# United Stat es Court of Appeals For the First C ircuit

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 a ppe llant, 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, 2004-2- CAMPBELL, Senior Circuit Judge . These appeals challenge the bankruptcy court's resolution of an is sue at the intersection of federal bankruptcy and Maine family law.

Sometime after his wife, appellant Laurie Davis, had sued himfor divorce in the Maine state district court, Thomas Cox, the

cross- app ellant, filed for bankruptcy in the United States BankruptcyCourt 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 awardedto Davis most of an Individual Retirement Account ("the Advest IRA") ow ne d by Cox. The court also directed that sums being held in es crow pursuant to its prior order be usedt o pay the couple's taxes and other debts.

Davis then sought permission from the bank rupt cy court to execute the divorce court 's divis ion 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 IRAgave Davis merely a general unsecured claim for the relevant amount against th e bankruptcy estate. Regarding the

sums held in escrow, the bankruptcy court ruledthat these could be disbursedaccording to the divorce judgment. The bankruptcy court-3-

concludedthat the state court's order placing the funds in escrow hadacted as a lien, effec tive at the time of bankruptcy, against those funds.

Davis and Cox both appeal from the se orders of the bankruptcycourt. While we affirmthe bankruptcy court's decision

on the escrow property, we reverse th e cou rt's decision as to the Advest IRAand remand for further proceedings consistent with this opinion. I. BACKGROUND

Lau rie Davis and Thomas Cox were married on August 17 , 1985. They have two minor children, ages 14 and 12. Aft er the marriage, Davis wa s 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 d id issue, a preliminaryinjunction enjoining either spouse from "transferring, encumbering, concealing, selling or otherwise disposing of property of either or both of the parti es , 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). T he pre liminary injunction was meant to keep intact, until ultimate division bythe court, the divorcing couple's "marital property," a termMaine law describes as including1 Cox also maintained ano the r 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 IRAis not at issue in this appeal.

2 By t he t ime the divorce decree was issued, the IRA's value had risen to approximately $90,000. -4- (with certain exceptions) all property acquir ed by either party

s ubsequent to the marriage -- property that, upon div orce, i s equitablydividedby th e 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, Dav is 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 Adves t IRA, valued at approximately $65,000 at t he commencement of the divorce proceeding, 2 was titled in Cox's name only.

Despite the preliminary injunction, Cox withdrew funds fromthe Adv est IRA and disposed of other marital assets in violation of t he restr ictions contained in the injunction. When Davis brought Cox's conduct to the d ivorce c ourt's attention, it ente red an i nterim order on May 24, 1999, providing among other things that "nei ther party may draw down funds from the IRA's or fromother liquid or semi-liquid a ssets, whether or not-5-

characterizedas for the necessities of life, without either prior written approval fromthe other party or order of the court." Cox ignoredthis 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 di st rict court also ordered the parties' attorneys, Martin Ridge and Pamela Lawrason, to hold in escrow with their respective firms cert ain f unds belonging to Cox and Davis. Those funds were not to be mo ved, 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 i n 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 s pouse the spouse's propertyand shall divide the marital property in p ro portions the court considers just after considering all relevant factors." Id. at § 953(1).

The divorce action was initially set for trial on February28, 2000, but tri al was postponed when Cox informed the court that he was filing a bankruptcy petition later that day. When the bankruptcy petition was not f iled, the Maine district court rescheduledthe trial for April 5, 2000. The trial w as d elayed-6-

again, however, when, on t hat date , Cox filed with United States BankruptcyCourt for the District of Maine a petition for bankruptcy under Chapter 13 of the Bankruptcy Code. 11 U. S.C. § 301 (2000). Astay 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, relievedher from the automatic stay to the extent necessary for her to continue with the divorce in s tate court. In its order, the bankruptcycourt noted that the state co ur t divorce action was virtuallyready to be tried, that it involved st ate l aw issues as to which the state court has special and ev eryday e xpertise not requiring the expertise of the bankruptcy court, and that the estate andcreditors were protected by Trustee Fessen den'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 divor ce." Th e trustee's position was not unlike that now asserted byDavis, that the Maine district court woulddetermine the ownership rights of the marital property pursuant to state l aw an d the state court's disposition of the property would establish what is "property of the debtor" and define the bankruptcy estate. The trustee recognized,-7-

however, that Maine law was unsettled "whether the eventual divorce judgmen t crea tes 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 t he state court "to take this opportunityto addr ess th e fundamental issues of when divorcing parties' property rights arise a s a matt er of state law" and encouragedthe 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 disposit io n to make of marital assets and debt. After the trial, but before the court's judgment

was issued, Cox, on October 30, 20 00, conv erted his Chapter 13 petition to a Chapter 7 liquidation.

