Reshetar Systems, Inc. v. Scott Thompson
686 F.3d 940
8th Cir.2012Background
- Construction 70 promised to promptly pay subcontractors upon owner payment for the Applebee’s Cambridge project; Reshetar completed carpentry/drywall but was unpaid $48,293.81.
- In 2007 Construction 70 settled with Applebee’s and offered Reshetar a pro rata share, which Reshetar rejected.
- Reshetar sued in state court for breach of contract, conversion, unjust enrichment, and violations of Minn. Stat. § 337.10 and § 514.02.
- Thompson signed a $78,000 confession of judgment in 2009; Thompson and his wife filed Chapter 7 in December 2009 leaving the debt to Reshetar unsatisfied.
- Reshetar filed an adversary proceeding in bankruptcy to have the debt nondischargeable; the BAP affirmed, and the district court reviewed the dischargeability rulings under 11 U.S.C. § 523(a)(4) and § 523(a)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 514.02 creates a fiduciary relationship under § 523(a)(4) | Reshetar argues the statute creates a trust/fiduciary for subcontractors | Thompson argues no fiduciary relationship is created by the statute | No fiduciary relationship created under § 523(a)(4) by § 514.02 |
| Whether Minnesota common law fiduciary duties can support § 523(a)(4) nondischargeability | Reshetar relies on a duty of officers to creditors in insolvency | Thompson argues such duties do not create cognizable § 523(a)(4) fiduciary status | No cognizable common-law fiduciary duty under § 523(a)(4) established |
| Whether the § 514.02 funds constitute embezzlement under § 523(a)(4) | Funds paid to Reshetar’s benefit were misappropriated | Construction 70 used its own funds; no specific funds earmarked for Reshetar | Embezzlement not shown; cannot embezzle one’s own property |
| Whether the § 514.02 funds constitute larceny under § 523(a)(4) | Reshetar’s property rights in payments were violated | Payments were lawfully possessed by Construction 70; no larceny | Larceny not established; no unlawful taking of Reshetar’s property |
| Whether Thompson’s conduct was willful and malicious under § 523(a)(6) | Thompson’s actions harmed Reshetar; malicious intent alleged | Evidence shows efforts to save the business; no malice | No willful and malicious injury; § 523(a)(6) not triggered |
Key Cases Cited
- In re Nail, 680 F.3d 1036 (8th Cir. 2012) (strict/narrow fiduciary standard governs § 523(a)(4))
- Davis v. Aetna Acceptance Co., 293 U.S. 328 (1934) (trusts must preexist the wrong)
- Matter of Marchiando, 13 F.3d 1111 (7th Cir. 1994) (fiduciary status must predate the wrong)
- In re Long, 774 F.2d 875 (8th Cir. 1985) (trust-like duties required for § 523(a)(4))
- In re Belfry, 862 F.2d 661 (8th Cir. 1988) (emphasizes ownership interests in funds; cannot embezzle one's own property)
- In re Phillips, 882 F.2d 302 (8th Cir. 1989) (security interest context for funds received)