The Locked Ledger: When Silence Became a Tool of Financial Fraud

The following is a case update written by Hale Andrew Antico, Chief Counsel of Antico Law Firm, analyzing a recent case of interest, Mayorga v. Fancher (In re Fancher), 2025 WL 2171778 (Bankr. C.D. Cal. Jul 30, 2025).

Summary

In Fancher, the bankruptcy court held unpaid music royalties nondischargeable under Bankruptcy Code § 523(a)(2) based on fraudulent accounting omissions but held that no fiduciary duty existed under § 523(a)(4) due to lack of entrustment to the manager, as a nonowner.

To view the full decision, click here.

Facts

Punk rock band Suicidal Tendencies signed with Lisa Fancher in 1983 just before releasing their self-titled debut. Louis “Louiche” Mayorga, songwriter and musician, holds composition credits for four tracks on it, including the iconic “Institutionalized,” which was featured in numerous movies.

Fancher held the copyright title. Her duties: collecting all revenues from any recorded format — physical, digital, future tech — and distributing 4% of wholesale royalties to each member, including Mayorga.

When digital streaming emerged, Fancher collected digital royalties from 2009 to 2022, tracking them only in Excel spreadsheets—a system lacking the transparency and auditability of a proper general ledger. Fancher notably did not issue Mayorga any royalty statements, stating she was unprepared for the digital revolution. Mayorga’s frustration boiled over, echoing his own lyrics: “Slaving in a factory, a different kind of insanity, feels like I’m locked in a cage.” He demanded payment, saying he didn’t want to “wait another 20 somethin years.”

Mayorga repeatedly requested payments and accounting. Fancher sent checks ranging from $500 to $5,000 at irregular intervals, often claiming she was “super broke” or prioritizing other debts. The court found Fancher actively concealed digital streaming revenue, only paying other band members while stopping Mayorga’s payments entirely upon litigation.  She said she was unprepared for the “overwhelming” accounting of digital royalties, where the amounts owed to him were “guesstimates,” and that she used a system prioritizing payments: “squeaky wheel gets the grease.”  At the hint of being sued, Fancher wrote, “I will send you some loot…” reducing his amount owed to a triviality: like a mere soda. “….no need to spend money on lawyers when you don’t have funds already.” Fancher at *11-12.

Mayorga’s patience wore thin. Fancher dismissively replied: “….I’m not a bank… Considering you’re actively trying to take the record away, there’s not a lot of incentive to put you first in line.” Id. at *13.

Mayorga filed suit against Fancher in state court, resulting in a 2021 decision against Fancher for breach of contract. Audit attempts were met with obstruction, including heavily redacted documents and pandemic-era demands for in-person viewing. Mayorga filed an Order to Show Cause. Two weeks before the six-figure fee hearing related to the contempt proceedings, Fancher filed Chapter 13.

In the Chapter 13 case, Mayorga filed an adversary proceeding claiming nondischargeable debts under, among other claims, § 523(a)(2) and (a)(4) for debts based on fraud or breach of fiduciary duty. The bankruptcy court ruled that Fancher’s debt to Mayorga of $8,787 in actual damages was nondischargeable under § 523(a)(2) for fraud but dismissed the breach of fiduciary duty claim under § 523(a)(4).

Don’t wanna be nobody’s gardener I want more.
Don’t wanna be a garbage man I want more.

— “I Want More,” Suicidal Tendencies’ 1983 debut album

Reasoning

False Pretenses and False Representation

The bankruptcy court began its analysis under § 523(a)(2), noting that actual fraud extends beyond mere misrepresentation. Husky International Electronics v. Ritz, 578 U.S. 355, 136 S.Ct. 1581 (2016). The court then focused on the elements of false pretenses and false representation: (1) misrepresentation or fraudulent omission or deceptive conduct; (2) knowledge of the falsity; (3) intent to deceive; (4) justifiable reliance; and (5) damages proximately caused by that reliance.

“[S]ilence… can be the basis of a false impression which creates a misrepresentation actionable under § 523(a)(2)(A).” In re Evans, 181 B.R. 508, 514 (Bankr. S.D. Cal. 1995). The deliberate evasion of transparency mirrored the lyrics from Mayorga’s anthem:

They stick me in an institution
And said it was the only solution

— “Institutionalized” Id.

The bankruptcy court emphasized that silence can constitute actionable fraud when there is a duty to disclose. In re Eashai, 87 F.3d 1082, 1082 (9th Cir. 1996). A duty to disclose exists when one party is ignorant of material facts which they lack opportunity to discover. Apte v. Japra (In re Apte), 96 F.3d 1319, 1324 (9th Cir. 1996).  The court found that Fancher, with a duty to disclose, made false representations and fraudulent omissions when she said Mayorga was “very close to getting caught up” even though he was not receiving digital streaming royalties, she was “cognizant of the deceptiveness of her conduct” when she made unrealistic constraints on his request to inspect records—including refusing to produce documents in violation of the state court’s order— and demonstrated intent to deceive by systematically failing to comply with audits.

The court determined that Mayorga was justified in his reliance on Fancher and her representations. He was 19 years old when they signed the contract, and he trusted Fancher in full when she said he was being paid what he was owed. While Fancher responded that he never actively pursued or asked for statements, the bankruptcy court ruled that he had no duty to investigate to have justifiable reliance, and even if he did review them, Fancher’s false representations would not have been apparent from the statements. However, Mayorga’s justifiable reliance ended upon filing his state court lawsuit in 2016.