On November 21, 2000, the Main e di strict court entered its judgment. It granted the divorce, awarded parental rig hts t o Davis, and mad e detail ed orders concerning care of the children. Regarding disposition of the couple's property, the court inter alia foundthat the Advest IRA account, by then valued a t $90 ,000, was

a part of the co uple's mar ital property. The court ordered that $10,500 of the Advest IRAbe paidfor guardian ad litem fees amassed during the divor ce proce edings. It found it equitable to award $65,250 from the Advest IRA account to Davis, holding that Cox "was in contempt for vi olation of the preliminary injunction" and that $65,250 was a proper "sanction" for the contempt. The court stated that that sum "resto res Plai ntiff to the position she would have3 The court found that "[b]oth parties contributed to the

acquisition of the marital property, Defendant through his successful law practi ce andPlaintiff 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 eco nomic 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 ma rital cash assets to pay bills and current expenses, including psychiatry not covered by insurance. T he cou rt 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. -8- en jo yedhad Defendant not put these funds to his own use." In making that and the other prop er ty 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 deb ts. 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, andth e balance was to be applied to a joint debt o f the parties to Key Bank. The Ridge Acco un t balance was approximately $8,400, $6,600 of which was to be paid to Dav is for the support of their minor4 Under 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 -9- children, and the balance to be applied toward the satisfaction of their debt to Key Bank.

Neither partyappealed from the divorce court's property division to a higher Maine court.

Although encouraged to do so by the trustee in b ankruptcy, the Maine state district court said nothing abou t 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 di rec tion on these questions from the Supreme Judicial C ourt 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 o f 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 th at the c ourt 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 stipulatedthat the Advest IRA was entirely exempt pursuant to title 14, § 4422 of the Maine Revised St at utes. 4 The trustee filed a response to Davis'sanydebt of the debtor that aros e pre-petit ion. See id. at §

522(c). A debtor may choose to claim the exemptions listed in § 522(d) or those provided for under state l aw. Cox f ollowed 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 necessaryfor the support of the debtor and any depende nt of the debtor." Id. Section 4422(13) was ame nde d by 2001 Me. Laws c. 306, §§ 1-5 effective September 21, 2001. It does not appear, however, that this amendment applies here. See Steelstone Indus tries, Inc. v. McCrum , 785 A.2d 1256, 1258, n.3 (2001) (concluding that amendment didnot apply although it became effective during pe ndency of li tigation). Even were the amendment applicable, its langu ag e would not alter the exempt status of the Advest IRA. -10- motion. There, he consentedto the granting to Davis of relief from the automatic stay, and he requested that the fe deral ba nkruptcy court enter an order recognizing the state co ur t divorce judgment with the condition that the bankrupt cy court refuse to adopt the portion of the judg ment whi ch 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 relie f fromthe bankruptcystay in order to execute the divorce property judgment. He argued that the Advest IRA had become the pro perty of the bankruptcyestate, 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-11-

pet itioned for bankruptcy, had by then become a part of the bankruptcyestate. The co urt conc luded that Davis's right to any marital property held in Cox's name was contingent and didnot 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 th en , the Advest IRA, ownedby Cox, was under the jurisdiction of the bankrupt cy 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 containedvarious specific remedies to protect the marital property, most relevantly attachment. The court reasoned:

If a divorcing spous e's contingent rights to a distribution of marital property fromassets heldin the other's name can be prot ected by attachment, it follows they are unprot ec ted without it (or its functional equi valent); .

. . if the pendency of a divorce does not, of itself, disa ble a spouse from dealing with propertyheld in his or her name, it s imply cannot be that a Mai ne non-debtor spouse's unsecured, undeclared rights to a p ot ential m arital property distribution trump th e estate's rights at bankruptcy. Id. (citations omitted).

As to the funds held in escrow, the bankruptcy court held that the state co urt's pre-petition order placing the funds in

escrow opera ted effe ctively as an attachment of those funds. Id. at 33. The state court order p la ced the funds in custodia legis ,-12-

the reby s ecuring Davis's claim pending entry of the divorce judgment. Id. As a result, D av is's right to benefit from the distribution of the escrow funds in a ccordance 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 distric t court (as here) or else to a fed era l bankruptcy appellate panel ("B.A.P."). Nonetheless, when

an appeal reaches us fromone of these tribunals, this court focuses

-- especially, as here, where the district court has affirmedon 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

Adebtor's estate in bankruptcy comprises all property in which the debtor has "legal or equit able interests." 11 U.S.C. §5 As indicatedin note 4, supra , inclusion of the Advest IRA in

the bankruptcy estate would not mean the IRA w ill go to Cox's creditors. By the parties' stipulation, the Advest IRA is exempt fromCox'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 commentedthat "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 part icular t o award the lion's share of the IRA to Davis in repara t ion for Cox's contempt of the court's preliminary injunction, will be thwar ted. 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 bankr uptc y 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 Dav is'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.

