United States Bankruptcy Court for the District of Kansas
236 B.R. 420 (1999)
Gary Leitner was employed by Leo Wetherill (defendant) to perform legal and accounting services for Wetherill’s company, L.G.W. Energy Resources, Inc. (the Company). Leitner embezzled approximately $1 million from the Company over six years. Leitner used some of the funds to purchase a home. Wetherill discovered the fraud in 1992 and sued Leitner in state court in Kansas. Wetherill sought a constructive trust on the home. Leitner eventually admitted the fraud, and Wetherill submitted an order that imposed the constructive trust on the home. However, before the order was signed, Leitner filed for Chapter 7 bankruptcy. The state court action was stayed until October 1993. The bankruptcy trustee (plaintiff) filed an adversary action seeking a determination that no constructive trust exists and that the home is part of the bankruptcy estate. The bankruptcy trustee moved for summary judgment. While this motion was pending, the state trial court entered the judgment declaring that the home was the subject of a constructive trust with Wetherill as the beneficiary.
Rule of Law
Holding and Reasoning (Flannagan, J.)
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