In re Waters (Ch. 7 Case Case No. 04-50100, Adv. No. 09-05014)
The debtor was the guardian of his minor son who was injured in an automobile accident. The debtor, as guardian, received settlement proceeds of $15,500 and obtained a surety bond from the plaintiff. The probate court determined that the debtor had made numerous unauthorized expenditures and encroached upon the corpus of the settlement proceeds without leave of the court. The plaintiff, as surety, was called upon to pay the missing corpus to the successor guardian. The bankruptcy court determined that collateral estoppel applied to the probate court's determination and that the debtor's obligation to the plaintiff, as surety, was nondischargeable as a defalcation while acting in a fiduciary capacity under § 523(a)(4).