MEMORANDUM
We are considering an appeal from an Order of the United States Bankruptcy Court for the Middle District of Pennsylvania, filed December 29, 1994, and exercise appellate jurisdiction pursuant to 28 U.S.C. § 158.
I. BACKGROUND
On March 8,1993, Carmen Librandi filed a petition for relief under the Bankruptcy Code and a Chapter 13 bankruptcy plan, to which the Appellant, Joan Windsor, filed objections on April 23, 1993. After the case was converted to a Chapter 7 ease, Windsor filed an objection to Librandi’s list of exempt property, alleging that Librandi’s residence was not held in a valid tenancy by the entire-ties. She also filed a complaint to ascertain the dischargeability of her claim against Li-brandi pursuant to 11 U.S.C. § 523(a)(4). 1
The Bankruptcy Court determined that: (1) the debt was not nondischargeable under section 523(a)(4) of the Bankruptcy Code because Librandi was not acting in a “fiduciary capacity” for purposes of that section; and (2) Librandi’s residence was validly held as a tenancy by the entireties with his wife. On January 6, 1995, Windsor filed the present appeal.
II. LAW AND DISCUSSION
A. Standard of Review
A district court acts in an appellate capacity in reviewing a bankruptcy court’s decision. We review conclusions of law
de novo, In re Marcus Hook Development Park, Inc.,
B. Dischargeability
Windsor contends that Librandi’s debt to her is nondischargeable pursuant to 11 U.S.C. § 523(a)(4), which provides that
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny;
11 U.S.C. § 523(a)(4). In order to prevail under this exception to discharge, Windsor must prove, by a preponderance of the evidence, that: (1) Librandi was acting in a fiduciary capacity; and (2) while acting in that capacity, he engaged in fraud or defalcation.
The Bankruptcy Court concluded that Librandi engaged in improper conduct in his dealings with Windsor. [Memorandum Opinion at 14]. 2 It also determined that although Librandi was likely a common law fiduciary, “Windsor failed to establish the existence of an express trust or technical trust relationship between herself and Librandi such as would be required to render him a ‘fiduciary' for purposes of section 523(a)(4).” [Memorandum Opinion at 18-19]. Windsor argues that the court applied an incorrect standard in finding that Librandi was not acting in a fiduciary capacity pursuant to 11 U.S.C. § 523(a)(4). We review this determination de novo.
While the issue of whether a debt is dischargeable under section 523(a)(4) is a question of federal law, courts also look to state law to determine whether the requisite trust relationship exists.
Matter of Bennett,
There are three elements necessary to establish an express trust: (1) a declaration of trust; (2) a clearly defined trust res; and (3) an intent to create a trust relationship.
In re Ballantyne,
Windsor contends that Librandi was a fiduciary for purposes of section 523(a)(4) because he was a fiduciary pursuant to the Pennsylvania Securities Act, 70 P.S. § 1-101 et seq., and the regulations promulgated thereunder, 64 Pa.Code § 305.019.
4
A statutory fiduciary under state law is only considered a fiduciary for purposes of section 523 if the statute: (1) defines the trust res; (2) identifies the trustee’s fund management duties and authority; and (3) imposes obligations on him prior to the alleged wrongdoing.
In re Christian,
Windsor also contends that Librandi was acting in a fiduciary capacity under section 523(a)(4) based on the “special relationship” between the parties. In support of this argument, she identifies a recent line of cases that expand the definition of fiduciary under section 523. In
Sciscoe v. Leistner,
the term ‘fiduciary’, as used in 11 U.S.C. § 523(a)(4) is limited to the class of fiduciaries including trustees of specific written declarations of trust, guardians, administrators, executors, or public officers, and, absent special considerations, does not extend to the more general class of fiduciaries such as agents, bailees, brokers, factors, and partners.
Id.
at 88 (citing
In re Krause,
either express trusts of a conventional variety or fiduciary relations of the kind just described — relations of inequality that justify the imposition on the fiduciary of a special duty, basically to treat his principal’s affairs with all the solicitude that he would accord his own affairs.
Marchiando,
In the present case, the Bankruptcy Court did not expressly consider whether the “special considerations” or “special relationships” identified in
Marchiando
and
Sciscoe
are present in this action.
6
However, we need
In every case cited by Windsor in support of her claim, the debtor was entrusted with the creditor’s funds.
See, e.g., Goldberg,
The court in
In re Evans,
The bankruptcy court concluded that the state court decision established all the elements necessary for nondischargeability under section 523, and therefore invoked the doctrine of collateral estoppel to conclude that the debt was nondischargeable. However, the Bankruptcy Appellate Panel held that although the parties’ relationship fell within the broad definition of fiduciary relationship, it was not “an express or technical trust relationship as is required under section 523(a)(4).”
