USCA1 Opinion
November 6, 1995 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 95-1406
RICHARD P. TRITTER,
Appellant,
v.
DIANE KINCH CORRY AND MELISSA TRITTER,
Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
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Before
Selya, Cyr and Boudin,
Circuit Judges.
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Richard P. Tritter on brief pro se.
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Diane Kinch Corry on brief for appellees.
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Per Curiam. Appellant Richard P. Tritter
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("Tritter') appeals pro se from the district court order
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affirming the decision of the bankruptcy court that his debt
to his daughter, Melissa Tritter ("Melissa") is
nondischargeable under 11 U.S.C. 523(a)(4). "In an appeal
from district court review of a bankruptcy court order, we
independently review the bankruptcy court's decision,
applying the 'clearly erroneous' standard to findings of fact
and de novo review to conclusions of law." Grella v. Salem
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Five Cent Sav. Bank, 42 F.3d 26, 30 (1st Cir. 1994).
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I. Donative Intent
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Tritter raises an argument on appeal to this court
which he did not raise before the bankruptcy court or the
district court: that evidence of donative intent should have
been admitted to show that "there was never a valid gift
under the Uniform Gifts to Minors Act." This argument is
waived because it was not raised below. See United States v.
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Palmer, 956 F.2d 3, 6 (1st Cir. 1992). Moreover, the
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bankruptcy court found that, by Tritter's own admission, an
account had been established under the Uniform Gift to Minors
Act ("UGMA") for Melissa's benefit, over which he was
custodian. There is nothing in the record to suggest that
the bankruptcy court's finding in that regard was clearly
erroneous.
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II. Breach of Fiduciary Duty Amounting to
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Defalcation
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In addition to donative intent, Tritter
"incorporated by reference" the issues raised in his district
court brief. Chief among those issues is whether the
bankruptcy court erred in ruling that Tritter breached his
fiduciary duty under the relevant statute and, thereby,
engaged in "defalcation" pursuant to 523(a)(4).1 We need
not decide whether the propriety of the expenditures at issue
should be judged under the UGMA, Mass. Gen. L. ch. 201A
(1957), in effect when the account was established, or under
the UTMA, ch. 201A (1986), which replaced the UGMA, effective
January 30, 1987. The expenditures at issue here were not
"for the minor's benefit" under either Act.
Tritter argues that the UGMA grants a custodian
broader discretion than the UTMA and should apply to this
case. The UGMA provides, in relevant part, as follows:
The custodian shall pay over to the minor for
expenditure by him, or expend for the minor's
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benefit, so much of or all the custodial property
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as the custodian deems advisable for the support,
maintenance, education and benefit of the minor in
the manner, at the time or times and to the extent
that the custodian in his discretion deems suitable
and proper . . . .
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1. With respect to the remaining issues incorporated by
reference, we agree with the district court's determination
that they lack factual support.
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Ch. 201A, 4(b) (1957) (emphasis added). Payment of a
parent's legal fees, even for custody matters, is not an
expenditure "for the minor's benefit" within the meaning of
the UGMA. See Perlberger v. Perlberger, 626 A.2d 1186, 1202
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(Pa. Super., 1993) (interpreting Pennsylvania UGMA, which
contains language identical to 4(b) of the Massachusetts
UGMA). Tritter has failed to cite any cases in support of
his argument that his use of the funds for legal fees was for
his daughter's benefit under the Massachusetts UGMA. We
conclude that the bankruptcy court did not err in ruling that
payment of a parent's legal fees, even to litigate custody or
visitation issues, is not an expenditure "for the minor's
benefit." Assuming there may exist exceptions to this
general rule in extraordinary circumstances, such
circumstances are not present here.
The bankruptcy court also found that Tritter, in
his capacity as custodian of his daughter's account, failed
to keep proper records and commingled funds. Tritter does
not contest those findings. Under the UGMA, the custodian
was required to keep custodial property "separate and
distinct from his own property in a manner to identify it
clearly as custodial property," Ch. 201A, 4(g) (1957). The
UGMA also required the custodian to "keep accounts of all his
transactions with respect to the property held by him as
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custodian . . . ." Id., 4(h). Tritter clearly failed to
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comply with those duties as custodian under the UGMA.
Pursuant to 11 U.S.C. 523(a)(4), a debt incurred
by "fraud or defalcation while acting in a fiduciary
capacity" is non-dischargeable. "In order for [plaintiffs]
to prevail under 523(a)(4), [they] must prove by a
preponderance of the evidence that the Debtor committed fraud
or defalcation while acting in a fiduciary capacity." In re
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Christian, 172 B.R. 490, 495 (Bankr.D.Mass., 1994). Tritter
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became a fiduciary for purposes of 523(a)(4) when the
account was established under the UGMA, naming him as
custodian. See In re Johns, 181 B.R. 965, 973 (Bankr.D.Ariz.
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1995)(holding that custodian of UGMA or UTMA accounts acts in
a fiduciary capacity for purposes of 523(a)(4)).
Tritter breached his fiduciary duties under both
the UGMA and the UTMA by 1) expending the funds to pay his
own legal fees, not "for the minor's benefit;" 2) failing to
keep the custodial funds separate from his own funds; and 3)
failing to keep proper records. The bankruptcy court
correctly ruled that Tritter's breach of his fiduciary duties
constituted "defalcation" within the meaning of 11 U.S.C.
523(a)(4), notwithstanding the absence of any proof of
intentional wrongdoing. See In re Christian, 172 B.R. at 495.
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The decision of the bankruptcy court is affirmed.
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