Opinion ID: 501184
Heading Depth: 1
Heading Rank: 4

Heading: rodriguez's liability

Text: 38 Rodriguez faces personal liability claims by CG and Universal for his handling of the claim for fire loss at the hotel. In the district court, Lopez also asserted a cross-claim against Rodriguez, seeking reimbursement in the event he were found liable to Universal or to CG. The district court found that Lopez was not liable and dismissed Lopez's cross-claim. On appeal, Lopez has not pressed his cross-claim and, in view of the fact that we have affirmed the district court's decision with respect to Lopez's liability, we do not consider it. 39 Rodriguez raises two general defenses to his personal liability. First, he argues that he cannot be held personally liable because all of his actions relevant to this action were carried out in his official capacity as trustee. Second, he argues that, even if he could be held personally liable for deliberate violations of his fiduciary duties, there is insufficient evidence in the record to support the district court's finding in that respect. We find neither claim persuasive. 40 As to Rodriguez's first argument, the law is directly to the contrary. In Mosser v. Darrow, 341 U.S. 267, 71 S.Ct. 680, 95 L.Ed. 927 (1951), the Supreme Court held that a bankruptcy trustee could be held personally liable for permitting two employees to trade on inside information. The Court noted: 41 Courts are quite likely to protect trustees against heavy liabilities for disinterested mistakes in business judgment. But a trusteeship is serious business and is not to be undertaken lightly or so discharged. The most effective sanction for good administration is personal liability for the consequences of forbidden acts.... 42 Id. at 274, 71 S.Ct. at 683. Building on Mosser, federal courts have uniformly held that bankruptcy trustees are subject to personal liability for the willful and deliberate violation of their fiduciary duties. E.g., In re Gorski, 766 F.2d 723, 727 (2d Cir.1985); In re Cochise College Park, Inc., 703 F.2d 1339, 1357 (9th Cir.1983); Ford Motor Credit Co. v. Weaver, 680 F.2d 451, 461 (6th Cir.1982); Sherr v. Winkler, 552 F.2d 1367, 1375 (10th Cir.1977). Some courts have even held that personal liability can be imposed for negligent acts by a trustee, at least where discretionary judgments are not involved. E.g., Gorski, 766 F.2d at 727; Cochise College Park, 703 F.2d at 1357 & n. 26. 43 Rodriguez's argument concerning evidence to support the district court's finding of deliberateness centers on the court's judicial notice of a related district court proceeding in which Rodriguez was found personally liable to the bankrupt hotel corporation for deliberate violations of his fiduciary duties. See In re San Juan Hotel Corp., 71 B.R. 413 (D.P.R.1987). Characterizing the district court's action as an offensive use of collateral estoppel, Rodriguez cites numerous cases to support his contention that this is not a proper subject for judicial notice under Federal Rule of Evidence 201. This argument misses the point. As the district court's opinion makes clear, the finding of willful and intentional disregard of Rodriguez's trustee duties was not based solely, or even predominantly, on the prior case. Rather, the district court based its finding on the following: despite the fact that Rodriguez negotiated the stipulation and thus knew its provisions, he never notified CG of the fire, he never reported CG as a party in interest when filing the proof of loss, and he never forwarded to CG the payment which it was due. The district court's finding of deliberateness is a factual determination which we review under the clearly erroneous standard of Federal Rule of Civil Procedure 52(a). Even assuming that the judicial notice was improper, we find that there is ample circumstantial evidence on the record--independent of the judicially-noticed prior case--to support the district court's determination. 44 With respect to CG's claim, Rodriguez raises an additional defense: he argues that a cause of action arising out of his fiduciary duties as a bankruptcy trustee was never properly pleaded in the district court. Having reviewed the record from the district court, we conclude that this argument must be rejected. CG's complaint in this action set out the basic facts underlying the dispute over the insurance proceeds and asserted two causes of action against Rodriguez: one for knowingly and wrongfully collecting the insurance proceeds in violation of his obligations under the stipulation, and one for violation of his fiduciary duties under a constructive trust impressed on the proceeds. Rodriguez is thus technically correct when he argues that CG never explicitly identified the legal theory of Mosser and its progeny as a ground for recovery. But, as the district court noted, modern federal pleading practice does not demand so precise a statement. 