In re Vogel, Bankruptcy No. 80-01644-BKC-SMW
| Decision Date | 01 February 1982 |
| Docket Number | Bankruptcy No. 80-01644-BKC-SMW,Adv. No. 81-0372-BKC-SMW-A. |
| Citation | 16 BR 670 |
| Parties | In re Dale Irene VOGEL, Debtor. James B. McCRACKEN, Trustee, Plaintiff, v. MANUFACTURERS HANOVER TRUST COMPANY, and George Dines, as Trustees of the Trust created for the benefit of Dale Irene Jacobs, n/k/a Dale Irene Vogel, Dale Irene Vogel and Chase Manhattan Bank, N.A., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
Reggie D. Sanger, Fort Lauderdale, Fla., for the bankruptcy trustee.
Irving Wolff, Miami, Fla., for debtor.
Barton D. Ford, Jackson Heights, N.Y., for Manufacturers Hanover Trust Co. and George Dines.
Lewis Kanner, Miami, Fla., for Chase Manhattan Bank.
Garrison du P. Lickle, New York City, for Manufacturers Hanover Trust Co.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
THIS CAUSE coming on to be heard upon a Complaint seeking a Declaratory Judgment and Recovery of Funds filed herein and the Court, having heard the testimony and examined the evidence presented; observed the candor and demeanor of the witnesses; considered the arguments of counsel and being otherwise fully advised in the premises, does hereby make the following findings of fact and conclusions of law:
The defendant/debtor, Dale Irene Vogel, (hereinafter referred to as the debtor) is a beneficiary of a trust created under the will of her father, Henry Feinberg, who died on October 19, 1971 (hereinafter referred to as the Feinberg trust). Under the terms of the trust, the defendant/co-trustees, the Manufacturer's Hanover Trust Company and George Dines, (hereinafter referred to as trustees), are directed to pay to the debtor, without discretion, the following sums:
a. All income from the principal in quarterly installments.
b. For the first 25 years after death, payment of $10,000.00 per year in semi-annual payments.
c. On the tenth anniversary date of death, payment of $50,000.00.
d. On the twentieth anniversary of death, payment of $50,000.00.
e. On the twenty-fifth anniversary of death, payment of the balance of the principal or $100,000.00, whichever is less.
By the terms of the Feinberg trust, any sums not payed to the debtor as directed above shall be divided equally among her children thus creating contingent beneficiaries with an interest in the trust. Under a stipulation of facts filed herein, the parties agreed that regular payments from the Feinberg trust ceased on or about February 22, 1980, when the Manufacturers Hanover Trust Company received a "Restraining Notice to Garnishee" relating to the debtor's interest in, or right to receive dividends from, the Feinberg trust. This garnishment, brought by Chase Manhattan Bank, N.A. in New York in an attempt to satisfy a judgment against the debtor in the amount of $401,330.33, was opposed by the trustees. The last payment of principal or income from the Feinberg trust to the debtor was on or about February, 1980, when the trustees stopped all payments and there have been no subsequent payments to the debtor. During the pendency of the garnishment proceedings, the trustees withheld, and continues to withhold, the following payments of income and principal which would have been made to the debtor:
On or about: Income
April 19, 1980 $3,248.44
July 19, 1980 6,141.95
October 19, 1980 4,835.62
January 19, 1981 5,777.09
April 19, 1981 5,421.89
July 19, 1981 6,595.74
_________
Total $32,020.73
Earned from
July 20, 1981 to $1,310.00
Total $33,330.73
August 17, 1981
On or about: Principal
April 19, 1980 $5,000.00
October 19, 1980 5,000.00
April 19, 1981 5,000.00
________
Total $15,000.00
The principal remaining in the Feinberg trust as of September 14, 1981 (the approximate date of the stipulation of facts) was valued at $221,053.78 inclusive of $15,000.00 of principal payments, indicated above as withheld since February, 1980. The trust continues to earn at a rate of approximately $63.00 per day. On or about October 19, 1981 there was an additional principal payment of $55,000.00 due to the debtor. Commissions and fees are payable from the sums accumulated to date.
On November 6, 1980, an order was entered in New York adjudicating that the Feinberg trust was a Spendthrift trust under New York law and, as such, was subject to the statutory protections and exemptions afforded such a trust. That Court ruled that the beneficiary's interest in the income and principal of the trust is inalienable pursuant to Article "Thirteenth" of the will and assignment or attachment of any interest in the trust fund was specifically prohibited. However, that Court applied New York law, Civil Practice Law and Rules (CPLR) Section 5202(a)(1) finding that at least ten per cent (10%) of the trust income could be levied upon by judgment creditors once payment was made to the debtor. Trust funds which have not vested in the debtor at the time of levy, remain exempt and immune to assault by judgment creditors. The New York Court further found that under CPLR 5205(d)(1), the ninety per cent (90%) which is exempt may be reached by creditors to whatever extent the funds are "unnecessary for the reasonable requirements of the judgment debtor and (her) dependents", Exhibit "B".
The New York Court ordered a hearing to determine what amount of the exempted funds exceeded the reasonable needs of the debtor. That action was stayed by the debtor's filing of the bankruptcy petition herein.
The Bankruptcy Code, 11 U.S.C. at Section 541(a)(1) is clear as to property of the debtor held in trust. Such property becomes property of the estate except to the extent that a restriction on transfer of a Spendthrift trust is enforceable under applicable non-bankruptcy law. The Court finds that applicable non-bankruptcy law in the instant case on issues directly pertaining to the Feinberg trust is governed by New York law. The trust was created in New York state, by a New York settlor, with New York trustees, with a res located in New York. The only connection with Florida is that the beneficiary presently lives in Florida. See Hansen v. Denekla, 357 U.S....
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