Opinion
Case No. 97-15544-SSM
August 25, 1998
Bennett A. Brown, Esq., Fairfax, VA, of Counsel for the debtor in possession
Ms. Miriam Landy, Claimant pro se
MEMORANDUM OPINION
A hearing was held in open court on August 4, 1998, on the objection filed by the debtor in possession to the claim of Miriam Landy. The debtor was present in person and was represented by counsel. The creditor was present in person and represented herself. After receiving the evidence of the parties and hearing argument, the court took the matter under advisement. After reviewing the evidence and the applicable law, the court concludes that the claim must be disallowed. This opinion constitutes the court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.
Following the hearing, Ms. Landy mailed to the court copies of two additional documents she had referred to in her testimony but had not brought with her to the hearing. Debtor's counsel has objected to the court's consideration of the exhibits on the basis that they are irrelevant; that he had no opportunity to cross-examine the proponent concerning them; and that their submission after the hearing was untimely. There is no question that the Federal Rules of Evidence govern civil proceedings before bankruptcy judges. Fed.R.Evid. 101 and 1101(a) and (b); F.R.Bankr.P. 9017. In general, the testimony of witnesses must be taken in open court, subject to cross-examination. Fed.R.Civ.P. 43(a), as incorporated by F.R.Bankr.P. 9017. The only exception is that the court may, in its discretion when ruling on a motion, determine questions of fact based on affidavits. Fed.R.Civ.P. 43(e). A hearing on an objection to a proof of claim, however, is more akin to a trial than to a motion. Unless a document is self-authenticating under Federal Rule of Evidence 902, it cannot be admitted over objection without "evidence sufficient to support a finding that [the document] is what its proponent claims." Fed.R.Evid. 901(a). It is certainly tempting — where a party is proceeding pro se and lives 2,800 miles from the situs of the hearing — to relax the rules of evidence and permit follow-up exhibits to be informally submitted. However, while the court is always alert to prevent an unrepresented party from being taken advantage of, or losing important rights, by the invocation of mere technicalities, the court cannot, under the salutary rubric of giving reasonable latitude to an unrepresented party unfamiliar with bankruptcy practice, prejudice the rights of other parties to the litigation. Accordingly, the court must decline to consider the two documents offered. In any event, as will be discussed, their consideration would not change the court's ruling.
Findings of Fact
Norman Landy ("the debtor") filed a voluntary petition under chapter 13 of the Bankruptcy Code in this court on July 28, 1997. The case was converted to chapter 11 on November 17, 1997, and the debtor remains in possession of his estate as debtor in possession. A plan has not yet been confirmed. On October 15, 1997, Miriam Landy, the debtor's former wife ("Ms. Landy"), filed a timely proof of claim (Claim No. 11) in the amount of $200,000.00, asserting that it was secured by the assets of a trust created by Mr. Landy.
The debtor and Ms. Landy were married for 45 years and during the period of their marriage became partners in a number of real estate ventures. In 1978, the debtor determined to seek a divorce in the Dominican Republic. He testified that he was extremely depressed at the time, and that he and Ms. Landy had long discussions concerning the matter. In her presence, he wrote in his own handwriting a document entitled "Trust Agreement," which, in pertinent part, reads as follows:
The actual handwriting is in all capitals.
This agreement is between Norman Landy and Miriam Landy who agrees [sic] as follows:
Norman Landy is desirous of obtaining a divorce from Miriam Landy and in consideration of Norman Landy filing for a divorce decree Norman Landy agrees that thereafter on the 20th ofMarch 1978 his interest in the properties listed in Schedule A of this agreement will be held in trust for him during his lifetime and upon his death to be delivered to Miriam Landy and upon her death equally to Robin Bruce Landy, or their survivors. *** If Miriam Landy predeceases Norman Landy this trust is to go to Bruce and Robin Landy upon the same terms and conditions as this trust. *** Norman Landy further agrees as part of the property agreement that he will will the balance of his estate to Bruce and Robin Landy.
