Opinion ID: 2737436
Heading Depth: 2
Heading Rank: 3

Heading: Proceedings in the present case

Text: ATN filed the instant adversary proceeding in the Bankruptcy Court shortly after Allen filed his Chapter 7 petition. ATN sought an order “determining that the ATN/Allen Litigation [in the Florida Bankruptcy Court] was not stayed pursuant to [Allen’s] bankruptcy filing because ATN was seeking to collect its own estate assets and not those of [Allen];” or, in the alternative, “granting ATN relief from the automatic stay to continue with the ATN/Allen Litigation and collection of the Judgment and waiving the 14 day stay of effectiveness of order.” App. at 288. ATN maintains that the funds at issue should not be subject to the automatic stay 3 in Allen’s bankruptcy case pursuant to § 3 The automatic stay provisions of the Bankruptcy Code provide that: [A] petition filed under section 301, 302, or 303 of this title . . . operates as a stay, applicable to all entities, of— 7 362(d) of the Code, which allows a court to grant relief from the stay “for cause.” 11 U.S.C. § 362(d)(1). (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title; (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate . . . 11 U.S.C. § 362. 8 Following a hearing, the Bankruptcy Court denied ATN’s motions by concluding that: (1) any property in the Cook Islands trusts was not property of ATN’s bankruptcy estate pursuant to 11 U.S.C. § 541, 4 but was instead property of Allen’s estate and thus subject to the automatic stay upon Allen’s bankruptcy filing; and (2) the funds were not held by Allen in constructive trust for the benefit of ATN under New Jersey law. As is relevant here, the Bankruptcy Court concluded that the funds did not fit within the Bankruptcy Code’s definition of “property of the estate” because ATN— despite having avoided the transfer—did not actually recover tangible possession of the funds under § 550. Absent actual tangible recovery, Allen had a superior interest in the funds, which were thus the property of his estate (not ATN’s) and subject to the automatic stay. The Bankruptcy Court entered its opinion on March 2, 2012, and ATN appealed. On July 19, 2013, the District Court affirmed for essentially the same reasons. It also rejected ATN’s argument that the New Jersey Bankruptcy and District Courts (the “New Jersey Federal Courts”) lacked jurisdiction to hear the adversary proceeding. ATN filed a timely notice of appeal to this Court on August 19, 2013. On October 11, 2013, the Bankruptcy Court entered an order discharging Allen’s debts pursuant to 11 U.S.C. § 727. 4 Section 541 of the Bankruptcy Code provides, in relevant part, that “[t]he commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held: . . . (3) Any interest in property that the trustee recovers under section . . . 550 . . . of this title.” 11 U.S.C. § 541(a). 9