Court Opinion

ID: 6335653
Source: CourtListenerOpinion
Date Created: 2022-04-28 00:00:27.993221+00
Date Added: 2024-06-11T09:23:59.699711
License: Public Domain

Case: 20-61011    Document: 00516298048        Page: 1   Date Filed: 04/27/2022

          United States Court of Appeals
               for the Fifth Circuit
                                                            United States Court of Appeals
                                                                     Fifth Circuit

                                      FILED
                                                                April 27, 2022
                                No. 20-61011                    Lyle W. Cayce
                                                                     Clerk

   In the Matter of: Community Home Financial Services
   Corporation,

                                                                          Debtor,

   _____________________________

   Edwards Family Partnership, L.P.; Beher Holdings
   Trust,

                                                 Appellants—Cross-Appellees,

                                    versus

   Kristina M. Johnson, Trustee for Community Home
   Financial Services Corporation,

                                                  Appellee—Cross-Appellant.

                 Appeal from the United States District Court
                   for the Southern District of Mississippi
                           USDC No. 3:18-CV-154
                           USDC No. 3:18-CV-155
                           USDC No. 3:18-CV-156
                           USDC No. 3:18-CV-157
Case: 20-61011      Document: 00516298048           Page: 2    Date Filed: 04/27/2022

                                     No. 20-61011

   Before Dennis, Higginson, and Costa, Circuit Judges.
   Stephen A. Higginson, Circuit Judge:
          This is a second review appeal and cross-appeal from consolidated
   matters in the Bankruptcy Court for the Southern District of Mississippi.
   The dispute centers around a business relationship between companies
   owned by Dr. Charles C. Edwards and William D. Dickson. Appellants are
   the Edwards Family Partnership (“EFP”) and Beher Holdings Trust
   (“BHT”), two companies owned by Edwards and collectively referred to as
   the “Edwards entities.” Appellee/Cross-Appellant is Trustee Kristina M.
   Johnson, who presently manages Dickson’s former company, Community
   Home Financial Services Corporation (“CHFS”). The parties each raise
   four issues on appeal relating to the business relationship between EFP,
   BHT, and CHFS. We AFFIRM the district court’s decision in part,
   REVERSE in part, and REMAND.
                                          I.
                                          A.
                                          i.
          The lengthy relationship between Edwards, an orthopedic surgeon
   from Maryland, and Dickson, a business owner from Jackson, Mississippi,
   began sixteen years ago. Both Edwards and Dickson owned and operated
   multiple family businesses. The two men were introduced by a broker hired
   by Dickson to find a replacement lender for CHFS. CHFS is a mortgage
   servicing entity, managed by Dickson, that purchased discounted mortgage
   loan portfolios from third parties and serviced those loans, as well as servicing
   loans from several affiliated companies.
          In July 2006, Edwards and Dickson met for the first time. Edwards’s
   daughter then traveled to Jackson, Mississippi, where CHFS was

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   headquartered, to survey the company’s business operations. Although
   Edwards’s daughter had no expertise in the realm of mortgage servicing, she
   reported favorably to her father about CHFS. Sometime thereafter, Edwards
   and Dickson commenced their first business deal, a credit facility of $10
   million to fund the purchase of home improvement loans.
          To conserve financial resources and to expedite the arrangements, an
   employee of CHFS, who happened to be a disbarred attorney, drafted the
   loan documents, using as forms the documents prepared by CHFS’s prior
   lender, cutting and pasting different names and addresses where appropriate.
   Meanwhile, Edwards relied on his daughter, who is not an accountant, to
   review CHFS’s financial reports, to calculate the principal balance and
   interest due on the promissory notes each month, and to determine “eligible
   receivables” based on a “Borrowing Base Certificate.”
          Although the financial entanglements of Edwards and Dickson
   contained many elements, the present dispute centers around two business
   transactions: (1) the initial home improvement loans from Edwards to CHFS
   and (2) a subsequent arrangement of seven mortgage portfolios of subprime
   loans (the “Mortgage Portfolios”) purchased as “joint ventures” between
   Edwards and CHFS. In total, Edwards’s proofs of claim with respect to his
   financial arrangements with Dickson and CHFS amount to roughly $30
   million.
                                        ii.
          The first deal between Edwards and CHFS, which began in 2006,
   pertained to “Home Improvement Line” loans (otherwise known as the
   “home improvement loans” or the “Home Improvement Line”). Edwards
   agreed to loan $10 million to CHFS through his company Rainbow Group.
   CHFS used the funds from Rainbow Group/Edwards to purchase consumer

