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In re Omegas Group, Inc.

16 F.3d 1443 (1994)

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In re Omegas Group, Inc.

United States Court of Appeals for the Sixth Circuit
16 F.3d 1443 (1994)

Facts

Omegas Group, Inc. (Omegas) (debtor) and XL/Datacomp (Datacomp) (creditor) were industry remarketers of IBM computers. In early 1990, Omegas and Datacomp entered an arrangement in which Omegas was to order new computers from IBM on Datacomp’s behalf, without IBM’s knowledge, in exchange for a percentage of Datacomp’s eventual sale price. Datacomp sent Omegas orders for IBM computers and paid Omegas roughly $1.1 million, which Omegas was to remit to IBM. On September 12, 1990, Omegas ordered the termination of payments to IBM for the computers on order but still continued to invoice Datacomp for the computers. Unbeknownst to Datacomp, on October 15, 1990, Omegas asked IBM to cancel its pending computer deliveries. Omegas then filed for bankruptcy. Datacomp commenced an adversary proceeding seeking to recover Datacomp’s $1.1 million. Datacomp argued that Omegas had committed fraud and, therefore, the money Omegas had received from Datacomp was subject to a constructive trust in Datacomp’s favor and was not part of Omegas’s bankruptcy estate. The bankruptcy court imposed a constructive trust on all funds received by Omegas from Datacomp after September 12, 1990, which amounted to $302,142. The bankruptcy court held that Datacomp could recover that amount, and the district court affirmed. The parties appealed.

Rule of Law

Issue

Holding and Reasoning (Batchelder, J.)

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Casebooks

Debtors and Creditors

Key Terms