                                                                           United States Court of Appeals
                                                                                    Fifth Circuit
                                                                                 F I L E D
            IN THE UNITED STATES COURT OF APPEALS 26, 2007
                                                 July
                     FOR THE FIFTH CIRCUIT
                                                                              Charles R. Fulbruge III
                                                                                      Clerk


                                          No. 06-51460
                                        Summary Calendar


In The Matter Of: PAUL CLIFFORD JACOBSON

                                                        Debtor

-----------------------------------------------------

PAUL CLIFFORD JACOBSON

                                                        Appellant

v.

BRETT ORMSBY, Conservator for James Robert Miller

                                                        Appellee


                      Appeal from the United States District Court
                      for the Western District of Texas, San Antonio
                                USDC No. 5:05-CV-1125.


Before KING, BARKSDALE, and GARZA, Circuit Judges.
PER CURIAM:*
        The bankruptcy court held that the debt owed by appellant Paul Clifford
Jacobson to appellee James Robert Miller is nondischargeable pursuant to 11


        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
                                  No. 06-51460

U.S.C. § 523(a)(2)(A), and the district court affirmed the judgment. For the
reasons that follow, we AFFIRM.
            I. FACTUAL AND PROCEDURAL BACKGROUND
      The subject of this adversary proceeding before the bankruptcy court was
a series of transactions among appellee James Robert Miller, appellant Paul
Clifford Jacobson, and Clair Phillips, a business associate of Jacobson. Jacobson
owned a company called FS Condominiums (“FSC”).1 Over a period of several
years, Miller loaned funds to FSC and Jacobson, evidenced by multiple
promissory notes, so that FSC could acquire and refurbish thirty-three
condominium units in Dallas, Texas. The promissory notes were secured by
liens on various condominium units. In 1999 and 2000, Miller entered into a
series of agreements with Jacobson to extend the maturity dates on the notes.
      But in November 2000, when Jacobson needed more money to complete
the project, Miller was unwilling to lend additional funds. To allow Jacobson to
borrow the needed funds from Bank Dallas, Miller and Jacobson signed a “Letter
Agreement” on November 29, 2000. The agreement contemplated the execution
of a new note in a principal amount equal to the total outstanding indebtedness
of FSC and Jacobson, extending the due date of the indebtedness to March 15,
2001, and secured by a new deed of trust on twenty-three of the condominiums
that collateralized the outstanding indebtedness. The agreement provided that
Miller would release his first liens on ten other condominiums to allow those
units to be pledged as collateral on a loan from Bank Dallas. In December 2000,
Miller and Jacobson executed the “Modification Agreement,” which implemented
and supplemented the Letter Agreement. On June 1, 2001, the parties modified
the Modification Agreement.



      1
        Jacobson was the president, sole officer, director, and owner of 100% of the
outstanding shares of FSC stock.

                                         2
                                 No. 06-51460

      Ultimately, however, Jacobson failed to make any loan payments, and on
August 6, 2002, the twenty-three units on which Miller held the first lien were
subject to a foreclosure sale. Miller, through his conservator Brett Ormsby,
purchased the units at the foreclosure sale.
      Ormsby, on Miller’s behalf, filed suit against Jacobson, FSC, and Phillips
in state district court in Dallas County, Texas, alleging fraud in real estate
transactions, fraud, fraud in the inducement, and breach of fiduciary duty.
Shortly afterwards, Jacobson filed a voluntary petition for bankruptcy pursuant
to Chapter 7 of Title 11 of the United States Code.
      Ormsby then filed a complaint instituting an adversary proceeding in
Jacobson’s bankruptcy case. The complaint contained allegations of fraud and
fraud in the inducement and asked that the debts owed by Jacobson to Miller be
deemed nondischargeable pursuant to 11 U.S.C. § 523(a)(2), (4), and (6). The
bankruptcy court found that the debt was nondischargeable pursuant to 11
U.S.C. § 523(a)(2)(A) as Jacobson had “obtained an extension, modification, or
renewal . . . by false representations.”       The district court affirmed the
bankruptcy court’s decision.
      Jacobson appeals, arguing that the district court erred when it affirmed
the following determinations by the bankruptcy court: (1) that Jacobson made
a false representation with respect to the amount of funds needed to complete
the project; (2) that Jacobson, a member of the board of directors of the
homeowners’ association, made a false representation that the homeowners’
association was about to foreclose on the condominium units because the
assessments had not been paid; (3) that there was no accord and satisfaction,
release, compromise and settlement, novation, or purging of the false
representations effected by the later extension or renewal of the loans, and (4)
that Miller’s exhibits correctly reflected the amount of damages owed by
Jacobson.


                                       3
                                      No. 06-51460

                                     II. Discussion
       We review the bankruptcy court’s findings of fact for clear error and its
conclusions of law de novo. In re Acosta, 406 F.3d 367, 372 (5th Cir. 2005).
“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.” Otto Candies, L.L.C. v. Nippon Kaiji Kyokai Corp., 346 F.3d 530,
533 (5th Cir. 2003) (quoting In re Walker, 51 F.3d 562, 565 (5th Cir. 1995)).
       Section 523(a)(2)(A) of the Bankruptcy Code provides that a debt will not
be discharged in bankruptcy if it is “for money, property, services, or an
extension, renewal, or refinancing of credit,” to the extent that it was “obtained
by false pretenses, a false representation, or actual fraud.”                   11 U.S.C.
§ 523(a)(2)(A). “A creditor must prove its claim of nondischargeability by a
preponderance of the evidence.” In re Acosta, 406 F.3d at 372. For a debt to be
nondischargeable as a result of false representations under § 523(a)(2)(A), the
creditor must show “(1) [a] knowing and fraudulent falsehood [ ], (2) describing
past or current facts, (3) that [was] relied upon by the other party[ ].2
RecoverEdge L.P. v. Pentecost, 44 F.3d 1284, 1292-93 (5th Cir. 1995). Section
523(a)(2)(A) “requires justifiable, but not reasonable, reliance.” Field v. Mans,
516 U.S. 59, 74-75 (1995).
A. False Representations
       In reaching its decision, the bankruptcy court found that Jacobson made
several false representations, including (1) that a $400,000 loan would be enough
to complete the entire project and (2) that the homeowners’ association was
about to foreclose on the condominium unit owners who had not paid their




