' respective

property interest are vested but subject to subsequent

definition."); In re Greer, 242 B.R. 389, 396 (Bankr. N.D. Ohio

1999) (finding that "it was the intention under Ohio law to confer

upon a spouse an interest in any property that is or would qualify

as 'marital property' regardless of whether such property was

separately titled."); Roberge, 188 B.R. at 369 ("Once a [divorce

action is filed] the right to equitable distribution vests [and]

the parties to the divorce obtain inchoate equitable interests in

the marital estate equivalent to the shares to which they are

entitled under equitable distribution.").

-32-

of a constructive trust in order to protect Davis's interest in the

property.

As previously said, we need not go so far as to

determine, as Davis encourages us to do, that the Supreme Judicial

Court of Maine would broadly infer from the design and structure of

the Maine divorce statute that, upon commencement of every divorce

action, each spouse automatically acquires an equitable interest in

the other spouse's separately held assets of whatever kind -- an

interest sufficient to block transfer to a subsequent bankruptcy

trustee of property the latter individually owns.

10 Such an

inference would arguably be consistent with the partnership theory

of marriage adopted by the Maine legislature, since it would result

in treating marital property like "partnership property" in a

business partnership or "community property" in a community property

state. See Carter, 419 A.2d at 1021. Courts have held that

partnership property itself does not become property of an

individual partner's bankruptcy estate. See McGahren v. Gray (In
11Our reluctance is increased by the fact that any such broad

pronouncement as to Maine law could have unforseen effects on Maine

creditors' rights law in factual circumstances quite different from

the present. Any such interpretation of Maine law, even

provisionally, should be left to the Supreme Judicial Court of

Maine upon certification or otherwise rather than attempted by a

federal court.

-33-

re Weiss), 111 F.3d 1159, 1166 (4th Cir.), cert. denied, 522 U.S.

950 (1997). While the debtor's interest in the partnership is

included in the estate, the assets held by the partnership itself

are not. Id. If these principles were to be applied to the current

case, only Cox's undeclared interest in marital property would

become part of the bankruptcy estate. See Tidwell v. Cent. Savs.

Bank (In re Hunt), 154 B.R. 1016, 1023 (Bankr. M.D. Ga. 1993)

(noting that trustee's only interest in partnership property was the

right to demand partner's share after an accounting and payment of

partnership liabilities).

The particular circumstances of this case, however,

render it unnecessary for us to make such an extensive pronouncement

regarding the scope of Maine law.11 All we need hold here is that

where one spouse held title to marital property that, as a practical

matter, was exempt from attachment, and where the specific facts and

equities were such as have been described, the non-owner spouse may

claim to have held an undeclared beneficial interest in the property

awarded by the divorce court, her interest having been held for her

prior to bankruptcy upon a constructive trust by the owner-spouse
-34-

until such time as the divorce decree became final and the marital

assets were divided. This beneficial interest, the scope of which

was ultimately determined by the state court when dividing the

marital property, was excluded from the bankruptcy estate by

operation of 11 U.S.C. § 541(d). Compare In re Perry, 131 B.R. at

768 (excluding from the bankruptcy estate under Massachusetts law

and § 541(d) a spouse's beneficial interest in marital property

found to be held in a "constructive trust" by the debtor-spouse).

Our conclusion is consistent with the Maine legislature's adoption

of the partnership theory of marriage and the powers it has granted

to the state courts, as well as the powers those courts inherently

retain, to protect and divide the marital property. See Me. Rev.

Stat. Ann. tit. 19-A, § 903; id. at § 953. 

Under this analysis, Davis obtained an undeclared

beneficial interest in the Advest IRA at the time the divorce

petition was filed. Although the IRA was titled in Cox's name, once

the divorce action commenced, he held the IRA in trust pending the

state court's order dividing the marital property. Davis's

beneficial interest to the extent ultimately awarded to her did not

become a part of the bankruptcy estate. 

We add that, for purposes of this case, we need not worry

about whether the trustee's strong arm powers under 11 U.S.C. § 544
12In so stating we do not mean to indicate our view on this

separate issue one way or the other.

13See, e.g., Perlow v. Perlow, 128 B.R. 412, 415 (E.D.N.C.