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   mortgages taken out by individuals seeking to improve their homes.1 CHFS
   then serviced the purchased mortgages and sent Rainbow Group the interest
   it owed.2 Nearly 2,000 home improvement loans were handled through this
   arrangement, with roughly $600,000 to $700,000 flowing through the deal
   each month.
          CHFS established a custodial agreement with Harold B. McCarley,
   Jr., PLLC, a Mississippi law firm, designating attorney Harold McCarley, Jr.,
   as the custodian of the original loan documents and assignments for Rainbow
   Group’s benefit. McCarley testified in the bankruptcy trial that he holds
   these documents and releases them only upon receipt of a written request
   signed by CHFS and Rainbow Group (or other entity identified by Edwards).
          The Home Improvement Loan Agreement gives Rainbow Group the
   authority to assign its rights and duties as Lender, pursuant to Paragraph 9.6
   of the agreement, which reads:
          9.6 ASSIGNMENT BY LENDER. LENDER MAY AT ANY
          TIME (A) DIVIDE AND REISSUE (WITHOUT
          SUBSTANTIVE CHANGES OTHER THAN RESULTING
          FROM SUCH DIVISION) THE NOTE, AND/OR (B)
          SELL, ASSIGN, GRANT PARTICIPATION IN,
          DELEGATE OR OTHERWISE TRANSFER TO ANY
          OTHER PERSON (AN “ASSIGNEE”) ALL OR PART OF
          RIGHTS AND DUTIES OF LENDER UNDER THIS
          AGREEMENT AND THE OTHER LOAN DOCUMENTS.
          TO THE EXTENT INDICATED IN ANY DOCUMENT,
          INSTRUMENT OR AGREEMENT SO SELLING,

          1
           The nature of the mortgages in question is the origin for the name “Home
   Improvement Line.”
          2
            More specific details regarding the financial terms of the initial Home
   Improvement Line agreement between Rainbow Group and CHFS can be found in the
   bankruptcy court opinion.

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            ASSIGNING, GRANTING PARTICIPATION IN, OR
            OTHERWISE TRANSFERRING TO AN ASSIGNEE
            SUCH RIGHTS AND/OR DUTIES, (I) THE ASSIGNEE
            SHALL ACQUIRE ALL THE LENDER’S RIGHTS
            UNDER THE AGREEMENT AND THE OTHER LOAN
            DOCUMENTS AND (II) THE ASSIGNEE SHALL BE
            DEEMED TO BE THE “LENDER” UNDER THIS
            AGREEMENT AND THE OTHER LOAN DOCUMENTS
            WITH THE AUTHORITY TO EXERCISE SUCH RIGHTS
            IN THE CAPACITY OF LENDER.
            Edwards exercised this authority twice on behalf of Rainbow Group.
   In 2007, Edwards assigned Rainbow Group’s rights and duties to Beher
   Holdings Limited (“BHL”).3 Then in 2010, Edwards re-assigned and split
   rights to the Home Improvement Line loans between the present appellants:
   EFP and BHT. In each instance, when Edwards exercised his reassignment
   powers, the business relationship between Edwards and CHFS remained
   fundamentally unchanged.         Several years after the initial 2006 loan
   agreement, Edwards and CHFS entered into amended loan agreements with
   respect to the Home Improvement Line. The amended agreements resulted
   in a $4 million commercial note and line of credit between CHFS and EFP,
   as well as a $12 million commercial note and line of credit between CHFS
   and BHT. The parties do not dispute that by the time CHFS declared
   bankruptcy in 2012, it owed the Edwards entities $17.8 million on these
   notes.

