512 B.R. 103
Bankr. D. Mass.2014Background
- Stallworth hired McBride to represent him in State Forfeiture Action arising from drug arrest and property seizures; fees initially paid by Stallworth's parents.
- McBride settled the State Forfeiture Action without Stallworth's consent and without a signed authority, and then allocated settlement funds to himself via a contingent fee and other charges.
- A Fee Settlement Agreement misrepresented that Stallworth Sr. had authority to approve fees by power of attorney, which Stallworth never authorized.
- Stallworth later sued McBride in Massachusetts state court; the Superior Court awarded damages including $1,000 in unreturned fees and trebling under Mass. Gen. Laws ch. 93A totaling $38,866.67, later reflected as $5,186.80 attributable to McBride’s conduct for discharge purposes.
- McBride was disbarred by the Massachusetts Supreme Judicial Court for professional misconduct related to Stallworth and related parties, and Stallworth initiated this adversary proceeding under 11 U.S.C. § 523 to determine dischargeability of the state court judgment debt.
- Judgment execution in 2018 showed total damages including interest and costs; the court apportioned the portion attributable to McBride’s misconduct as $5,186.80, which is sought to be excepted from discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| § 523(a)(2)(A) false representation | Stallworth contends McBride obtained funds via false representation to settle. | McBride contends no misrepresentation caused the debt; settlement was authorized. | Debt excepted to $5,186.80 for false representation |
| § 523(a)(4) fiduciary defalcation | Stallworth alleges McBride acted in a fiduciary capacity with entrusted funds. | McBride argues no express/technical trust existed and no fiduciary misappropriation occurred. | Defalcation found; $5,186.80 excepted |
| § 523(a)(6) willful and malicious injury | Stallworth asserts willful/malicious injury to Stallworth’s and parents' property from settling without authorization. | McBride disputes willfulness and malice; argues insufficient proof of intent. | Injury deemed willful/malicious for the same $5,186.80 |
| Counterclaim for abuse of process | N/A | McBride's abuse-of-process claim asserted; court finds waived and frivolous. | Counterclaim waived and dismissed as frivolous |
Key Cases Cited
- McCrory v. Spigel (In re Spigel), 260 F.3d 27 (1st Cir. 2001) (elements of § 523(a)(2)(A) fraud)
- Palmacci v. Umpierrez, 121 F.3d 781 (1st Cir. 1997) (creditor reliance and damages under § 523(a)(2)(A))
- Danvers Savings Bank v. Alexander (In re Alexander), 427 B.R. 183 (Bankr.D. Mass. 2010) (fresh start; narrow construction of discharge exceptions)
- Fahey (In re Fahey), 482 B.R. 678 (1st Cir. BAP 2012) (fiduciary status under § 523(a)(4) for express/technical trust)
- In re Cochrane, 124 F.3d 978 (8th Cir. 1997) (express/technical trust requirement for § 523(a)(4))
- In re Ingeneri, 321 B.R. 601 (Bankr. Me. 2005) (fiduciary entrustment creates fiduciary status for § 523(a)(4))
- In re Rickabaugh, 355 B.R. 743 (Bankr. D. Iowa 2006) (trust funds required for § 523(a)(4) application)
- Stephens v. Bigelow (In re Bigelow), 271 B.R. 178 (9th Cir. BAP 2001) (no fiduciary relationship where no trust funds involved)
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (willful injury requires intentional act causing injury)
- Printy v. Dean Witter Reynolds, Inc., 110 F.3d 853 (1st Cir. 1997) (malice and willfulness elements in § 523(a)(6))
- Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013) (defalcation requires culpable state of mind; knowledge or reckless disregard)
- Neronha v. Burke (In re Neronha), 344 B.R. 229 (Bankr. D. Mass. 2006) (malice and willfulness in § 523(a)(6))
- Baylis v. In re Baylis, 313 F.3d 9 (1st Cir. 2002) (defalcation jurisprudence; knowledge/conscious disregard)