Opinion ID: 516232
Heading Depth: 2
Heading Rank: 2

Heading: equitable interest as property of the estate

Text: 13 On appeal, the Trustee also argues that it was error for the lower courts not to find that the estate had an equitable interest in the proceeds independent of any agreement of the parties. Initially, we note that the Trustee pursued recovery solely on the theory that subsequent negotiations and the conduct of the parties established that an agreement had in fact been reached whereby Rice would either hold the proceeds in trust, or as Northwest's agent. 14 The overriding consideration in bankruptcy, however, is that equitable principles govern. Matter of Tucson Yellow Cab, 789 F.2d 701, 704 (9th Cir.1986) (citing Bank of Marin v. England, 385 U.S. 99, 103, 87 S.Ct. 274, 277, 17 L.Ed.2d 197 (1966)). Equitable principles must be directed toward the care and preservation of the estate. See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 527, 104 S.Ct. 1188, 1196, 79 L.Ed.2d 482 (1984). Because we believe that the estate does have an equitable interest in some of the proceeds held by Rice, we now define that interest. 15 In determining whether Northwest has an equitable interest in any of the money collected by Rice through issuance of Northwest's money orders, we look to state law to define the interest. 4 Collier p 547.03, at 547-22. We will assume that the parties still intend Texas law to govern as they did when the November 1984, agreement was in effect. 16 In the absence of a contract governing the subject matter (here, the proceeds of uninsured money orders) a plaintiff may recover under the doctrine of quantum meruit where the plaintiff has (1) provided valuable services or materials; (2) the services and materials are accepted; and (3) the services and materials are accepted under such circumstances as to reasonably notify the recipient that the plaintiff intended to be paid. See Corpus Christi v. S.S. Smith & Sons Masonry, 736 S.W.2d 247, 248 (Tex.App.1987). 17 The theory of recovery is one of implied or quasi contract. It is based on a promise implied by law to pay for benefits rendered, knowingly accepted, and retained against the principles of equity and good conscience. See Allen v. Berrey, 645 S.W.2d 550, 553 (Tex.App.1982). The measure of recovery is, as indicated, referred to as quantum meruit, see Knebel v. Capital Nat. Bk., 505 S.W.2d 628, 631-32 (Tex.Civ.App.), aff'd in part, 518 S.W.2d 795 (Tex.Sup.Ct.1974), and is, in practice, reimbursement for unjust enrichment that stems from failure to make restitution of the benefits received under the circumstances. Allen, 645 S.W.2d at 553. 18 While we recognize that the money orders and the proceeds of their sale may be neither goods nor services, we believe that under Texas law, Northwest has an interest in at least some of the proceeds presently held by Rice. A person who has been unjustly enriched at the expense of another is required to make restitution to the other. Restatement of Restitution Sec. 1, at 12 (1937). At least one Texas court has adopted this Restatement section. See Muller v. Nelson, Sherrod & Carter, 563 S.W.2d 697, 701 (Tex.Civ.App.1978). 19 Unjust enrichment occurs where there is a failure to make restitution of benefits received under such circumstances as to give rise to [an] implied or quasi-contract to repay. Allen, 645 S.W.2d at 553 (emphasis added). Recovery is permitted in quantum meruit to prevent unjust enrichment. Angroson, Inc. v. Independent Communications, 711 S.W.2d 268, 273 (Tex.App.1986). The measure of recovery is reimbursement for unjust enrichment that stems from failure to make restitution of the benefits received under the circumstances. Allen, 645 S.W.2d at 553. Texas courts find a quasi-contract where a claimant has shown the right to recover in quantum meruit. See id. at 553. 20 We believe that there is unjust enrichment in allowing Rice to retain all monies held. Rice has profited. It knew that Northwest was supplying money orders with the intent of being paid, and in fact it did pay the face value and a fee to Northwest on the uninsured money orders for over a year. 21 We understand, as earlier indicated, that the money orders themselves may be neither materials nor services. We are not, however, addressing restitution based on the face value of the money orders. Rather, we are considering the benefits unjustly retained by Rice. Thus, we are confident that Texas courts would allow a claim in this case. Cf. Goswami v. Metropolitan Sav. & Loan, 751 S.W.2d 487, 491 (Tex.Sup.Ct.1988) (pleading that alleged payment of money may state a claim in quantum meruit); Montes v. Naismith & Trevino Constr. Co., 459 S.W.2d 691, 692-94 (Tex.Civ.App.1970) (restitution ordered in the amount of the dollar value of materials supplied). 22 As other bankruptcy cases have indicated, see Matter of Tucson Yellow Cab, 789 F.2d 701, 704 (9th Cir.1986), one permissible measure of reasonable value is the value that the parties established in their last valid agreement. Here, that would be the amount of the interest collected on proceeds withheld beyond the date upon which the November agreement required remittance, plus the agreed upon fee of 11 cents per order. 23 On the issue of the refunded proceeds, however, no basis appears upon which such proceeds can be ordered turned over. Because Rice has refunded that amount, it cannot be said to be unjustly enriched. As to the proceeds not yet paid out, they should now be remitted to the estate except to the extent that Rice can clearly establish obligations to make further refunds during the life of the money orders. This is because retention in the absence of refunding unjustly enriches Rice, and because the estate apparently has claims against it from the holders of these unredeemed money orders.