/s/ Norman Landy
Exh. 3. It appears that both parties contemplated that the handwritten agreement would be incorporated into a formal trust instrument to be prepared by the debtor's then law partner, Norman P. Wolken, who was named in the handwritten agreement as the trustee. In any event, Mr. Wolken prepared, sometime in 1978 or 1979, an undated typewritten document entitled "Trust Agreement" signed by the debtor as grantor and by Mr. Wolken as trustee. Relevant to the present controversy, the agreement provided as follows:
The debtor introduced into evidence a letter to Mr. Wolken purporting to revoke a trust agreement "dated August 30, 1978." Exh. 2. As noted, however, the trust agreement itself does not bear a date. In any event, the actual date is not critical to the court's conclusions.
2. DISPOSITIVE PROVISIONS. The Trustee shall hold, manage, invest, and reinvest the trust property, and shall apply and distribute the income and principal of the trust property in the following manner:
(a) The trustee shall pay the net income from the trust property to Norman Landy, hereinafter called Beneficiary, throughout his lifetime, annually during the term of this trust, or more frequently as Trustee shall deem convenient.
(b) This trust shall terminate upon the death of Norman Landy and upon such termination the principal then in the hands of the Trustee shall be paid over to Bruce A. Landy and Robin Landy, children of the Grantor.
3. TRUSTEE'S POWERS. In the administration of the trust, the Trustee shall have the following powers, all of which shall be exercised only in a fiduciary capacity with the advice, consent and primarily in the interest of the beneficiary:
(a) To hold, manage, sell, invest, reinvest, encumber or otherwise dispose of the trust property.
* * *
4. PRINCIPAL AND INCOME. All profits from sales, exchanges, or other dispositions of trust assets shall be credited to income.
Exh. 1. The trust agreement provided that it was to be governed by the law of Pennsylvania (where the debtor then resided) and is silent with respect to any power of the grantor to revoke, although Mr. Landy testified at the hearing that it was his intent to create a revocable trust. A "Schedule of Property Held in Trust" attached to the agreement listed the debtor's interest in two corporations, three partnerships, six buildings, a shopping center, and an apartment project.
These are the same properties listed on the back of the handwritten agreement. The debtor filed a divorce action in the Dominican Republic in 1979 and was granted a divorce that same year. He testified that the reason the typed trust agreement differed from the handwritten agreement concerning the disposition of the property on his death was because, on further reflection, he had determined that it was preferable to leave the property directly to his children. A copy of the typed agreement was mailed to Ms. Landy. She then made the following interlineations to paragraph 2(b) in her own handwriting:
Based upon the debtor's testimony, Bruce Landy was then 24 years old and Robin Landy was 21 years old.
The interlineations are here shown in italic.
(b) This trust shall terminate upon the death of Norman Landy and upon such termination the principal then in the hands of the Trustee shall be paid over to Miriam Landy. If Miriam Landy predeceases Norman Lan[dy], Bruce A. Landy and Robin Landy, children of the Grantor, shall receive the principal upon the death of Norman Lan[dy].
She also made the following interlineation to paragraph 3(a):
(a) To hold, manage, sell, invest, reinvest, encumber or otherwise dispose of the trust property. In the event of sale of any of the Scheduled Properties 1/2 of the proceeds is to be paid to Miriam Landy.
She testified that before making the interlineations, she telephoned Mr. Wolken, who told her that it was okay for her to make the changes and that the debtor agreed to the changes. The debtor, however, testified that he had never seen and was unaware of the changes and had not authorized them. The interlineations are not initialed by the debtor, by Mr. Wolken, or by Bruce and Robin Landy as beneficiaries. On October 1, 1984, the debtor wrote a letter to Mr. Wolken revoking the trust. Exh. 2. A copy of the letter was not sent to Ms. Landy or, apparently, to Bruce or Robin Landy.
