SE Prop Holdings v. Lawrence Green, et al

United States Court of Appeals
for the Fifth Circuit

No. 19-30325

In the Matter of: Jeffrey Stephen Lawrence Green;
Memory C. Green,

Debtors,

SE Property Holdings, L.L.C.,

Appellant,

versus

Jeffrey Stephen Lawrence Green; Memory C. Green,

Appellees.

Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:18-CV-710

Before Dennis, Graves, and Willett, Circuit Judges.
Don R. Willett, Circuit Judge:
The Bankruptcy Code offers debtors a fresh start. But not all debts are
discharged. For example, § 523(a) of the Code leaves debtors on the hook for
United States Court of Appeals
Fifth Circuit
FILED
August 3, 2020

Lyle W. Cayce
Clerk

No. 19-30325
2
obligations incurred by intentional wrongdoing.
1
Here, after Jeffery
2
Green
filed for Chapter 7 bankruptcy, Southeast Property Holdings, LLC (SEPH)
sought a judgment of nondischarge for $41 million that Green owed. SEPH
argues that portions of this debt are doubly nondischargeable because they
(1) were obtained by fraud (excepted from discharge under § 523(a)(2)(A)),
or else (2) inflicted willful and malicious injury (excepted under § 523(a)(6)).
In this appeal from summary judgment in favor of Green, SEPH argues that
Green triggered both subsections of § 523(a) through two allegedly wrongful
transactions. We hold that SEPH has raised a genuine dispute of material fact
as to the impropriety of one transaction but not of the other. We thus affirm
in part and reverse and remand in part.
I
Green owned several natural disaster remediation businesses and had
personally guaranteed debts that his businesses owed to Vision Bank, the
predecessor-in-interest of SEPH. After Green’s businesses defaulted on
those debts in 2014, SEPH sued and received a final judgment in its favor.
The Southern District of Alabama later issued a charging order to facilitate
SEPH’s collection of that judgment. The charging order directed certain of
Green’s companies to “distribute to SEPH any amounts that become due or
distributable to [Green].”
A few years later, Green filed for Chapter 7 bankruptcy. SEPH then
filed an adversary proceeding against Green based on the 2014 judgment,
which by that time exceeded $41 million (including interest). SEPH alleged
that the judgment against Green was not dischargeable under

1
11 U.S.C. § 523(a)(2)(A) and (a)(6).
2
While the caption spells Green’s first name “Jeffrey,” Green represents that his
first name is in fact spelled “Jeffery.”

No. 19-30325
3
§§ 523(a)(2)(A) and (a)(6) because Green had engaged in fraudulent activity
and willful and malicious conduct.
The bankruptcy court granted partial summary judgment in favor of
Green and dismissed with prejudice all but one of SEPH’s claims, which
concerned improper payments that one of Green’s companies made to a CPA
firm and is not at issue in this case. Trial was held on the remaining claim,
and the bankruptcy court found that all but $1,626 of Green’s debt was
dischargeable. SEPH appealed to the Middle District of Louisiana, which
affirmed across the board.
On appeal, SEPH contests the bankruptcy court’s grant of summary
judgment on two separate claims: (1) that Green committed actual fraud and
intentionally harmed SEPH by diverting funds; and (2) that Green willfully
and maliciously injured SEPH by failing to transfer to SEPH funds that
Green’s company had received from FEMA—the “Livingston Parish
receivables”—despite SEPH’s security interest in those funds.
II
The fundamental rules governing summary judgment are familiar.
Our review is de novo, using the same standard as the district court.
3
Under
Rule 56, summary judgment is proper “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.”
4
And in the bankruptcy context, while the district court’s
analysis of the issues may be helpful, “[o]ur review is properly focused on the
actions of the bankruptcy court.”
5

3
Petzold v. Rostollan, 946 F.3d 242, 247 (5th Cir. 2019).
4
FED. R. CIV. P. 56.
5
In re Age Ref., Inc., 801 F.3d 530, 538 (5th Cir. 2015).

