Bruinsma v. Zagotta et al

Filing 22

OPINION AND ORDER affirming the decision of the Bankruptcy Court; signed by District Judge Jane M. Beckering (lep)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

In re:
NICHOLAS M. ZAGOTTA,
Debtor.
_______________________________/
Case No. 1:23-cv-302

THOMAS A. BRUINSMA,

HON. JANE M. BECKERING

Appellant/Plaintiff,
v.
JAMIE L. ZAGOTTA, et al.,
Appellees/Defendants.
_______________________________/

OPINION AND ORDER
This is an appeal from the judgment in an Adversary Proceeding in the Bankruptcy Court
for the Western District of Michigan. Appellant Thomas Bruinsma (“Trustee”) appeals a decision
by the Bankruptcy Court holding that Trustee, standing in either the shoes of the creditor or Debtor,
was not, as a matter of law, entitled to imposition of a constructive trust over specific property at
issue. Having considered the parties’ submissions, the Court concludes that oral argument is not
necessary to resolve the issues presented. For the reasons herein, the decision of the Bankruptcy
Court is affirmed.

I. BACKGROUND
A. Factual Background1
In 2013, Nicholas M. Zagotta (“Debtor”) and Mrs. Jamie L. Zagotta married and moved to
Chicago, Illinois. Debtor practiced law, and Mrs. Zagotta worked at a jewelry store. In 2014, the
couple had their first child, and Mrs. Zagotta left her job for full-time parenthood. Also in 2014,
Debtor and Christopher Johnson formed a limited liability company called Content Curation and
Data Asset Management (“CCDM”), which initially performed technology consulting services,
and then later focused on licensing technology.
In 2015, Debtor and Johnson met with Alfred Koplin, a Chicago investor, to discuss
Koplin’s potential investment in CCDM. Debtor had become acquainted with Koplin through
Debtor’s father, who was also present for discussions about the initial investment. Debtor told
Koplin that CCDM had a contract with the International Business Machines Corporation (“IBM”)
and sent a copy of what appeared to be a Software License Agreement between CCDM and IBM
to Koplin’s counsel. The document was signed by Laura Thompson, who was listed as an
executive officer for IBM and who was Johnson’s aunt.
Koplin formed a limited partnership, Jorie, LP (“Jorie”), to invest in CCDM. Jorie invested
$2,750,000 into CCDM on September 29, 2015. The same day, Debtor signed a check on behalf
of CCDM and payable to himself in the amount of $1,225,000 and deposited it in his “Law Offices
of Nicholas M. Zagotta” bank account. Approximately two weeks later, Debtor used $895,000 of
the funds from that bank account to purchase a property in Chicago (“the Illinois Property”), which

1

A more detailed factual background has been provided in the Opinion issued by the Bankruptcy
Court (ECF No. 12-10). Unless otherwise noted, the facts herein are derived from the parties’
statements of undisputed material facts (see ECF Nos. 12-4 at PageID.570, 12-10) The facts are
generally not disputed. See id.
2

was acquired by Debtor and Mrs. Zagotta as tenants by the entirety. The total purchase price was
$949,000. Debtor testified that he and Mrs. Zagotta decided to purchase the Illinois Property
because they were expanding their family and because CCDM “had this IBM deal going on and
everybody was under the realistic impression that there was a lot of money to be made off the
license agreement” (Debtor Trans., ECF No. 12-3 at PageID.371). On November 2, 2015, CCDM
received a second investment from Jorie in the amount of $2,950,000, and the following day,
Debtor received a $1,400,000 wire transfer from CCDM.
In 2016, Debtor and Mrs. Zagotta’s financial advisor recommended that they consult an
estate planning attorney, who advised that the Illinois Property be placed in a revocable trust. The
Jamie L. Zagotta Revocable Trust was created on December 19, 2016, and Debtor and Mrs.
Zagotta transferred the Illinois Property to the Trust.
On June 26, 2017, Jorie and Koplin filed a lawsuit (“the Illinois Lawsuit”) against Debtor,
Johnson, Debtor’s father, the father’s law firm, and CCDM in the DuPage County, Illinois Circuit
Court claiming fraudulent inducement, breach of fiduciary duty, unjust enrichment, civil
conspiracy, unlawful distribution, and breach of contract. Neither Mrs. Zagotta nor her Trust were
parties to the Illinois Lawsuit.
In 2019, while the Illinois Lawsuit was still pending, Debtor and Mrs. Zagotta moved to
Michigan. The Trust sold the Illinois Property for $1,135,000. $722,712.52 of the sale proceeds
were used by the Trust to purchase property in Grand Rapids, Michigan (“the Michigan Property”)
on April 30, 2019. The total purchase price was $760,000.
Through discovery in the Illinois Lawsuit, it became clear that the IBM contract was
fraudulent and never existed. On August 6, 2019, the Illinois Court entered a liability judgment
against Debtor for Jorie and Koplin’s unjust enrichment claim, and on August 29, 2019, the Illinois