None of the assets listed on the schedule attached to the typewritten trust agreement was ever formally conveyed or assigned to Mr. Wolken as trustee, and over the years the distributions from the partnerships and from the sale of the real estate assets were made payable directly to the debtor. Additionally, Form K-l's for the debtor's partnership interests were issued in his name, not Mr. Wolken's as trustee. Over the years, the majority of the properties listed on the schedule have been sold, with the closings being handled by Mr. Wolken. Ms. Landy testified that in each instance she received the proceeds attributable to her one-half ownership interest. The debtor's interest in two of the properties have been conveyed to his son Bruce, apparently to settle a controversy between him and his son over an unrelated "Clifford" trust. The only remaining property with any value is Commonwealth Hotels, Ltd., and Ms. Landy (who writes all the checks for the partnership) testified that the debtor's share of the remaining sums coming into the partnership from the sale of a hotel is approximately $110,000.00.
In 1989, Ms. Landy, concerned that the Dominican Republic divorce was not valid and not wishing to be liable for any of the debtor's debts, filed for divorce in the state of Washington, where she then (as now) resided. The divorce was granted on October 30, 1989, and the decree expressly awards to the debtor "[a]ny bank accounts and certificates of deposit in this name," "[a]ny stocks, bonds and mutual funds in his name," and "[a]ny businesses which he owns." Exh. 4.
Conclusions of Law I.
This court has jurisdiction over this controversy under 28 U.S.C. § 1334 and 157(a) and the general order of reference from the United States District Court for the Eastern District of Virginia dated August 15, 1984. Under 28 U.S.C. § 157(b)(2)(B), this is a core proceeding in which final orders may be entered by a bankruptcy judge.
Once filed, a timely proof of claim in a bankruptcy case "is deemed allowed" unless a party in interest objects. § 502(a), Bankruptcy Code. A proof of claim executed and filed in accordance with the Federal Rules of Bankruptcy Procedure constitutes "prima facie evidence of the validity and amount of the claim." F.R.Bankr.P. 3001(f). As a result, the party objecting to a properly filed proof of claim has the initial burden of presenting sufficient probative evidence to overcome such prima facie effect. In re C-4 Media Cable South, L.P., 150 B.R. 374, 377 (Bankr. E.D. Va. 1992). Once the objecting party has done so, the burden of proof then shifts to the creditor to establish the validity and amount of its claim. In re Shabazz, 206 B.R. 116, 120 (Bankr. E.D. Va. 1996), aff'd, 1997 WL 593863 (E.D. Va. 1997).
II.
The debtor's stated grounds of objection to Ms. Landy's proof of claim are not as clearly articulated as they might be, but, as amplified somewhat at the hearing, essentially come down to an assertion that Ms. Landy's claim, if any, is not secured; that Ms. Landy has no present claim but only a potential claim contingent upon her surviving the debtor; that the trust was properly revoked; that the interlineations making Ms. Landy the beneficiary of the trust on Mr. Landy's death were not authorized by him and have no legal effect; and that the trust was never funded and has no assets. The court will address each basis of objection in turn.
A. Whether Ms. Landy's claim, if any, is secured. Although not precisely articulated, either in the proof of claim or at trial, it appears that the theory of Ms. Landy's claim is either that the debtor failed to place into trust assets he agreed to place in trust for her ultimate benefit, or that, having created a valid trust, he then improperly withdrew and converted those assets. In her proof of claim, Ms. Landy asserts that hers is a "secured" claim. A claim is a "secured" claim in bankruptcy if it is "secured by a lien on property in which the estate has an interest," but only to the extent of the value of the estate's interest in the property. § 506(a), Bankruptcy Code. A "lien" in turn is broadly, if somewhat circularly, defined as a "charge against or interest in property to secure payment of a debt or performance of an obligation." § 101(37), Bankruptcy Code. Ms. Landy admitted in testimony that she had no lien, as such, against any particular assets belonging to the debtor.