1991) (finding § 544 cut-off spouse's right because under North

Carolina law a judgment creditor's rights are superior to a spouses

because the filing of divorce does not create a lien on specific

marital property in favor of the spouse); Lawrence v. Lawrence, 237

B.R. 61, 78-79 (Bankr. D.N.J. 1999) (finding § 544 cut-off spouse's

right because under New Jersey law a judgment creditor's rights are

superior to a spouse's if the lien was obtained prior to divorce

judgment); Anderson v. Briglevich (In re Anderson), 147 B.R. 1015,

1022 (Bankr. N.D. Ga. 1992) (concluding that non-debtor's

unrecorded equitable interest in marital property cut-off by

trustee's strong arm powers); In re Vann, 113 B.R. 704, 706 (Bankr.

D. Colo. 1990) (stating that until a spouse takes affirmative

action to perfect her interest in marital property the trustee's

rights are superior under § 544). 

-35-

cut off Davis's beneficial interest in the Advest IRA.12 In this

case, the trustee did not attempt to avoid Davis's interest in the

Advest IRA and, in fact, wholly supported the award. Thus, this

case can be distinguished from those cases in which the courts have

concluded that the filing of a bankruptcy petition cut off the

unrecorded equitable rights of a non-debtor spouse.13 In this case,

once the divorce judgment dividing the property became final, Davis

was free to execute the judgment and claim her beneficial interest

in the Advest IRA.

C. Escrow Accounts

Mr. Cox appeals from the bankruptcy court's ruling that

the funds held in escrow were not property of the estate and could

be disbursed according to the divorce judgment. The divorce court
14Of the $36,000 in the Lawrason Account, $10,850 was set aside

to pay taxes on the premature withdrawals from the Advest IRA,

$10,210 was earmarked to pay state and federal income taxes from

1985 and 1986, and the balance was to be applied to the parties'

joint debt to Key Bank. Of the $8,400 in the Ridge Account, $6,600

represented retroactive SSDI payments paid to Davis on behalf of

the children and was awarded to Davis for that purpose, the balance

of the escrow account, $1,800, was also to be applied toward the

Key Bank debt.

15Davis argues on appeal that Cox does not have standing to

appeal the bankruptcy court's judgment regarding the escrow

-36-

ordered that funds held in the Lawrason Account and the Ridge

Account be used to pay certain tax debts and a joint mortgage

serviced by Key Bank.14 In the proceedings below, the trustee

opposed implementation of the divorce judgment to the extent that

it ordered funds from the Lawrason Account to pay pre-petition

creditors. The trustee argued that the Lawrason Account should be

turned over to the estate and used to pay the creditors according

to the distribution scheme set forth in the Bankruptcy Code. Cox

also opposed the implementation of the divorce judgment as it

related to the escrow accounts. Unlike the trustee, however, Cox

did not contend that the escrow account could not be used to pay the

tax debts. He argued only that Key Bank, as a general, unsecured

creditor, should not be paid outside of priorities set forth in the

Bankruptcy Code. 

The bankruptcy court concluded that the funds held in

escrow were not property of the estate and could be distributed in

accordance with the divorce judgment.

15 The bankruptcy court
accounts. The bankruptcy court addressed whether Cox had standing

to oppose the implementation of the divorce decree as it pertained

to the escrow accounts and stated it was "unconvinced that Cox

ha[d] independent standing." It did not make a final determination

on this issue, however, because the trustee had standing to oppose

the divorce judgment's disposition of the escrow accounts. Under

the Bankruptcy Code, standing to appeal from a final bankruptcy

order is accorded only to a "person aggrieved" by the decision.

Spenlinhauer v. O'Donnell, 261 F.3d 113, 117-18 (1st Cir. 2001).

A "person aggrieved" is one whose pecuniary interests are directly

and adversely affected by the order. Id. at 118. Cox argues that

he has a direct pecuniary interest in the outcome of the appeal

because the majority of the funds held in escrow are exempt assets

and thus would pass out of the bankruptcy estate and into his

hands. This theory is viable only if the allegedly exempt assets

were Cox's property at the time the petition was filed and thus

became property of the estate. The standing issue and the

substantive issue of what, if any, interest Cox had in the escrowed

funds at the commencement of the bankruptcy case are closely

intertwined. If Cox does not have an interest in the escrowed

funds then it is unlikely that he has standing to challenge the

order disposing of those funds. Thus, whether we address the

merits or the standing issue, we must examine what interest Cox had

in the escrowed funds at the commencement of his bankruptcy.