            3
           Beher Holdings Limited is a British Virgin Islands company, acquired by Dr.
   Edwards for the purpose of the assignment orchestrated between BHL and the Rainbow
   Group.

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                                        iii.
          In 2008, Edwards began to pursue a second type of investment with
   Dickson and CHFS. Because of the nationwide financial crisis at the time,
   Dickson believed that CHFS could purchase subprime loan portfolios at a
   favorable price. Accordingly, Dickson approached Edwards about providing
   roughly $9 million through various entities to CHFS to purchase seven
   mortgage portfolios (the “Mortgage Portfolios”) of subprime loans. The
   Edwards entities maintain that Edwards did not intend for these transactions
   to be considered loans but rather “joint ventures” between the Edwards
   entities and CHFS.
          Edwards (acting on behalf of EFP and BHT) finalized agreements
   with CHFS to purchase the Mortgage Portfolios between January 2008 and
   March 2011.     The parties to Mortgage Portfolios #1-6 are CHFS and
   Appellant EFP. The parties to Mortgage Portfolio #7 are CHFS and
   Appellant BHT. Only three of the Mortgage Portfolio transactions between
   the Edwards entities and CHFS are documented in writing (Mortgage
   Portfolios #1, 2, and 7).
          The parties do not dispute that the Edwards entities funded the
   purchase of the Mortgage Portfolios. Although the purchases of the seven
   portfolios were funded directly by entities purportedly controlled by Edwards
   (not necessarily EFP/BHT), all portfolio purchase agreements were between
   CHFS and the portfolio seller. Moreover, for Portfolios #1-6, the portfolio
   sellers assigned the loans to CHFS. The original notes and assignments
   comprising the consumer loans in Portfolios #1-6 are in EFP’s possession as
   “collateral.”
          The agreement between CHFS and BHT regarding Portfolio #7
   “contains terms that are materially different” from the agreements for

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   Mortgage Portfolios #1-6.4 The parties to the agreement decided the original
   notes and assignments in Portfolio #7 would not be held by CHFS, Dickson,
   Edwards, or BHT, but rather by a third party. Currently, these custodial
   documents for Portfolio #7 are missing.5
           It is undisputed that when CHFS declared bankruptcy, the investment
   in the portfolios that had not yet been recouped by the Edwards entities was
   $11,780,451.
                                               B.
                                                i.
           In 2010, the business relationship between Edwards and Dickson
   started to deteriorate. The deterioration culminated in a lawsuit filed in
   February 2012 by CHFS and Dickson against Edwards in Mississippi state
   court. On April 11, 2012, Edwards and EFP/BHT removed the original state
   court lawsuit to the United States District Court for the Southern District of
   Mississippi. Shortly thereafter, EFP/BHT filed an emergency motion for
   immediate appointment of a receiver for CHFS. Just as the district court was

           4
             Unlike the other agreements, Portfolio #7’s agreement required CHFS to pay all
   of its due diligence expenses, and CHFS received a reduced monthly servicing fee of only
   $15 per month. Under the terms of this agreement, CHFS was not entitled to receive any
   distribution of its 25 percent share of the net proceeds until BHT recovered its entire cash
   contribution. In addition, the agreement states that “benefits and obligations of the
   Purchase Agreement have been assigned from CHFS to [BHT]. [BHT] will be the
   beneficial owner of the loans, subject to the terms of this Joint Venture.”
           5
             Patrick Frascogna, a Mississippi attorney whose law office was in the same
   building as the CHFS headquarters, was supposed to keep the notes and assignments for
   Portfolio #7 in his custody. However, Frascogna either released the loan documents to
   Dickson or never received them. Dickson claims that the documents are in a Panamanian
   warehouse but has not divulged the location of the warehouse.

