## Facts

- James S. Nance, a professional football player, owed substantial debts to Coolidge Bank and Trust Co.
- In 1970, Nance executed a purported assignment of his multi-year player contract compensation as additional collateral; the arrangement functioned as an assignment of future wages under Massachusetts law.
- After Nance was traded in 1971, the bank questioned the adequacy of its collateral, including rights to deferred compensation tied to prior seasons.
- In 1972, Nance executed a trust instrument directing that outstanding compensation owed by the Patriots for the 1970 and 1971 seasons be paid into a trust naming the bank and Nance’s agent as trustees.
- About a month later, Nance signed a demand note consolidating his debts and expressly naming as security the trust and all compensation owed by the Patriots.
- In December 1973, Nance settled a dispute with the Patriots over deferred compensation and received roughly $29,000.
- Nance remitted about $5,000 to the bank and retained the remainder.
- The bank sued in state court on the demand note, but Nance filed a bankruptcy petition in July 1974, staying the state action.
- The bank sought a determination that approximately $24,000 was nondischargeable as a liability for willful and malicious conversion of the bank’s property.

## Issues

1. Whether the 1972 trust/assignment and related security arrangements created a valid property interest for the bank in Nance’s deferred compensation under Massachusetts law, despite restrictions on assignment of wages.
2. If the bank had a valid property interest, whether Nance’s retention and use of the settlement proceeds constituted a willful and malicious conversion rendering the debt nondischargeable under Bankruptcy Act § 17(a)(2).

## Decision

- The First Circuit reversed the district court and reinstated the bankruptcy court’s nondischargeability determination.
- The court held the 1970 assignment was invalid as an assignment of future wages, but the 1972 arrangements concerned already earned deferred compensation and were not barred by the Massachusetts wage-assignment statute.
- Because the bank held a valid interest in the deferred compensation proceeds, Nance’s knowing retention of the bulk of the settlement funds constituted willful and malicious conversion.
- The resulting debt was excepted from discharge under § 17(a)(2) as a liability for willful and malicious injury to the property of another.

## Legal Principles

- State-law prohibitions on assigning future wages do not necessarily invalidate a transfer or security interest in compensation that has already been earned but is payable later.
- For nondischargeability under Bankruptcy Act § 17(a)(2), “willful and malicious” can be satisfied by an intentional act, done without just cause or excuse, that the debtor knows will harm another’s property rights; personal animus is not required.
- A debtor’s knowing appropriation of proceeds subject to a valid assignment or security interest can constitute conversion and support nondischargeability when the creditor’s property interest is established.

## Conclusion

The First Circuit held that the bank’s interest attached to Nance’s earned deferred compensation through the 1972 trust and security arrangements, and that Nance’s deliberate retention of settlement proceeds in derogation of that interest amounted to willful and malicious conversion, making the corresponding debt nondischargeable.


In re Nance, 556 F.2d 602 (1st Cir. 1977)