-37-

reasoned that as of the petition date, Cox's interest in the funds

was a "contingent one, depending on the divorce court's

determination regarding their disposition." According to the

bankruptcy court, the state court order for escrow of the funds held

by Lawrason and Ridge placed the funds in custodia legis and

"operated, effectively, as an attachment of those funds," thereby

securing Davis's claim pending entry of the divorce decree. 

To determine what interest, if any, Cox had in the funds

held by order of the court and thus what interest passed to the

bankruptcy estate, we must look to Maine law. The bankruptcy court

relied on Maine law regarding court-appointed custodians to support
16Moreover, while in custodia legis, the property is not

subject to levy or attachment in any form. See, e.g., Hardy, 68

Me. at 195. As a result, the trustee, as a hypothetical lien

creditor, cannot recover the property for the estate. 11 U.S.C. §

544. In any event, the trustee in this case did not attempt to

avoid any interest that was transferred to the custodian pursuant

to the state court order nor did the trustee request the turnover

-38-

its decision. Under Maine law, when a court in equity appoints a

receiver, the title to the property vests in the receiver and is

held in custodia legis until it is disposed of by the receiver in

compliance with an order of that court. See Hazzard v. Westview

Golf Club, Inc., 217 A.2d 217, 223 (Me. 1966); Cobb v. Camden Savs.

Bank, 76 A. 667 (Me. 1909); Littlefield v. Maine Cent. R.R. Co., 71

A. 657, 660 (Me. 1908). This includes money collected by an officer

of the court. See Hardy v. Tilton, 68 Me. 195 (1878). Title vests

in the receiver upon his or her appointment. Cobb, 76 A. 667

(stating "the decree of appointment ipso facto vests the title to

the [property] in the receiver"). 

The court here appointed the parties' attorneys to hold

certain funds in escrow pending the division of the marital assets.

The attorneys were appointed to safeguard the property to prevent

Cox from continuing to dissipate the funds in violation of a court

order. When the state court directed the attorneys to place the

money in escrow accounts and to disburse the money only upon an

order of the court, the funds were placed in custodia legis and Cox

was divested of legal title of the funds and title passed to the

attorneys as officers of the court.16
of the property pursuant to § 543.

-39-

As a result, the funds held in custodia legis did not

pass into the bankruptcy estate upon the filing of the bankruptcy

petition. As noted by the bankruptcy court, at the commencement of

the bankruptcy proceeding, Cox held just a contingent interest to

the property held in custodia legis, subject to the divorce court's

disposition of the property. Thus, only Cox's contingent interest

became property of the estate. 

Cox contends that the escrow funds could not have been

"effectively attached" as the bankruptcy court concluded because the

majority of the funds were exempt from attachment under Maine law.

As a result, Cox argues, the exempt property in the escrow funds

passed unencumbered into the bankruptcy estate when he filed his

petition. Cox's argument is flawed. While under Maine law certain

property is exempt from attachment, 14 M.R.S.A. § 4422, the property

at issue here was not attached. It is true that the bankruptcy

court said the property was "effectively attached" when it was

placed in custodia legis, but it was not actually attached. The

bankruptcy court was merely analogizing property held in custodia

legis for the benefit and protection of an individual to that

individual's attaching of the property in a hypothetical situation

to secure a debt. But unlike a mere attachment, the court's

decision to place the property in custodia legis divested Cox of
-40-

legal title and left him with only a contingent right to the

property. 

D. Conclusion

The bankruptcy court's order that the escrow funds could

be disbursed as stated in the divorce judgment is affirmed. The

bankruptcy court's order denying the disbursement of the Advest IRA

to Davis as described in the divorce decree is reversed and the case

is remanded to the bankruptcy court for proceedings consistent with

this opinion.

Dissenting Opinion follows.
17See also, e.g., Robbins v. Robbins (In re Robbins), 964 F.2d

342, 346 (4th Cir. 1992) (noting that debtor-spouse's separatelyheld property becomes part of bankrupt estate; non-debtor spouse

holds an unsecured claim); In re Anjum, 288 B.R. 72, 76-77 (Bankr.

