In the Matter of CARL J. SELENBERG, Debtor.
DIANNE BATES, Appellee. CARL J. SELENBERG, Appellant,
from the United States District Court for the Eastern
District of Louisiana
PRADO, HIGGINSON, and COSTA, Circuit Judges.
C. PRADO, Circuit Judge:
appeal involves a bankruptcy dispute between Debtor and
Appellant Carl J. Selenberg and Appellee Dianne P. Bates. The
bankruptcy court held that a promissory note Selenberg gave
to Bates was a nondischargeable debt under 11 U.S.C. §
523(a)(2)(A). The district court affirmed. On appeal,
Selenberg argues that the bankruptcy court erred in
concluding that the requirements for nondischargeability
under § 523(a)(2)(A) were met. We AFFIRM.
2008, Bates was seriously injured in an accident. Bates
retained an attorney, Robert Faucheux, to represent her in
bringing a personal injury lawsuit, but Faucheux failed to
file the suit before the prescriptive period had run. Bates
then retained another attorney, Selenberg, to represent her
in bringing a malpractice claim against Faucheux. But in
another unfortunate series of events, Selenberg failed to
properly file Bates's malpractice suit against Faucheux
before the prescriptive period had run, and the case was
early December 2011, Selenberg informed Bates that her case
had been dismissed, and he told her that he had no
malpractice insurance and no money with which to compensate
her. On December 15, 2011, Selenberg met with Bates to
discuss her potential malpractice claim against him. He only
agreed to this meeting after Bates assured him that she did
not intend to hire another attorney. Selenberg offered to
give Bates a promissory note in the amount of $275, 000 plus
attorneys' fees of up to 25% of the value of the note. He
explained that one of his cases might pay out in the future
and that he might be able to compensate Bates for her loss at
that point. According to Selenberg, Bates would have five
years to file suit to collect on the note, whereas she would
only have one year to bring a malpractice claim against him.
Selenberg also told Bates that if she filed an attorney
disciplinary complaint against him, she would never recover
anything from him. Bates accepted the offer, and shortly
thereafter, Selenberg sent her the promissory note.
never made any payments on the note. On June 19, 2012, Bates
filed a disciplinary complaint against Selenberg with the
Louisiana Office of Disciplinary Counsel. On November 19,
2013, almost two years after she received the promissory note
from Selenberg, Bates filed suit to collect on the note in
Louisiana state court. At that point, the prescription period
for her malpractice claim against Selenberg had run. On
February 25, 2014, Selenberg filed for Chapter 7 bankruptcy,
staying the state court case. Bates then filed this adversary
proceeding seeking to have the promissory note declared
nondischargeable under 11 U.S.C. § 523(a)(2)(A)-(B).
Following a bench trial, the bankruptcy court held that the
debt was nondischargeable under § 523(a)(2)(A). The
district court affirmed, and Selenberg timely appealed.
STANDARD OF REVIEW
a court of appeals reviews the decision of a district court,
sitting as an appellate court, it applies the same standards
of review to the bankruptcy court's findings of fact and
conclusions of law as applied by the district court."
In re Jacobsen, 609 F.3d 647, 652 (5th Cir. 2010)
(quoting Kennedy v. MindPrint (In re
ProEducation Int'l, Inc.), 587 F.3d 296, 299 (5th
Cir. 2009)). "Accordingly, we review conclusions of law
de novo and findings of fact for clear error." In re
Ritz, 787 F.3d 312, 315 (5th Cir. 2015), rev'd
and remanded on other grounds sub nom. Husky Int'l
Elecs., Inc. v. Ritz, 136 S.Ct. 1581 (2016). "Under
a clear error standard, this court will reverse only if, on
the entire evidence, we are left with the definite and firm
conviction that a mistake has been made." In re Am.
Hous. Found., 785 F.3d 143, 152 (5th Cir. 2015) (quoting
Morrison v. W. Builders of Amarillo, Inc. (In re
Morrison), 555 F.3d 473, 480 (5th Cir. 2009)). In
reviewing the bankruptcy court's findings of fact, we
must also bear in mind that "the standard of proof for
the dischargeability exceptions in 11 U.S.C. § 523(a) is
the ordinary preponderance-of-the-evidence standard."
Grogan v. Garner, 498 U.S. 279, 291 (1991).
523(a)(2)(A) provides that an individual debtor will not be
discharged "from any debt . . . for money, property,
services, or an extension, renewal, or refinancing of credit,
to the extent obtained by . . . false pretenses, a false
representation, or actual fraud, other than a statement
respecting the debtor's or an insider's financial
condition." The bankruptcy court found that when
Selenberg gave Bates the promissory note, the parties entered
into an "agreement or settlement that bought [Selenberg]
almost two years of time without being sued by Mrs.
Bates." The court also held that Selenberg had a duty
under Louisiana Rule of Professional Responsibility 1.8(h) to
inform Bates of the desirability of seeking independent legal
counsel before entering into this agreement. According to the
bankruptcy court, by failing to disclose this information to
Bates, Selenberg engaged in actual fraud within the meaning
of § 523(a)(2)(A). Selenberg appears to make two basic
contentions on appeal: (1) he did not receive an extension of
credit from Bates; and (2) he did not use actual fraud to
obtain any such extension of credit.
Extension of Credit
first argues that he did not receive an extension of credit
from Bates. Courts have stated that "[a]n extension,
within the meaning of § 523(a)(2), is 'an indulgence
by a creditor giving his debtor further time to pay an
existing debt.'" In re Gerlach, 897 F.2d
1048, 1050 (10th Cir. 1990) (quoting Takeuchi Mfg.
(U.S.), Ltd. v. Fields (In re Fields), 44 B.R.
322, 329 (Bankr. S.D. Fla. 1984)); accord In re
Rollins, No. 06-10549, 2007 WL 2319778, at *6 (Bankr.
E.D. La. Aug. 10, 2007). In other words, the Bankruptcy Code
"protects the creditor who is deceived into forbearing