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   about to conclude its trial in the matter of the receivership, 6 CHFS
   voluntarily filed a Chapter 11 petition for relief, which stayed all proceedings
   against CHFS in the receivership action.
            Amid the bankruptcy proceedings (sometime in 2013), Dickson
   absconded to Costa Rica to establish “rogue” operations of the CHFS
   business outside of the United States. The parties do not dispute that
   Dickson stole nearly $10 million from CHFS bank accounts while in South
   America. Dickson also shipped various pieces of office equipment, several
   computer servers, and many of CHFS’s loan records to Costa Rica.
   Ultimately, Dickson was returned to the United States in federal custody,
   arrested for bank fraud, and indicted on April 9, 2014.
            In 2012, EFP/BHT filed a Motion to Appoint Chapter 11 Trustee for
   CHFS based on the alleged misconduct of CHFS and Dickson.7 Then in
   December 2013, the bankruptcy court entered an Order Granting United
   States Trustee’s Emergency Motion for Order for the Appointment of a
   Chapter 11 Trustee. Over the objection of the Edwards entities,8 the
   bankruptcy court appointed Appellee Kristina Johnson (“Johnson” or

            6
             The Edwards entities allege that after hearing testimony in the receivership
   matter, the district court judge “indicated that a receivership would likely be imposed.”
            7
            A bankruptcy trustee is entrusted with specific, legally binding responsibilities,
   which are “extensive.” Commodity Futures Trading Comm‘n v. Weintraub, 471 U.S. 343,
   352 (1985). “A trustee shall . . . investigate the acts, conduct, assets, liabilities, and financial
   condition of the debtor, the operation of the debtor’s business and the desirability of the
   continuance of such business.” 11 U.S.C. § 1106(a)(3). The trustee, as well as the trustee’s
   attorneys, “are held to high fiduciary standards of conduct.” Matter of Evangeline Ref. Co.,
   890 F.2d 1312, 1323 (5th Cir. 1989).
            8
            The Edwards entities objected to Johnson’s appointment as Chapter 11 trustee
   on the grounds that Johnson’s law firm was representing the accounting firm retained by
   CHFS as an expert witness in the bankruptcy case. The bankruptcy court found Johnson
   had no conflict.

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   “Trustee”) as the Chapter 11 trustee for CHFS on January 21, 2014.
   Johnson subsequently hired the law firm at which she is a partner, to
   represent her9 in the matter. Once the order granting the emergency motion
   for the appointment of a Chapter 11 trustee – in this case Johnson – was
   entered, Dickson no longer had any decision-making authority for CHFS.
   See 11 U.S.C. § 704, § 1106. Nevertheless, Dickson’s illicit activities with
   respect to CHFS continued until he was taken into federal custody.
                                                ii.
           In September 2014, Edwards was contacted by a business associate of
   Dickson’s in Costa Rica, Mike James Meehan (“Meehan”). Edwards and
   Meehan began to communicate sporadically over email regarding the affairs
   of CHFS in Costa Rica. Edwards and Meehan’s correspondence lasted for
   roughly five months.
           Emails between Edwards and Meehan reveal that Edwards sent
   Meehan wire transfers in exchange for information about CHFS’s South
   American operations on multiple occasions. 10 Sometime during the email
   correspondence period, Meehan emailed Edwards a link to a Dropbox folder
   that contained data on CHFS pulled from a CHFS computer. After Edwards
   informed Meehan that he was unable to access the Dropbox folder, Meehan
   mailed Edwards two compact discs (“CDs”) with the information in
   question. Edwards testified at trial “that he believed the CDs to be duplicates
   of each other,” with no relevant or new information.

           9
             The district court order opined on the troubling incentives associated with the
   arrangement between Johnson and her law firm in this case. Thus far, more than thirty
   lawyers have billed the estate for work on this matter, amounting to over $5 million in legal
   fees for which the estate is now responsible.
           10
             Specifically, Edwards testified at trial that he wired Meehan money “out of just
   appreciation.”

