Case Summary:
LeRoy Lee filed two adversary actions against Harvey Haukaas, and a separate case against Harlan Haukaas to determine the nondischargeability of his claim under § 523(a)(4) and § 523(a)(6). The two cases were consolidated for trial. Just before trial, the parties agreed to submit stipulated facts, and a trial was never held. Lee argued that he was injured when the Defendants transferred corporate assets to a new corporate entity, which precluded his ability to collect on an unsecured debt that he was owed by the original corporation. Based on stipulated facts, the Court concluded Lee was not injured by the defendants’ conduct, because the original corporate entity that was controlled by the defendants had no assets that were unencumbered, and thus available for unsecured creditors. Accordingly, Lee failed to meet his burden under § 523(a)(6). The Court also found that Lee had neither established that an express trust existed, nor that the Defendants ever owed, or breached any fiduciary duties owed to Lee, as a creditor. As a result, Lee did not establish a claim under § 523(a)(4). The Court dismissed Lee’s complaint.

Statute/Rule References:
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud in Fiduciary Capacity
11 U.S.C. § 523(a)(6) -- Nondischargeability - Willful and Malicious Injury
Wis. Stat. § 134.01

Key Terms:
Civil Conspiracy
Defalcation While Acting as a Fiduciary
Fiduciary Duties Owe Corporate Directors Owe to Creditors
Willful and Malicious - Defined