It seems clear that, as a technical matter, Ms. Landy is not a secured creditor. There is no mortgage, deed of trust, UCC security agreement, or similar instrument creating a consensual lien, nor is there a judicial lien or statutory lien. Of course, as the Fourth Circuit has admonished, pleadings filed by pro se parties must be liberally construed. Coleman v. Peyton, 340 F.2d 603, 604 (4th Cir. 1965) ("claims of legal substance should not be forfeited because of a failure to state them with technical precision"), cert. denied, 385 U.S. 905, 87 S.Ct. 216, 17 L.Ed.2d 135 (1966); Gordon v. Leeke, 574 F.2d 1147, 1151 (4th Cir 1978) ("In the great run of pro se cases, the issues are faintly articulated and often only dimly perceived."), cert. denied, 439 U.S. 970, 99 S.Ct. 464, 58 L.Ed.2d 431 (1978). What Ms.Landy, as a non-lawyer, characterizes as a secured claim, is probably more accurately viewed as a claim of beneficial ownership arising from either an express or constructive trust. Under § 541(d), Bankruptcy Code, property in which the debtor has only legal title but not a beneficial interest becomes property of the estate only to the extent of the legal interest. See United States v. Whiting Pools, Inc., 462 U.S. 198, 205 n. 10, 103 S.Ct. 2309, 2314 n. 10, 76 L.Ed.2d 515 (1983) ("Congress plainly excluded property of others held by the debtor in trust at the time of the filing of the petition [from property of the estate]."); Old Republic Nat'l Title Ins. Co. v. Tyler (In re Dameron), 206 B.R. 394, 401-02 (Bankr. E.D. Va. 1997) (holding that funds entrusted by lender to real estate settlement agent were held in constructive trust for lender and were not property of the bankruptcy estate). An assertion of beneficial ownership can ordinarily only be determined in the context of an adversary proceeding brought for that purpose. F.R.Bankr.P. 7001. Putting such procedural niceties aside, in order for Ms. Landy to claim beneficial ownership of the trust assets, she must show that she is the has appeared generally. present or contingent beneficiary of the trust. As will be discussed below, the evidence does not support such a finding.
B. Whether Ms. Landy has at best only a contingent claim. The debtor correctly notes that Ms. Landy is not presently a beneficiary of the trust even if one were to accept the interlineations made on her copy of the agreement. The beneficiary during the debtor's lifetime is the debtor himself. Ms. Landy only becomes a beneficiary if she outlives the debtor. However, the fact that her interest is contingent does not prevent her from having a claim. Under § 101(5), Bankruptcy Code, a "claim" is defined as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." A claim may not be disallowed solely on the basis that it is contingent. § 502(b)(1), Bankruptcy Code. Indeed, a court is expressly empowered to estimate, for the purpose of allowance, "any contingent . . . claim, the fixing . . . of which . . . would unduly delay the administration of the case." § 502(c)(1), Bankruptcy Code. It is true that a contingent claim must be valued based on the likelihood of the contingency occurring, but published actuarial tables exist to determine the present value of a remainder interest after a life estate based on the respective ages of the life tenant and the remainderman. Such tables would provide a workable means for computing the value of Ms. Landy's contingent claim once it were determined what the value of the trust corpus should have been on the date the debtor filed his bankruptcy petition. Accordingly, while the estimation of the claim would not be without some computational difficulty, the contingent nature of the claim affects only the amount to be allowed and not its general allowability. Although the respective ages of the debtor and Ms. Landy are in evidence (85 and 78, respectively), the evidence offered at the hearing was wholly insufficient to permit any finding of the amount that should have been in the trust. Nevertheless, assuming the claim was otherwise allowable, the court would not sustain the debtor's objection solely on the basis that the claim was contingent but would set a further hearing to estimate the claim.