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          In addition to corresponding over email, Edwards traveled to Costa
   Rica to meet with Meehan in person in December 2014. After this visit,
   Edwards, once again, reached out to Meehan over email seeking information
   from the hard drives of computers in the CHFS Costa Rica office, as well as
   information about assets seized by the Costa Rican government from
   Dickson. Edwards claims that the only information he received from Meehan
   were “some computer records of the Home Improvement Loans and the
   other EFP/BHT portfolios that Meehan copied onto CDs.”
          Meehan did not attempt to contact Johnson until February 2015
   (roughly five months after contacting Edwards). Before Meehan reached out
   to Johnson, she was unaware of the location of CHFS’s computers, books,
   and records in Costa Rica and had no knowledge of the financial affairs of
   CHFS in South America. Johnson alleges that, because of Edwards’s
   communications with Meehan, Edwards had extensive knowledge of various
   matters related to CHFS’s business affairs for several months,11 while she
   remained in the dark as to the same information.
          In response, Johnson filed the PPC Amended Complaint against
   Edwards and the Edwards entities alleging violations of the automatic stay
   under 11 U.S.C. §§ 105(a), 362(a), (k). In the Amended Complaint, Trustee
   Johnson estimated that the estate was forced to incur additional servicing
   costs of more than $10,000, which could have been avoided if Edwards had
   notified Johnson of his communications with Meehan or turned over the
   information he possessed. Additionally, Johnson alleged that Edwards’s

          11
             According to Johnson, as referenced in the bankruptcy court opinion, Edwards
   “had knowledge of approximately 2,000 loans, at least two bank accounts in CHFS’s name
   (one with Banco de Costa Rica and the other with Banco Panameño), over $1.5 million in
   loans purchased in Costa Rica with funds stolen from the estate, and the names of two
   CHFS affiliates (Pirrana SA and Mary Madison Foundation)[.]”

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   actions with respect to Meehan cost her an opportunity to obtain CHFS
   assets that were either seized or frozen by the Costa Rican government,
   thereby incurring greater legal fees and expenses to retrieve the repossessed
   assets. At the time of the bankruptcy trial, Johnson estimated the estate had
   “incurred legal fees and expenses attributable to Edwards’s conduct in
   excess of $61,458.2535” and would continue to incur additional expenses.
   The bankruptcy court consolidated the PPC Amended Complaint with the
   other related proceedings in an order on February 15, 2017.
                                        iii.
          From October 30, 2017, through November 2, 2017, and on
   November 27, 2017, the bankruptcy court conducted a consolidated trial
   consisting of three adversary proceedings and five related contested matters.
   Judge Olack issued a far-reaching opinion in February 2018. With respect to
   the issues presently before this court on appeal, the bankruptcy court
   concluded:
          A. Mortgage Portfolios
          1) The Loans to CHFS to purchase Mortgage Portfolios #3-6
          were barred by the statute of frauds and, therefore, were
          unenforceable against the estate.
          2) The Edwards entities were entitled (in 2018) to $788,611 for
          their secured claim on the loans for Mortgage Portfolio #1-2.
          3) Johnson was not required to return collections from
          Mortgage Portfolio #7 to the Edwards entities.
          B. Home Improvement Line Loans
          1) Trustee Johnson was entitled to a judgment that the 2010
          Assignment is void.

