United States Court of Appeals

for the Fifth Circuit

No. 21-30291

In re: W Resources, L.L.C.,

Debtor,

NCC Financial, L.L.C., 

Appellant,

versus

Investar Bank, N.A.; 

W Resources, L.L.C. Liquidating Trust, 

Appellees.

Appeal from the United States District Court 

for the Middle District of Louisiana

USDC No. 3:20-CV-137

Before Jones, Higginson, and Duncan, Circuit Judges.

Per Curiam:*

* Pursuant to 5th Circuit Rule 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opinion should not be published and is not precedent except under the limited 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 Circuit Rule 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

April 14, 2022

Lyle W. Cayce

Clerk

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In 2015, W Resources entered into an agreement with NCC Financial 

to secure debt to NCC Financial with a mortgage on properties owned by W 

Resources. But W Resources never incurred any debt to NCC Financial. 

After W Resources went bankrupt in 2018, W Resources Liquidating Trust

(“the Trust”) and Investar Bank, N.A. (“Investar”) asked the bankruptcy 

court to disallow NCC Financial’s proof of claim and declare its mortgage on 

the debtor’s real property invalid and unenforceable. The bankruptcy court 

did so, and the district court affirmed. We Affirm.

I. Background

Michael Worley is the sole member and manager of W Resources, a 

Louisiana limited liability company. In the fall of 2015, Worley executed a

personal Loan Agreement and Promissory Note in favor of NCC Financial, 

in return for $8 million. W Resources is not a borrower or signatory under

either the Loan Agreement or the Promissory Note. Each agreement 

identifies the borrower, Worley, as “an individual.”

The same day, NCC Financial executed a Multiple Indebtedness 

Mortgage (the “Mortgage”) in favor of NCC Financial securing W 

Resources’ debt to NCC Financial. The Mortgage identifies W Resources 

as the “Mortgagor,” specifically defines the term “indebtedness” to mean 

“all obligations and liabilities of Mortgagor,” and purports to encumber 

certain W Resources properties in and around East Baton Rouge Parish (the 

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“Mortgaged Properties”). W Resources is the sole signatory to the 

Mortgage.2

On July 23, 2018, W Resources filed a petition for Chapter 11 

bankruptcy. See In re W Resources, LLC, Debtor, Bankruptcy Case No. 18-

10798 (Bkrtcy. M.D. La.). In December 2018, NCC Financial filed a proof 

of claim in the case for over $8 million supported by the Mortgage, the Loan 

Agreement, and the Promissory Note. In the spring of 2019, Appellee 

Investar, which holds a secured interest in the Mortgaged Properties, 

initiated an adversary proceeding seeking a determination that its mortgages 

are first in priority.

The Trust and Investar sought summary judgment rejecting NCC

Financial’s unsecured and secured claims. Investar argued that because W 

Resources never owed NCC Financial anything, the Mortgage between W 

resources and NCC Financial was unenforceable as a matter of law because 

it secured nothing. Because the Mortgage is invalid, Investar argued, NCC 

Financial has no claim against W Resources.

Based on the parties’ briefing, the bankruptcy court granted Investar’s 

summary judgment motion in an oral ruling. It concluded that the Mortgage 

was clear and unambiguous and that it secured only debt of W Resources to 

NCC Financial. Because of the contract’s clarity and the fact that creditors’

rights are fixed at the moment the bankruptcy case is filed, the bankruptcy 

2 Despite executing the Mortgage, no party disputes that W Resources did not 

thereby incur any indebtedness to NCC Financial.

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court rejected NCC Financial’s efforts to introduce parol evidence to clarify 

or reform the mortgage. The bankruptcy court also held that NCC 

Financial’s mortgage was unenforceable for a lack of any underlying 

indebtedness supporting the Mortgage. The court entered judgment

accordingly, disallowing both the secured and unsecured claims.

NCC timely appealed to the district court, which affirmed on state law

grounds. NCC timely appealed.

