In re Kyle
| Decision Date | 14 December 1990 |
| Docket Number | Adv. No. 90-0161-BKC-AJC-A.,Bankruptcy No. 87-02713-BKC-AJC |
| Parties | In re Osceola Cabot KYLE, Debtor. Osceola Cabot KYLE, Plaintiff, v. Daniel BUDZINSKI, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
D. Jean Ryan, Miami, Fla., for debtor/plaintiff.
William M. Tuttle, II, Catlin, Saxon, Tuttle & Evans, Miami, Fla., for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
THIS CAUSE came on for trial before the Court on August 14, September 20, and October 23, 1990. The Court has examined the evidence and considered the testimony presented, observed the candor and demeanor of the witnesses, considered the arguments of counsel, and being otherwise duly advised in the premises, does hereby make the following findings of fact and conclusions of law:
The plaintiff is a debtor before this Court by virtue of a voluntary petition filed under Chapter 11 on July 30, 1987; which case was later converted to Chapter 7 liquidation on November 23, 1988. During the Chapter 11 proceedings, the debtor was the title owner of an approximate 17½ acre parcel of real estate upon which the second mortgage was in arrears. This property was listed in the debtor's schedules as his homestead property.
The debtor, during the Chapter 11 case, attempted to refinance the property, or to sell a portion of same to satisfy the outstanding indebtedness. This Court finally allowed a one acre parcel, containing the debtor's residence and veterinary clinic, to be severed from the total parcel, and entered an order approving the sale of this specific one acre to the defendant for $35,000.00. The defendant paid $33,000.00 of the purchase price. The remaining balance of $2,000.00, plus other surveying and closing costs were paid by other parties.
Pursuant to the order approving the sale, the second mortgagee was entitled to the issuance of a certificate of title on the remaining 16½ acres. Title to the approximate one acre parcel passed to the defendant through a Special Warranty Deed, which was properly recorded. The debtor has remained in possession of the property and continued to reside on the property up to, and including, the present date.
The plaintiff and defendant essentially agree as to the facts as set forth above. It is from this point that the positions of the parties depart with both parties now disputing the rightful ownership of the subject one acre parcel of property.
It is the plaintiff's position that there was an oral agreement that the defendant would purchase this one acre parcel of property on behalf of the debtor and that the property would be reconveyed to the debtor when he had the financial ability to reimburse the defendant. It is further alleged by the debtor that despite repeated requests and demands for same, the defendant has refused to reconvey the property, per the agreement, but has demanded an amount far in excess of the agreement for the return of the property. Accordingly, it is the debtor's position that a constructive trust should be imposed on the property for the debtor's benefit. The debtor has also asserted other claims for specific performance and relief from judgment based upon fraud.
The defendant asserts that there never was any such oral agreement, and that the complaint is without merit.
It's a fact of life that a beautiful ripe peach or apple, with the passage of time turns rotten. So, in this case, a beautiful, benevolent act by the defendant, and the generous helping of a friend to save his home, with the passage of time turned rotten and corrupt, with the benefactor turning into an over-reacher.
It is well established that the bankruptcy court must look to state law to determine if a constructive trust comes into existence. City National Bank of Miami v. General Coffee Corporation (In re General Coffee Corporation), 64 B.R. 702 (S.D.Fla.1986), aff'd 828 F.2d 699 (11th Cir.1987), cert. denied 485 U.S. 1007, 108 S.Ct. 1470, 99 L.Ed.2d 699 (1988), citing Matter of Esgro, Inc., 645 F.2d 794 (9th Cir.1981) and In re Shepard, 29 B.R. 928 (Bankr.M.D.Fla. 1983).
Under Florida law a constructive trust is defined as a remedial devise with dual objectives — to restore property to its rightful owner and to prevent unjust enrichment. Abreu v. Amaro, 534 So.2d 771 (Fla. 3rd D.C.A.1988). Furthermore, it is clear that a constructive trust can be proved by parol evidence under a clear and convincing standard. The elements to establish a constructive trust are: (1) a confidential relationship; (2) by which one acquires an advantage; (3) which one should not, in good equity and good conscience, retain. Williams v. Department of HRS, 522 So.2d 951 (Fla. 1st D.C.A.1988). It has also been established, under Florida law, that the trust is created when the fraud occurs and not when the Court decrees the trust. In re General Coffee, supra., 64 B.R. 702 at 704.
The long-standing authority of Thomas v. Goodbread, 78 Fla. 278, 82 So. 835 (1919), (wherein the court held that where a party buys land under a prior fraudulent promise to the owner that he will take title at a judicial sale and hold the property for the benefit of such owner, and he refuses to abide by his oral promise and retains the property as his own) establishes that equity will relieve the defrauded owner by impressing a constructive trust on the property for his benefit. Additionally, this case holds that the statute of fraud defense is inapplicable to the imposition of constructive trust. Goodbread, supra., 82 So. at 837.
Fortunately, for the debtor, who was at the time unable to fend for himself, sufficient clear, strong and unequivocal evidence exists to establish a constructive trust in favor of the debtor against that of the defendant. The Court, in reviewing the testamentary evidence finds that Mrs. Griffith was credible; Mrs. Bridges was credible; and that the debtor's memory is very poor. The Court further finds that the defendant was not credible, nor forthcoming. Further, the testimony of the defendant's prior counsel was credible, but added nothing, and the testimony of Kay Canington was credible, as was the testimony of Thomas Householder.
Based upon a thorough review of the evidence and testimony presented, the Court finds that the defendant does not have clean hands. He put up $33,000 towards the purchase price, and yet has made no effort to do equity and repay the balance of the purchase price, which he did not pay. Nowhere in the pleadings or in this proceeding was any such offer made.
Furthermore, the defendant may have jeopardized his entire cash advance by having demanded $120,000.00 for the property, which exceeds the allowable interest rate on a loan under Florida usury law.
The defendant's argument that the balance of purchase funds due were paid by the debtor's own funds, only causes this Court to find contrary to the defendant's position. If the debtor had no interest in the property, and if the property was being sold from the bankruptcy estate to the defendant, there would be no...
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