3

Court entered a money judgment against Debtor. On August 30, 2019, the Illinois Court also
entered an order imposing a constructive trust on the Michigan Property for Jorie’s benefit.
On September 16, 2019, Jorie filed a motion for turnover in the Illinois Lawsuit, seeking
an order compelling Debtor to deliver title to the Michigan Property within fourteen days. The
Illinois Court granted the motion on October 9, 2019 and entered an order requiring Debtor to
“immediately turn over deed, title, and possession” of the Property (10/9/2019 Illinois Order, ECF
No. 12-3 at PageID.532). The Illinois Court amended its order on October 28, 2019 to require
Debtor to “take all necessary actions required” to effectuate the turnover of the Michigan Property,
including but not limited to making written direction to Mrs. Zagotta (10/28/2019 Illinois Order,
ECF No. 12-3 at PageID.534). Debtor made such written direction, but Mrs. Zagotta took no
action in response, based on the advice of her attorney. The Michigan Property was never turned
over to Jorie.
On January 23, 2020, Debtor filed a voluntary Chapter 7 petition. On February 21, 2020,
Jorie and Koplin filed a motion for relief from stay in the Bankruptcy Court to allow them to
proceed to trial on the two remaining claims—fraudulent inducement and breach of fiduciary
duty—in the Illinois Lawsuit. The Bankruptcy Court granted the motion, and the Illinois Court
found for Debtor and other remaining defendants on both remaining claims. In doing so, the
Illinois Court observed that no one involved in the initial investment transaction between the
parties, except for Johnson, suspected that the IBM contract was fraudulent.
On October 2020, Jorie, Koplin, and Trustee entered into a settlement agreement pursuant
to which Jorie transferred “its right, title and interest in any constructive trust held by it on the
[Michigan Property] and/or any other property owned by the Debtor, the Debtor’s spouse and/or
her Trust” to the bankruptcy estate and provided that the estate would be “vested with the rights

4

and powers of Jorie to pursue an action for constructive trust.” On November 25, 2020, the Illinois
Court approved the settlement agreement.
B. The Bankruptcy Court Proceedings
Trustee filed the Adversary Proceeding in the Bankruptcy Court on December 18, 2020 for
turnover of the Michigan Property and for claims of unjust enrichment and imposition of a
constructive trust against Debtor Nicholas M. Zagotta, Jamie L. Zagotta, and the Jamie L. Zagotta
Revocable Trust (collectively “Appellee-Defendants”).

