- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 22-1240 (9th Circuit, Jul 18,2023) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the decision of the U.S. Bankruptcy Court for the Central District of California granting summary judgment excepting the debt of Wallace Steffen (DR) to Linda Steffen (LS) from discharge under § 523(a)(4) arising from his conduct while serving as successor trustee of his deceased father’s trust based on the preclusive effect of the findings of fact and conclusions of law set forth in an Ohio probate court's final decision holding the DR liable for breach of trust, with that effect the sole issue on appeal.
- Procedural context:
- Even as time the Ohio probate court's judgment against him was still interlocutory, "awaiting the award of fees and costs" to LS, the DR filed for chapter 7 bankruptcy. The BC granted relief from the stay or the parties to complete that litigation. Ultimately, the probate court entered final judgment in March 2020 in favor of LS. The DR then appealed the final judgment, but the Ohio Court of Appeals affirmed on procedural grounds. Meanwhile, in June 2019, LS commenced her nondischargeability action under § 523(a)(4) based on two counts (defalcation and embezzlement), while this latter probate court action was still pending. In April 2020, just after the probate court’s entry of final judgment, LS moved for summary judgment; the BC held everything in abeyance pending exhaustion of appeals in Ohio by the DR. Once that occurred, the BC adjudicated the pending motion, ruling, among other findings, that the issue of the DR's intent was necessary to the probate court's decision.
- Facts:
- LS and the DR were sibling who, per the revocable living trust established by their father, Wallace Steffen Sr.. in 2004, were to receive an equal share of its assets upon his death. However, due to their father's dementia from 2010 through at least February 2018, the DR served as the trustee, during which time he engaged in numerous transactions involving the Trust's assets for his own benefit. When this came to light, LS sued the DR in an Ohio probate court in June 2015 for breach of trust and avoidance of loans he made to himself while serving as trustee. After a three-day bench trial in December 2016, the probate court rendered numerous findings of fact and conclusions law in support of the DR's liability.
- Judge(s):
- William J. Lafferty III; Robert J. Faris; and Gary A. Spraker
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