Opinion ID: 543813
Heading Depth: 3
Heading Rank: 3

Heading: The DOE's Cross-Appeal

Text: 27 In a cross-appeal, the DOE argues that the constructive trust fund should be increased by $54,690.09. It contends that the bankruptcy court erroneously approved that amount of expenditures out of the fund for administrative fees. We agree. 28 As the district court noted, the $54,690.09 was spent before DOE's constructive trust was approved. 76 B.R. 818. Thus, the district court concluded that it was within the bankruptcy court's discretion to allow the expenditure of that amount for administrative expenses. See 11 U.S.C. Sec. 503(b)(1)(A) (allows for payment of administrative expenses incurred during bankruptcy after notice and hearing). However, these constructive trust funds were never part of the bankruptcy estate, and therefore could not be used by the trustee to pay administrative expenses. There is some dispute conceptually whether a constructive trust arises at the time of the wrongful act or whether it arises only at the time it is so declared by the court, but then applied retroactively to the time of the wrongful act. Compare V A. Scott, The Law of Trusts Sec. 462.4 (3d ed. 1967) (constructive trust arises at the time of the wrongful act) with G. Bogert, Trusts and Trustees, Sec. 472 (2d ed. rev. 1978) (constructive trust arises only after it is imposed by a court, but after it is imposed, the trust relates back to the time of the wrongful act). However, we need not resolve that dispute because under either theory, the effective date of the constructive trust is the date the wrongful act occurred. The bankruptcy estate expressly does not include any equitable interest in [p]roperty in which the debtor holds, as of the commencement of the case, only legal title. 11 U.S.C. Sec. 541(d); see also In re Mahan & Rowsey, Inc., 817 F.2d at 684; cf. Begier v. Internal Revenue Serv., --- U.S. ----, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990) (trust-fund tax payments made from debtor's general accounts prior to filing bankruptcy petition are not avoidable as preferences because the payments involved trust property, which would not have been part of the bankruptcy estate). Thus, we remand to the district court for an order to have the trust fund reimbursed in the amount of $54,690.09 from whatever source is determined to be most appropriate and in accordance with law.