Bos v. Board of Trustees

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
10 years 7 months ago

Citation:

In re Gregory Bos, No. 13-15604 (9th Cir. July 30, 2015).

Tag(s):

Ruling:

Debtor was not § 523(a)(4) fiduciary when he failed to make contributions to ERISA employee-benefit funds.

Procedural context:

After debtor, an individual, filed his chapter 7 petition, the board of a group of ERISA employee-benefit funds, which held debtor’s note, filed brought a dischargeability action under § 523(a)(4) alleging that debtor committed defalcation while acting as a fiduciary of the funds. The bankruptcy court ruled for the board, and the district court affirmed. On further appeal, the Ninth Circuit reversed and remanded.

Facts:

Debtor owned and was president of a corporation. The corporation was a member of an employer association. Debtor agreed on behalf of the corporation that it would be bound by a collective-bargaining agreement and several trust agreement. The CBA required each member, including the corporation, to contribute monthly payments to the trust funds for providing employee benefits. Each trust agreement defined its fund as including “all contributions required by the [CBA] . . . to be made for the establishment and maintenance of the [plan], and all interest, income and other returns of any kind.” Debtor personally had full control over corporation’s finances and the authority to make payments on behalf of the corporation, whether to the funds or to other creditors. Debtor was thus personally responsible for making the required contributions to the funds on behalf of the corporation. After the corporation fell behind on contribution payments, debtor signed a promissory note personally guaranteeing payment to the funds. He failed to pay most of the amount due under the note. An arbitration award was entered against debtor and corporation. For a debt to be held nondischargeability under the defalcation provision, the debtor must have been a fiduciary before commission of the defalcation. The act of wrongdoing that created the debt cannot be the same act that gives rise to the fiduciary relationship. Although an individual who is a fiduciary under ERSA is also a fiduciary under § 523(a)(4), unpaid contributions to an employee-benefit fund are not plan assets—even if the plan document expressly defines the fund to include future payments. Thus, debtor did not engage in defalcation under § 523(a)(4).

Judge(s):

Diarmuid F. O’Scannlain and Sandra S. Ikuta, Circuit Judges, and Larry A. Burns, District Judge (S.D. Cal.), sitting by designation.

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