Estate of Stanley Cora v. Jahrling (In re Jahrling)

Summarized by Daniel Waxman , KEWA Financial Inc.
9 years 11 months ago

Citation:

Estate of Stanley Cora v. Jahrling (In re Jahrling), Case No. 15-2252 (7th Cir. Mar. 18, 2016)

Tag(s):

Ruling:

Legal malpractice judgment entered against the debtor was not dischargeable because the judgment was for a "defalcation while acting in a fiduciary capacity." The Court held that although legal malpractice judgments and/or judgments resulting from an attorney's violation of rules of professional conduct did not necessarily mean that "defalcation" had occurred, the instant debtor's conduct met the requisite standard of "subjective recklessness" because he "consciously disregarded a substantial and unjustifiable risk that his conduct would violate a fiduciary duty."

Procedural context:

AFFIRMING decision of District Court for the Northern District of Illinois, which affirmed the decision of the Bankruptcy Court for the Northern District of Illinois.

Facts:

The Debtor, Jahring, acted as an attorney for a client who was selling his home. Jahring did not speak the same language as his 90 year old client and received all of his information regarding his client's wishes from counsel for the purchaser. The sale price for the home was substantially less than the market value of the home, presumably because, Jahring's client wished to retain a life estate in the home. No life estate was ever included in the sales documents, Jahring's client was evicted and successfully sued Jahring for legal malpractice. Jahring filed a chapter 7 bankruptcy petition and the estate of Jahring's client filed an adversary proceeding to declare the judgment non-dischargeable pursuant to section 523(a)(4).

Judge(s):

Kanne, Rovner, and Hamilton

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