Matter of Baitcher, Bankruptcy No. 79-02987A

• Decision Date: 14 December 1983
• Docket Number: Adv. No. 82-0260A.,Bankruptcy No. 79-02987A
• Parties: In the Matter of Barbara Ann BAITCHER, Debtor, John SAMUEL, Plaintiff, v. Barbara Ann BAITCHER, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia

36 B.R. 588 (1983)

In the Matter of Barbara Ann BAITCHER, Debtor,

John SAMUEL, Plaintiff, v. Barbara Ann BAITCHER, Defendant.

Bankruptcy No. 79-02987A, Adv. No. 82-0260A.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

December 14, 1983.

COPYRIGHT MATERIAL OMITTED

Kenneth G. Levin, Atlanta, Ga., for plaintiff.

Gus H. Small, Jr., Zusmann, Small, Stamps & White, Atlanta, Ga., for defendant.

MEMORANDUM OF OPINION AND ORDER

A.D. KAHN, Bankruptcy Judge.

Plaintiff filed the above-styled adversary complaint to determine the dischargeability of a debt. It is before the Court on cross-motions for summary judgment.¹ The controlling facts are not in dispute and may be summarized as follows.

Defendant-Debtor and her ex-husband were officers of and Defendant-Debtor was an employee of The Flame Restaurant where Plaintiff was employed as a waiter. On August 7, 1974, The Flame, Inc., which operated The Flame Restaurant, filed for an arrangement under Chapter XI of the Bankruptcy Act. On August 9, 1974, Bankruptcy Judge William L. Norton, Jr. appointed Sidney L. May and Gray Lindgren as Receivers with full powers. On September 28, Plaintiff tripped, fell, and suffered an injury in the course of his employment at The Flame Restaurant.

On December 22, 1975, the Georgia Board of Workmen's Compensation found The Flame, Inc. liable for workmen's compensation in the amount of $10,001.40. Plaintiff obtained a judgment against The Flame, Inc. in the Superior Court of Fulton County, Georgia, for $10,001.40. He then brought an action against Defendant-Debtor and her ex-husband in the Superior Court of Fulton County seeking to hold them personally liable for the $10,001.40. On October 1, 1979, the Superior Court dismissed Plaintiff's complaint and granted judgment for the defendants. The Order of Dismissal was affirmed by the Georgia Court of Appeals. The Supreme Court of Georgia, however, reversed the holding of the two lower courts by an Order dated February 2, 1981. The Supreme Court held that corporate officers and directors could be held liable for the failure of a corporate employer to pay workmen's compensation awards. See, Samuel v. Baitcher, 247 Ga. 71, 274 S.E.2d 327 (1981). On April 29, 1981, the Superior Court of Fulton County entered an Order on Remittitur awarding judgment in favor of Plaintiff and against Defendant-Debtor and her ex-husband in the amount of $10,001.40 plus interest. Plaintiff now seeks to have this judgment declared nondischargeable.

Plaintiff offers four theories upon which he contends this debt should be nondischargeable. They are: 1) Plaintiff's debt was not timely filed by Defendant-Debtor 11 U.S.C. § 523(a)(3); 2) Plaintiff's debt was created by Defendant-Debtor's defalcation while acting in a fiduciary capacity 11 U.S.C. § 523(a)(4); 3) Plaintiff's debt was created in connection with the obtaining of services by false pretenses 11 U.S.C. § 523(a)(2)(A); and 4) Plaintiff's debt was caused by the willful and malicious injury to Plaintiff 11 U.S.C. § 523(a)(6). For the reasons stated below, the Court finds that all four of Plaintiff's theories are without merit and that this debt should be declared to be dischargeable in bankruptcy.

1. Plaintiff's Debt Not Timely Filed—11 U.S.C. § 523(a)(3)

Section 523(a)(3) provides that

A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt—

neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit—

if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or

if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request.

Plaintiff argues that his debt was not timely filed. Defendant-Debtor filed a petition for relief under Chapter 7 on October 2, 1979. She did not list Plaintiff's claim. This petition was filed the day after the Superior Court of Fulton County had dismissed Plaintiff's complaint against Defendant-Debtor and her ex-husband. Defendant-Debtor received her discharge on January 31, 1980, and the case was closed. On June 9, 1981, Defendant-Debtor filed an "Application to Reopen Estate and for Reinstatement of Automatic Stay." This Court granted the application and set a time for Defendant-Debtor to amend her schedules to include the debt to Plaintiff and for Plaintiff to file a complaint to determine the dischargeability of the debt.