S.D.N.Y. 2003) (same, collecting cases); In re Lawrence, 237 B.R.

61, 80-81 (Bankr. D.N.J. 1999); In re Abma, 215 B.R. 148, 152

(Bankr. N.D. Ill. 1997); In re Palmer, 78 B.R. 402, 406 (Bankr.

E.D.N.Y. 1987).

-41-

CYR, Senior Circuit Judge, dissenting. After apparently

accepting the bankruptcy court's cogent interpretation of the

applicable legal principles, see In re Cox, 274 B.R. 13, 26-30

(Bankr. D. Me. 2002),17 the majority predicates its reversal upon

the contention that the particular facts of this case warrant

extraordinary equitable relief - viz., the impressment of a

constructive or resulting trust upon the otherwise exempt Advest IRA

- so as to preclude Cox from unjustly and unilaterally retaining

marital property which rightly belonged to the joint marital estate.

As its tenuous prediction of Maine law is improvident and its

recourse to equitable relief entirely unnecessary, I respectfully

dissent.

As the majority must concede, no Maine case law either

explicitly or implicitly holds that a cognizable legal or equitable

property interest in a marital asset - held exclusively in the name

of one spouse - vests in both spouses instanter simply upon the

filing of a divorce petition, rather than upon entry of a final

decree of legal separation or divorce. Moreover, arguably at least,

some Maine decisional law implies quite the opposite. See Long v.
18The majority heavily relies upon such cases as Long, which

ambiguously advert to the accrual of present rights in the marital

estate "on divorce." While it may be arguable that this phrase

would permit an interpretation which includes the time period from

the filing of a divorce petition to the entry of a final divorce

decree, the much more plausible and natural construction is that

"on divorce" refers simply to the time commencing with the entry of

the final divorce decree. Thus, Davis could have accrued no

present rights in the Advest IRA until after it had become property

of the Cox bankrupt estate.

-42-

Long, 697 A.2d 1317, 1321 (Me. 1997) ("The 'marital property'

designation grants no present rights in the property during the

marriage.") (emphasis added).18

The majority predicates its construction upon a presumed

legislative intent - motivating the 1972 amendment to the Maine

divorce statute - to accord divorcing spouses "more" protection from

divestments of property jointly acquired during the marriage.

Although this is so, the operative question is how far the Maine

Legislature intended to go in according "more" protections. The

pre-1972 Maine statute accorded overwhelming weight to a single,

formalistic criterion - viz., which spouse is the named titleholder

of the property at issue - and the amended divorce statute

undeniably accords more protection to the non-titleholder spouse by

even including such separately-held property in the marital estate,

and by directing the divorce court to distribute separately-held

property to either spouse as well, based upon its consideration of

a panoply of equitable considerations aside from the record title.
-43-

I would submit, however, that the majority proceeds upon

extremely unstable ground in extrapolating from the nebulous

legislative purpose, in order to bolster the "partnership" or "joint

enterprise" theory of marriage, to the majority's thesis that the

legislature must have intended other - yet more expansive - reforms.

Cf., e.g., Lyerly v. IRS, 235 B.R. 401, 404 (W.D.N.C. 1998) ("The

[North Carolina] legislature's intent . . . was to create a right

to equitable distribution of the marital property, which had not

existed up to that time, and to make that right vest at the time of

filing for divorce. [The amended divorce statute] did not create

any vested rights in particular marital property; it created a right

to the equitable distribution of that property, whatever a court

should determine that property is.") (emphasis added).

The holdings in those non-Maine decisions which are

characterized by the majority as lending "significant support" to

its approach - e.g., Walston v. Walston, 190 B.R. 66, 67-69

(E.D.N.C. 1995), and In re Perry, 131 B.R. 763, 766-67 (Bankr. D.

Mass. 1991) – are not only exceptionally terse, but rest upon the

dubious notion that a constructive or resulting trust is essential

to the achievement of an "equitable" result. But see supra note 1

(cataloging dozens of judicial decisions rejecting the Walston-Perry

rationale). Normally, we may resort to equitable remedies, such as

unjust enrichment and its concomitant remedy of constructive trust,

only after concluding that the complainant has or will have no
19Davis has already invoked an important state-law legal

remedy. Even if the Advest IRA is entirely exempt from attachment,

see Me. Rev. Stat. Ann. tit. 19-A, § 903(5); see also Me. Rev.