-13- 541(a). The bankruptcy court -- concluding that Cox, as the owner of the Advest IRA, wouldhave held all legal andequitable 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 t ime, the divorce action was ongoing in the state court but that tribunal had yet to issue its judgment dete rmining inter alia how the marital propertywas to be divided as between the two spouses. Accordingly, the bankruptcy court believed that by the time of the state court's-14-

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 t hesis is that, after commencement of a divorce proceeding, Main e law should be understood as providing to a non-owner spouse an inchoate equitable interest in all marital assets separately owned by the other s pouse. 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, exclude d from Cox's bankruptcyestate by operation of § 541(d). When the divorce court later entered its judgment g ra nting the divorce and awarding a portion of the Advest IRAto 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 shouldbe deemed to have held the Advest IRA upon a constructive trust for her benefit prior to the bankruptcy , resu lting in its provisional exclusion from the bankruptcy estate until the divorce court's final disposition of the marital property clarified what assets went t o Davis.6 While 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. , Anjumv. Anju m , 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). -15- Anu mber of courts in divorce situations outside Maine have adoptedone or the other of the above theories. 6 In respect to the first, some courts infer from divorce law s not un like Maine's that, once a divorce proceed ing has begun, the non-debtor spouse acquires an inchoa te equit able interest in all assets held in the oth er spouse's name that form a part of the divisible m arita l 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-own ership" 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. B ui s , 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 s pouse up on 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) (conclu di ng "the fact of a pending act ion for the inevitable distribution of specified propertyshould operate to creat e a constructive lien in favor of the non-debtor spouse"); In re Perry , 131 B.R. 763, 767-68 (Bankr.-16-

D. Mass. 1991) (relying on constructive trust theory to exclude nondebtor spouse's un declared interest in marital property from bankruptcy estate).

On the facts of this case, we conclude that, under Maine law, Davis did ind ee d possess at bankruptcy an equitable interest in the A dvest I RA such as prevented it, by virtue of 11 U.S.C. § 541(d) , from b ecoming at that moment a part of Cox's bankruptcy estate. In reaching this result, we pro ceed nar rowly on the

re medial theory of constructive trust. We need not deci de, an d indeedthink it inappropriate for a federal court to decide without first seeking more specific guidance from Maine's Supreme Judicial Cour t, whether Maine law, broadly applied, gives to non-ow ne r spouses in ordinary circumstances after commen cement 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 wouldhave profound implications for Maine's law o f creditors' rights in a variety of factual situations diff erent from the present. As the issue is one of first impression in Maine, Maine's highest court rather than a federal co urt 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 awardof most of the Advest IRA to Da vis was granted, following a four-daytrial, expressly in order to restore her to t he posit ion-17-

she would have been in had not Cox misapplied marital assets to his

own use in disobedience of t he court's preliminary injunction and the in terim or der -- a pattern of misconduct that commenced well before Cox filed for bankruptcy. Because of Cox's disability an d support needs, att achme nt 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 Dav is of $65,250 from the Advest IRA, a remedy that will have mea ning if Davis had an equitable interest in the Adv est IRA prior to Cox's f iling of his petition for bankruptcy but not otherwis e. On th e present facts, especially given Cox's contemptuous behavior before the filing for bankruptcy, we think a Ma ine cour t, applying Maine law, would in these circumstances rule that, by the time he file d for bankruptc y, Cox h eld the Advest IRA upon a constructive trust for his spouse, Davis, subject to the divorce cour t' s ultimate determination of its ownership.

We begin our analysis by looking at Ma ine law as presentlyreflected in its divorce statute, andin the opinions of its Supreme Judicial Court. Butner v. United States , 440 U.S. 48, 54 (1979) (stating that what con stitutes a legal or equitable interest for bankruptcy purposes turns on state law).7 The 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 propertyis 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).

-18- 1. Maine's Statutory Law

Maine's divorce law embodies major revisions adopted in 1972 by the Maine le gislature. 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 "m ar ital property." See Fournier v. Fournier , 376 A.2d 100, 102 (Me. 1977). Under Maine's statute, the divorce court is directed an d authorized to divide the marital propertyas equity demands, taking into account the various factors set forth in Me. Rev. Stat. Ann. tit. 19-A, § 953(1). 7 T he legislature broadly defined "marital property" to encompass "all propertyacquired by either spouse subsequent to the marriage . . . regardless of whether title is held individually or by the spo use in some fo rm 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-19-

a single enterprise. See Lo ng v. Long , 697 A.2d 1317, 1320 (Me. 1997). With this premise in mind, courts, when determining a "just" divisi on of mari tal property are to take into account not only a spouse's monetary contri b utions but the non-monetary ones made during a marriage such a s being the primary caretaker for the children. See Me. Rev. Stat. Ann. ti t. 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 s tandard preliminary injunction will issue, preventing either spou se , during the course of the divorce proc ee ding, from "transferring, encumbering, selling, or otherwise disposing of the pro perty of either or both of the parties, except in the usual c ourse of business or for the

nec essities 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); Libertyv. Liber ty , 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 andother specified remedies, reflect a clear legislative intent to prevent divorcing spouses from disposing unfairly pendente lite of marital as se ts that, upon divorce, the court must inevitably det er mine belong in equity to one or the other of them. Such-20-

assets, as already noted, include ones tha t are ow ned in the individual name of one or the other spouse. Tha t such sta tutory restrictions come into existence upon the institution of a divorce pr oceeding indicates the Maine legislature's expectation that th e filing of a divorc e case -- an d not just the entry of judgment at the end of the cas e -- wil l 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 de ny to a non-owner spouse any other unstated remedies, including equitabl e 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 andsequester marital assets for the benefit of both spouses until the court couldeffect their just division. The Maine statute goes

on to state that "[t]he remedies provided in this subsecti on fo r enforcement of a preliminary injunction are in addition to any other civil or criminal remedi es ava ilable, including civil contempt of court." Me. Rev. Stat. Ann. tit. 19-A, § 903(3)(C). The statutory language and schem e are th us compatible with -- indeed, strongly sug gest - - legislative approval of supplemental measures that a court m ight find reasonable and necessary to achieve the goal o f safeguarding the marital estate until it can be proper ly divided.-21-

