In re Johnson
Decision Date | 26 March 1981 |
Docket Number | No. G80-629-CA1.,G80-629-CA1. |
Citation | 10 BR 322 |
Parties | In re Gerald W. JOHNSON and Gerald W. Johnson d/b/a Johnson's Pole Buildings, Bankrupt. CARLISLE CASHWAY, INC., Plaintiff-Appellant, v. Gerald JOHNSON, Defendant-Appellee. |
Court | U.S. District Court — Western District of Michigan |
David M. Thompson, Law, Weathers, Richardson & Dutcher, Grand Rapids, Mich., for plaintiff-appellant.
Richard J. Heath, Grand Rapids, Mich., for defendant-appellee.
This matter has come before this Court as an appeal filed by the plaintiff seeking review of the July 24, 1980, opinion and order entered by the Honorable David E. Nims, Jr., United States Bankruptcy Judge, discharging a debt which the appellant here claims was not dischargeable under Section 17(a)(4) of the old Bankruptcy Act, 11 U.S.C. § 35(a)(4), 30 Stat. 550 (1898), as amended.
It is clear that this appeal is governed by the pre-1979 version of the Bankruptcy Act. Pub.L. 95-598, Title IV, §§ 403(a), 405, 92 Stat. 2683 (1978). Accordingly, all authorities cited in this opinion will relate to the old Bankruptcy Act, 11 U.S.C. §§ 1-1103 (1898), as amended.
In considering this appeal, the Court cannot disturb or set aside Judge Nims's findings of fact unless they are clearly erroneous. In re Albert-Harris, Inc., 313 F.2d 447 (6th Cir. 1963); Cle-Ware Industries, Inc. v. Sokolsky, 493 F.2d 863 (6th Cir. 1974), cert. denied, 419 U.S. 829, 95 S.Ct. 50, 42 L.Ed.2d 53 and sub nom. Whalen v. Cle-Ware Industries, Inc., 419 U.S. 829, 95 S.Ct. 50, 42 L.Ed.2d 53; In re Wyse, 296 F.2d 214 (6th Cir. 1961). See also In re Pennyrich International, Inc., of Dallas, 473 F.2d 417 (5th Cir. 1973).
Appellant contends that Judge Nims erred in concluding that appellee's debt is not dischargeable because Michigan law created in appellee a fiduciary obligation toward appellant, the breach of which through misappropriation or defalcation would give rise to nondischargeability of the debt under Section 17(a)(4). Such a position necessarily involves a mixed question of law and fact. The legal issues hinge on the application of Michigan's Building Contract Fund Act, M.C.L.A. §§ 570.151 — 570.153, M.S.A. §§ 26.331 — 26.333, including the defining of all elements for a civil cause of action to be maintained successfully thereunder. The factual issues focus on Judge Nims's findings as to the degree to which appellant satisfied the elements of proving the existence of a fiduciary relationship under the Building Contract Fund Act and a breach of that fiduciary duty within the meaning of that Act. The Court will limit its plenary review of Judge Nims's opinion and order to a reconsideration of his conclusions of law regarding the applicability of the Building Contract Fund Act in a Section 17(a)(4) setting. As indicated above, however, Judge Nims's treatment of the facts will not be disturbed unless they are clearly erroneous, and any of his findings of fact are considered by this Court cloaked with a presumption of correctness. General Order 47; In re Souder, 449 F.2d 284 (5th Cir. 1971); In re National Furniture Co., 230 F.Supp. 130 (W.D.Ark. 1964), rev'd on other grounds sub nom. United States v. National Furniture Company, Inc., 348 F.2d 390 (8th Cir. 1965).
Judge Nims's version of the facts affords this Court a succinct summary of the basis of the parties' dispute:
In re Johnson, No. NG 78-01257-B-1 (W.D. Mich.1980) slip op. at 1-3.
The Michigan Building Contract Fund Act was enacted "to protect the people of the state from imposition and fraud in the building construction industry and to provide penalties for the violation of this act." 31 M.C.L.A. at 542 (1967). The Act reads:
M.C.L.A. §§ 570.151 — 570.153, M.S.A. §§ 26.331 — 26.333, as amended (emphasis supplied). Although the Building Contract Fund Act is a criminal statute, it has been held to apply in civil actions as well. See B.F. Farnell Company v. Monahan, 377 Mich. 552, 141 N.W.2d 58 (1966). It is clear that the underlying basis for enacting this statute lies in the problems experienced in the 1920's concerning the building industry in Michigan. As the court in General Ins. Co. of America v. Lamar Corp., 482 F.2d 856, 860 (6th Cir. 1973), observed:
... Speculative builders often undertook to construct projects too large for their available capital to finance, and they frequently paid suppliers and materialmen on older projects with funds received as payment on more current operations. With the advent of the crash of 1929 and the consequent widespread insolvency of many building contractors, these pyramided empires also collapsed and many subcontractors and suppliers were never paid.
The purpose of the Building Contract Fund Act was explained further by a panel of the Michigan Court of Appeals in People v. Miller, 78 Mich.App. 336, 339-40, 342, 259 N.W.2d 877 (1977), a criminal case, in which the "basic thrust of the statute" was described as one of protecting "certain persons including materialmen from unscrupulous or underfinanced building contractors" so as to prevent "contractors from juggling funds between unrelated...
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