Stat. Ann. tit. 14, § 4422(13)(F) (limiting IRA exemption to amount

"reasonably necessary for the support of the debtor"), the Maine

divorce statute authorizes the divorce court to factor in a party's

"economic misconduct" in apportioning the marital property (viz.,

when effectively setting a value to Davis's unsecured claim), and

so the injunction that issues when spouses file a petition for

divorce constituted a valuable legal remedy to Davis, see Me. Rev.

Stat. Ann. tit. 19-A, § 903(1). As Cox was enjoined from

transferring the Advest IRA funds except for ordinary and necessary

personal expenses, and Cox violated the injunction, Davis could

have initiated a civil contempt proceeding against Cox, or

requested the divorce court to adjust the property settlement to

compensate Davis for Cox’s dissipation of the IRA. She elected to

avail herself of the latter remedy.

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"adequate" remedy at law. See Infusaid Corp. v. Intermedics

Infusaid, Inc., 739 F.2d 661, 668 (1st Cir. 1984); see also Stanton

v. Trustees of St. Joseph's College, 233 A.2d 718, 723 (Me. 1967).

The majority, on the other hand, simply posits that since Davis is

unable to attach the Advest IRA under the statute, we may conclude

instanter that Davis is without any meaningful recourse other than

a constructive trust. As the Bankruptcy Code explicitly

contemplates an orderly succession of remedies in these sorts of

cases, and Davis has yet to exhaust such available legal remedies,

I respectfully disagree.

Davis either had, has, or will have various legal

remedies to protect her unvested rights in the Advest IRA.19 Even

under the rationale adopted by the bankruptcy court, the filing of

the Cox bankruptcy petition simply terminated Davis's rights in the
20Based upon a current assessment of the condition of the

estate, the trustee predicted that the dividend could approximate

ten-percent, which would result in a $6,525 recovery for Davis.

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specific property (viz., the Advest IRA), see In re Abma, 215 B.R.

148, 151 (Bankr. N.D. Ill. 1997) ("[N]on-debtor spouse's rights in

specific marital property were cut off by the bankruptcy filing.")

(emphasis added), whereas she retains a $65,250 unsecured claim

against the Cox bankrupt estate. See Davis v. Cox, 274 B.R. 13, 23

(Bankr. D. Me. 2002). Thus, Davis may share pro rata in any

dividend available to Cox's unsecured creditors. Nonetheless, the

majority implicitly concludes that Davis can recover but a pittance,

a speculative prediction at best given the mercurial nature of

bankruptcy proceedings at such an early juncture. See In re Anjum,

288 B.R. 72, 73 n.1 (Bankr. S.D.N.Y. 2003) ("[T]he [non-debtor

spouse's] entitlement to share in the debtor's estate has no value

in this no-asset case, but could be of great value in another

case.").20

Finally, even assuming that the pro rata share realized

by Davis were to prove meager, the balance of her $65,250 claim

would remain presumptively non-dischargeable in bankruptcy.

Bankruptcy Code § 523(a)(15) excepts from discharge any debt

not of the kind described in [§ 523(a)](5)

that is incurred by the debtor in the course

of a divorce or separation or in connection

with a separation agreement, divorce decree or

other order of a court of record, a

determination made in accordance with State or
-46-

territorial law by a governmental unit unless

– 

(A) the debtor does not have

the ability to pay such

debt from income or

property of the debtor not

reasonably necessary to be

expended for th e

maintenance or support of

the debtor or a dependant

of the debtor and, if the

debtor is engaged in a

business, for the payment

of expenditures necessary

for the continuation,

preservation, and operation

of such business; or 

(B) discharging such debt would

result in a benefit to the

debtor that outweighs the

detrimental consequences to

a spouse, former spouse, or

child of the debtor. 