No. 19-30325
4
In assessing whether genuine disputes of material fact exist, “the
court may not undertake to evaluate the credibility of witnesses, weigh the
evidence, or resolve factual disputes.”
6
It must instead view all facts in favor
of the non-moving party—here SEPH—“disregard[ing] all evidence
favorable to the moving party that the [finder of fact] is not required to
believe.”
7
And the court may not reject the nonmovant’s statement “merely
because it is not supported by the movant’s . . . divergent statements.”
8
That
said, the court “is not required to accept the nonmovant’s conclusory
allegations, speculation, and unsubstantiated assertions which are either
entirely unsupported, or supported by a mere scintilla of evidence.”
9

III
SEPH argues that Green offended § 523(a) through two improper
transactions (or inactions):
1. intentionally diverting funds from SEPH by making dis-
guised distributions to himself via sham real estate invest-
ments; and
2. purposefully withholding the Livingston Parish receivables
from SEPH.
We examine each allegation in turn.
A
SEPH asserts that Green’s first wrongful act was making disguised
distributions to himself, in violation of the charging order, thus triggering

6
Int’l Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263 (5th Cir. 1991).
7
Heinsohn v. Carabin & Shaw, P.C., 832 F.3d 224, 245 (5th Cir. 2016) (internal
quotation omitted) (second alteration and emphasis in original).
8
Id.
9
Id. (internal quotation omitted).

No. 19-30325
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both §§ 523(a)(2)(A) and (a)(6). On this claim, we agree with the district
court that summary judgment for Green was proper.
First, § 523(a)(2)(A): Actual Fraud. Section 523(a)(2)(A) excepts from
discharge “any debt . . . for money . . . to the extent obtained by . . . actual
fraud,” including fraudulent conveyance schemes.
10
SEPH says Green
hatched such a scheme when he made disguised distributions to himself in
violation of the charging order, which required certain of Green’s companies
to “distribute to SEPH any amounts that become due or distributable to
[Green].” Specifically, SEPH alleges that Green & Sons—a real estate
holding company of which Green is 51% owner—fraudulently “loaned”
$225,000 to a Panamanian entity to avoid making payments to SEPH.
11

SEPH focuses on the “due or distributable” language of the charging order,
arguing that Alabama law construes “distribution” broadly, such that it
includes this type of transfer.
12

SEPH stumbles, however, on § 523(a)(2)(A)’s “obtained by”
requirement. Even assuming that Green engaged in a fraudulent scheme,
SEPH has not produced any facts to suggest that Green obtained a debt from

10
Husky Intern. Elecs., Inc. v. Ritz, 136 S. Ct. 1581, 1590 (2016).
11
SEPH believes the loan money was actually a disguised disbursement because
(1) the $225,000 loan came from the proceeds of Green & Sons’ sale of real property; (2)
Green & Sons “is in the real estate business and not a lending entity”; (3) the owner of the
Panamanian entity is a personal friend of Green; (4) the loan agreement was entered into
months before the loan was funded; (5) Green “did not know how much of the loan had
been paid back, what [the Panamanian entity] had used the money for, or other pertinent
facts about the transaction”; and (6) Green has “clear ill will toward SEPH.”
12
The charging order was issued pursuant to Alabama Code § 10A-5- 6.05. Under
Alabama law, a “distribution” is “a transfer of money or other property from a limited
liability company, or series thereof, to another person on account of a transferable
interest.” Ala. Code § 10A-5A-1.02(h).

No. 19-30325
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his alleged fraud; therefore, SEPH has not raised a genuine dispute of
material fact.
13

Second, § 523(a)(6): Willful and Malicious Injury. Under § 523(a)(6),
Green’s debt is nondischargeable only if SEPH was harmed as an intended
result of Green’s actions.
14
SEPH avers that it was harmed because Green
prevented it from capturing distributions to which it was entitled. Yet, even
under the broad reading of “distributions,” SEPH has not demonstrated that
it was entitled to the proceeds of Green & Sons’ sale of real property. Alabama
law says that a creditor is entitled to the payment of distributions “to which
the judgment debtor [Green] would otherwise be entitled.”
15
A creditor,
however, “shall have no right to obtain possession of, or otherwise exercise
legal or equitable remedies with respect to, the property of a limited liability
company.”
16
Here, SEPH has not offered any evidence to suggest that Green
was entitled to the proceeds of Green & Sons’ sale of its real property, even
accepting SEPH’s position that the details surrounding the loan were
“suspicious.” Absent competent evidence that Green & Sons was required
to distribute the sale proceeds to Green instead of reinvesting the funds,

