482 F.3d 319 (5th Cir. 2007), 06-30105, In re Ark-La-Tex Timber Co., Inc.

Docket Nº:06-30105.
Citation:482 F.3d 319
Party Name:In the Matter of: ARK-LA-TEX TIMBER CO., INC., Debtor. Peoples State Bank, Appellant, v. General Electric Capital Corp.; Ark-La-Tex Timber Co., Inc.; and John Clifton Conine, Appellees.
Case Date:March 15, 2007
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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482 F.3d 319 (5th Cir. 2007)

In the Matter of: ARK-LA-TEX TIMBER CO., INC., Debtor.

Peoples State Bank, Appellant,

v.

General Electric Capital Corp.; Ark-La-Tex Timber Co., Inc.; and John Clifton Conine, Appellees.

No. 06-30105.

United States Court of Appeals, Fifth Circuit

March 15, 2007

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Edward Keith Carter (argued), Rogers & Hearne, Shreveport, LA, for Peoples State Bank.

Alexander Terras (argued), Timothy Harris, DLA Piper Rudnick Gray Cary, Chicago, IL, Bernard S. Johnson, Cook, Yancey, King & Galloway, Shreveport, LA, for General Elec. Capital Corp.

John Clifton Conine, Luster & Conine, Natchitoches, LA, pro se.

Appeal from the United States District Court for the Western District of Louisiana.

Before GARWOOD, DENNIS and OWEN, Circuit Judges. [*]

DENNIS, Circuit Judge:

In this case, we review decisions by the bankruptcy and district courts resolving the competing claims of two secured creditors, Peoples State Bank ("Peoples State") and General Electric Capital Corporation ("General Electric"), to proceeds resulting from an auction of non-titled movables 1 formerly owned by a bankrupt corporation, Ark-La-Tex, and its two related juridical persons, Alba Source, L.L.C. and Pearl Equipment Company. We affirm.

General Electric brought this suit in Louisiana state court to recover sums delivered by the auctioneer to Peoples State but allegedly not due to it. The defendant,

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Peoples State, removed the case to the United States District Court for the Western District of Louisiana. The district court thereafter transferred the case to the Bankruptcy Court that had ordered the auction sale of the movables formerly owned by the bankruptcy debtor and its affiliated juridical persons.

Facts and Procedural History

The issues in this case revolve around three Louisiana juridical persons, 2 Ark-La-Tex Timber Company, a bankrupt Louisiana corporation, and its two related 3 Louisiana juridical persons, Alba Source, L.L.C. ("Alba") and Pearl Equipment Company, ("Pearl"). In order to obtain financing for their business ventures, each of these entities granted various, separate security interests 4 in their non-titled movables, such as logging equipment, to their various creditors.

General Electric held the highest-ranking 5 security interest in the non-titled

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movables owned by Alba and Pearl. Although the first-ranking priority as to the non-titled movables owned by Ark-La-Tex changed several times, at the time of its bankruptcy on May 7, 2001, Peoples State was the highest-ranking secured creditor with respect to its non-titled movables.

During the bankruptcy proceedings, on August 10, 2001, the bankruptcy judge issued an order effectuating Ark-La-Tex's purchase of all of the membership interests in Pearl and Alba for the consideration of the nominal amount of $10.00 ("the August 10, 2001 Order"). The parties formed the erroneous impression that this order effected a substantive consolidation 6 of the three juridical persons. The order did not and could not merge the assets of Pearl and Alba into the bankruptcy estate of Ark-La-Tex, however, because neither juridical person had been placed into bankruptcy. 7 On October 20, 2001, the Bankruptcy Judge issued an order directing the movables (and other collateral) of Ark-La-Tex only to be sold at an auction. However, at the auction, held on November 30, 2001, because the parties thought that the bankruptcy estate had been expanded to include the assets of Pearl and Alba, their movables were auctioned off together with those owned by Ark-La-Tex. Thus, all of the non-titled movables of the Ark-La-Tex, Alba, and Pearl were sold at auction for a total of $433,908.62. Peoples State ranked first among Ark-La-Tex's secured creditors with a claim exceeding that amount against its non-titled movables. Consequently, this entire amount was disbursed to Peoples State, although, in truth, only $111,700 of the auction proceeds were attributable to Ark-La-Tex's non-titled movables; the remaining $322,208.62 was attributable to non-titled movables owned by Alba and Pearl.