Trustee also sought avoidance and

recovery of the initial transfer of funds from Debtor to purchase the Illinois Property.
The parties filed cross-motions for summary judgment on which the Bankruptcy Court held
a hearing on June 30, 2022. In a 48-page opinion dated February 9, 2023, the Bankruptcy Court
denied Trustee’s motion for summary judgment, granted Appellee-Defendants’ motion for
summary judgment, and dismissed the complaint in the Adversary Proceeding. The Bankruptcy
Court reasoned that although Trustee’s view—that the transfers occurring between Debtor and
Mrs. Zagotta and her trust were suspicious and potentially inequitable—was understandable, “the
normal means of challenging the transfers as fraudulent [were] not available in this case” due to
circumstances outside of Trustee’s control, including the timing of transfers and unique features
of Illinois law (Bankr. Op. [ECF No. 12-10] at 47). The Bankruptcy Court further held that the
equitable remedy of constructive trust was not warranted in this case “where Mrs. Zagotta and her
Trust acquired their property interests in ordinary transactions and the full value of that property
cannot be directly traced to the original unjust enrichment” (id. at 47–48).
C. Procedural History
On March 24, 2023, the Clerk’s Office docketed Trustee’s notice of appeal in this case.
Trustee limits his appeal to the Bankruptcy Court’s decision regarding the imposition of a

5

constructive trust (ECF No. 14 at PageID.1707).
II. LEGAL STANDARD
When reviewing a bankruptcy court’s decision on appeal under 28 U.S.C. § 158(a)(1), a
district court reviews a bankruptcy court’s conclusions of law de novo, and affirms its factual
findings unless they are clearly erroneous. In re Made in Detroit, Inc., 414 F.3d 576, 580 (6th Cir.
1996); 255 Park Plaza Assocs. Ltd. P’ship v. Conn. Gen. Life Ins. Co., 100 F.3d 1214, 1216 (6th
Cir. 1996). Because a decision to grant summary judgment is a question of law, a district court
reviews the bankruptcy court’s grant of summary judgment under the de novo standard. Hagan v.
Baird, 288 F. Supp. 3d 803, 806 (W.D. Mich. 2018) (citing In re Morris, 260 F.3d 654, 663 (6th
Cir. 2001); In re Markowitz, 190 F.3d 455, 463 (6th Cir. 1999)). The party seeking review of the
bankruptcy court’s determination bears the burden of proof. In re Shearer, No. 1:95-cv-761, 1996
WL 173154, at *1 (W.D. Mich. 1996) (citing In re Van Rhee, 80 B.R. 844, 846 (W.D. Mich.
1987)).
Federal Rule of Civil Procedure 56, incorporated by Federal Rule of Bankruptcy Procedure
7056, provides that a court should enter summary judgment in favor of a party where that party
shows that “there is no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.” FED. R. CIV. P. 56(c); FED. R. BANKR. P. 7056(c). In resolving
a motion for summary judgment, a court must consider the evidence and all reasonable inferences
in favor of the nonmoving party. In re B & P Baird Holdings, Inc., 759 F. App’x 468, 473 (6th
Cir. 2019) (quoting FED. R. CIV. P. 56(a) and citing FED. R. BANKR. P. 7056).
III. DISCUSSION
A. Constructive Trust as Assignee of Jorie
Trustee argues that the Bankruptcy Court erred in declining to impose a constructive trust

6

on the Michigan Property as Jorie’s assignee because the trust was unjustly enriched to Jorie’s
detriment and Jorie’s investment was traceable to the Michigan Property, or at the very least, there
is a genuine issue of material fact as to whether the Jorie investment was traceable to the Michigan
Property (ECF No. 14 at PageID.1712, 1718).
In response, Appellee-Defendants argue that the Bankruptcy Court properly decided that
standing in the shoes of Jorie, Trustee’s unjust enrichment and imposition of a constructive trust
claim fails as a matter of law because the constructive trust imposed by the Illinois Court only
impacted Debtor’s property interests, and at the time of the imposition of the constructive trust,
Debtor did not hold title to the Michigan Property (ECF No. 17 at PageID.1750). AppelleeDefendants further argue that Trustee did not raise any arguments related to lesser relief than a
constructive trust, including that of an equitable lien, and so has waived such arguments (id. at
PageID.1762).
Under both Illinois and Michigan law, a constructive trust is an equitable remedy and can
be “imposed to prevent a person holding title to property to profit from his wrong or be unjustly
enriched by retaining the property.” Sadacca v. Monhart, 470 N.E.2d 589, 593 (Ill. 1984); Ooley
v. Collins, 73 N.W.2d 464, 469 (Mich. 1955) (a court may impose a constructive trust “where such
trust is necessary to do equity or to prevent unjust enrichment”).2 Jorie assigned to Trustee all
rights, title, and interest in any constructive trust on the Michigan Property or on any property
owned by Debtor, Mrs. Zagotta, or her Trust to the bankruptcy estate. Thus, the rights to which
Trustee succeeded regarding the Michigan Property depends on the effect of the Illinois Court
Order imposing a constructive trust and whether a new constructive trust on the Michigan Property