The Supreme Judicial Court of Maine has expressly stated that "the divorce court's power to divide marital propertyi ncludes powers necessaryto 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 i ssue (i.e. the Advest IRA) was apparently exempted by Maine law from at ta chment, although it also formed a part of t he marital property that the Maine court ultimately could and d id award to Davis. Under Maine law, an IRA is exe mpt fromattachment "to the extent reasonably necessary" for the support of a debtor and his dependents. See Me. Rev. Stat. Ann. tit. 14, § 44 22(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 "' reason ably

necess ary' needs of Cox and his family would seem to b e substantial." Cox , 274 B.R. at 31 n.29. Thus, any attempt byDavis to have protecte d her inte rest in the Advest IRA by attaching it wouldlikely have been futile. Davis did attempt dili gently i f unsuccessfully in other ways to protect her interest, by obtaining

a co ur t order tightening the injunction after Cox violated the previously worded one, and by sending a letter to Advest, the entity maintaining the IRA, advisin g it of the pending divorce and the terms of the injunction.-22- Ultimately, the divorce court, after having the benefit

o f a four-day trial during which it reviewed exhausti vely th e circumstances and relationship of the two divorcing spouses, awarded to Davi s a substantial interest in the Advest IRA as compensatio n for Cox's contempt of th e court's preliminary injunction. This awardwas part of the court's compreh ensive d ivision of the total marital property as between the divorcing spouses. In t he cours e of these proce edings t he court was fully informed of Cox's disabilityand support needs as well as Davis's conflicting needs andclaims, and the needs of the ir 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 D avis's detriment, allowing Cox to regain all of the Ad vest IRA notwithstanding h is v iolation of the preliminary injunction and contraryto 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 appli cation under federal bankruptcy law of an exemption for th e debtor's support needs derived from a Maine state statute. Me. Rev. St at . 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 a cc ount the equities as between the divorcing-23-

parties, including Cox's n eeds ins ofar as they could properly be accommodated. That dispos ition, rather than the narrower support provision of § 4422(13)(E), reflectedMaine'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 decidedby a divorce court's judgment, each spouse wholly owns his

or her separately owned property even if forming a par t of th e marital estate. Cox bases this argument on Maine cases interpreting spousal property rights where, ho wever, divorce was neither contemplatednor in process. We do not find those cases dispositive here. As already pointed out, the legislature's provision for

a preliminary injunction and other protecti ve rem edies once a divorce case is filed indicate a legislative intent to constrain the free disposition of marital property during the periodafter divorce proceedings begin. See Plourde v. Plourde , 678 A.2d 1032, 1035-36 (Me. 1996) (commenting that the mandatory preliminary injunction is d esignedto maintain the status quo and prevent the dimin ution o f marital property prior to final judgment ). Thus we reject Cox's suggestion that the freedomof an o wner spouse to deal with separately-ownedmarital assets after commencem en t of divorce proceedings is no more limited than it ever was before. The Maine-24-

case law citedby Cox deals with situations not involving divorce. T hose cases merely hold that where a divorce is not i nvolved , marita l proper ty that is individually held may be disposed of at will by either spouse. See Long , 697 A.2d at 1321 (notin g that "[t]he 'marital property' designation grants no present rights [of the non- owner sp ouse] in the property during the marriage"). In other words, a non-owner spouse does not , absent a divorce situation , a cquire 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, onc e a divo rce proceeding has begun, a non-owner spouse holds an equity interest in marital property held by an owner

s pouse. As already indicated, however, the creation of specifi c protective remedies during the divorce p roceeding reflects a legislative intent that marital assets be sheltered and preserved during that period. Moreover, the aim s of Maine's modernized divorce law are at odds with the view that, during divorce proceedings, a non-owner spouse is without some intere st in the

m ar ital property that is soon to be divided at the end of the proceeding. The Long court noted that pr eviously at common law "marriage didn ot create rights to property held during the marriage, and a spouse couldacquire an interest in the property of the o ther only by dower or courtesy right on the death of the8 While one possible readi ng of the Long court's "on divorce"

phraseologycould be that a non-owner spouse's interest only arises -25- other." 697 A.2dat 1320. To avoid the inequities at common law, the court pointed out that the Maine legislature adoptedthe "shared enterprise or partnership theory " of mar riage. Id. Under this theory, the Court wrote, t he statute provides "a mechanism for identifying marital prop erty, creates for spouses a right to an equitable share of m arital property, and empowers the court to equitablydivide the property." Id. at 1321. The court went on to discuss the status of property held in the name of one spouse.

