FNFS, Ltd. v. Harwood (In re Harwood)

Summarized by Alan Gerger , The Gerger Law Firm PLLC
15 years 1 day ago

Citation:

5th Circuit Ct. of Appeals, No. 10-40406, Appeal from the United States District Court, Eastern District of Texas, document no. 00511435498, April 15, 2011, 523(a)(4), King (concurring Davis, Southwick)

Tag(s):

5th Circuit

Ruling:

The Court ruled that an officer of a corporate general partner who is entrusted with the management of a limited parthership and who exercises sufficient control over that limited partnership is one type of fiduciary contemplated by 11 US.C. §524(a)(4). The inquiry will be into the "degree of control actually exercised" not the corporate structure. The Court also ruled that the debts were incurred through defalcation while acting in a fiduciary capacity and that the debts were, therefore, excepted from the chapter 7 discharge under 11 U.S.C. §523(a)(4).

Procedural context:

Appeal from the District Court, Eastern District of Texas which affirmed the Bankrutpcy Court ruling that debts were non-dischargeable. 11 USC §523(a)(4)

Facts:

Defendant debtor was an officer of a corporate general partner who exercised operational control over both the general partner and its limited partnership and in whom was placed a high degree of confidence and trust. Debtor’s actions include making significant loans from limited partnership on which interest was paid only intermittently, borrowing more to pay interest on existing loans, and failing to ensure deed of trust lien was perfected. Debtor appeals district court order affirming bankruptcy court judgment finding him to be a fiduciary under 11 USC§523(a)(4) and incurring debts through defalcation while acting in that fiduciary capacity.

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