II. Standard of Review

We review the decision of a district court that sat as an appellate court

over a bankruptcy court decision by applying 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 Gerhardt, 348 F.3d 89, 91 (5th Cir. 2003). A 

bankruptcy court's findings of fact are reviewed for clear error and 

conclusions of law are reviewed de novo. Id.

III. Discussion

NCC Financial argues that the Mortgage is valid and enforceable

because it was intended to and actually does secure NCC Financial’s loans 

to Worley by means of W Resources’ properties.3 NCC Financial seeks to 

offer parol evidence that allegedly reflectsthe parties’ true intent and clarifies 

purported “ambiguities” in the Mortgage. NCC Financial objects to the 

3 LA Civ. Code Art. 3295 allows persons to mortgage their property to secure the 

debt of another.

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application of the Louisiana Public Records Doctrine as a bar to its proposed 

clarification of the Mortgage. All in all, NCC Financial essentially seeks to

reform the publicly recorded Mortgage to cover Worley’s substantial debt.4 

What NCC Financial does not do is grapple with the iron rule of bankruptcy: 

creditor claims are fixed for allowance purposes as of the date of filing of the 

debtor’s petition. See 11 U.S.C. §§ 506(b), 502(b)(1), 544(a). Even though 

we do not agree with every facet of the district court’s opinion, the 

bankruptcy court’s analysis of the impact of state law and the Bankruptcy 

Code was essentially correct.

We begin with the Bankruptcy Code. NCC Financial filed a timely 

proof of claim asserting both an unsecured and secured claim against the 

debtor based on Worley’s Promissory Note and the Mortgage. 11 U.S.C. 

§ 502(a) states that a claim against the debtor is deemed allowed unless 

objected to by the Trustee, which is exactly what the Trustee did here. 

Investar moved for a determination of the extent and priority of liens, and the 

Trustee took part in the proceeding to assert its disagreement with NCC 

Financial’s position. Further, bankruptcy law provides that after notice and 

a hearing, the court must disallow claims that are “unenforceable against the 

debtor and property of the debtor, under any agreement or applicable law.” 

11 U.S.C. § 502(b)(1). The bankruptcy court’s ruling applied this provision 

along with Section 544(a), the Trustee’s “strong-arm” power, to invalidate 

4 NCC Financial also raises a number of procedural issues that we need not address 

in light of the following analysis.

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any liens or agreements that were unperfected or unenforceable as of the date 

of bankruptcy.5 The strong-arm power enables the Trustee to marshal the 

assets of the debtor as they existed at the date of bankruptcy, and that date

furnishes a stable backdrop for valuing the assets according to the priorities 

established by the Bankruptcy Code and state law.6

NCC Financial’s Mortgage was defective at the inception of 

bankruptcy because it reflected only an obligation to pay by W Resources, yet 

the debtor owed it nothing. Louisiana law renders unenforceable such a 

mortgage that does not support an underlying obligation.

7 Thus, NCC 

Financial’s effort to enforce the Mortgage is doomed as a consequence of the 

strong-arm clause and Louisiana law. This consequence is no different from 

the paradigmatic examples of the putative lienholder who inadvertently failed 

to record a mortgage or failed to perfect an Art. 9 security interest before the 

bankruptcy filing date. See COLLIER ON BANKRUPTCY ¶ 544.05 (16th 

ed. 2019). NCC Financial also did not cite any case, and we are aware of 

5 Although the bankruptcy court did not cite these provisions, the parties’ 

pleadings were implicitly based on these provisions of the Bankruptcy Code, and the court 

referenced its inability to accede to NCC Financial’s attempt to improve its position by 

obtaining a reformation of its Mortgage post-bankruptcy filing by W Resources.

6 See In re Robertson, 203 F.3d 855, 864 (5th Cir. 2000)(“Under [11 U.S.C.]

section 544(a), the trustee has the right and power, as of the date of the commencement of 

the case, to avoid any lien or transfer avoidable by a hypothetical bona fide purchaser of real 

property of the debtor as of the date of the commencement of the case...The extent of the 

trustee’s rights as a bona fide purchaser of real property, however, is measured by the 

substantive law of the state governing the property in question”).

