Walsh
Walsh v. Northwestern National Insurance Co. (In re Ferrante)
Opinion
Lead Opinion
Fernandez, J.
Northwestern National Insurance Company appeals the Bankruptcy Appellate Panel’s affirmance of the bankruptcy court’s summary judgment for Edward M. Walsh, Chapter 11 Trustee. Walsh had sued on a surety bond issued by Northwestern to Charles Duck, Walsh’s predecessor as trustee for the estate of Michael and Geraldine Ferrante. The bankruptcy court surcharged Northwestern for proceeds that remained unaccounted for after Duck auctioned off certain vehicles of Great American Construction Company (GACC), the Ferrantes’ wholly owned company. It also surcharged Northwestern for other monies that Duck embezzled. We affirm.
BACKGROUND
Michael and Geraldine Ferrante filed their Chapter 11 petition on October 22, 1982. Charles Duck was appointed as Chapter 11 trustee. Northwestern issued two bonds totaling $500,000, ensuring Duck’s faithful performance as trustee.
Michael Ferrante was the sole shareholder of GACC, an apparently insolvent corporation suspended by the State of California for failure to pay its franchise taxes. On September 29, 1983, Duck, as trustee, took control of GACC and, without leave of court, he liquidated the assets. Duck obtained auction proceeds of $231,750.96…