IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 12-40070

Summary Calendar

In the Matter of: DONALD LEE CARDWELL,

Debtor

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DONALD LEE CARDWELL,

Appellant

v.

BILL GURLEY,

Appellee

Appeal from the United States District Court

for the Eastern District of Texas

USDC No. 4:10-CV-706

Before REAVLEY, JOLLY, and DAVIS, Circuit Judges.

PER CURIAM:*

Donald Lee Cardwell challenges the district court’s summary judgment

affirming the bankruptcy court’s determination that his debt to Bill

Gurley–arising out of a state-court judgment–was non-dischargeable under 11

United States Court of Appeals

Fifth Circuit

F I L E D

August 31, 2012

Lyle W. Cayce

Clerk

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.

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No. 12-40070

U.S.C. §§ 523(a)(2)(A) and 523(a)(4). Cardwell contends the district court erred

because: he did not waive his arguments regarding collateral estoppel; and, the

state court’s findings of fact and conclusions of law (FOFCOL) did not support

the non-dischargeability of the debt. 

Cardwell and Gurley were business partners and co-owners of 121

Ventures, LLC, which was involved in, inter alia, real-estate development.

Cardwell was the managing member and was trusted by Gurley to handle all of

the LLC’s day-to-day business. Cardwell made misrepresentations to Gurley in

order to induce him to consent to various transactions that ultimately injured

Gurley to the benefit of Cardwell. Gurley filed an action in state court and

received a judgment for approximately $370,830. Cardwell subsequently filed

for bankruptcy and Gurley filed this action seeking to exempt the judgment debt

from discharge. Giving preclusive effect to the FOFCOL of the state court, the

bankruptcy court concluded the debt was non-dischargeable. The district court

affirmed the bankruptcy court and this appeal followed.

Gurley contends Cardwell waived his arguments, in part, because he failed

to submit the pleadings in the bankruptcy court as part of the appellate record.

Cardwell maintains that this was due to a mistake in the clerk’s office. But, our

court need not resolve the waiver issue because the bankruptcy court correctly

concluded the state-court FOFCOL establish the debt is non-dischargeable. 

 The parties concede that collateral estoppel should apply to prevent the

re-litigation of the FOFCOL of the state court; they only disagree as to whether

those findings support the discharge or the non-dischargeability of the debt. Our

court reviews a grant of summary judgment de novo. In re National Gypsum,

208 F.3d 498, 504 (5th Cir. 2000). 

Under § 523(a)(2)(A), a debtor is not 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

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condition.” Though our court’s precedent has previously distinguished between

“false pretenses,” “false representations,” and “actual fraud,” Cardwell contends

our court in In re Acosta, 406 F.3d 367 (5th Cir. 2005), set out a five-element

“actual fraud” test applicable to any claims under § 523(a)(2)(A). Id. at 372. Our

court has not determined whether the five-element test applies to all actions

under § 523(a)(2)(A), and it need not do so here because the debt at issue is not

dischargeable even under the more stringent Acosta test.

For a debt to be non-dischargeable under this standard, a creditor must

show: “(1) that the debtor made a representation; (2) that the debtor knew the

representation was false; (3) that the representation was made with the intent

to deceive the creditor; (4) that the creditor actually and justifiably relied on the

representation; and (5) that the creditor sustained a loss as a proximate result

of its reliance.” Id. Cardwell contends the FOFCOL lack specific language

stating the court found “fraud” and an “intent to deceive,” but these contentions

are unavailing. 

The state court found, inter alia, the following: Cardwell persuaded

Gurley to consent to the transaction by stating he would “manage [a new]

development to fruition” using the land acquired in the transaction; Cardwell

“had no intention” (emphasis added) of developing this new property; but, Gurley

believed him and agreed to the proposal; Gurley had been doing business with

Cardwell over ten years and had developed “the utmost trust and confidence” in

him; Gurley would not have agreed to the transaction had Cardwell not made

“materially false and misleading” statements and promises; Cardwell

subsequently sold the new property far below market value without informing

or receiving consent from Gurley; and, Cardwell’s behavior caused damage to

Gurley in excess of $300,000. 

Even ignoring the myriad of other misrepresentations and breaches by

Cardwell, these findings are sufficient to meet the elements of the Acosta test for

non-dischargeability. Specifically, the finding that Cardwell made a

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promise–with no intention of following through on that promise–in order to

persuade Gurley to consent to the transaction satisfies elements two and three

of the Acosta test, which are the primary elements in contention. As a result,

the debt is not dischargeable under § 523(a)(2)(A).

Because we affirm under § 523(a)(2)(A), it is unnecessary to reach the

contentions pertaining to other provisions of §523 relied upon as separate

grounds for non-dischargeability. 

AFFIRMED.

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