Evans,
[a] trust is defined as a “fiduciary relationship with respect to property, subjecting the person by whom title to the property is held to equitable duties to deal with the property for the benefit of another person. ...” Restatement (Second) of Trusts § 2 (1959) (emphasis supplied). Thus a requirement of a trust relationship is a trust res — money or property that is entrusted to the debtor-fiduciary. In re Gans,75 B.R. 474 , 490 (Bankr.S.D.N.Y. 1987); Restatement (Second) of Trusts § 74 (1959) (trust cannot be created unless there is trust property).
Id. The court held, therefore, that because there was no trust res, collateral estoppel based on the state court judgment was not appropriate. Id. at 479.
Although the procedural posture of the present action differs from
Evans,
the underlying premise of that decision applies with equal force here: general fiduciary obligations are not sufficient to establish a fiduciary relationship under section 523(a)(4) “because of the absence of an express or technical trust relationship with an identifiable res.”
Evans,
Other courts have reached the same conclusion. In
Matter of Barton,
We have located only one case, not cited by either party, wherein a court held that section 523(a)(4) was applicable in the absence of the entrustment of funds by the creditor to the debtor. In
In re Cochrane,
The court rejected that argument, and held that “[s]uch positions of power [an attorney’s relationship with his client] do not always involve the deposit of identifiable assets in trust with the attorney. Correspondingly, the professional’s fiduciary duty of forbearance is not limited to situations involving segregated, entrusted assets.” Id. at 634 (citing Janet A. Flaccus, Attorney Malpractice Judgments, Bankruptcy Discharge, and Professional Responsibility, 4 J.Bankr.L. & Pract. 219, 227 (1995)). It based its decision on the fact that “the concept of ‘fiduciary’ is broader than the concept of ‘trustee under an express trust.’ ” Id. The court further stated that “while a trustee under an express trust is always a fiduciary, a fiduciary need not always be a trustee under an express trust.” Id. at 634 n. 15.
The decision in
Cochrane
conflicts with a long line of cases that require the establishment of a trust res before section 523(a)(4) can be applied,
see, e.g., Evans,
Thus, it is clear that the Court intended “fiduciary capacity”, as that term is used in section 523(a)(4), to apply only in those situations that involve a trust, either express or technical. In order to establish a trust, there must be a trust res and equitable title to that res must be transferred to the trustee.
See Hamilton,
Additionally, the decision in
Marchiando
is not to the contrary. There, the
C. Exemption
The Bankruptcy Court also found that Librandi’s residence is held by him and his wife as tenants by the entireties. Windsor contends that the tenancy was severed by a property settlement agreement executed by Librandi and his wife after a complaint in divorce had been filed. However, no settlement agreement, signed by the Librandis, was entered into evidence. [Memorandum Opinion at 10]. Additionally, the court concluded that Librandi and his wife were never divorced (either legally or de facto), and in fact reconciled in 1992. [Memorandum Opinion at 10].
We may disturb findings of fact only if they are clearly erroneous. After reviewing the evidence and opinion of the Bankruptcy Court, we conclude that its findings of fact are not clearly erroneous, and therefore Windsor’s appeal on this issue must be denied.
We will issue an appropriate Order.
Notes
. It is unclear from the record whether Windsor ever obtained a judgment against Librandi. However, since Librandi has not raised the issue, we will not address it.
. Although the court did not determine whether Lihrandi engaged in fraud, it did find that he made material misrepresentations which were relied upon by Windsor. [Memorandum Opinion at 14].
. Additionally, the trust must arise prior to the act of wrongdoing, thus eliminating implied, constructive, and resulting trusts.
In re Short,
. Windsor also contends that the Bankruptcy Court erred in finding that "[t]he record is ambiguous as to whether [Librandi] was a registered securities agent under Pennsylvania law." [Memorandum Opinion at 2], She claims that it is undisputed that Librandi was a registered agent under the Pennsylvania Securities Act. In fact, Librandi admits that he was a registered agent. [Appellee’s Br. at 14]. However, we need not consider this issue since the Bankruptcy Court assumed that Librandi was a registered agent for purposes of its decision. In any event, as set forth below, Librandi was not a statutory fiduciary for purposes of section 523.
. The Third Circuit's only entry into this fray was in
Goldberg v. New Jersey Lawyers’ Fund for Client Protection,
.The court did, however, note that the parties’ relationship was "of the type inherent in the ordinary commercial relationship between a broker of a non-discretionary account and a client." [Memorandum Opinion at 15].
. Although the statute in Barton was the predecessor to section 523(a)(4), "the two statutes are similar enough that decisions construing the pri- or statute are applicable to section 523(a)(4).”
. As set forth below, even assuming there was not a trust res requirement, the circumstances in the case at bar do not rise to the level necessary for dischargeability. The decision in
Cochrane
involved an attorney-client relationship, which differs substantially from the broker-client relationship present here.
See Cochrane,
. Even assuming Windsor satisfied the trust res requirement, her relationship with Librandi does not contain the requisite "special considerations” that fall within the scope of section 523. Windsor contends that her age, lack of investment skill, and past history of dealing with Li-brandi are sufficient to establish such a relationship. However, such disparities are present in a large number of circumstances. We believe there must be something more akin to the facts of
In re Schneider,