In re: Dantone, No. 12-8006 (6th Cir. 2012)
Annotate this CasePlaintiffs delivered artifacts from a famous shipwreck to Debtor for display and, according to Debtor, sale in Debtor’s jewelry store. The store went out of business. When Debtor returned the artifacts, an emerald pendant and musket balls were missing. Plaintiffs filed a complaint alleging breach of fiduciary duty, common law conversion, and statutory conversion or negligence. A Michigan state court found that Debtor’s failure to respond to any written discovery requests, file a response to the Motion for Summary Disposition, and appear at the hearing were sufficient basis for entry of summary disposition and awarded $42,706.10. The judgment did not specify the claim upon which it was based. Debtor filed a voluntary Chapter 7 bankruptcy petition. Plaintiffs filed an adversary complaint seeking to have the debt declared nondischargeable under 11 U.S.C. 523(a)(4), stating that Debtor’s actions constituted “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” The bankruptcy court granted Plaintiffs summary judgment. The Sixth Circuit reversed. The bankruptcy court erred when it held that the issue of fraud was “necessarily determined” by the state court; the state court judgment cannot have issue preclusive effect as to this element for nondischargeability under the embezzlement portion of section 523(a)(4).
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