Destfino v. Bockting
- Summarized by Mark Hudson , Schian Walker, PLC
- 14 years 1 month ago
- Citation:
- unavailable
- Tag(s):
-
- Ruling:
- The Ninth Circuit Court of Appeals affirmed the District Court (and Bankruptcy Court) decision that debtor / appellant and her husband were liable for debt and that debt was excepted from discharge by § 523(a)(4) but remanded for a recalculation of damages.
The Bankruptcy Court awarded Appellee Bockting a judgment of $388,327, including a ruling that the debt was excepted from discharge pursuant to §523 (a)(4). The District Court affirmed and the Ninth Circuit, in an unpublished Memorandum decision, affirmed on liability but vacated and remanded for the Bankruptcy Court to recalculate the damages.
Noting that the Bankruptcy Court had declined to find Bockting the victim of a fraud and that both parties entered the scheme "because of their own greed", the Court dealt with the defenses to § 523(a)(4) liability raised by Destfino on appeal; ruling that:
a) the contract was not enforceable as an illegal contract – holding that while the scheme may have been illegal in the sense of allegedly defrauding its investors, that did not make investing in the scheme illegal;
b) the contention that it was error to find Robert Destfino (Mr. Destfino) liable for the defalcation was mooted by the Bankruptcy Court's finding that both Destfinos had committed embezzlement and that the Destfinos had failed to raise the embezzlement issue on appeal; and
c) the Bankruptcy Court did not commit clear error in making the factual finding that a trust existed due to the repeated use of the word "trustee" in the agreement.
After affirming on liability, the Court ruled that the Bankruptcy Court had erred in entirely rejecting Mrs. Destfino's accountings (despite their inconsistencies) and entering judgment for the full $388,327. This was clear error given the testimony that some part of those moneys invested by Bockting were later (i) paid on his behalf and (ii) the payments were authorized by Bockting. Therefore, the Destfinos liability was limited to the amount misappropriated or unaccounted for by the Destfinos.
- Procedural context:
- Ninth Circuit reviewed decision of the District Court (E.D. Cal.), which had affirmed the decision of the Bankruptcy Court. The Ninth Circuit decision was an unpublished Memorandum decision.
- Facts:
- Appellant Bockting and Appellee Ila Destfino (Mrs. Destfino) entered into an agreement under which Bockting would invest money with Mrs. Destfino into a scheme purported to eliminate their debt and tax liability. It was undisputed that Bockting gave Destfino about $388,327, net of distributions to Bockting. Mrs. Destfino produced (4) exhibits accounting for between $312,679 and $366,423 of these funds; i.e., that these amounts were paid on behalf of Bockting for expenses such as mortgage payments and at least one auto used by Bockting. The balance of $20,000 to $80,000 was unaccounted for by Mrs. Destfino.
- Judge(s):
- McKeown, Clifton, Bybee
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