  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
Cash Am. Fin. Servs., Inc. v. Fox (In re Fox), 370 B.R. 104 (B.A.P. 6th Cir. 2007) (Collection agent's failure to post a surety bond and to maintain a separate segregated collection account was not defalcation in a fiduciary capacity when the contract specifically stated that neither party will be deemed a fiduciary "for any purpose whatsoever." Had the plaintiff proven defalcation in a fiduciary capacity, Ohio law would hold debtor personally liable as corporate officer and director who participated in a tort by the corporation. Debtor was half owner, president and chief operating officer of R.R. Fox, an incorporated debt collection agency. Plaintiff was a payday lender that contracted with R.R. Fox to assist with debt collection. Contrary to the contract requirements, R.R. Fox neither posted a surety bond nor established a segregated trust account for collections on behalf of plaintiff. The contract specifically stated: "This Agreement does not constitute any party hereto as [a]. . . fiduciary. . . for any purpose whatsoever." R.R. Fox failed to comply with the remittance requirements but plaintiff continued to send R.R. Fox new accounts. Plaintiff asserted that the debtor should be held personally liable for the unremitted collections and that this debt should be nondischargeable under SS 523(a)(4) and (a)(6). Under Ohio law, "to the extent the Debtor engaged in tortious conduct as President of R.R. Fox, or caused R.R. Fox to commit a corporate tort, he may be held personally liable for the resulting injury to the [plaintiff]." The BAP held that the contract precluded finding a fiduciary relationship for purposes of S 523(a)(4).).
3. Embezzlement or Larceny
Board of Trustees of the Ohio Carpenters' Pension Fund v. Bucci, 493 F.3d 635 (6th Cir. 2007) (Failure to remit employer contributions to ERISA-qualified funds was not embezzlement for S 523(a)(4) purposes because there was no property entrusted to the debtor. It was assumed that unpaid employer contributions still held by the debtor qualified as assets of the ERISA plans and the debtor exercised control over those assets, becoming an ERISA fudiciary. "'A creditor proves embezzlement by showing that he entrusted his property to the debtor, the debtor appropriated the property for use other than that for which was entrusted and the circumstances indicate fraud.'. . .The Funds argue that Bucci was entrusted with the employer contributions and that he appropriated them for another use by failing to pay them. The bankruptcy court found no evidence that the Funds entrusted Bucci with the unpaid employer contributions. . . . The court agrees with the bankruptcy court that a breach of contract, without more, is not embezzlement.").
Cash Am. Fin. Servs., Inc. v. Fox (In re Fox), 370 B.R. 104 (B.A.P. 6th Cir. 2007) (Collection agent's failure to remit collected accounts was not embezzlement for S 523(a)(4) purposes because plaintiff failed to prove fraudulent intent; that plaintiff knew the debtor had not set up a proper trust account and was not timely remitting under its contract coupled with the absence of any hiding or concealment by the debtor was evidence of lack of fraudulent intent. The embezzlement prong of S 523(a)(4) requires proof of three elements: "(1) 'that he entrusted his property to the debtor,' (2) that 'the debtor appropriated the property for a use other than that for which it was entrusted,' and (3) that 'the circumstances indicate fraud.' The 'fraud' required under S 523(a)(4) is 'fraud in fact,