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          C. Tracing
          1) EFP/BHT were not entitled to a judgment declaring that
          they have a security interest in any of the stolen funds
          recovered or intercepted by the Trustee.
          D. Post-Petition Adversary Conduct
          1) Trustee Johnson was entitled to a judgment against Edwards
          and EFP/BHT, jointly and severally, for the conversion of the
          original CD.
          2) Trustee Johnson was entitled to damages against Edwards
          and EFP/BHT, jointly and severally, for violations of the
          automatic stay.
                                       iv.
          On October 2, 2020, the district court issued a memorandum opinion
   and judgment affirming in part, reversing in part, and rendering in part the
   bankruptcy court’s opinion. With respect to the issues presently on appeal,
   the district court concluded:
          A. Mortgage Portfolios
          1) The bankruptcy court’s rulings on the mortgage portfolios
          were within the standard of review and affirmed.
          B. Home Improvement Line Loans
          1) Trustee Johnson’s challenge to Dr. Edwards’s internal 2010
          Assignment was reversed and rendered.
          C. Post-Petition Adversary Conduct
          1) The Trustee’s conversion claim was reversed and rendered.
          2) The bankruptcy court’s findings under § 362(k) were
          vacated and remanded. The district court held that “[i]f it is
          determined [on remand] that fees should be awarded, the court
          should clearly explain how it arrived at the level of
          compensation awarded.”

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                                         II.
          A district court reviewing the final judgement of a bankruptcy court
   uses the clearly erroneous standard of review for questions of fact and a de
   novo standard of review for conclusions of law. In re Gerhardt, 348 F.3d 89,
   91 (5th Cir. 2003). When we review the decision of a district court, sitting in
   its bankruptcy appellate capacity, we apply the same standards of review. In
   re SI Restructuring, Inc., 542 F.3d 131, 134 (5th Cir. 2008). See also Barron &
   Newburger, P.C. v. Tex. Skyline, Ltd. (In re Woerner), 783 F.3d 266, 270 (5th
   Cir. 2015) (en banc). We also apply these standards when reviewing a
   bankruptcy court’s final judgements directly. In re ASARCO, L.L.C., 702
   F.3d 250, 257 (5th Cir. 2012).
                                        III.
                                         A.
          The Edwards entities first ask this court to overturn the bankruptcy
   court’s conclusion that the entities’ right to repayment for the funding of
   Mortgage Portfolios #3-6 is barred by the statute of frauds. The Edwards
   entities argue the “statute of frauds does not apply to agreements already
   fully performed by one party; or to agreements capable of being fully
   performed within 15 months, even if performance is not expected.”
          Mississippi law provides that “[a]n action shall not be brought . . .
   upon any agreement which is not to be performed within the space of fifteen
   months from the making thereof” unless the agreement is “in writing, and
   signed by the party to be charged therewith or signed by some person by him
   or her thereunto lawfully authorized in writing.” Miss. Code Ann.
   § 15-3-1. The Mississippi Supreme Court and our court have both previously
   struck down loan agreements with durations that fell beyond the fifteen-
   month period. See, e.g., Fireman's Fund Ins. Co. v. Williams, 154 So. 545, 547
   (Miss. 1934) Williams v. Evans, 547 So. 2d 54, 56 (Miss. 1989); Stahlman v.

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   Nat'l Lead Co., 318 F.2d 388, 395 (5th Cir. 1963). However, the Mississippi
   Supreme Court has also considered the indefinite duration of an agreement
   to be a determinative factor in removing the agreement from the statute of
   frauds consideration. See, e.g., Beane v. Bowden, 399 So. 2d 1358, 1361 (Miss.
   1981) (“[T]he oral contract was of an indefinite duration and susceptible of
   performance within 15 months, thus removing it from the statute of
   frauds.”). See also Morgan v. Jackson Ready-Mix Concrete, 157 So. 2d 772, 779
   (Miss. 1963) (“The possibility of performance within fifteen months takes
   the contract out of the operation of the statute [of frauds].”).
          Accordingly, the salient question is whether the agreement between
   the Edwards entities and CHFS pertaining to the repayment of Mortgage
   Portfolios #3-6 had an indefinite duration for repayment and was susceptible
   of performance within fifteen months.12          To answer this question, the
   bankruptcy court looked to the terms of the underlying subprime loans that
   comprise the larger Mortgage Portfolios. The bankruptcy court reasoned
   that “[b]ecause the loans that comprise Portfolios #3-#6 are all for terms
   longer than five (5) years, . . . the loans to CHFS to purchase Portfolios #3-#6
   could not be performed within the space of fifteen (15) months and,
   therefore, are unenforceable against the estate.”
          We will affirm the bankruptcy court’s findings if its “‘account of the
   evidence is plausible in light of the record,’ even if we ‘would have weighed
   the evidence differently.’” Matter of Trendsetter HR L.L.C., 949 F.3d 905,
   910 (5th Cir. 2020) (quoting Anderson v. City of Bessemer City, 470 U.S. 564,
   574 (1985)). The bankruptcy court’s determination that CHFS could not
   repay the Edwards entities until it had collected on the underlying loans in