2

The parties agree that Illinois and Michigan law on unjust enrichment and constructive trust is
substantively the same (ECF No. 14 at PageID.1710 n.8; ECF No. 17 at PageID.1749).
7

could be imposed.
1.

Effect of Illinois Court Order Imposing Constructive Trust

First, Illinois law determines the effect of an order entered by an Illinois state court in
federal court. Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81 (1984) (“It is now
settled that a federal court must give to a state-court judgment the same preclusive effect as would
be given that judgment under the law of the State in which the judgment was rendered.”).
Enforcement of the Illinois Court Order does not entitle Trustee to turn over of the
Michigan Property. As the Bankruptcy Court noted, the Illinois Court judgment against Debtor
was in personam insofar as it sought to compel performance by Debtor in satisfaction of the unjust
enrichment claim exclusively against him. It is undisputed that at the time the Illinois Court issued
its Order imposing a constructive trust, Debtor did not hold legal title to the Michigan Property
(Bankr. Op. at 33). Given that the Michigan Property sat outside of Illinois’ jurisdiction and that
the owners of the Michigan Property (the Trust and Mrs. Zagotta) were not parties to the Illinois
Lawsuit, the Illinois Court did not have jurisdiction to compel the transfer of the Michigan
Property. See Hansberry v. Lee, 311 U.S. 32, 40 (1940) (“[i]t is a principle of general application
in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation
in which he is not designated as a party”). Indeed, the Illinois Court recognized the limits of its
jurisdiction in imposing the constructive trust by ordering Debtor only to take “all necessary
actions required” to effectuate the turnover of the property, including making “written direction to
his wife, Jamie L. Zagotta” (10/28/2019 Illinois Order, ECF No. 12-3 at PageID.534).
Accordingly, Trustee, standing in Jorie’s shoes, does not have an entitlement to a constructive trust
over the Michigan Property based on the Illinois Court Order alone. Therefore, the Court agrees
with the Bankruptcy Court that to the extent Trustee, as the assignee of Jorie, seeks turnover of the

8

Michigan Property based solely on the enforcement of the Illinois Court Order, Trustee is not
entitled to that relief.
2. Imposition of New Constructive Trust
Trustee argues that the Bankruptcy Court should have imposed a new constructive trust
against the Michigan Property because (1) Jorie’s investment in CCDM was traceable to the
Michigan Property and (2) Appellee-Defendants in the Adversary Proceeding were estopped from
denying that the Jorie funds were traceable to the Michigan Property (ECF No. 14 at PageID.1713).
The Court will address each argument in turn.
a. Tracing
Illinois follows the “well-established principle” that “[t]he trust res, if capable of
identification, may be followed by the beneficiary into any and all the forms it may assume.”
Sadacca, 470 N.E.2d at 593. “When a person’s property has been wrongfully appropriated and
converted into a different form, equity impresses a constructive trust upon the new form or species
of property, not only while it is in the hands of the original wrong-doer but as long as it can be
followed and identified in whosesoever hands it may come, except those of a bona fide purchaser
for value.” Id. at 593–594 (internal quotation marks & citation omitted). For a court to impose a
constructive trust pursuant to this rule, “the claimant must prove that his specific funds were used
to purchase a specific subsequent asset. It is not enough to show only that the property may have
been a product” of the original funds. In re Comm’r of Banks & Real Est., 764 N.E.2d 66, 108
(Ill. 2001) (citing G. Bogert & G. Bogert, Law of Trusts & Trustees § 921, at 435 (2d ed. 1995))
(emphasis in original). In other words, “it is not enough to simply show that trust funds went into
the commingled account.” In re Mich. Boiler & Eng’g, 171 B.R. 565, 569 (Bankr. E.D. Mich.
1993). “One can follow his money so long as it is not so mingled with other money or property