Thus p ropert y held in the name of one spouse m ay s till be treated as "marital property." The "marital property" d esignation grants no present rights in the property during the marriage but, on div orce , the court must divide all marital property "as the court deems just" granting an equitable shar e to each spouse. Id. (emphasis supplied); see also Szelenyi v. Miller , 564 A.2d768, 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 marri ed p ersons from owning property separately during marriage and di sposing of it in anyfashion either of them may choose, assuming neither a separation

nor a divorce intervenes .") (emphasis supplied) (citi ng In re Questions Submittedby the United States District Court in Imel v. United States , 517 P.2d 1331, 1335 (Colo. 1974)). 8up on the issuance of the final judgment granting divorce a n d

dividi ng 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 equit a ble distribution" upon divorce. Salenius v. Salenius , 654 A.2d 426, 429 (Me. 1995) . It logically follows that after a divorce proceeding has commenced the Main e courts will afford such reasonable protection as may be required to

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

are not thwarted by the owner spouse prior to the time the court can issue its decree d ividing the property. According to the Supreme Judicial Court of Maine, the Maine court s "are v ested with the general power as well as duty to deal with all m arita l property." Bryant v. Bryant , 411 A.2d 391, 393 (Me. 1980). 3. Equitable Relief

In the present case, none of the legal remedies specif ic allyprovided under Maine law sufficed to have prevented Davis's interest in the IRA from bei ng included in her husband's ba n kruptcyestate. While the mandatory preliminary injunction forbadCox'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 attemptedin advance of bankruptcy to attach the Advest IRAthat she could have done so given the statutory exemp tion now claimedby Co x. See supra . In the bankruptcy court's view, this-27-

absence o f any express legal remedy confirms a legislative desire to leave Davis without rec ourse . 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 o f the equities, that, in equity, this marital asset be longs, i n large part, to her. Ironically, the husband's creditors will receive no benefit from this outcome; ind ee d, they will be worse off in that their claims will now be dilut ed by Davis's. Only Cox personally w ill benefit, winning in bankruptcy what he lost in the divorce court.

We do not believe that either Ma ine law or federal bankruptcylaw, 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 mayassume that the divorce court here acted properly and within its authorityin awarding the lion's share of the Advest IRA to Davis,

no appeal fromits judgment having been taken. Moreover, the award

was r end ered specifically to remedy Cox's pre-bankruptcy contempt of the court's statutory injunction. For that a ward to be

e ssential lynullified, leaving the Advest IRA in the hands of Davis's ex-spouse, is to reject the obvious intentions of the Maine9 As previously noted, while Maine's own attachment statute and

ultimatelythe bankruptcy statute exempt property reasonably necessaryfor the owner's support, th e Ma ine 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 andDavis, 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 equitabl e divi sion here be dispositive as between the divorcing spouses. 9

To be sure, the issu e i s ultimately one of federal bankruptcylaw, but federal bankrupt cy law makes the question of what propertyto include in Cox's bankruptcy estate dependent upon state law, and we think a Maine court w ould rule, on these facts, that, prior to ban kruptcy, 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 a vail herself in a timely fashion of an avai lable legal attachment remedy that could have shelteredher interest in the marital property from in clusion in Cox's bankruptcy estate. Nor is it a case involving credi to r interests other than such as ma y be said to exist between the divorcing couple themselves, Davis andCox. The question under the federal bankru ptcy 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 al l 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 heldthe Advest IRAupon 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 equi table in terest sufficedunder section 541(d) of the Bankruptcy Code to remove the Advest IRA from Co x's ba nkruptcy estate, subject to final disposition by the Maine divorc e court. It is commonplace that where lega l remedi es 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 conceivablyachieve some measure of future relief if, for example, the bankruptc y cou rt 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 bankruptc y arena and Cox's intransigence, seems slight at best. We are far less optimistic than our dissenting colleague that relitigation of the divorce eq uities in a federal bankruptcy tribunal would provide succor to Davis.

Constructive and resulting trusts are traditional constructs utilized by courts, incl ud ing those in Maine, to avoid unjust enrichment an d other forms of injustice that would result-30-

fromallowing the legal ow ner to ben efit from the property. See Thomas v. Fales , 577 A.2d 1181, 1183 (Me. 1990); see also In re Questions Submitted bythe United States District Court in Imel v. UnitedStates , 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 u ltimatel y to fr ustrate the decree of the Maine divorce court and bene fit Co x exclusivelyat the expense of his former spouse and in d erogation

o f the divorce decree, is the very sort of inequity su ch device s have been utilized to prevent. Here, following Cox's violation of the statutory injunction, the Maine cour t issuedon 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 decisi on hin ges, 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 t o Davis causedby that misconduct, our decision can be said to rest upon the remedial the or y of constructive trust. See Restatement of Res titu tion § 160 et seq. (1937). But the concept of resulting trust is analogous also.-31- The creation of a resulting trust protects tho se w ho contribute toward the acquisition of property against the prospect of losing it to a second party who took title i n the transaction. See Restatement (Second) of Trusts § 440 (1959). The partyfor whom the res ulting trust is created need not have made a moneta r y contribution to acquire the property -- any contribution of services