7 LA Civ. Code Art. 3283 (“Mortgage is accessory to the obligation it secures. 

Consequently, except as provided by law, the mortgagee may enforce the mortgage only to 

the extent that he may enforce any obligation it secures”).

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none, that remotely resembles this one, in which a secured creditor was 

allowed to clean up its documentation and perfect an otherwise 

unenforceable claim post-bankruptcy.

Moreover, even if the Mortgage could be “cured” under bankruptcy 

law, neither the reference to “collectively” in the definition of “mortgagor”8

nor the alleged “scrivener’s error” that identified W Resources as the only 

obligor to NCC Financial renders the Mortgage ambiguous and thus even 

potentially within an exception to the parol evidence rule.9 On its face, the 

Mortgage plainly references the debts, if any, of W Resources to NCC 

Financial. Such “clear and explicit” language does not permit further 

“search of the parties’ intent” under Louisiana law. LA Civ. Code 

Art. 2046. And this is not a case in which the language leads to “absurd 

8 That Worley himself was identified as the “sole Managing Member” of W 

Resources LLC is legally distinct from his being individually bound as a mortgagor.

9 Additionally, the Louisiana public records doctrine states that if a party does not 

record itsinterest in immovable property, the interest does not exist as against third parties. 

See Cimarex Energy Co. v. Mauboules, 40 So. 3d 931, 944 (La. 2010). Though third-parties 

are unable to rely on what is recorded, under the public records doctrine, third-parties can 

“rely . . . on the absence from the public record of those interests that are required to be 

recorded.” Camel v. Waller, 526 So. 2d 1086, 1090 (La. 1988) (emphasis in original). W 

Resources, LLC, Liquidating Trust is a third-party, a bona fide purchaser for value and 

without notice, according to bankruptcy law, 11 U.S.C. 544(a)(3). See Matter of Goodrich 

Petrol. Co., 894 F.3d 192, 197-99 (5th Cir. 2018), citing In re Zedda, 103 F.3d 1195, 1202 (5th

Cir. 1997). Because the Liquidating Trust had the right to disregard the mortgage as to an 

unnamed borrower for purposes of disposing of the debtor’s property, Investar’s lien, like 

that of other lienholders on the affected properties, benefits from the non-enforceability of 

the NCC lien irrespective of how the parol evidence rule might otherwise apply. Further 

supporting Investar is La. Civ. Code Art. 3342, which states that parties to a recorded 

instrument may not contradict the terms of the instrument to the prejudice of a third 

person.

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consequences.” Id. Such an error is not necessarily a legal absurdity, as a 

state court determined in analogous circumstances. JAB of Oakdale, LLC v. 

Oakwood Inn Dev. Corp., 2008 WL 597193 (La. App. 3d Cir. 2008). The 

bankruptcy court acknowledged that parol evidence might have been 

admissible outside of bankruptcy to demonstrate the incompleteness of the

Mortgage, but that exception does not come into play in this bankruptcy case, 

where the rights of other creditors are involved and the strong-arm clause 

takes effect. The bankruptcy court did not explicitly mention the strong-arm 

clause here, but its relevance is unmistakable.

Having concluded that NCC Financial’s infirm mortgage claim 

against this debtor is unenforceable by virtue of applicable bankruptcy law 

and certain provisions of Louisiana law, we need not consider whether the 

Mortgage also failed under the state’s recording law.

The judgments of the bankruptcy and district courts are AFFIRMED.

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Stephen A Higginson, Circuit Judge, dissenting:

I respectfully dissent from the majority’s opinion affirming the district 

court’s order granting summary judgment in favor of Investar. I would vacate 

the district court’s order and remand the case for further proceedings.

I.

On October 27, 2015, Michael A. Worley and NCC Financial (NCC) 

executed a Loan Agreement. The Loan Agreement provides that NCC would 

loan Worley $8 million, which would be secured by, among other collateral, 

a mortgage on certain property in Louisiana (the Louisiana Property) owned 

by W Resources, L.L.C. Worley signed the Loan Agreement as an 

“individual.” Worley also signed a Promissory Note in favor of NCC. 