45 Under Rule 8 [of the Federal Rules of Civil Procedure], a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to relief. It is not necessary to set out the legal theory on which the claim is based. Siegelman v. Cunard White Star Ltd., 221 F.2d 189, 196 (2d Cir.1955) (Harlan, J.); see also Gins v. Mauser Plumbing Supply Co., 148 F.2d 974, 976 (2d Cir.1945) (particular legal theories of counsel yield to the court's duty to grant the relief to which the prevailing party is entitled, whether demanded or not); 2A J. Moore & J. Lucas, Moore's Federal Practice p 8.14 (1987). Here, at least with respect to Universal's claim, the district court ruled that the bankruptcy law issues were sufficiently implicated by the pleadings and evidence to support a judgment against Rodriguez personally. We agree. In its complaint, CG alleged that Rodriguez knowingly violated both the terms of the stipulation and the fiduciary duties owed to CG. It is precisely those allegations--eventually found as conclusions of fact and law by the district court--which entitle CG to prevail under the Mosser line of cases. That CG did not plead this particular legal theory, when it did plead two related theories, will not be a bar to recovery. See Janke Construction Co. v. Vulcan Materials Co., 527 F.2d 772, 776 (7th Cir.1976) (We concur with the District Court that the fact that [plaintiff] misconceived the legal theory of his case does not preclude it from obtaining relief under another theory.). Rodriguez had every reason to know that his fiduciary duties as bankruptcy trustee would be an issue in the case and, indeed, he raised provisions of the bankruptcy code as a defense. 46 Having made the necessary factual and legal findings to support CG's claim against Rodriguez, the district court nevertheless dismissed CG's complaint against Rodriguez. That decision is reversed, and judgment is entered for CG against Rodriguez individually for $418,217, the full amount of the insurance proceeds relating to property damage which should have been paid to CG under the stipulation. 2 Rodriguez is jointly liable with Universal for the $164,000 in structural loss proceeds and solely liable for the $254,217 in personal property loss proceeds. 47 Universal's cross-claim against Rodriguez stands on different footing. Rodriguez admittedly owed fiduciary duties to CG as a creditor and contractual duties to CG under the stipulation, but Universal is not a party to the stipulation and has not alleged a fiduciary relationship. Contrary to the district court's conclusion, therefore, Universal does not have a bankruptcy law-based claim against Rodriguez in his personal capacity. Such a claim is contingent upon the existence of a fiduciary relationship. Universal tries to avoid this conclusion by pointing to the permissive cross-claim provisions of Rule 13(g) and by bootstrapping the duties that Rodriguez owed to CG. Universal characterizes its claim not as a separate and independent action between co-parties, but as a contingent remedy requested on the basis of the result in the original complaint filed. Apparently, Universal believes that it is entitled to contribution or indemnity from Rodriguez for Universal's liability to CG, on account of Rodriguez's violation of duties owed to CG. But Rule 13(g) is not a general provision for indemnity or contribution. It is purely a procedural device for facilitating affirmative claims for relief among co-parties to a lawsuit. See 3 J. Moore, Moore's Federal Practice p 13.34, at 13-213 n. 11 (1987); 6 C. Wright & A Miller, Federal Practice & Procedure Sec. 1431, at 162 (1971). The pleading requirements of Rule 8(a) apply to Rule 13(g) cross-claims, which must contain ... a short and plain statement ... showing that the pleader is entitled to relief. See Washington Building Realty Corp. v. Peoples Drug Stores, Inc., 161 F.2d 879, 880 (D.C.Cir.1947); Paur v. Crookston Marine, Inc., 83 F.R.D. 466, 471 (D.N.D.1979). Universal has not pointed to any substantive legal basis for contribution or indemnity, and it has not and cannot assert that it has a cause of action against Rodriguez under the bankruptcy laws. Its cross-claim must fail. 48 In finding for Universal on its cross-claim, the district court referred to section 1795 of the Civil Code of Puerto Rico. Universal now endorses the district court's ruling by arguing that it is indeed entitled to restitution under section 1795. This argument is rejected on two grounds. First, as already discussed, section 1795 applies only to payments made because of a mistake of fact, not because of a mistake of law, like that involved here. Second, there is no evidence that Rodriguez personally received any of the insurance proceeds. He has not been unjustly enriched and cannot be held to make restitution for something that he never received. The district court's judgment for Universal is reversed and Universal's cross-claim against Rodriguez is dismissed. 49 Reaching an issue never raised by any of the parties, the district court also held that any personal liability imposed on Rodriguez is not dischargeable in bankruptcy. The district court was apparently concerned that Rodriguez would declare bankruptcy and seek to avoid the financial consequences of his malfeasance as a trustee. Rodriguez argues that the district court erred in this respect, and we agree. The Rules of Bankruptcy Procedure provide that dischargeability is a question to be raised before a bankruptcy court only after bankruptcy proceedings have been initiated. Bankr. Rules 4004-08. At that time, a discharge shall be granted to individual debtors unless an objection is filed or the debtor waives the discharge. Bankr. Rule 4004(c). And the objector carries the burden of proof. Bankr. Rule 4005. Because Rodriguez has not filed for bankruptcy, the district court's decision regarding discharge is premature and must be vacated.