          12
             The record belies any cursory suggestion that the Edwards entities fully
   performed under Mortgage Portfolios #3-6, inasmuch as the Edwards entities had
   continuing service and fee obligations.

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   the Portfolios—which would take more than five years, based on the terms
   of the loan agreements—is “plausible in light of the record.” Id. We agree
   that the agreement between the Edwards entities and CHFS was not
   performable within a fifteen-month period. As such, we affirm the district
   and bankruptcy courts’ conclusion that the Edwards entities’ right to
   repayment for their funding of Mortgage Portfolios #3-6 was barred by the
   statute of frauds
                                         B.
          The Edwards entities further contend that while the bankruptcy court
   correctly identified the unrecouped, combined value of Mortgage Portfolios
   #1-2 and rightly deemed that amount to be a secured loan to CHFS of
   $1,778,804, the bankruptcy court “reached [an] unreasonable result by
   arbitrarily adopting a valuation model put forward by the Trustee through her
   expert” for the two portfolios.      The Edwards entities argue that the
   bankruptcy court itself found the underlying notes at issue were owned by
   the estate and, as such, that “[t]he valuation model that the bankruptcy court
   accepted was based on assumptions that the bankruptcy court’s findings had
   expressly rejected.”
          This court has previously held that “[v]aluation is a mixed question of
   law and fact, the factual premises being subject to review on a clearly
   erroneous standard, and the legal conclusion being subject to de novo
   review.” In re Stembridge, 394 F.3d 383, 385 (5th Cir. 2004) (citation
   omitted). As we have observed, the Bankruptcy Code “leaves valuation
   questions to judges” to resolve “on a case-by-case basis.” Matter of Clark
   Pipe & Supply Co., Inc., 893 F.2d 693, 697 (5th Cir. 1990).
          Here, the bankruptcy court opinion does not elaborate on the
   reasoning behind its valuation method. The bankruptcy court simply adopted
   valuations for Mortgage Portfolio #1-2 proposed by the Trustee’s expert,

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   accountant Jeffrey N. Aucoin that is $788,611.13 In one prior case, we
   concluded that a bankruptcy court’s proposed valuation was unreviewable
   because the bankruptcy court had not given specific reasons for its choice of
   valuation method. See Matter of Missionary Baptist Found. of Am., Inc., 796
   F.2d 752, 760-61 (5th Cir. 1986). Although they did not provide an alternative
   valuation, the Edwards entities did point out a problem underlying the
   bankruptcy court’s valuation: The bankruptcy court found that Mortgage
   Portfolios #1 and #2 were loans to CHFS, but then assumed they were joint
   ventures for purposes of the valuation. This classification leads to a big
   difference in the money that EFP is owed. Our court’s analysis of the issue
   indicates that if the portfolio agreements are loans, EFP is entitled to the
   entire loan payment from CHFS (which is the secured interest of
   $1,728,804); if they are joint ventures, EFP is only entitled to the money from
   the mortgage collection.
           Upon review, we conclude this uncertainty is sufficient to merit
   further consideration by the bankruptcy court, in order for the court to
   determine how much money EFP is owed for Mortgage Portfolios #1 and #2
   and to explain why the court’s valuation of these portfolios is correct.
   Accordingly, we remand solely this issue of the valuations of Mortgage
   Portfolios #1-2 to the bankruptcy court.