11 U.S.C. § 523(a)(15). 

Thus, Cox would have to carry the burden of proving one

of these two criteria in order to obtain a discharge of the

property-settlement claim held by Davis. See In re Lawrence, 237

B.R. 61, 83 (Bankr. D.N.J. 1999). The "ability to pay" factor in

Bankruptcy Code § 523(a)(15)(A) enables the bankruptcy court to

consider the present and future prospects for repayment from Cox's

expendable property, including any assets, previously acquired in

contravention of the divorce court injunction, which remain in Cox's

possession, see supra note 3, or from Cox's disposable income,

including future wages. See Feldmann v. Feldmann (In re Feldmann),

220 B.R. 138, 145-46 (Bankr. N.D. Ga. 1998). Were Cox unable to
21Moreover, even assuming Davis were unable to prevail under

§ 523(a)(15), she could pursue a non-dischargeability ruling under

§ 523(a)(6) (excepting from discharge any debt "for willful and

malicious injury by the debtor"), based upon Cox's prior violations

of the divorce court injunction. See Siemer v. Nangle (In re

Nangle), 274 F.3d 481, 484 (8th Cir. 2001) (noting that contempt

judgments may be excepted from discharge under § 523(a)(6)).

-47-

sustain this substantial burden of proof, the obligation due Davis

would remain undischarged, notwithstanding a general discharge in

bankruptcy. See Bowden v. Grindle, 675 A.2d 968, 972-73 n.2 (Me.

1996) (noting that one element of "unjust enrichment" claim is

inequitable retention of benefit "without payment") (emphasis

added). Consequently, the significance of this potential postpetition remedy under subsection 523(a)(15) cannot be ignored.

Moreover, Bankruptcy Code § 523(a)(15) imports the same

types of equitable considerations and balancing requirements as

undergird the state-law remedies of constructive and resulting

trusts, in many respects paralleling the "economic misconduct"

inquiry mandated under the Maine divorce statute's scheme for

equitable distribution. See supra note 3. Thus, assuming arguendo

that Cox deliberately engaged in financial shenanigans with the

Advest IRA, he cannot anticipate any considerable windfall in

bankruptcy.21

The majority proposes that the bankruptcy court ruling

effectively nullifies the divorce decree, and offends the wellaccepted principles that (i) state law normally defines property

rights in bankruptcy, and (ii) the state divorce court possesses a
-48-

more specialized expertise to undertake the equitable distribution

of marital property than does a federal bankruptcy court. But, of

course, the bankruptcy court did defer to the state court's

expertise when it granted the first motion to lift the automatic

stay - filed by Davis - while at the same time explicitly stating

that "relief from the stay is not granted to implement any property

settlement absent further order of this court." (Emphasis added.)

Just as state courts possess special competence in

determining equitable marital-property distributions, so too it

cannot be gainsaid that they possess a specialized expertise in

declaring state law. In determining its equitable property

division, the divorce court - though presumably aware that Cox could

exempt the entire IRA account pursuant to Maine law - declined the

trustee's invitation to reach the difficult state-law questions

presently before us: whether Davis acquired an equitable property

interest in the Advest IRA at the time she filed for divorce, or

whether the equities in this case mandated that Cox hold the IRA in

constructive or resulting trust for Davis. Davis did not appeal

from the divorce judgment on the ground that it failed adequately

to define the nature of her state-law rights in the IRA. Once the

state court has pronounced the spouses' respective distributive

rights, the Bankruptcy Code governs the ramifications of these

pronouncements in the context of the Cox bankruptcy case. 
-49-

Although one may sympathize with Davis in the present

predicament, as well as with the majority's conscientious intention

to minimize its impact, the intervention of a bankruptcy petition

very frequently entails unfortunate consequences for the most

innocent of parties. Plainly and understandably, then, Davis would

prefer the more immediate, convenient, and predictable remedy

afforded by a constructive or resulting trust. Yet somewhat lesser

alternative remedies at law - even if merely adequate - take

precedence over equitable remedies, see Infusaid Corp., 739 F.2d at

668, lest equitable relief become mere redundant surplusage.

Accordingly, once Congress explicitly prescribes legal remedies

under the Bankruptcy Code for spouses with property settlement

claims, courts must recognize that such settlements presumptively

are to be treated as "claims" in bankruptcy. Consequently, at a

minimum the courts are to defer any decision as to whether to seize

upon extraordinary state-law equitable remedies until such time as

a spouse has unsuccessfully exhausted all such remedies. At that

juncture, the bankruptcy court can then address the issue

competently.

For the foregoing reasons, I would hold that the Cox IRA

became part of the bankrupt estate prior to the Davis property

settlement. See supra note 1. As I believe the bankruptcy court

decision should be affirmed, I respectfully dissent.