or property may entitle her to a beneficial inte rest in the property. See id. at § 455. T hus, it is appropriate to find a trust analogous to a resultin g trust in favor of a spouse who may subseq ue ntlybe found by the divorce court to have contributed

mo ney, pro perty, or services during the course of a marriage and,

as a consequence, to be eq uitably entitled to receive all or part of the property upon division. Ba ke r , 444 A.2d at 985; see g enerallyRestatement (Second) of Trusts §§ 442-43 & 455 (1959) . The Supreme Judic ial Cour t 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.2d9, 12 n.7 ( Me. 1979 ); see generally Restatement (Second) of Trusts § 440 et seq. (19 59). That i t would be willing to protect

a spouse's interest in marital property in these circumstances seems only reasonable. In anyevent, Cox's contemptuous misuse of marital

ass ets p rior to bankruptcy, including those from the Advest IRA itself, in defiance of the court's injunction, warrants the finding10 See, e .g. , Whit e 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 pro pe rtyinterest 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 separatelytitled."); Roberge , 188 B.R. at 369 ("O nce a [divorce action is filed] the right to equit able 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 whateve r kind - - an interest s uf ficient to block transfer to a subsequent bankruptcy trustee of property the latter individually owns . 10 Suc h 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. C ourts have held that partnership property itself does not become pr operty of an individual partner's bankruptcy estate. See McGahr en v. Gray( In11 Our 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 up on cer tification or otherwise rather than attempted by a federal court.

-33- re Weis s ), 1 11 F.3d 1159, 1166 (4th Cir.), cert. denied , 522 U.S. 950 (19 97). While the debtor's interest in the partnership is includedin the estate, the assets held by th e partne rship itself

are not. Id. If these principles were to be applied to the current case, only Cox's undeclared interest in marital prop er ty 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 claimto have held an undeclared beneficial interest in the property awardedby 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 t he marital property, was ex cl uded 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 es tate u nder Massachusetts law and§ 541(d ) a spouse's beneficial interest in marital property foundto b e held i n 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 an d div ide 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 Ad vest IRAat 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 p ropert y. Davis's beneficial interest to the extent ultimately awardedto 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 armpowers under 11 U.S.C. § 54412 In so stating we do not mean to indicate our view on this

separate issue one way or the other.

13 See , 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 divo rce d oes 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 superi or 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. 19 92) (concluding that non-debtor's unrecorded equita ble interest in marital property cut-off by trustee's strong arm powers); In re Vann , 113 B.R. 704, 706 (Bankr. D. Col o. 199 0) (stating that until a spouse takes affirmative action t o perf ect 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 distinguishedfrom those cases in which the courts have concludedthat the filing of a bankruptcy petition c ut off t he unrecordedequitable 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 court14 Of 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 representedretroactive SSDI payments paid to Davis on b ehalf of the children and was awarded to Davis for that purpose, the balance of the escrow accou nt, $1,800, was also to be applied toward the Key Bank debt.

15 Dav is argue s on appeal that Cox does not have standing to appeal the bankruptcy court's judgment regarding the esc row -36- orderedthat funds hel d in the Lawrason Account and the Ridge Account be used to pay certain tax debts and a joint mor tgage

ser vicedby Key Bank. 14 In the proceedings below, the tru ste e

o pposedimplementation of the divorce judgment to the extent tha t it ordered funds from the Lawrason Account to pay pr e- petition creditors. The trustee arguedthat the Lawrason Account should be turnedover to the estate and used to pay the creditors accor ding to the dis tribu tion scheme set forth in the Bankruptcy Code. Cox also opposed the implement ation of the divorce judgment as it relatedto the escrow accounts. Unlike the trus tee, how ever, Cox didnot contendthat the escrow account could not be used to pay the tax debts. He arguedo nly that Key Bank, as a general, unsecured creditor, should not be paidoutside 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 ju dgment . 15 The bankruptcy courtaccounts. 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, 117-1 8 (1st Cir. 2001). A"person aggrieved" is one whose pecuniaryinterests are directly andadverselyaffected by the order. Id. at 118. Cox argues that he has a direct pecuniary interest in the outcome of the appe a l because the majority of the funds held in escrow are exempt assets and thus woul d 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 commencemen t o f the bankruptcy case are closely int ertw ined. 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- reasonedthat as of the petition date, Cox's interest in the funds

was a "contingent one, dep ending on the divorce court's determination regarding thei r disposition." According to the bankruptcycourt, the state court order for escrow of the funds held by Lawr ason and Ridge placed the funds in custodia legis a n d "operated, effectively, as an attachm ent 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 heldby order of the court and thus what interest passedt o the bankruptcyestate, we must look to Maine law. The bankruptcy court reliedon Maine law regarding court-appointed custodians to support16 Moreover, 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 c ase 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 dec is ion. Under Maine law, when a court in equity appoints a receiver, the title to the property vests in the receiver and is heldin custodia legis until it is disposed o f by the receiver in compliance with an order of that court . See Hazzardv. Westview Golf Club, Inc. , 217 A.2d 217, 223 (Me. 1966); Cobb v. Camden Savs. Bank , 76 A. 667 (Me. 1909); Littlefieldv. Maine Cent. R.R. Co. , 71 A. 657, 660 (Me. 1908). This includes money collected by an officer of the court. See Hardyv. Tilton , 68 Me. 195 (1878). Title vests in the receiver upon his o r her appointment. Cobb , 76 A. 667 (stating "the decree of appointment ipso facto v ests 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 p re vent Cox from continuing to dissipate the funds in violation of a court order. When the state court directe d the atto rneys to place the

mone y 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 fun ds and title passed to the attorneys as officers of the court. 16of the property pursuant to § 543.