13
Husky, 136 S. Ct. at 1589 (“It is of course true that the transferor does not
‘obtain’ debts in a fraudulent conveyance. But the recipient of the transfer . . . can ‘obtain’
assets ‘by’ his or her participation in the fraud. If that recipient later files for bankruptcy,
any debts ‘traceable to’ the fraudulent conveyance will be nondischargeable under
§ 523(a)(2)(A). . . .” (internal citations and alterations omitted) (emphasis added)). Here,
Green & Sons is the transferor, not the recipient. Section 523(a)(2)(A) is thus inapplicable.
14
See In re Williams, 337 F.3d 504, 508–09 (5th Cir. 2003) (holding that, for a
violation of 11 U.S.C. § 523(a)(6) to occur, the debtor must have acted with “either an
objective substantial certainty of harm or a subjective motive to cause harm” (internal
citation omitted)).
15
Ala. Code § 10A-5A-5.03(b).
16
Id. at § 10A-5A-5.03(f).

No. 19-30325
7
SEPH has not shown that it suffered a harm. On this allegation, the
bankruptcy court was correct to grant summary judgment in Green’s favor.
B
SEPH contends that Green’s second act of impropriety was
withholding the Livingston Parish receivables from SEPH, again offending
§ 523(a)(6).
17
Here, too, the bankruptcy court held that SEPH failed to
demonstrate a genuine dispute of material fact. We see the receivables
allegation differently.
To reach its decision, the bankruptcy court considered evidence
submitted by Green, including the affidavit of Cheryl Ellison, an office
manager at one of Green’s businesses. And it found that the evidence
supported Green’s contention that SEPH had consented to the company’s
use of the Livingston Parish receivables for further disaster-relief work.
The bankruptcy court then noted SEPH’s argument: “it never
consented to [the company’s] use of the Livingston Parish payments.” The
court reviewed the affidavit of Jennifer Corbitt, a vice president at SEPH.
Corbitt, as relayed by the bankruptcy court, “recites that [SEPH] did not
consent to a request to use the funds . . . .” The affidavit also directed the
court to a letter by another SEPH vice president that denied Green’s
companies’ request to use receivables for any use other than payment of loans
held by SEPH. “The problem with [SEPH’s] argument,” the court found,
“is that the letter denying the entities’ permission to use the funds is dated

17
In one sentence, SEPH also argues that “Green’s enmity toward SEPH and other
circumstances would have supported an inference that Green acted with the requisite
intent under § 523(a)(2)(A)” vis-à-vis the Livingston Parish receivables. Arguments given
short shrift, such as this one, are forfeited. See Cinel v. Connick, 15 F.3d 1338, 1345 (5th Cir.
1994) (“A party who inadequately briefs an issue is considered to have abandoned the
claim.”).

No. 19-30325
8
April 20, 2012, nearly two years after [Green] received the vast majority of
the Livingston Parish payments on which this part of SEPH’s claim rests.”
The court also questioned the veracity of Corbitt’s affidavit, describing it as
“artfully worded” to “avoid[] drawing attention to the extensive time
between [Green’s] receipt of the payments from the Livingston Parish and
SEPH’s denial . . . in an effort to suggest that a disputed material fact exists.”
Finally, the bankruptcy court discounted Corbitt’s affidavit altogether,
finding that it was not based on her personal knowledge. Discounting the
evidence provided by SEPH, and finding the evidence provided by Green
persuasive, the bankruptcy court concluded that “no disputed material fact
exists” and that “SEPH has not contradicted the affidavit of Ms. Ellison that
Vision . . . consented to [Green’s] use of the Livingston Parish payments.” It
accordingly granted summary judgment in Green’s favor.
Respectfully, the bankruptcy court erred in assessing the evidence.
18

As noted above, a court must disregard all evidence in the movant’s—here,
Green’s—favor that it is not required to believe.
19
So the bankruptcy court
should not have evaluated the persuasiveness of Ellison’s affidavit against the
relative persuasiveness of Corbitt’s affidavit. Nor was it proper to make
credibility determinations regarding Corbitt’s affidavit, regardless of
whether the affidavit was “artfully worded” or unshakably veracious. The
bankruptcy court was permitted to consider only whether the competing
affidavits diverged on specific facts to determine whether a factual dispute
existed for trial.
20
And it failed to stay within this limited scope of authority.

18
The district court did not address this issue; its analysis focused on whether the
bankruptcy court properly discounted Corbitt’s affidavit for lack of personal knowledge.
19
Heinsohn, 832 F.3d at 245; Int’l Shortstop, 939 F.2d at 1263.
20
See Travelers Ins. Co. v. Liljeberg Enters., Inc., 7 F.3d 1203, 1206–07 (5th Cir.
1993).

