Doran Shubert v. Wendell Jeter ( 1996 )

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No. 95-1632
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In re: WENDELL JETER and *
BETTY JETER, *
*
Debtors. *
_________________________ * [PUBLISHED]
*
DORAN SHUBERT, *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the Western
WENDELL JETER, individually * District of Missouri.
and doing business as Farrell *
Jeter Construction Co.; BETTY *
FERN JETER, individually and *
doing business as Farrell Jeter *
Construction Co.; TRI-LAKES *
BUILDERS, INC., a Missouri *
Corporation; THOMAS J. CARLSON, *
Trustee for the Estate of *
Wendell and Betty Jeter, *
Bankrupts, *
*
Appellees. *
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Submitted: December 14, 1995
Filed: January 8, 1996
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Before MAGILL, BRIGHT and MURPHY, Circuit Judges.
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PER CURIAM.
The appellant Doran Shubert, a creditor, seeks to impose a
constructive trust on assets of bankrupts Wendell Jeter and Betty
Jeter, as well as upon a corporation owned by the Jeters, Tri-Lakes
Builders, Inc. The bankruptcy court denied the constructive trust
and the district court affirmed.1 The creditor, Doran Shubert,
appeals. We affirm.
The parties do not contest the underlying facts. The district
court briefly stated the facts which we relate below:
In May of 1984, Doran Shubert loaned
$105,000.00 to Wendell and Betty Jeter in the
form of an unsecured loan. A promissory note
was executed in that amount to be due in one
year. In short, payment was never made on the
note. The Jeters invested the money in a
vacation resort which they eventually sold.
The Jeters used the funds from the sale to
purchase another hotel and ended up seeking
relief under a Chapter 11 bankruptcy petition.
The money received from the remaining
proceedings was used to purchase a certificate
of deposit at the Ozark Mountain Bank.
Shubert filed suit for non-payment of the
promissory note in August 1986. While the
suit was pending, the Jeters moved to
California, taking some of the money from the
Ozark Mountain Bank with them. In California
they purchased a business which was later
sold. They moved back to Missouri in February
of 1990 and moved their assets into accounts
at the same Ozark Mountain Bank. The accounts
were operated in the names of the Jeters and
in the name of the Jeter's son, Farrell Jeter.
The Jeters were involved in the business of
buying and selling realty. They had several
named corporations. Accounts for the corpor-
ations were kept in Farrell Jeter's name. The
Jeters admitted they had their son execute a
power of attorney to them which allowed the
Jeters to buy and sell realty and operate bank
accounts under the name of Farrell Jeter which
allowed Wendell and Betty Jeter to frustrate
their creditors.
In September 1990, Shubert's lawsuit on
the promissory note was tried in Taney County,
1
The bankruptcy court opinion is reported at In re Jeter,
171 B.R. 1015 (Bankr. W.D. Mo. 1994). The district court opinion
is reported at In re Jeter, 178 B.R. 787 (W.D. Mo. 1995).
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Missouri. On February 22, 1991, Judge James
Eiffert rendered a judgment against the Jeters
in the amount of $267,000.00 which represented
the amount of the promissory note of
$105,000.00 plus interest accrued to that time
and attorney's fees. Post-judgment interest
accrues at the contract rate of 13%.
In October 1991, Shubert attempted to
garnish the accounts of the Jeters. Due to
Wendell and Betty's actions of having their
checking accounts in their son's name, the
garnishment was largely unsuccessful. The
garnishment attached only to an account with
Wendell and Betty's name on it. Thus, the
Jeters were successful in keeping their funds
from Shubert. In January of 1992, Shubert
again attempted to execute a garnishment.
Again, the execution was unsuccessful because
only a modest sum of money was in the account
titled in the names of Wendell and Betty
Jeter.
On August 16, 1993, the Jeters filed a
petition in bankruptcy under Chapter 7 of the
Bankruptcy Code. The schedules filed by the
debtors were inaccurate. The Jeters concealed
assets of the estate and failed to report
property of the estate. During a 11 U.S.C.
Rule 2004 examination conducted in November of
1993, it was determined that the sale of a
house built by Tri-Lakes Builders, the
corporation owned by the Jeters, was sold to
Merrill and Mary Osmond and the deal had
closed that morning. The Osmonds deposited
the sale proceeds of approximately $72,000.00
into the Tri-Lakes Builders account which had
only Farrell Jeter's name on it. Bills on the
house remained unpaid and work remained to be
done, so the bankruptcy court entered an order
freezing the account so that the funds
deposited there would not be dissipated
pending the resolution of the case.
After the Jeters filed for personal
bankruptcy, their trustee, Thomas J. Carlson,
moved to consolidate the estate with the
assets and liabilities of the Jeter's
corporation. Shubert filed an adversary
proceeding to revoke the debtor's discharge,
to impose a constructive trust on the Osmond
sale proceeds, and to prohibit the trustee
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from consolidating any funds allegedly subject
to the constructive trust with the Jeter's
estate.
Following a trial on the merits, the
bankruptcy court granted judgment in favor of
Shubert on his 11 U.S.C. § 727 claim to revoke
the discharge previously granted the debtors.
The bankruptcy court consolidated the assets
and liabilities of the Jeter's personal estate
and the accounts of the corporation controlled
by the Jeters, Tri-Lakes Builders. The
bankruptcy court denied Shubert's request for
a constructive trust.
In re Jeter, 178 B.R. 787, 789-90 (W.D. Mo. 1995).
The issue presented on appeal is whether Tri-Lakes Builders'
assets became subject to a constructive trust in favor of Shubert
and, therefore, did not become part of the estate of the bankrupts.
Both the district court and the bankruptcy judge determined that no
constructive trust existed under Missouri law.
The bankruptcy judge has written an excellent analysis of the
issue and has determined that a constructive trust should not be
imposed against the trustee in bankruptcy who represents all of the
creditors. In re Jeter, 171 B.R. 1015 (Bankr. W.D. Mo. 1994). The
bankruptcy judge observed that no unjust enrichment would result
from refusing to recognize a constructive trust in this instance.
Here, the flow of funds and property through the hands and
businesses operated by the Jeters have left a trail of unpaid bills
and a line of creditors. Some of these creditors have strong
equitable claims on the remaining assets. Under these circum-
stances the district court and the bankruptcy court determined that
Shubert was situated like every other creditor and was not entitled
to any special rights.
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We have reviewed the record and affirm on the well reasoned
opinion of Bankruptcy Judge Karen M. See.2 We, however, do not
rely on the adequate remedy of law discussion as a basis for
rejecting the alleged constructive trust. See id. at 1023.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
2
Appellant placed great reliance on Chiu v. Wong, 16 F.3d
306 (8th Cir. 1994) to support his claim of constructive trust.
There, the asset subject to the constructive trust was not
reachable by other creditors in bankruptcy because of the
homestead exemption. The holder of the homestead title became
unjustly enriched to the extent of constructive trust assets used
to purchase the home. Other creditors in bankruptcy would not be
prejudiced by imposition of the constructive trust. That is not
the case here.
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