-39- As a result, the funds held in custodia legis did not pass into the bankruptcy e state up on the filing of the bankruptcy petition. As notedby the bankruptcy court, at the commencement of t he bankruptcy proceeding, Cox held just a contingent interest t o 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 couldnot h ave been "effectivelyattached" as the bankruptcy court concluded because the majorityof the funds were exempt from attachment under Maine law. A s a result, Cox argues, the exempt property in the es crow fund s passedunenc umbered into the bankruptcy estate when he filed his petition. Cox's argument is flawed. While under Maine law certain propertyis exempt from attachment, 14 M.R.S.A. § 4422, the property at issue here was n ot attached. It is true that the bankruptcy court said the property was "effectively attached" w hen it was place din custodia legis , but it was not actually attached . Th e bankr uptcy court was merely analogizing property held in custodia legis for the benefit and prote ction 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 custod ia legis divested Cox of-40-

legal title and left him with only a conti ngent ri ght to the property. D. Conclusion

The bankruptcy court's order that the escrow funds could be d isbursed a s stated in the divorce judgment is affirmed . The bankruptcycourt'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.17 See also , e.g. , Robbins v. Robbins ( In re Robbins ), 964 F.2d

342, 346 (4th Cir. 1992) (noting that debtor-spouse's separatelyheldpr oper ty 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. 6 1, 80-81 (Bankr. D.N.J. 1999); In re Abma , 215 B.R. 148, 15 2 (Bankr. N.D. Ill. 1997 ); In re P almer , 78 B.R. 402, 406 (Bankr. E.D.N.Y. 1987). -41-

CYR, Senior Circuit Judge, dissenting . After apparently accept ing t he bankruptcy court's cogent interpretation of the applicable legal p rinciples, see In re Cox , 274 B.R. 13, 26-30 (Bankr. D. Me . 200 2), 17 the majority predicates its reversal upon the contention that the particular fac ts of th is case warrant extraordinary equitable r elief - 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 ten uous pre diction of Maine law is improvident and its

recourse to equi tab le relief entirely unnecessary, I respectfully dissent. As the majority must concede, no Maine case law ei ther explicitlyor implicitly holds that a cognizable legal or equitable propertyinterest in a marital asset - held exclusively in the name of one spouse - vests in both spouses instanter simply u pon the filing of a divorc e pe tition, 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.18 T he majority heavily relies upon such cases as Long , which

ambiguouslyadvert to the accrual of present rights in the marital estate "on divorce." While it may be arguable that this phrase wouldpermit 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 constr uction 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, 1 321 (Me. 1997) ("The 'marital property' designa tion grants no present rights in the property during the marriage .") (emphasis added). 18

The majoritypredicates its construction upon a presumed legislative intent - mot ivating the 1972 amendment to the Maine divorce statute - to accord divorcing spouses "more" protection from divestments of property j ointl y acquired during the marriage. Although this is so, the operative question is how f ar the Mai ne Legislatur e intend ed to go in according "more" protections. The pre-1972 Maine statute accorded ov erwhelming weight to a single, formalistic criterion - viz. , which spouse is the namedtitleholder of the p roperty at issue - and the amended divorce statute undeniablyaccords more protection to the non-titleholder spouse by

even including such separately-held property in the marital estate, andby directi ng the divorce court to distribute separately-held propertyto either spouse as well, based upon its consideration of

a panoply of equitable considerations aside from the recordtitle.-43- I would submit, however, that the majority proceeds upon extremelyunstab le ground in extrapolating fromthe nebulous legislative purpose, in order to bolster the "partnership" or "joint

e nterprise" theory of marriage, to the majority's thesis that th e legislature must have intended other - yet more expansive - reforms. Cf. , e.g. , Lyerlyv. IRS , 235 B.R. 40 1, 40 4 (W.D.N.C. 1998) ("The [North Carolina] legislature's intent . . . was to creat e a r ight to equitable distribution of the marital property, w hich had not existedup to that time, and to make that right vest at the time of filing for divorce. [The amended divorce statut e] did n ot create anyvested rights in particular marital property ; it created a right to the equit able dis tribution of that property, whatever a court should determine that property is.") (emphasis added).

The holdings in those non-Maine decisions whic h are characterizedby th e majority as lending "significant support" to its approach - e.g ., Walsto n v. Wal ston , 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 com plainant has or will have no19 Davis 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 "reasonablynecessary for the support of the de btor") , 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 Co x was enjoined from transferring the Advest IRAfunds except for ordinary and necessary personal expenses, and Cox violated the injunction, Davis could have initiated a civil con tempt proceeding against Cox, or requestedthe divorce court t o adju st the property settlement to compensate Davis for Cox’s dissipation of the IRA. She elected to avail herself of the latter remedy.