C. Whether the trust was properly revoked. The debtor testified that by a letter dated October 1, 1984, to Mr. Wolken, the trustee, he effectively revoked the trust and that therefore, Ms. Landy's claim is essentially non-existent. Exh. 2. Because the trust instrument provided that it was to be governed by the laws of Pennsylvania, the court turns to the law of that state. See In re Schoble, 30 A.2d 316, 320 (Pa. 1943) ("the general rule is that such an inter vivos trust will be . . . administered by the trustee according to the law of the state where the instrument creating the trust locates . . . its administration") (internal quotation omitted) (omissions in original). Under Pennsylvania law, when property is placed in trust for a named beneficiary, it is prima facie irrevocable unless the power of revocation is expressly or impliedly reserved. In re Brose, 206 A.2d 301, 306 (Pa. 1965); Rebidas v. Murasko, 677 A.2d 331, 333 ( Pa. Super. 1996); In re Fellman, 604 A.2d 263, (Pa.Super. 1992) ("A settlor has the power to revoke a trust if and to the extent he has reserved such power by the terms of the trust."). However, certain exceptions to this rule have emerged. An otherwise irrevocable trust is revocable if the trust was created through fraud, duress, undue influence, or mistake. In re Curry, 134 A.2d 497, 500 (Pa. 1957); Rebidas, 677 A.2d at 333. The same rule applies if the settlor can show that he or she intended to reserve a power of revocation, but mistakenly omitted to reserve such power in the instrument creating the trust. Curry, 134 A.2d at 500. Furthermore, if the settlor's intent is uncertain, it may be shown by parol evidence. Brose, 206 A.2d at 306.
The one type of trust that is generally excepted from this principle, and which is revocable at the pleasure of the settlor, is a deposit of money in a savings account in trust for another. This type of trust is called a "tentative" or "Totten" trust, after the New York case for which it was named, In re Totten, 71 N.E. 748 (N.Y. 1904). See Brose, 206 A.2d at 306-07; In re Rodgers' Estate, 97 A.2d 789, 790-91 (Pa. 1953). However, the Supreme Court of Pennsylvania has recognized that this doctrine has never extended to any other kind of property. Brose, 206 A.2d at 307.
Here, the property is shares of stock, partnership interests, and real estate interests and the trust instrument itself is silent as to whether it is revocable. Although Mr. Landy testified at the hearing that he intended to create a revocable trust, he did not testify that his failure to do so was the result of fraud, duress, undue influence, or mistake. Moreover, this court finds it incredible that a trust — in which the settlor and life beneficiary (the debtor) and the trustee (Mr. Wolken) are both attorneys and law partners at the time — could simply omit something so critical and fundamental as a power of revocation if that power was so intended. Accordingly, this court finds that the trust was an irrevocable trust and the debtor's attempted revocation on October 1, 1984, was ineffectual.
D. Whether the handwritten interlineations making Ms. Landy a beneficiary have any legal effect. Preliminarily, the court must distinguish among the three separate documents that purportedly create a trust relationship among the parties. First, there is the hand-written document, Exhibit 3, entitled "Trust Agreement." Based upon the testimony of the debtor and Ms. Landy at the hearing, and upon the language of the document itself, it seems clear that the parties contemplated that the handwritten agreement would be incorporated into a formal trust instrument to be prepared by Mr. Wolken. In substance, therefore, this document was not itself a declaration of trust, but rather a contract to create a trust. Such a contract can nevertheless give rise to enforceable rights. Cf. Fidelity Title Trust Co. of Pittsburgh v. Graham, 105 A. 295, 297 (Pa. 1918) (recognizing a defective "declaration of trust" as in substance a legally enforceable contract, made under seal, for a wife to place her beneficial interest in her husband's life insurance policy in a trust created under the husband's will); Restatement (Second) of Trusts § 22 comment a (1959) (noting that a person can "promise" to create a trust).
For example, the document uses the language of contract and speaks of future performance: " [I]n consideration of Norman Landy filing for a divorce decree Norman Landy agrees that thereafter . . . his interest in the properties listed in Schedule A . . . will be held in trust[.]"