No. 19-30325
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The court’s error, however, is not the end of our inquiry; we still must
undertake a plenary review of whether SEPH has demonstrated a genuine
dispute of material fact. And “[p]lenary review requires that we first settle
the record by resolving issues of evidence,”
21
such as the propriety of
Corbitt’s affidavit. While a court should not make credibility determinations,
it may properly find that an affidavit unsupported by personal knowledge is
inadmissible as competent summary judgment evidence.
22
We review the
bankruptcy court’s determination that “[t]he affidavit of Ms. Corbitt lacks
information required by Rule 56(c)(2)” for abuse of discretion.
23

The bankruptcy court discounted Corbitt’s affidavit because, in its
view, the affidavit lacked information regarding Corbitt’s “personal
knowledge of whether or not Vision Bank gave permission for use of the
receivables at any time before the [April 2012 letter].” The court was correct
that Corbitt’s affidavit does not include an explicit statement of her personal
knowledge, but it failed to acknowledge that “there is no requirement for a
set of magic words.”
24
We have held that personal knowledge can be inferred
if such knowledge reasonably falls within the person’s “sphere of
responsibility,” particularly as a corporate officer.
25
We have also held that
“personal knowledge does not necessarily mean contemporaneous

21
Salas v. Carpenter, 980 F.2d 299, 304 (5th Cir. 1992).
22
See DirectTV, Inc. v. Budden, 420 F.3d 521, 529 (5th Cir. 2005); D’Onofrio v.
Vacation Publ’n, Inc., 888 F.3d 197, 208 (5th Cir. 2018); see also Fed. R. Civ. P. 56(c)(4).
23
In re SGSM Acquisition Co., LLC, 439 F.3d 233, 239 (5th Cir. 2006). The
bankruptcy court refers to Rule 56(c)(2), which refers to a party’s right to object to
evidence as inadmissible; Rule 56(c)(4), however, sets forth the requirement that an
affidavit be based on personal knowledge.
24
DirectTV, 420 F.3d at 530.
25
Id.

No. 19-30325
10
knowledge.”
26
In Dalton v. F.D.I.C., for instance, we reiterated that an
affidavit of an FDIC account officer is not necessarily defective just because
the officer didn’t have personal knowledge of the underlying loan at the time
it originated.
27
Such a strict personal-knowledge requirement, we
emphasized, would be impractical in the banking context.
28

Despite this permissive rule of inference, the bankruptcy court failed
to consider whether the information in Corbitt’s affidavit fell within the
scope of her responsibility as a vice president at SEPH. Additionally, the
court seemed to suggest that Corbitt would need to have demonstrated
contemporaneous knowledge of the arrangement between the bank and
Green to legitimize her affidavit under Rule 56(c)(4). In so doing, the
bankruptcy court held SEPH to a higher standard than our precedent
requires, and accordingly, abused its discretion. Because the bankruptcy
court abused its discretion, we decline to follow its logic and independently
assess Corbitt’s attestation.
A review of Corbitt’s affidavit, with an eye toward whether personal
knowledge can be reasonably inferred, suggests that the affidavit is
competent summary judgment evidence. As a vice president of SEPH,
Corbitt’s responsibilities would likely include knowing whether the bank
permitted a borrower to otherwise use money ($4.5 million) that he was
contractually obligated to repay pursuant to a written security agreement. So

26
Cutting Underwater Techs. USA, Inc. v. Eni U.S. Op. Co., 671 F.3d 512, 516 (5th
Cir. 2012) (per curiam) (mem.).
27
987 F.2d 1216, 1223 (5th Cir. 1993).
28
Id.