Fiduciary Duty

The bankruptcy court then turned to the § 523(a)(4) claim, analyzing whether Fancher breached a fiduciary duty to Mayorga. Under their recording agreement, Fancher owned the album, and owed Mayorga semi-annual royalty payments based on her earnings from the album. To prove embezzlement under § 523(a)(4), creditors must show: (1) property was rightfully in a nonowner’s possession; (2) that nonowner appropriated it for unauthorized use; and (3) fraudulent circumstances. Here, since he did not own the music, “Mr. Mayorga cannot establish that he entrusted to Ms. Fancher, as a nonowner, any of the recording royalties that became payable to him.” *30,33, citing In re Littleton, 942 F.2d 551, 555 (9^th Cir, 1991).

The court dismissed the § 523(a)(4) claim, finding Mr. Mayorga could not establish entrustment of his royalties to Ms. Fancher as a non-owner.

However, the bankruptcy court found Fancher’s debt nondischargeable under § 523(a)(2), awarding Mayorga actual damages of $8,787 (reduced because justifiable reliance ended in 2016), plus prevailing attorney fees under Cal. Civ. Code § 1717, but denying punitive and emotional distress damages.

Author’s Commentary

This isn’t just another bankruptcy case about royalties and dischargeability. It’s a dissonant chord in a long song: one where the silence between notes becomes the most deafening. It’s a case about a musician who wrote songs like “I Want More” almost 50 years ago about slaving in a factory… felt like he’s locked in a cage, now fighting against its locks, still wanting more. He wrote his most famous song about institutionalization and then spent decades fighting against an institution denying him his fair share. His cry for “a Pepsi” — not a drink, but his dignity, his fees, his very soul — ripped from the lyrics: “All I wanted was a Pepsi. Just one Pepsi.”

“And she wouldn’t give it to me.”

The court heard his plea. And in doing so, it didn’t just rule on a contract dispute; it recognized the human cost of silence.

Fancher’s core deception wasn’t just omission; it was the deliberate construction of silence. Mayorga’s desperation was palpable in his communications with Fancher: “…don’t mean to [bother you] but I’m gonna loose my car, all my [stuff] in the pawn shop, not to mention my rent, so please understand 300.00 bux will not cut it, not even close … I hope u understand Lisa and please let me know what’s up.” The human cost — the potential for utter loss — was the direct consequence of Fancher’s deliberate evasion. Her failure to provide statements or allow inspection wasn’t oversight; it was the fraudulent omission actionable under § 523(a)(2); the locking of the cage’s door of silence where royalties should have echoed.  She built a cage from spreadsheets and silence, locking away both royalties and acknowledgment. While cashing checks for digital royalties, Fancher systematically withheld Mayorga’s share, dismissing him as the “squeaky wheel” demanding grease. Her gaslighting (“I’m not a bank”) only highlighted the institutional power she wielded She dismissively called him the squeaky wheel who needed to wait his turn, all while wearing the long sleeves of institutional control.

The bankruptcy court found Fancher deceived him and failed to act in good faith. Thus, Mayorga wasn’t the problem; he was the victim of that deception.

So, what does this mean for practitioners?

• Silence as Fraud: Demand regular, auditable royalty statements and record access. The ruling establishes failure to provide these as actionable fraud under § 523(a)(2) where silence creates a misleading impression.
• Fiduciary Duty: Clarify relationships. Bankruptcy Code § 523(a)(4) requires specific entrustment of the property, not merely handling of funds. A contractual manager/artist relationship alone is insufficient.
• Digital Recordkeeping: Implement robust systems beyond personal spreadsheets. Complex revenue streams require auditable records to prevent disputes and potential fraud claims.
• Justifiable Reliance: Establish reliance pre-litigation: Representations made before suit can support fraud claims if reasonable reliance is shown; reliance ends upon filing.
• Practical Action: Contractually mandate disclosure timelines and reporting formats. Document all requests for information and responses (or lack thereof)

If the other party doesn’t have all the information or a chance to discover, there’s a duty to disclose, and even silence can be deception. This ruling, after many long years, was the key that unlocked the cage of denial and betrayal. The key that unlocked it wasn’t just a legal ruling… it was the recognition that silence can be as loud as a lie. After decades of silence, the court didn’t merely rule against Fancher. It gave Louis Mayorga what he’d been singing about since 1983: his Pepsi. Not a soda, but dignity, compensation, and freedom.

The court saw the evidence and found that Fancher strung him along for years, denying him his due as he struggled. Ultimately, it ruled the debt nondischargeable and found Mayorga to be the prevailing party under the Recording Agreement, who requested a six-figure award of attorney’s fees that far exceeded the damages awarded (the fee motion remains pending as of publication of this e-bulletin).

I’m not crazy!
You’re the one that’s crazy!
They stick me in an institution
And said it was the only solution
To protect from the enemy…. myself

The cage door swung open, and the silence was finally broken. For once, the only thing echoing through those halls wasn’t institutionalized despair — but hope.

These materials were written by Hale Andrew Antico, Chief Counsel of Antico Law Firm, representing consumer debtors in the Central District of California, and President of the Central District Consumer Bankruptcy Attorneys Association, with editorial contributions by Joseph Boufadel with Salvato Boufadel LLP in Los Angeles and Santa Ana, California and Kathleen A. Cashman-Kramer with Fennemore Law’s San Diego office.