Plaintiff contends that, "since the application to reopen the case was not filed until nearly two years after the original bankruptcy petition, it is obvious that the debt was not timely scheduled." Plaintiff's Brief in Support of Motion for Summary Judgment, at 2. In order for a debt to be declared nondischargeable under this subsection of § 523, prejudice to the creditor must be established. Atlantic Nat'l Bank of Fla. v. Jones (In re Jones), 22 B.R. 416 (Bkrtcy.M.D.Fla.1982). Plaintiff has alleged no prejudice from the late scheduling of his debt. The Court has allowed him to file this adversary complaint to determine the dischargeability of his debt. He now has the opportunity to fully litigate the issue of dischargeability. It would be a great injustice, under the circumstances of this case, to find the debt nondischargeable for the failure to timely schedule it when liability has only been fixed since the Supreme Court of Georgia's decision rendered on February 2, 1981. Therefore, the Court finds that the debt in question is not barred from discharge under § 523(a)(3).

2. Debt Created by Defalcation While Acting in a Fiduciary Capacity—11 U.S.C. § 523(a)(4)

Plaintiff maintains that the debt is nondischargeable under § 523(a)(4) which provides that an individual is not discharged from any debt "for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny." Plaintiff contends that Defendant-Debtor was acting in a fiduciary capacity in two ways.

First, Plaintiff asserts that Defendant-Debtor was a fiduciary to Plaintiff in her capacity as an officer of a corporate employer. Pursuant to O.C.G.A. § 34-9-120, employers have a duty to insure the payment of workmen's compensation. If a corporate employer fails to pay an award of workmen's compensation, the officers of that corporation can be held liable. See, Samuel v. Baitcher, 247 Ga. 71, 274 S.E.2d 327 (1981). Plaintiff argues that

Both because she was a corporate officer and manager, and because of the special trust that Georgia public policy imposes on such officers to assure that they keep such insurance in force (imposing personal liability upon them for employee personal injury damages if they fail to do so), Defendant occupied a fiduciary status regarding that legal right of Plaintiff even before her corporation filed for reorganization in bankruptcy, especially in view of its impending insolvency once the state liquor authorities had determined to revoke the right of Defendant and her ex-husband to hold a liquor license. (footnote omitted)

Plaintiff's Brief in Support of Motion for Summary Judgment at 12-13.

It has been well established that § 523(a)(4) is to be limited to technical or express trust relationships and not to trusts which are imposed or implied in law or those which arise out of a contract. See, e.g., Hall v. Cooper (In re Cooper), 30 B.R. 484 (Bkrtcy. 9th Cir.1982); Chrysler Credit Corp. v. Freeman (In re Freeman), 30 B.R. 704 (Bkrtcy.W.D.La.1983); Ford Motor Credit Corp. v. Talcott (In re Talcott), 29 B.R. 874 (Bkrtcy.D.Kan.1983); Banker Trust Co. v. Lichstrahl (In re Lichstrahl), 27 B.R. 46 (Bkrtcy.S.D.Fla.1983); Jacobs v. Ballard (In re Ballard), 26 B.R. 981 (Bkrtcy. D.Conn.1983); Anderson v. Anderson (In re Anderson), 21 B.R. 335 (Bkrtcy.S.D.Ca. 1982). Defendant-Debtor had a duty under Georgia law to see that her corporation insured the payment of workmen's compensation. However, that duty did not constitute a fiduciary duty within the meaning of § 523(a)(4). The only case found by this Court to have considered this issue, held that there had been no evidence presented that a fiduciary relationship existed between an employer and an employee. Hamilton v. Brower (In re Brower), 24 B.R. 246, 247 (Bkrtcy.D.N.M.1982). In a similar case, a bankruptcy court held that an employer's duty to provide for the payment of welfare and pension funds did not constitute a fiduciary duty. Livolsi v. Johnston (In re Johnston), 24 B.R. 685 (Bkrtcy.W.D. Pa.1982). The Court finds that, as an officer of Plaintiff's employer, no fiduciary relationship existed between Defendant-Debtor and Plaintiff within the meaning of § 523(a)(4).

Plaintiff also argues that Defendant-Debtor, as an officer of a debtor-in-possession was serving in a fiduciary capacity. It appears from the record of The Flame, Case No. B74-1985A that, at the time of Plaintiff's fall, The Flame Restaurant was no longer a debtor-in-possession. On August 9, 1974, the Court ordered the appointment of Gray Lindgren and Sydney L. May as joint receivers with

full power and authority until the further Order of this Court to operate and manage the business of the Debtor Corporation including but not limited to the right to employ, discharge and fix compensation of all employees and officers, enter into contracts including the application, receipt and maintenance of licenses to serve alcoholic beverages of all kinds and nature and are authorized and directed to keep books and records of the business and keep the property insured in such a manner as they deem

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