9

that it can no longer be specifically separated.” In re Comm’r of Banks & Real Est., 764 N.E.2d
at 108.
As Appellee-Defendants observe, the Bankruptcy Court “painstakingly went through all of
the transactions that resulted in the purchase of the Michigan Property” (ECF No. 17 at
PageID.1759), tracing each fact as follows:
The Defendants originally purchased the Illinois Property for $949,000 in
October 2015. The parties agree that $895,000 of the purchase price was
paid with funds from the Debtor’s law office bank account, where some of
the proceeds of Jorie’s CCDM investment had been deposited
approximately two weeks earlier. However, the Defendants also made a
$50,000 earnest money deposit, the exact origins of which are not known.
After acquiring the Illinois Property, the Defendants made numerous
improvements to the property. Although the parties agree that these
improvements were paid for using funds from the Debtor’s law firm account
as well as the Defendants’ personal checking account, there is no evidence
that any of these funds were directly traceable to Jorie’s investment. After
the Illinois Property was transferred to the Trust, the Trust sold the property
for $1,135,000, which is significantly more than the Defendants paid for it.
It is clear that the value of the real property at this time was attributable not
only to Jorie’s investment, but also to the Defendants’ earnest money
deposit, the improvements they made between 2015 and 2019, and arguably
to general appreciation. In addition, when the Illinois Property was sold,
almost $300,000 of the sale proceeds were used to pay off a loan that had
been obtained by the Debtor; there is no evidence in the record to show
whether this $300,000 was paid from funds received at the sale that were
traceable to Jorie’s investment, the deposit, the improvements, or any other
source. Approximately $723,000 of the sale proceeds were then put toward
the purchase of the Michigan Property. However, the total purchase price
for the Michigan Property was $760,000, and the settlement statement
shows that the Defendants again contributed an earnest money deposit, the
source of which is not disclosed in the record.
As this recitation demonstrates, the direct factual links between Jorie’s
investment and the full value of the Michigan Property break down at
several critical points. Again, as the party bearing the burden of proof on
the tracing issues, it was the Trustee’s obligation to come forward with
specific facts that could lead a rational trier of fact to find in his favor. Here,
even if one focuses only on the two earnest money deposits, which have not
been (and in the case of the deposit on the Michigan Property, likely cannot
be) traced to the Jorie investment, the undisputed facts lead to the opposite
conclusion: that the Trustee is not entitled to a constructive trust on the
10

Michigan Property as a whole, which is the only relief he has requested. At
this advanced stage in the proceeding, the Trustee has not provided any
evidence suggesting the chain was not broken at these critical points, nor
has he articulated any legal theories or presumptions that would permit the
court to disregard these breaks in the chain. Finally, the court reiterates that
the Trustee has not requested any relief, such as an equitable lien, for
anything less than the full value of the Michigan Property.
(Bankr. Op. at 42–43, ECF No. 17 at PageID.1759). Trustee identifies no clear error in the
Bankruptcy Court’s factual tracing, and, on de novo review of the decision on summary judgment,
the Court concludes that Trustee did not meet his burden to show that a jury could find the standard
for traceability satisfied. Moreover, Appellee-Defendants’ statements that Debtor used some of
the money from Jorie’s initial investment to purchase the Illinois Property, the proceeds of which
contributed to the purchase of the Michigan Property, does not amount to a concession that Jorie’s
funds could be traced to the Michigan Property with the requisite specificity. In short, the Court
concludes that the Bankruptcy Court correctly decided that Trustee was not entitled to the
imposition of a new constructive trust based on the traceability of Jorie’s investment to the
Michigan Property.3
b. Collateral Estoppel
Trustee further argues that even if the facts did not support the conclusion that the funds
were traceable, Appellee-Defendants were collaterally estopped from denying that unjust
enrichment occurred in the Adversary Proceeding (ECF No. 14 at PageID.1713).
In response, Appellee-Defendants argue that collateral estoppel does not apply because the
3

