Hawks Holdings, LLC v. Kalinowski (In re Kalinowski)
- Summarized by Steven Mulligan , Coan, Payton & Payne, LLC
- 12 years 1 month ago
- Citation:
- In re Kalinowski, 2012 WL 5505078 (B.A.P. 10th Cir. Nov. 14, 2012)
- Tag(s):
-
- Ruling:
- Since Debtor was the de facto manager of an LLC, he stood in a fiduciary relationship to the creditor of that LLC under a New Mexico statute that created a technical trust and Debtor’s participation in the mismanagement of funds paid to the LLC for the construction of homes constituted defalcation and thus, the debt was excepted from discharge.
- Procedural context:
- Two individual Chapter 7 Bankruptcy Cases were commenced in New Mexico and Appellee filed adversary proceedings against both Debtors to have the debt owed to Appellee excepted from discharge for fraud and defalcation while acting in a fiduciary capacity under 11 U.S.C. § 523(a)(4). The adversary proceedings were consolidated into one case and the Bankruptcy Court ruled in favor of the Appellee finding that the debt was non-dischargeable. Only one of the Debtors appealed to the 10th Circuit BAP. The 10th Circuit BAP affirmed the Bankruptcy Court’s decision.
- Facts:
- The Debtors, William Kalinowski (“William”) and Karen Dieter Kalinowski (“Karen”) were involved in K2 Construction Company, LLC (“K2”), a licensed general contractor. Karen owned 51% and was listed as the sole manager of K2. William did not have any ownership interest in K2 and was not listed as a manager in K2’s operating agreement or organizational minutes. However, William told Appellee and others that he controlled and managed K2 and as a result, was found to be the de facto manager of K2. K2 mismanaged funds paid by Appellee for the construction of three homes when K2 used those funds on different projects. Since William had an active role in that mismanagement, he was not protected by any corporate immunity for K2’s debt to Appellee.
- Judge(s):
- Thurman, Brown, and Somers
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