Stoughton Lumber Co., Inc. v. Sveum

Bankruptcy Ct. did not err in finding in instant Chapter 7 bankruptcy proceeding that $589,638.10 default judgment was not dischargeable, where said judgment had been previously entered against debtor in lawsuit alleging that debtor had violated terms of settlement in underlying breach of contract and theft by contractor claim. While debtor argued that his conduct, in failing to pay creditor with money that should have been held in trust for creditor, was result of innocent mistake, Bankruptcy Ct. could properly believe that debtor, with 40 years of experience in building industry, knew of obligation to create trust account for instant creditor, but instead used money to pay other creditors. Moreover, instant debt was not dischargeable, where record showed that debtor’s conduct was reckless in that: (1) debtor admitted to making no effort to apprise himself of Wisconsin statute requiring creation of instant trust account until 18 months after being initially sued for payment of said moneys; and (2) debtor was aware that he was making false statements to purchasers of his properties that all subcontractors such as instant creditor had been paid in full.