Knoll, Jr. v. Uku, 658 B.R. 812

Eustace O. Uku (Debtor), president and sole shareholder of Exico, and Charles A. Knoll, Jr. (Plaintiff), co-owned Yale Development & Contracting, Inc. with a 51/49% split (Uku/Knoll).
State Court judgment found Uku and Exico liable for breach of contract, breach of fiduciary duty, and conversion after funds in excess of $280,000 were withdrawn and dissipated without proper distributions to Knoll.
Knoll filed a proof of claim and adversary complaint in Uku’s Chapter 13 bankruptcy, seeking the debt’s non-dischargeability under 11 U.S.C. §523(a)(4) (fiduciary fraud/defalcation, embezzlement, or larceny) and §523(a)(6), though §523(a)(6) was later acknowledged inapplicable.
Knoll moved for summary judgment based on State Court findings and asserted that collateral estoppel should apply to render the debt non-dischargeable; Uku opposed, disputing the sufficiency of findings and applicability of estoppel.
The Bankruptcy Court addressed whether State Court findings alone, under collateral estoppel, were sufficient to grant summary judgment on non-dischargeability under §523(a)(4).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Applicability of §523(a)(2) (fraud) to complaint	Fraud alleged generally & §523(a) cited—so §523(a)(2) should be considered.	§523(a)(2) not specifically plead; should not be considered.	Court refused to consider §523(a)(2), as it was not properly plead.
State Court finding of fiduciary relationship suffices for §523(a)(4)	State Court’s breach of fiduciary duty finding satisfies §523(a)(4) fiduciary requirement.	§523(a)(4) requires a narrow, Bankruptcy Code-defined fiduciary status—State Court’s finding insufficient.	Court agreed with Uku; state “fiduciary” finding is insufficient.
Sufficiency of State Court findings to prove embezzlement/larceny	The findings, taken together, show fraudulent or felonious intent sufficient for §523(a)(4).	No express State Court finding of fraudulent/larcenous intent; intent not established.	Court found requisite intent not established—summary judgment denied.
Application of collateral estoppel to intent element	State Court’s detailed findings preclude relitigation—intent is established by collateral estoppel.	Collateral estoppel does not extend to intent, which was not explicitly found.	Collateral estoppel does not establish intent—trial required.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard)
Celotex Corp. v. Catrett, 477 U.S. 317 (movant's burden on summary judgment)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (burden shifting and inferences at summary judgment)