-44- " adequate " remedy at law . See Infusaid Co rp. 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 cons tr uctive trust. As the Bankruptcy Code explicitly contemplates an orderly succession of remedies in th ese sort s 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 unvestedrig hts 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 the20 Basedupon a current assessment of the condition of th e

estate, the trustee predicted that the dividend could approximate ten-percent, which would result in a $6,525 recovery for Davis. -45- 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 propertywere cut off by the bankruptcy filing.") ( emphasis added), whereas she retains a $65,250 unsecuredclai m against the Cox bankrupt estate. See Davis v. Cox , 274 B.R. 13, 23 (Bankr. D. Me. 2002). Thus, Dav is may share pro rata in any dividendavailable to Cox's unsecuredcreditors. Nonetheless, the majorityimplicitly concludes that Davis can recover but a pittance,

a speculative prediction at best given t he mercurial nature of bankruptcyproceedings 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 c oul d 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 wouldre main presumptively non-dischargeable in bankruptcy. Bankruptcy Code § 523(a)(15) excepts from discharge any debt

not of the k in d described in [§ 523(a)](5) that is incurred by the debtor in the course of a divorce or s eparation or in connection with a separation agreement, divorce decree or ot her order of a court of record, a determination made in accordance with State or-46- territorial law bya governmental unit unless

– (A) the debtor does not hav e 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, preservat ion, and opera tio n of such business; or (B) discharging such debt would result in a benefit to the debtor that outweighs the detr imental conse quences t o 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 obta in a discharge of the property- settleme nt claim held by Davis. See In re Lawrence , 237 B.R. 61, 83 (Bankr. D.N.J. 1 99 9). The "ability to pay" factor in BankruptcyCode § 523(a)(15)(A) enables the bankruptcy court to consider the present andfuture prospects for repayment fromCox's expendable property, in cluding any assets, previously acquired in contravention of the divorce court injunction, which remain in Cox's possession, see s upra note 3, or from Cox's disposable income, including future wages. See Feldmann v. Feldmann ( In re Feldmann ), 2 20 B.R. 138, 145-46 (Bankr. N.D. Ga. 1998). Were Cox unable t o21 Moreover, even assuming Davis were unable to prevail under

§ 523(a)(15), she couldpursue a non-dischargeability ruling under § 523(a)(6) (exc ept ing from discharge any debt "for willful and malicious injury by the debtor"), based upon Cox's prior violations o f the divorce court injunction. See Siemer v. Nang le ( In r e 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 wouldremain undischarged, no twithstanding a general discharge in bankruptcy. See Bowden v. Grindle , 675 A.2d 968, 972-73 n.2 (Me. 1996) (noting that one e le ment of "unjust enrichment" claim is inequitable retention of b enefit " without payment ") (emphasis added). Consequently, the significance of t his po tential 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 requirem ents as underg i rdthe state-law remedies of constructive and resulting trusts, in many respects paralleli n g the "economic misconduct" inqu irymandated under the Maine divorce statute's scheme fo r equitable distribution. See supra note 3. Thus, assuming arguendo that Cox deliberately engaged in financial shenanigans with t he Advest IRA, he cannot anticip ate an y considerable windfall in bankruptcy. 21

The majority proposes that the bankruptcy court ruling effectivelynullifies the div orce d ecree, and offends the wellacceptedprinciples that (i) state law n ormally 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 bankru pt cy court did defer to the state court's expertise when it granted th e first motion to lift the automatic stay - filed by Da vi s - while at the same time explicitly stating that "relief fromthe stay is not grantedto implement any property settlement absent further order of this court." (Emphasis added.)

Just as state courts possess special com petenc e in determining equitable marital-property distributions, so t oo it cannot be gainsaidthat 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 q uest ions presentlybefore us: whether Davis acquired an equitable property interest in the Advest IRA at the ti me she filed for divorce, or whether the equities in this case mandated that Cox hold the IRA in constructive or resultin g trust for Davis. Davis did not appeal fromthe divorce judgmen t 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' r espe ctive distributive rights, the Bankruptcy Code gove rn s 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 b ankruptcy petition very frequently entails unfortunate consequences for t he mo st innocent of parties. Plainly and understandably, then, Davis would prefer the more immediate, convenient, and predictable remed y affordedby a constructive or resulting trust. Yet somewhat lesser alternative remedies at law - even if me rely ade quate - take precedence over equitable remedies, see Infusaid Corp. , 739 F.2d at 668, lest equitable relief become mere redundant s urplusage. Accordingly, once Congress explicitly presc ri bes legal remedies

un der the Bankruptcy Code for spouses with property settlement claims, courts must recognize that such set tlements presumptively

are to be treated as "claims" in bankruptcy. Consequent ly, at a minimumthe 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 reme dies. A t that juncture, the bankruptcy court can then a ddress the issue competently.

For the foregoing reasons, I would hold that the Cox IRA beca me part of the bankrupt estate prior to the Davis property settlement. See s upra note 1. As I believe the bankruptcy court decision should be affirmed, I respectfully dissent.