09-12461-7 In re Rieck

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Bankruptcy
Discharge; fraud

Summary judgment on a debt’s nondischargeability for fraud is inappropriate where the debtor is a contractor, and there is a factual dispute whether he was negligent or committed an intentional theft.
“In essence, there is a dispute as to which of the company’s principals was the ‘intentional’ tortfeasor and which, if either, was the ‘negligent’ one in the context of the Wisconsin theft by contractor statute. As the court noted in Koch, the Wisconsin theft by contractor statute ‘creates an express fiduciary relationship and delineates clear duties, and Wisconsin contractors are charged with knowledge of the law in this area.’ 197 B.R. at 658. In order for a violation of the statute to be nondischargeable, there needs to be proof that the debtor was more than negligent in the handling of trust funds. Koch, 197 B.R. at 658; Ward, 417 B.R. at 592. In this case, if the defendant was responsible for the company’s accounts, was aware of the trust fund requirements, or was more than simply an innocent bystander ‘peripherally involved’ in what happened to the plaintiffs’ funds, the plaintiffs may be able to demonstrate more than mere negligence on his part. Certainly the finger-pointing between partners suggests a dispute on this factual issue, and the Court is obligated to view facts in the light most favorable to the non-moving parties, which in this instance means the plaintiffs.”

09-12461-7 In re Rieck

W.D.Wis., Utschig, Bankr. J.