       2
         “[O]ur court has applied different, but somewhat overlapping, elements of proof for
§ 523(a)(2)(A) actual fraud, as opposed to false pretenses/representation.” In re Mercer, 246
F.3d 391, 403 (5th Cir. 2001).

                                             4
                                      No. 06-51460

assessments. Jacobson argues, unsuccessfully, that both findings were clearly
erroneous.
       The record well supports the first finding of the bankruptcy court, that in
negotiating for the Letter Agreement and Modification Agreement, Jacobson
represented that renovation of the condominium units would be finished in
approximately four months with an additional loan of $400,000 to be made by
Bank Dallas. Despite these representations, the record shows that in fact no
measurable work was done on the twenty-three units Miller retained as
collateral. Instead the proceeds from the Bank Dallas loan were used to pay off
existing debts relating to the project, to pay other entities owned by Jacobson,
and to finish the ten units on which Bank Dallas had liens.
       Nor was the bankruptcy court’s finding that Jacobson falsely represented
that the homeowners’ association had already voted and was about to begin
foreclosure proceedings against condominium owners who had not paid their
dues (to induce Miller to enter the Modification Agreement) clearly erroneous.
No evidence of foreclosure proceedings was admitted at trial. The bankruptcy
court’s conclusion is supported by the testimony of Ken Morris, who worked for
the homeowners’ association and attended all meetings of the board of directors.
Morris testified at trial that the board did not pass a resolution to start
foreclosure proceedings or informally instruct that foreclosure proceedings
should begin. Further, Morris testified that Jacobson’s statement that “the
officers of the association have been instructed to retain attorneys on Monday
to proceed immediately with such foreclosures” was not accurate. Accordingly,
the bankruptcy court did not clearly err in finding that Jacobson made these two
false representations to obtain an extension, modification, or renewal.3

       3
        Jacobson also asserts that Miller unjustifiably relied on these representations. We
need not reach this issue as it was not presented to the district court. See Texas Commercial
Energy v. TXU Energy, Inc., 413 F.3d 503, 510 (5th Cir. 2005) (acknowledging that arguments
not brought before the district court are waived).

                                             5
                                   No. 06-51460

B. Contractual Defenses
      Jacobson argues that the district court clearly erred in affirming the
bankruptcy court’s finding that there was no accord and satisfaction, release,
compromise and settlement, novation, or purging of the false representations
made by a later extension or renewal of the loan. The only affirmative defenses
asserted by Jacobson were estoppel, release, and waiver. Jacobson contends that
these defenses are supported by the terms of the Modification Agreement, but
the bankruptcy court held that Jacobson made false representations to induce
Miller to enter into the Modification Agreement.
      As noted by the district court, Jacobson’s contractual defenses do not
shield him from liability for his tortious acts. See, e.g., Kucel v. Walter E. Heller
& Co., 813 F.2d 67, 70 (5th Cir. 1987) (recognizing that accord and satisfaction
is not a defense when the new, separate agreement was procured by false
representations); see also Wright v. Sydow, 173 S.W. 534, 546 (Tex.
App.–Houston [14th Dist.] 2004, pet. denied) (observing that a release can be
avoided if secured by fraud). Indeed, even when a settlement agreement or
release works “a kind of novation, . . . that fact does not bar the [creditor] from
showing that the settlement debt arose out of ‘false pretenses, a false
representation, or actual fraud,’ and consequently is nondischargeable.” Archer
v. Warner, 538 U.S. 314, 323 (2003) (quoting 11 U.S.C. § 523(a)(2)(A)). Further,
a contractual waiver must be knowing and intentional to be valid. Citizens Nat’l
Bank v. Allen Rae Invs., Inc., 142 S.W.3d 459, 475 (Tex. App.–Ft. Worth 2004,
no pet.); Comsys Info. Tech. Servs., Inc. v. Twin City Fire Ins. Co., 130 S.W.3d
181, 189-90 (Tex. App.–Houston [14th Dist.] 2003, pet. denied). The record
supports the conclusion that there was no knowing and intentional release.
Accordingly, the bankruptcy court did not clearly err.




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                                          No. 06-51460

C. Damages
         Jacobson argues that the district court erred in affirming the bankruptcy
court’s determination of Jacobson’s personal liability and the damages amount.
We need not address this issue. Jacobson waived his arguments concerning
personal liability and the amount of damages by failing to address them before
the bankruptcy court.4 See In re Quenzer, 19 F.3d 163, 164 (5th Cir. 1993)
(recognizing that when an issue is not presented to the bankruptcy court it is not
preserved for appeal).            As acknowledged by the district court, in the final
hearing before the bankruptcy court, Jacobson told the court he had no questions
regarding the calculation of the damages.
                                        III. Conclusion
         For the foregoing reasons, the judgment of the district court is
AFFIRMED.




         4
             Jacobson raised these arguments for the first time in his appeal before the district
court.

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