Trustee admits that the potential for lesser remedies of equitable lien or the imposition of a
constructive trust on anything lesser than the home itself were not raised on summary judgment in
the Bankruptcy Court (ECF No. 21 at PageID.1786). Thus, these issues are waived on appeal. See
In re Sinta, No. 13-10151, 2013 WL 1946185, at *2 (E.D. Mich. May 9, 2013) (“An issue is waived
on appeal if it was not first presented to the bankruptcy court.”) (citing In re Ferncrest Court
Partners, Ltd., 66 F.3d 778, 782 (6th Cir. 1995)).

11

issues in the Illinois lawsuit and the Adversary Proceeding were not the same and Mrs. Zagotta
was not represented in the Illinois Lawsuit (ECF No. 17 at PageID.1757).
Under Illinois law, “collateral estoppel, also referred to as issue preclusion, promotes
fairness and judicial economy by preventing the relitigation of issues that have already been
resolved in earlier actions.” Du Page Forklift Serv., Inc. v. Material Handling Servs., Inc., 744
N.E.2d 845, 849 (Ill. 2001) (citing Kessinger v. Grefco, Inc., 672 N.E.2d 1149 (Ill. 1996)). “The
minimum threshold requirements for the application of collateral estoppel are: (1) the issue decided
in the prior adjudication is identical with the one presented in the suit in question, (2) there was a
final judgment on the merits in the prior adjudication, and (3) the party against whom estoppel is
asserted was a party or in privity with a party to the prior adjudication.” Nowak v. St. Rita High
School, 757 N.E.2d 471, 478 (Ill. 2001) (emphasis in original).
Like the Bankruptcy Court, this Court cannot conclude that the traceability of Jorie’s
investment to the Michigan Property was decided by the Illinois Court. Trustee provides no
evidence that the Illinois Court made any factual findings to that effect. Trustee contends that
Illinois law requires that an issue be decided on the merits to be entitled to preclusive effect, and
that the Illinois Court order regarding the constructive trust on the Michigan Property was a
decision on the merits, and thus should be entitled to preclusive effect (ECF No. 21 at
PageID.1784). However, Trustee’s argument is conclusory and does not distill the issue that was
decided on the merits in the Illinois Lawsuit that gave rise to the remedy of constructive trust.
Therefore, despite the Illinois Court’s attempt to impose a constructive trust on the Michigan
Property, collateral estoppel did not prevent the Appellee-Defendants from arguing—and the

12

Bankruptcy Court from deciding—the issue of traceability.4
Accordingly, the Court concludes that Trustee was not entitled to the imposition of a new
constructive trust on the Michigan Property as Jorie’s assignee.5
B. Constructive Trust Standing in Debtor’s Shoes
Trustee argues that even if he was not entitled to a constructive trust as Jorie’s assignee, he
was entitled a constructive trust on the Michigan Property standing in Debtor’s shoes because “[i]t
was the Debtor who provided the funds used to purchase, improve, and maintain the Illinois and
Michigan properties, not the Trust or Mrs. Zagotta” (ECF No. 14 at PageID.1720) (emphasis in
original).
In response, Appellee-Defendants argue that under Illinois and Michigan law, the purchase
of the Illinois Property and subsequent transfer to the Trust was a marital gift pursuant to which a
party may not recover damages for unjust enrichment (ECF No. 17 at PageID.1766). AppelleeDefendants further argue that even if the Court were to find that the purchase and transfer of the
Illinois Property were not gift transactions, there was no inequity or injustice that resulted, and
thus there was no unjust enrichment (id.).
“As a creature of statute, the trustee in bankruptcy has only those powers conferred upon
him by the Bankruptcy [Code].” In re Cannon, 277 F.3d 838, 853 (6th Cir. 2002) (citing Cissell
v. American Home Assurance Co., 521 F.2d 790, 792 (6th Cir. 1975)). “The trustee stands in the

