Case Summary:
Defendant was a contractor who was hired to refurbish and remodel Plaintiffs’ properties in Osseo and Rice Lake. Neither project was completed, and Defendant failed to provide an accounting of the work done and money spent. Plaintiffs then received a judgment in their favor from state court and brought this adversary to determine that judgment nondischargeable under section 532(a)(4). The Court held (1) a fiduciary relationship existed between the parties under Wis. Stat. § 779.02(5) and (2) Defendant breached his fiduciary duty when he failed to account for money he spent on the project. Under Wis. Stat. § 779.02(5), funds paid to contractors for work constitute a trust fund. Plaintiffs demanded an accounting of payments made on the projects, but Defendant repeatedly failed to provide them. The Court found Defendant’s actions went beyond mere negligence. Plaintiffs had met their burden under section 523(a)(4) by establishing the amount of trust res and Defendant had failed to present some explanation and accounting in order to rebut the prima facie case. This Court determined that the $23,825 judgment was nondischargeable under section 523(a)(4).

Statute/Rule References:
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud or Defalcation in Fiduciary Capacity
Wis. Stat. § 779.02(5) -- Theft by Contractor

Key Terms:
Defalcation While Acting as a Fiduciary
Theft by Contractor