In re Acosta
| Citation | 406 F.3d 367 |
| Decision Date | 08 April 2005 |
| Docket Number | No. 04-30087.,04-30087. |
| Parties | In the Matter of Guilford Joseph ACOSTA, Debtor. General Electric Capital Corporation, Appellant, v. Guilford Joseph Acosta, Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Henry A. King, Michael L. Vincenzo (argued), King, LeBlanc & Bland, New Orleans, LA, for Appellant.
David M. Culpepper (argued), New Orleans, LA, for Appellee.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before SMITH and GARZA, Circuit Judges, and VANCE,* District Judge.
General Electric Capital Corporation appeals the district court's affirmance of the bankruptcy court's decision that refused to hold the debt of Guilford Acosta to GECC nondischargeable. Because we find no clear error in the court's treatment of the debt under 11 U.S.C. § 523(a)(2)(A), and we find that GECC waived its appeal of the issue of nondischargeability under 11 U.S.C. § 523(a)(2)(B), we affirm.
Acosta was the corporate secretary, chief administrative officer, and director of Arnoult Equipment & Construction, Inc., an oilfield repair and refurbishment operations company. On March 11, 1994, WRT Energy Corporation, AEC's primary customer, advanced $360,000.00 to AEC for the purchase of the vessel M/V ENERGY VII. WRT also advanced a substantial amount of money that AEC used to refurbish the vessel so that AEC could use the vessel in oilfield work for WRT. On December 4, 1994, AEC executed a $1.8 million promissory note and a preferred ship mortgage on the ENERGY VII in favor of WRT. Acosta signed the authorizing resolution for the transaction and understood that the note and mortgage created a legal obligation.
In early 1995, WRT and AEC disputed the outstanding balances of certain invoices that AEC had submitted for work it performed for WRT. On May 18, 1995, AEC and WRT resolved the dispute by agreeing in a memorandum of understanding that a $1,017,000 payment from WRT to AEC was "payment in full for all goods and services rendered through this date." On the same day, AEC Energy Marine, an AEC subsidiary, executed a $3.4 million promissory note and a mortgage in favor of WRT on five vessels that AEC Energy Marine purportedly owned, including the M/V JANE R. Acosta signed the authorizing resolution for the mortgage. AEC and WRT also entered a new agreement, called a master service contract, under which they restructured their business relationship and required WRT to make monthly payments to AEC for the work AEC performed.
Acosta testified that he believed that the May 18, 1995 memorandum of understanding extinguished AEC's $1.8 million note and accompanying mortgage on the ENERGY VII. The memorandum does not mention the AEC promissory note or the mortgage on the ENERGY VII, and Acosta wrote a letter five months later acknowledging that the ENERGY VII was subject to a $1.8 million mortgage in favor of WRT. By way of explanation, Acosta testified that when he acknowledged the mortgage, he meant simply to indicate that the mortgage existed as "signed paperwork," and he continued to believe that it had been discharged by the agreement between the two companies.
On August 16, 1995, Claude Mayfield, the captain of the ENERGY VII, was injured on the vessel. In September 1995, Mayfield's attorney contacted Acosta to demand that AEC provide Mayfield with maintenance and cure benefits. The attorney told Acosta that if the benefits were not provided, he would file a lawsuit and seize the ENERGY VII. On September 8, 1995, the insurance carrier for the ENERGY VII informed Acosta that insurance on the vessel had been cancelled as of August 11, 1995.
By the end of 1995, WRT had developed serious financial trouble, and it stopped paying AEC the amounts due under the master service contract. As a result, in late November or early December 1995, AEC entered negotiations with GECC for a working capital loan. Acosta was the contact person for the negotiations. AEC offered GECC three vessels as collateral for the loan, including the ENERGY VII and the JANE R. Before it did so, AEC searched the United States Coast Guard records, which reflected that the vessels were clear of all recorded liens, including the WRT mortgage on the ENERGY VII. The Coast Guard's abstract of title listed the WRT mortgage on the Energy VII as terminated.1 Acosta participated in the decision to offer the vessels as collateral for the GECC loan.
AEC provided GECC with a financial statement for 1994 that was prepared by a certified public accountant, based on information provided by AEC's chief financial officer. AEC also produced an internally prepared financial report for 1995. Acosta reviewed both documents to ensure they were accurate to the best of his knowledge. There was no evidence that Acosta transmitted the financial statements himself, but he was listed as a contact person. The only financial documents that Acosta personally forwarded to GECC were AEC revenue projections, which he testified were given to him by the CFO.