This document, however, contains several fatal flaws that preclude it from becoming an enforceable contract. First and foremost, the document itself recites that the trust was to be created as the "consideration" to the debtor filing for a divorce. It is well-settled under Pennsylvania law that if the purpose of a contract is to obtain a divorce, or to facilitate the procurement or in contemplation of a divorce, the contract is illegal as against the public policy of fostering and protecting the marriage. See, e.g., American National Bank of Camden, N.J. v. Kirk, 177 A. 801, 802 (Pa. 1935); Miller v. Miller, 131 A. 236, 238 (Pa. 1925); In re Mathiot's Estate, 90 A. 139, 140-41 (Pa. 1914); Lurie v. Lurie, 370 A.2d 739, 741-42 ( Pa. Super. 1976); Commonwealth ex rel. Miller v. Miller, 106 A.2d 627, 629 (Pa.Super. 1954); see also Restatement (Second) of Trusts § 62 comment e. Furthermore, it is clear that a contract to create a trust must meet all of the requirements to have a valid contract, including adequate consideration. Otherwise, the document or act has no legal significance. Cf. Graham, 105 A. at 297; see also Bogert, The Law of Trusts and Trustees § 203, at 13-14 (1992). In the present case, the agreement recites that "Norman Landy is desirous of obtaining a divorce from Miriam Landy and in consideration of Norman Landy filing for a divorce decree Norman Landy agrees [to place certain enumerated properties in trust for the benefit of Ms. Landy.]" While the consideration given by the debtor is apparent — a promise to place numerous properties in trust — the only consideration given by Ms. Landy that can be implied from the transaction is that she would consent to the divorce. Such consideration is inadequate in law to support an enforceable contract. Finally, even if this handwritten agreement was an enforceable contract, it is clear that the Pennsylvania four-year statute of limitations for enforcing a contract in writing has long since expired. 42 Pa. Cons. Stat. § 5525(8) (1998).
That leaves for consideration the second and third documents, the second being the formal, typewritten trust agreement as signed by the debtor, and the third being that same document with Ms. Landy's handwritten interlineations that made her, rather than her adult children, the death beneficiaries of the trust. As an initial matter, it appears that under Pennsylvania law, a written agreement — including an irrevocable trust — can be subsequently amended, even orally, provided that all parties agree. See Betterman v. American Stores Co., 80 A.2d 66, 71 (Pa. 1951), cert. denied, American Stores Co v. Betterman, 342 U.S. 827, 72 S.Ct. 49, 96 L.Ed. 625 (1951). Such modification must be "clearly established," Betterman, 80 A.2d at 71, and must have a certain degree of authentication. In re Dotterrer, 579 A.2d 952, ( Pa. Super. 1990), appeal denied 590 A.2d 297 (Pa. 1991). The burden of proving a modification to a prior agreement is on the party asserting the modification. Cf. Knight v. Gulf Refining Co., 166 A. 880, 882 (Pa. 1933) (modification to a written contract); East Texas Motor Freight, Diamond Division v. Lloyd, 484 A.2d 797, 800 ( Pa. Super. 1984) (same). For example, in Dotterrer, the settlor of a revocable, inter vivos trust amended and initialed the amendment, which, among other things, changed the named beneficiaries of a residuary trust and the property they would receive. Upon a challenge to the amendment that the mere initials of the settlor were insufficient to effectively complete the amendment, the court held that initialing the amendment was sufficient. Id. at 954. While recognizing that no Pennsylvania authority had directly addressed the issue, the court analogized to the law of wills and reasoned that the settlor's "signature need not be in any particular form, but must only provide some reliable indication that the grantor intended to authenticate the writing." Id. (Emphasis added).
Here, however, even if her version of the events were believed, Ms. Landy unilaterally and without getting the consent of the two named death beneficiaries, Robin and Bruce Landy, amended the trust to make herself the primary death beneficiary. Moreover, there is no external authentication of even the debtor's consent, as grantor, to the changes, such as his initials on the agreement itself or a separate writing or memorandum signed or adopted by him expressing such consent. As a consequence, the court cannot find that there is any "reliable indication" whatsoever that the debtor intended to authenticate and assent to the handwritten changes. Ms. Landy's only evidence on this point is that she spoke with the trustee, Mr. Wolken, and that he said the debtor agreed to the changes. Although there was no objection to this testimony on the ground of heresay, the same reliability concerns that would have made the testimony inadmissable under Fed.R.Evid. 802 had an objection been interposed, together with the lack of any corroborating evidence that the debtor assented to the changes, precludes the court from finding that the debtor in fact agreed to them. More importantly, once the property was placed in an irrevocable trust, the existing named beneficiaries — that is, Bruce and Robin Landy — would have to have consented to an amendment that would have placed Ms. Landy ahead of them. There is no evidence that this was done.
