* 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.

United States Court of Appeals

Fifth Circuit

FILED

July 26, 2007

Charles R. Fulbruge III

Clerk

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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
No. 06-51460

1 Jacobson was the president, sole officer, director, and owner of 100% of the

outstanding shares of FSC stock. 

2

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.
No. 06-51460

3

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.
No. 06-51460

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

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

severalfalse 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
No. 06-51460

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

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 ofthe 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
No. 06-51460

6

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 intentionalto 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.
No. 06-51460

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

court. 

7

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 courtitis 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.