Bullock v. BankChampaign, N.A. (In re Bullock)

Summarized by Tracy Frasier , Smith Frasier, P.A.
14 years 3 weeks ago

Citation:

--- F.3d ----, 2012 WL 446279, (11 Cir. 2012)

Tag(s):

Ruling:

Defalcation under 11 U.S.C. 523(a)(4) "requires a known breach of a fiduciary duty, such that the conduct can be characterized as objectively reckless." The Debtor, as trustee, should have known that he was engaging in self-dealing since he beneffitted from the loans. Further, the Debtor's affirmative defense of unclean hands was not effective although the Court agreed with the bankruptcy court that the trustee of the constructive trust was "abusing its position of trust by failing to liquidate the [property]."

Procedural context:

The bankruptcy court determined the judgment debt to be non-dischargeable under 11 U.S.C 523(a)(4). The district court affirmed, and on appeal to the 11th Circuit Court of Appeals, the Court again affirmed.

Facts:

Prebankruptcy judgment was entered against debtor for breach of fiduciary duty by self-dealing. Debtor was trustee of a trust. The terms of the trust limited the trustee's ability to borrow from it. On three occasions, the first of which was authorized by the trustor, the Debtor borrowed funds. The judgment awarded money damages in addition to creating constructive trusts comprised of the assets acquired through the loans. The Debtor tried to liquidate the assets to satisfy the judgment, but the constructive trust trustee blocked the Debtor's attempts to sell. After filing bankruptcy, the constructive trust trustee commenced an adversary proceeding challenging dischargeability of the judgment debt.

Judge(s):

Barkett, Pryor and Bucklew

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!