B&C’s Bryan Murphy and Laura Meyer Prevail in U.S. Bankruptcy Court, District of Arizona

Published on in Firm Highlights

Bryan Murphy
Melissa Iyer Julian

Burch & Cracchiolo prevailed for the plaintiff in a breach of fiduciary duty adversary proceeding tried to the bench in June 2014 in the U.S. Bankruptcy Court, District of Arizona.  The plaintiff had hired the debtor defendant and his real estate agency to sell her horse ranch in Scottsdale and assist her in purchasing a retirement home with the proceeds.  The debtor defendant leveraged his $575,000 real estate commission for the sale of the ranch into a loan back to the plaintiff under which she was obligated to pay him thousands of dollars more in interest-only payments and which he asked her to secure by executing a promissory note and deed of trust on her retirement home.  Burch & Cracchiolo proved at trial that the debtor defendant had breached his fiduciary duties to the plaintiff by, among other things, leveraging his commission into a loan without advising her to seek independent legal and tax advice and without disclosing his self-interest in using the loan to attempt to reduce his own taxes on his commission.  The Court decided that because the debtor defendant breached his fiduciary duties, he had forfeited his right to the $575,000 commission from the horse ranch sale, the $33,000 commission from the purchase of the retirement home, and the $130,359 in interest and late fees paid on the promissory notes.  The Court further held that the promissory notes and deeds of trust were void and unenforceable, that the defendants were enjoined from foreclosing on the deed of trust on plaintiff’s home, and finally that plaintiff would be awarded reasonable fees and costs.