4

Given that the Court’s conclusion with respect to collateral estoppel rests on the lack of evidence
that the same issue of traceability was brought to and decided by both the Bankruptcy Court and
the Illinois Court, this Court need not address the parties’ arguments concerning privity and virtual
representation.
5
Trustee also argues that the Bankruptcy Court erred in placing weight on Mrs. Zagotta’s lack of
culpability (ECF No. 14 at PageID.1717). Finding the lack of traceability issue dispositive to
summary judgment on the imposition of constructive trust, the Court does not reach the materiality
of Mrs. Zagotta’s culpability.
13

shoes of the debtor and has standing to bring any action that the bankrupt could have brought had
he not filed a petition for bankruptcy.” Id. (citing Melamed v. Lake Cnty Nat’l Bank, 727 F.2d
1399, 1404 (6th Cir. 1984)). Therefore, Trustee is entitled to stand in Debtor’s shoes and pursue
claims for unjust enrichment and imposition of a constructive trust against Mrs. Zagotta and the
Trust for the benefit of the bankruptcy estate. See In re Short, 625 B.R. 678, 693 (Bankr. E.D.
Mich. 2021) (considering the imposition of a constructive trust in the case of a trustee seeking to
augment the bankruptcy estate by pursuing the prepetition claim of the debtor based upon
prepetition conduct amounting to unjust enrichment).
To sustain a claim of unjust enrichment, Trustee must establish two elements: (1) the
receipt of a benefit by Appellee-Defendants (Mrs. Zagotta and her Trust) from Debtor; and (2) an
inequity resulting to Debtor because of the retention of the benefit by Appellee-Defendants.
Meisner L. Grp. PC v. Weston Downs Condo. Ass’n, 909 N.W.2d 890, 900 (Mich. 2017). Although
Appellee-Defendants likely received a benefit from Debtor in the transfer of the Illinois Property,
there are no facts in the record that would create a genuine issue of material fact as to the second
unjust enrichment prong—that inequity or injustice resulted from the retention of the benefit. See
Kammer Asphalt Paving Co. v. E. China Twp. Sch., 504 N.W.2d 635, 646 (Mich. 1993)
(Cavanagh, J., concurring in part) (“We must be cautious in applying this doctrine [of unjust
enrichment], however, because the mere fact that a benefit has been conveyed does not necessarily
indicate that it is unjust for the party to retain that benefit.”). The undisputed facts indicate that
Debtor and Mrs. Zagotta voluntarily transferred their interest in the Illinois Property to the Trust
pursuant to an estate plan on the advice their estate planning counsel. That the Michigan Property
may have been purchased with proceeds of Jorie’s investment premised on a contract that was later
proven to be forged does not alone establish that inequity resulted from Appellee-Defendants’

14

retention of the property. This is especially true in light of the Illinois Court’s finding that Debtor
was unaware of the fraudulent nature of the IBM contract. Thus, the Court agrees with the
Bankruptcy Court that it cannot be said that the initial purchase of the Illinois Property was unjust
to Debtor or that the transfer of the Illinois Property to the Trust was unjust.
In sum, the Court concludes, as the Bankruptcy Court did, that viewed in the light most
favorable to Trustee, a constructive trust is not warranted in this case, whether Trustee is standing
in the shoes of Jorie or Debtor. Accordingly, the Bankruptcy Court did not err in holding that
Appellee-Defendants are entitled to summary judgment.
IV. CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that the decision of the United States Bankruptcy Court for
the Western District of Michigan in Bankruptcy Case No. 20-00242 and Adversary Proceeding
No. 20-80169 that Trustee appeals from is AFFIRMED.

/s/ Jane M. Beckering
JANE M. BECKERING
United States District Judge

Dated: November 13, 2023

15