On December 6, 1995, Mayfield sued AEC's subsidiaries, AEC Energy Marine and Energy Labor Services, in federal district court and served Acosta as AEC Energy Marine's agent. Mayfield did not sue the ENERGY VII in rem and did not seek to seize the vessel. On December 11, 1995, GECC sent AEC a loan proposal for $1,173,170 to be secured by the ENERGY VII, the ENERGY VI, and the JANE R. AEC President James Arnoult accepted the proposal. Acosta did not sign it.
On March 12, 1996, Mayfield entered a default judgment against two AEC subsidiaries. Ten days later, GECC made a loan to AEC, but the principal amount was $656,625, not $1,173,170 as mentioned in the loan proposal. Acosta was present when the mortgage and promissory note were executed on AEC's behalf, but only Arnoult signed the mortgage. The mortgage states that "[t]he Owner lawfully owns and is lawfully possessed of each of the Vessels free from any lien or other encumbrance whatsoever prior to the lien of this Mortgage." As the corporate secretary, Acosta signed the authorizing resolutions for the mortgage. At the closing, GECC requested that AEC provide "key man" life insurance on Arnoult, but because of Arnoult's advanced age, the policy was too expensive. Instead, GECC agreed to accept personal guarantees from Arnoult and Acosta. Acosta testified that had he believed that AEC did not intend to repay the loan, he would not have personally guaranteed it.
AEC failed to make any payments on the note, and GECC defaulted AEC under the terms of the mortgage. On June 7, 1996, several months after the loan closing, Mayfield filed an action in district court against the ENERGY VII in rem and against AEC. GECC intervened to enforce its preferred ship mortgage on the ENERGY VII. The court entered summary judgment in GECC's favor. WRT then intervened in the action, seeking to enforce its $1.8 million mortgage on the ENERGY VII. The court entered summary judgment in favor of WRT, finding that WRT's mortgage on the ENERGY VII primed GECC's mortgage. GECC and WRT eventually reached a settlement and divided the proceeds from the judicial sale of the ENERGY VII.
Meanwhile, GECC also filed suit against the JANE R in rem and against AEC, Arnoult and Acosta in personam. WRT intervened to enforce its mortgage on the JANE R. On October 29, 1997, the court entered summary judgment in favor of GECC and dismissed WRT's intervention. The Court held that WRT's mortgage on the JANE R was invalid because it was not granted by the record owner of the vessel.
On September 8, 2000, Acosta filed a voluntary petition for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code. GECC filed an adversary proceeding, arguing that Acosta's personal guarantee of the GECC loan was nondischargeable in bankruptcy for two reasons. First, GECC argued that the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A) because Acosta made false representations with the intent to deceive GECC when he failed to disclose the existence of the mortgages and the Mayfield personal injury claim. Second, GECC argued that the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(B) because Acosta obtained money by causing to be made or published, with the intent to deceive, a written statement that was materially false respecting the debtor's financial condition.
After a bench trial, the bankruptcy court found that GECC had failed to meet its burden to prove by a preponderance of evidence that Acosta's debt should be excepted from discharge. The bankruptcy court credited Acosta's testimony that he did not make false representations with the intent to deceive GECC, and it therefore found that Acosta's debt was not excepted from discharge under section 523(a)(2)(A). The bankruptcy court also found that GECC had failed to prove that Acosta "prepared or furnished" any financial statements or financial information, because he simply transmitted information furnished by others. The court therefore held that Acosta's debt was not nondischargeable under section 523(a)(2)(B).
The district court affirmed the bankruptcy court's decision on the first claim on similar grounds. The district court affirmed on the second claim because GECC waived the issue by failing to brief and argue that Acosta prepared or furnished financial statements on appeal. GECC timely appeals.
We review the decision of the district court by applying the same standard to the bankruptcy court's findings of fact and conclusions of law that the district court applied. A bankruptcy court's findings of fact are subject to review for clear error, and its conclusions of law are reviewed de novo. In re Jack/Wade Drilling, Inc., 258 F.3d 385, 387 (5th Cir.2001).
Section 523(a)(2)(A) of the Bankruptcy Code provides that a debt will not...
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