Robert Destfino v. Gerald Bockting

MEMORANDUM

Appellant Ila Destfino entered into an agreement with Appellee Gerald Bockting to invest in a scheme called “Corporate Sole,” with the idea that it would eliminate their debt and tax liability. Bockting contributed the funds, and Ila Destfino managed them. Bockting seeks to recover from Ila Destfino and her husband Robert the funds Bockting contributed to the scheme. The bankruptcy court found the Destfinos liable for defalcation and embezzlement, giving rise to a non-dischargeable debt under 11 U.S.C. § 523 (a)(4), and assessed damages at $388,000. The district court affirmed.

The Destfinos argue: (1) Bockting cannot enforce the agreement against Ila Destfino because the agreement had an illegal purpose; (2) Ila Destfino did not owe Bockting a fiduciary duty; (3) Robert Destfino is not jointly and severally liable for the judgment of defalcation; and (4) the bankruptcy court incorrectly calculated damages to be the net amount of funds Bockting contributed to the scheme, rather than the funds Ila Destfino could not account for. We affirm on liability but vacate and remand to the district court with instructions to remand to the bankruptcy court for a recalculation of…