Worley and NCC subsequently signed an Amendment to Loan Agreement, 

which increased the amount of NCC’s loan to Worley to $9.5 million and 

reiterated that “[t]he Loan and Note are secured by, among other things, a 

Mortgage, Security Agreement and Financing Statement dated October 27, 

2015 for the benefit of [NCC] on [the Louisiana Property].”

A document titled Multiple Indebtedness Mortgage (the Mortgage) 

was also signed on October 27. The Mortgage purports to grant NCC a 

mortgage on the Louisiana Property, which would “secure the . . . 

indebtedness.” The Mortgage defines the term “[i]ndebtedness” to mean 

“all obligations and liabilities of Mortgagor to Mortgagee,” and it stated that 

“W Resources, L.L.C., . . . represented herein by Michael A Worley, sole 

Managing Member,” would be “referred to collectively as the 

‘Mortgagor.’” The Mortgage further states that the “Promissory Note from 

W Resources, LLC to NCC Financial, LLC dated as of October 27, 2015 in 

the principal amount of $8,000,000 . . . is secured by this Mortgage.” Worley 

signed the Mortgage on behalf of W Resources in his capacity as “Managing 

Member.” He did not sign the agreement as an individual.

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W Resources did not incur any debt to NCC as a result of the 

Mortgage. However, Worley later testified in an affidavit that it was his 

“understanding and intent when signing the Multiple Indebtedness 

Mortgage on behalf of W Resources that W Resources and I were . . . 

mortgaging the Louisiana Property to secure any and all indebtedness owed 

to NCC by me personally or by W Resources.” Worley also testified in the

affidavit that he “understood when signing the Loan Agreement on October 

27, 2015 that the original $8,000,000 loan made by [NCC] was specifically 

conditioned on W Resources, LLC granting NCC a mortgage on the 

[Louisiana Property].”

Kendrick James, the general counsel and chief operating officer of 

NCC, also submitted an affidavit testifying that the Mortgage was intended 

to secure Worley’s personal debt to NCC. James explained that the 

Mortgage’s reference to an $8 million promissory note from W Resources to 

NCC, rather than from Worley to NCC, was “an obvious scrivener’s error.”

On July 23, 2018, W Resources filed a petition for Chapter 11 

bankruptcy. In December 2018, NCC filed a proof of claim against W 

Resources for $8,893,002.78. In support of its claims, NCC filed the 

Mortgage, the Loan Agreement, and the Promissory Note.

In May 2019, Investar Bank initiated an adversary proceeding in the 

bankruptcy court seeking to determine that its mortgage on the Louisiana 

Property is first in priority. Investar subsequently moved for partial summary 

judgment, seeking a declaration that the Mortgage is invalid and 

unenforceable.

The bankruptcy court granted the motion. The court determined that 

the Mortgage “purports to secure only indebtedness of . . . W Resources.” 

However, the court explained, W Resources “has no obligation to NCC.” 

Accordingly, the court concluded, “NCC’s mortgage is not valid” under 

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Louisiana law, given its lack of an “underlying debt.” The court declined to 

consider the parol evidence offered by NCC.

The district court affirmed, concluding that the Mortgage 

unambiguously does not secure the Loan Agreement or the Promissory Note 

and is accordingly invalid for lack of indebtedness. Like the bankruptcy court, 

the district court declined to consider NCC’s parol evidence. NCC appealed. 

II.

“We review a district court’s grant of summary judgment de novo.” 

Maddox v. Townsend & Sons, Inc., 639 F.3d 214, 216 (5th Cir. 2011). Summary 

judgment is appropriate “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.” Fed. R. Civ. P. 56(a). When reviewing grants of summary 

judgment, “[w]e view the evidence and draw reasonable inferences in the 

light most favorable to the non-movant.” Maddox, 639 F.3d at 216.

