Case Summary:
On remand from the District Court, the Bankruptcy Court had to determine if the Debtor committed a defalcation as defined by the Supreme Court in Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013). On the facts admitted and proved, it was extremely unlikely that the Debtor did not have actual knowledge of his construction company’s wrongdoing. His participation in the decision not to pay the creditor demonstrated his knowledge that his company had more debts than money to pay them. Thus, every time he received a commission from the sale of the house, he was alerted to the fact that all the subcontractors were not receiving full payment. Even if the Debtor did not have actual knowledge, he was consciously disregarding the risk that he was violating his fiduciary duty. Consequently, the Court found Debtor, as a fiduciary of a trust that existed by operation of Wisconsin's theft by contractors statute, committed a defalcation for purposes of 11 U.S.C. § 523(a)(4) where, even if he was not actively cognizant of wrongdoing, he consciously disregarded the substantial and unjustifiable risk that his conduct violated his fiduciary duty.