The debtor's testimony directly contradicts Ms. Landy's. Specifically, he testified that he had never seen the changes nor had authorized them.
The two documents submitted by Ms. Landy following the hearing, even if they could properly be considered, would not alter the court's conclusion. The first document is what appears to be a totally unrelated trust agreement dated January 13, 1987, executed by Mr. Landy as grantor, in which he transferred to himself, as trustee, the sum of $10,822.34. This particular trust, by its terms, is revocable until Mr. Landy's death, at which point it would become irrevocable. One third of the principal and accumulated income would be distributed to the debtor's daughter, Robin, one-third to his grandson, Charles Amadom, and the remaining one-third would be held in trust for his son Bruce. These dispositive provisions in no sense tend to corroborate the interlineations made by Ms. Landy to the typewritten trust agreement. If anything, they are consistent with the intent evidenced by the typewritten agreement to provide for the debtor's children. The second document offered by Ms. Landy — who testified that she kept the books and made the distributions for the partnerships — is a copy of a check she wrote on the account of Commonwealth Hotels, Ltd. (one of the partnerships included on the list of property to be included in the trust) to the debtor on May 15, 1998, in the amount of $14,482.35, payable to "Norman Landy, Trustee." The check is endorsed simply "Norman Landy" for deposit "to acct of Norman Landy." Putting aside the fact that the check is dated after the debtor in possession filed his objection to Ms. Landy's claim, as well as the fact that Mr. Wolken, not the debtor, was the trustee of the trust under which Ms. Landy claims, the issuance of the distribution check to the debtor as "trustee" simply does not corroborate that the debtor agreed to a modification of the 1978 typewritten trust making her, rather than Robin and Bruce, the primary death beneficiary.
She is referred to in the document as Robin Amadom, which the court assumes is her married name.
Accordingly, having carefully considered the evidence, the court finds that the handwritten changes made by Ms. Landy to the 1987 typewritten trust agreement were not authorized by the debtor. Since she is not the beneficiary of the trust, she has no enforceable claim, even contingent, for breach of the trust.
E. Whether the objection to claim should be sustained because the trust was never funded with assets. Although the court's finding that Ms. Landy is not the death beneficiary of the trust precludes allowance of her claim in any event, some brief comment is nevertheless appropriate with respect to the debtor's argument that the claim would have to be disallowed on the alternate basis that the trust was never funded. Based upon the evidence presented at the hearing, it appears that none of the property originally contemplated to be placed into the trust was in fact ever formally conveyed or assigned to Mr. Wolken as trustee, although he handled the settlements when the properties were sold. It is, of course, fundamental that in order to have a valid trust, there must be an identifiable res. DiLucia v. Clemens, 541 A.2d 765, 767 ( Pa. Super. 1988), appeal denied 553 A.2d 968 (Pa. 1988); Restatement (Second) of Trusts § 74. Nevertheless, when property has not been conveyed to the trust by the settlor, the trust agreement can potentially be construed as a contract to create a trust. Restatement (Second) of Trusts § 74; see also Graham, 105 A. 295 (recognizing a contract for a wife to place her beneficial interest in her husband's life insurance policy in a trust created under the husband's will). Assuming that such a rule should be followed in this instance, and putting aside the possible applicability of the various avoidance powers available to a bankruptcy trustee or debtor in possession, the breach of the obligation to convey the properties to the trustee occurred more than eighteen years prior to the filing of the debtor's petition, and an action for breach of contract would, as discussed above, be barred under Pennsylvania law.
III.
In summary, the court concludes that because Ms. Landy is not the named death beneficiary of the 1987 typewritten trust and because she has not carried her burden of showing that the handwritten changes she made to the agreement were authorized by the debtor, her contingent claim for breach of the trust agreement or for failure to fund the trust must be disallowed. Additionally, to the extent her claim is based on the 1987 handwritten document, which may be fairly treated as a contract to create a trust, any claim for failure to create a trust in accordance with the terms of that writing is unenforceable as against public policy and is barred both by the applicable statute of limitations and by lack of consideration. Accordingly, a separate order will be entered sustaining the objection to Ms. Landy's claim.