The parties agree that Louisiana law governs the Mortgage. Under 

Louisiana law, a “[m]ortgage is accessory to the obligation that it secures. 

Consequently, except as provided by law, the mortgagee may enforce the 

mortgage only to the extent that he may enforce any obligation it secures.” 

La. Civ. Code art. 3282; see also Colonial Bank v. Marina Seafood Mkt., 

Inc., 425 So. 2d 722, 724 (La. 1983) (“[S]ince there exists no principal 

obligation owed by the defendant, the accessory obligation, the mortgage, 

must be invalid and unenforceable.”). Relying on Article 3282, the district 

court concluded that “the Mortgage is unenforceable and invalid,” reasoning 

that “the Mortgage depends upon a principal obligation for its existence, and 

here there is no principal obligation.” The district court did not consider 

parol evidence that NCC submitted in support of its argument that the 

parties to the Mortgage intended that the Mortgage would secure Worley’s 

personal debt to NCC.

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I would hold that the district court erred by declining to consider 

NCC’s parol evidence. After all, Louisiana law provides that 

“[i]nterpretation of a contract is the determination of the common intent of 

the parties,” La. Civ. Code art. 2045, and NCC’s parol evidence (in the 

form of the affidavits of Worley and James) was probative of that intent. And 

though Louisiana law generally provides that “[t]estimonial or other 

evidence may not be admitted to negate or vary the contents of an authentic 

act or an act under private signature,” La. Civ. Code art. 1848, the 

Louisiana Supreme Court has made it clear that “the ‘parol evidence rule . . . 

applies only between parties to the act and their representatives and not 

between a party to the act and third persons.’” Smith v. Chappell, 148 So. 

242, 246 (La. 1933).1 Because this dispute is between a party to the Mortgage 

(NCC) and a non-party (Investar), the parol evidence rule simply does not 

apply.

The district court declined to consider NCC’s parol evidence because 

it concluded that the Mortgage unambiguously does not secure Worley’s 

personal debt to NCC. The district court relied on the following rule of 

contract construction: “When the words of a contract are clear and explicit 

and lead to no absurd consequences, no further interpretation may be made 

in search of the parties’ intent.” La. Civ. Code art. 2046. However, the 

Louisiana Supreme Court has explained that “an authentic act only binds 

parties to the act and their representatives in suits between the parties or their 

representatives. In any controversy, therefore, between a party to the act and 

a stranger, the party to the act is as free to avail himself of parol evidence for 

contradicting or varying the act as the stranger is.” Mitchell v. Clark, 448 So. 

2d 681, 686 (La. 1984) (internal quotation marks omitted) (citing Smith, 148 

1 Smith interpreted Louisiana Civil Code Article 2276, see 148 So. at 246, which has 

been recodified as Article 1848. See La. Civ. Code art. 1848 cmt. a.

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So. 242; Commercial Germania Trust & Savings Bank v. White, 81 So. 753, 755 

(La. 1919)). Thus, in disputes between a party to a contract and a third party, 

parol evidence is admissible to vary the terms of even an unambiguous 

contract. See also Frank L. Marist, Nolan J. Edwards, and 

Holt B. Harrison, 19 La. Civ. L. Treatise, Evidence and 

Proof § 6.3 (2d ed.) (“[P]arol evidence is admissible for or against a third 

party who was not in privity with the contracting parties.” (citing Mitchell v. 

Clark, 431 So. 2d 817 (La. Ct. App. 2d Cir. 1983)).

Further, I do not agree with the district court that the Mortgage 

unambiguously does not secure Worley’s personal debt to NCC. As 

explained above, the Mortgage: (1) purported to grant NCC a mortgage on 

the Louisiana Property, which would “secure the . . . indebtedness”; 

(2) defined the term “[i]ndebtedness” to mean “all obligations and liabilities 

of Mortgagor to Mortgagee”; and (3) stated that “W Resources, L.L.C., . . . 

represented herein by Michael A Worley, sole Managing Member,” would 

be “referred to collectively as the ‘Mortgagor.’” This language at least 

creates ambiguity as to whether the Mortgage secures Worley’s obligations 

to NCC, as well as those of W Resources. Accordingly, even if I am reading 

Smith and Mitchell too broadly, Article 2046 does not prevent courts from 

considering parol evidence when interpreting this contract.