No. 19-30325
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we can, and will, infer personal knowledge based on Corbitt’s corporate
position.
29

We can now turn to whether SEPH, through Corbitt’s affidavit,
demonstrated a genuine dispute of material fact. SEPH’s claim against Green
is that certain debts Green owes to SEPH are nondischargeable because
Green willfully and maliciously injured SEPH by using the Livingston Parish
receivables instead of paying the money to SEPH pursuant to their written
agreement.
30
We “may infer that a debtor acted with malice, for purposes of
§ 523(a)(6), if the debtor acts in a manner which one knows will place the
lender at risk, such as converting property in which the lender holds a
security interest.”
31

To support its claim, SEPH points to uncontroverted evidence that
Green knew SEPH possessed a security interest in the Livingston Parish
receivables under the parties’ written security agreement. Green does not
disagree that SEPH had such a security interest or that he failed to pay SEPH
the Livingston Parish receivables. Instead, Green argues that SEPH (via

29
Green does not contest that the information in Corbitt’s affidavit falls within the
sphere of her responsibility. He instead challenges the affidavit by arguing that “Ms.
Corbitt could not even claim that she was employed by Vision Bank at the relevant time
much less that she had any personal knowledge of or involvement in the actual lending
relationship. . . .” Corbitt’s affidavit is silent on her dates of employment. Though we have
sometimes observed that the affiant was employed during the relevant time period, we have
not required an explicit statement of employment dates to infer personal knowledge,
focusing instead on the affiant’s job title. Compare Cutting Underwater, 671 F.3d at 516
(noting that affiant maintained his employment role during the relevant time period), with
DirectTV, 420 F.3d at 530 (relying on affiant’s corporate position without reference to
dates of employment to infer personal knowledge), and Campbell Harrison & Dagley, L.L.P.
v. PBL Multi-Strategy Fund, L.P., 744 F. App’x 192, 198 (5th Cir. 2018) (unpublished)
(same).
30
See 11 U.S.C. § 532(a)(6).
31
In re Lobell, 390 B.R. 206, 217 (Bankr. M.D. La. 2008).

No. 19-30325
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Vision Bank) “consented to [Green’s] use [of the proceeds] to pay such
things as payroll, taxes, insurance, [and] fuel . . . in the ordinary course of
business.” If SEPH agreed with Green’s contention—admitting (or failing
to refute) that it did give such permission—summary judgment would be
proper. SEPH is not so agreeable.
To contest Green’s motion for summary judgment, SEPH offered
Corbitt’s affidavit, which explicitly states that SEPH did not consent to the
use of the Livingston Parish receivables for anything other than making
payments to SEPH.
32
Green argues that these statements are insufficient to
create a dispute of fact because Corbitt does not attest to whether Vision
Bank—as opposed to SEPH—consented to Green’s use of the receivables.
However, SEPH acquired Vision Bank via merger, meaning that Vision Bank
was absorbed into SEPH and ceased to exist as a separate entity.
33
Therefore,
drawing reasonable inferences in favor of SEPH, as we must, it is reasonable
to conclude that Corbitt’s statements regarding “SEPH” refer to Vision
Bank as well. As such, Corbitt’s attestation that Green was never authorized
to use the Livingston Parish receivables for anything other than making
payments to SEPH—including her reference to the Security Agreement,
which she avers still controls—is sufficient to create a genuine dispute of

32
Corbitt Aff. 2 (“Documents filed contemporaneously herewith restrict and
restricted the ability of the Green entities . . . to use collections from the Livingston Parish.
. . . [T]he loan documents, including those guaranteed by [Green], clearly required that
collections on receivables such as those from Livingston Parish were to be held in trust. . .
. SEPH was unaware of the Green entities’ failure to hold [the Livingston Parish
receivables] in trust or to transfer them to SEPH. . . .”).
33
See Engel v. Teleprompter Corp., 703 F.2d 127, 131 (5th Cir. 1993) (“A merger of
two corporations contemplates that one corporation will be absorbed by the other and will
cease to exist while the absorbing corporation remains. . . . In a merger, both the assets and
liabilities of the disappearing corporation are vested in the surviving corporation.”). Prior
to the merger, Vision Bank was a wholly-owned subsidiary of Park National Corporation.
SEPH is also a wholly-owned subsidiary of Park National Corporation.

No. 19-30325
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material fact. Who to believe—Green (that he did receive consent) or SEPH
(that no such consent was given)—is a credibility determination for a finder
of fact, not a query for summary judgment review.
34

C
ONCLUSION
SEPH cannot avoid summary judgment regarding whether Green
committed fraud or intentionally harmed SEPH by loaning funds from Green
& Sons. But SEPH has raised a genuine dispute of material fact regarding
whether Green received consent to use the Livingston Parish receivables for
anything other than making payments to SEPH.
Accordingly, we AFFIRM in part and REVERSE and REMAND
in part.

34
See Int’l Shortstop, 939 F.2d at 1263.