Following a December 2002, ruling of the bankruptcy court that $322,208.62 of the auction proceeds was attributable to the non-titled movables of Alba and Pearl, General Electric realized its error and demanded that Peoples State return this amount, but Peoples State refused. General Electric then sued Peoples State in March 2003, in a Louisiana state court, and Peoples State removed the case to the United States District Court for the Western District of Louisiana. 8 The district court transferred the case to the United States Bankruptcy Court for the Western District of Louisiana.

The bankruptcy court, relying on Louisiana Civil Code article 2299, which provides

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that "[a] person who has received a payment or a thing not owed to him is bound to restore it to the person from whom he received it," granted partial summary judgment in favor of General Electric in the amount of $322,208.62. The court reasoned that since this amount was attributable to non-titled movables owned by Alba and Pearl, General Electric, as their highest-ranking creditor holding security interests in their non-titled movables, was entitled to the proceeds of their sale. However, the Bankruptcy Court reserved to Peoples State the opportunity to show, at a trial on the merits, that: (1) some or all of the $322,208.62 in question was attributable to non-titled movables that belonged to Ark-La-Tex; or that (2) Peoples State relied to its detriment upon the representations that General Electric had made in the bankruptcy proceedings. If successful on either showing, Peoples State would receive a setoff in the appropriate amount. After a full trial, however, the Bankruptcy Judge issued judgment in General Electric's favor, concluding that: (1) Peoples State had failed to show that Ark-La-Tex owned movables producing no more than $111,700 of the proceeds from the auction; and (2) Peoples State had failed to prove detrimental reliance upon any representations by General Electric. Peoples State appealed to the district court, which affirmed for the reasons given by the Bankruptcy Court in its rulings.

Peoples State argues before this court that: (1) General Electric has not presented a prima facie case of payment of a thing not due; (2) General Electric's damages were self-inflicted; (3) General Electric's claim is precluded by res judicata and as a forfeited compulsory counterclaim; (4) General Electric is barred from its claim because of judicial estoppel; (5) the bankruptcy court erred in finding that Peoples State did not detrimentally rely upon representations made by General Electric; and (6) the bankruptcy court erred in refusing to admit evidence or allow proof of a single business enterprise. We affirm the judgment of the district court, and like the district court, do so essentially for the reasons assigned by the bankruptcy court.

Discussion

In our review of the issues presented for appeal, we analyze the following asserted errors of the lower courts: (1) the grant of summary judgment in favor of General Electric on its claim of payment of a thing not due; (2) the judgment rendered, after full trial, that Peoples State had failed to prove ownership of more than $111,700 worth of the non-titled movables sold at the auction and had failed to show the requisite elements of detrimental reliance; and (3) the evidentiary decision to exclude Peoples State's proffered evidence that the three juridical persons comprised a single business enterprise.

I. Claims Addressed by Summary Judgment

We turn first to the claims upon which the partial summary judgment was granted in favor of General Electric.

Standard of Review

This court reviews the grant of summary judgment de novo, applying the same standard as the lower court. Gowesky v. Singing River Hosp. Sys., 321 F.3d 503, 507 (5th Cir.2003). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(C). A fact is material only when it might affect

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the outcome of the suit under the governing law, and a fact is genuinely in dispute only if a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The evidence should be viewed in the light most favorable to the non-movant. Duckett v. City of Cedar Park, Tex., 950 F.2d 272, 276 (5th Cir.1992). If the moving party meets the initial burden of showing there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial. Allen v. Rapides Parish Sch. Bd., 204 F.3d 619, 621 (5th Cir.2000).

A. Payment of a Thing Not Due 9

We agree with the District and Bankruptcy courts that General Electric is entitled to be restored to funds disbursed to Peoples State as the payment of a thing not due. Accordingly, we reject Peoples State's arguments, each of which asserts that General Electric failed to present a prima facie case of payment of a thing not due. Louisiana Civil Code article 2299 provides: "A person who has received a payment of a thing not owed him is bound to restore it to the person from...

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