2

2 Alternatively, I would hold that Article 2046 does not apply to this dispute 

because it is absurd for a document purporting to be a mortgage not to secure any 

underlying debt. To the extent that JAB of Oakdale, LLC v. Oakwood Inn Dev. Corp., 2007-

1426 (La. App. 3 Cir. 3/5/08), 2008 WL 597193, held that such a situation is not absurd, 

this unpublished opinion from an intermediate court of appeals is not binding authority, 

and I do not find its reasoning persuasive.

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III.

The majority concludes that “[a]ll in all, NCC Financial essentially 

seeks to reform the publicly recorded Mortgage,” a violation of “the iron rule 

of bankruptcy: creditor claims are fixed for allowance purposes as of the date 

of filing of the debtor’s petition.” Ante at 5 (citing 11 U.S.C. §§ 506(b),

502(b)(1), 544(a)). The majority reasons that the Mortgage “was defective 

at the inception of bankruptcy because it reflected only an obligation to pay 

by W Resources,” and it states that NCC has cited no cases “in which a 

secured creditor was allowed to clean up its documentation and perfect an 

otherwise unenforceable claim post-bankruptcy.”

I take no issue with the majority’s interpretation of the Bankruptcy 

Code. However, I note preliminarily that this was not the logic of the district 

court. More importantly, I disagree with the majority’s statements that NCC 

seeks “to reform” the Mortgage, which was “defective at the inception of 

bankruptcy.” Rather, I understand NCC to be arguing that parol evidence 

shows that, at the time the Mortgage was executed, NCC, Worley, and W 

Resources all intended for the Mortgage to secure Worley’s personal debt to 

NCC. If NCC is correct, then the Mortgage is not “defective” and does not 

need to be “reform[ed]”; rather, it is and always has been valid. See La. 

Civ. Code art. 2045 (“Interpretation of a contract is the determination of 

the common intent of the parties.”). Accordingly, I do not see the 

Bankruptcy Code as having relevance to the issue of whether the Mortgage 

is valid under Louisiana law, the only issue presented in this appeal. 

In a footnote, the majority cites the Louisiana public records doctrine

as an additional reason not to enforce the Mortgage against Investar’s 

challenge. Ante at 7 n.9. However, under the public records doctrine, “errors 

in a recorded document do not automatically preclude the effectiveness of 

the document against third persons. The issue is whether a recorded 

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document provides ‘sufficient notice’ to a third party.” Carr v. Oaktree 

Apartments, 46 So. 3d 793, 797-98 (La. Ct. App. 2010) (citation omitted). 

Here, the parties do not dispute that the Mortgage is recorded. Accordingly, 

the Mortgage is invalid under the public records doctrine only if the recorded 

instrument did not provide sufficient notice that the Louisiana Property was 

encumbered. “Determinations concerning the sufficiency of notice in the 

public records must be decided on a case-by-case basis. Such determinations 

are factual.” Id. (citation omitted). I would instruct the district to consider 

on remand whether the Mortgage provided third parties with sufficient 

notice.3

IV.

For the foregoing reasons, I would vacate the district court’s order 

granting summary judgment in favor of Investar and remand the case to the 

district court for consideration of NCC’s parol evidence, determination of 

whether the Mortgage provided sufficient notice, and other proceedings not 

inconsistent with this opinion.

3 The majority also cites at the end of this footnote Louisiana Civil Code Article 

3342, which provides, “A party to a recorded instrument may not contradict the terms of 

the instrument or statements of fact it contains to the prejudice of a third person who after 

its recordation acquires an interest in or over the immovable to which the instrument 

relates.” Because, as explained above, I conclude that the Mortgage is ambiguous, I do not 

believe that Article 3342 applies to this case.

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