           13
              We note that factual findings made by the bankruptcy court that are drawn from
   assessments of witness credibility are granted additional deference because “only the trial
   judge can be aware of the variations in demeanor and tone of voice that bear so heavily on
   the listener’s understanding of and belief in what is said.” In re Renaissance Hosp. Grand
   Prairie Inc., 713 F.3d 285, 293 (5th Cir. 2013) (quoting Anderson v. Bessemer City, N.C., 470
   U.S. 564, 575 (1985)).

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                                    No. 20-61011

                                         C.
          According to the Edwards entities, while the bankruptcy court
   correctly identified Mortgage Portfolio #7 as a joint venture, the bankruptcy
   court’s decision to disallow this claim “should be vacated and remanded for
   reasonable reevaluation of the amounts owed to the Edwards Entities for
   Mortgage Portfolio 7.” The Edwards entities correctly assert that the
   bankruptcy court did not offer any analysis or consideration of this issue
   beyond its disallowance of the claim in the concluding section of its opinion.
   Due to the absence of any analysis, EFP and BHT ask this court to remand
   this issue for “reasonable reevaluation of the amounts owed to the Edwards
   entities for Mortgage Portfolio 7.”
          “The court to which [a bankruptcy] claim or cause of action is
   removed may remand such claim or cause of action on any equitable
   ground.” 28 U.S.C. § 1452(b). We have previously recognized that fact and
   subject matter determinations, when presented to the court of appeals in the
   first instance, are best resolved by the bankruptcy court. See In re Baron, 593
   F. App’x 356, 361-62 (5th Cir. 2014) (finding the determination of whether a
   creditor’s right to seek relief in a bankruptcy matter may be enjoined by a
   district court is “best left to the bankruptcy court on remand” when the issue
   was raised before the bankruptcy court, but the court did not address the
   issue). See also Matter of T-H New Orleans Ltd. P’ship, 10 F.3d 1099, 1103
   (5th Cir. 1993) (same). Given the summary disallowance of this issue, as well
   as both parties’ acknowledgement that the issue remains unresolved, we
   remand this issue to the bankruptcy court.
                                         IV.
                                         A.
          Trustee Johnson argues that the 2010 Assignment of the Home
   Improvement Line loans is void and cannot be cured post-petition “for the

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                                    No. 20-61011

   reasons . . . determined by the bankruptcy court.” Johnson argues that she
   has standing to challenge the 2010 Assignment of the HIL loans—despite not
   being a party to the Assignment—pursuant to statutorily granted authority
   under several sections of the federal Bankruptcy Code. While the bankruptcy
   court determined that the 2010 Assignment was valid, the bankruptcy court
   also concluded that it would be unfair to treat Edwards’s 2010 Assignment
   as lawful because of intervening periods of non-compliance with local laws by
   the assignee entities. See On these grounds, the bankruptcy court voided the
   2010 Assignment. In response, the district court stated that “it was an abuse
   of discretion [for the bankruptcy court] to even consider” such arguments
   and deemed the 2010 Assignment to be valid.
          We examine the question of whether Johnson has standing to
   challenge the 2010 Assignment de novo. See Friends of St. Frances Xavier
   Cabrini Church v. Fed. Emergency Mgmt. Agency, 658 F.3d 460, 466 (5th Cir.
   2011) (“Standing is a question of law reviewed de novo by this court.”). We
   recently held in a related dispute that bankruptcy trustees generally have
   standing, as a party of interest, to challenge any matters concerning the
   bankruptcy estate. See Matter of Cmty. Home Fin. Servs., Inc., 990 F.3d 422,
   427 (5th Cir. 2021). In that case, we explained that a bankruptcy trustee “is
   distinct from all other bankruptcy parties because the trustee is responsible
   for the administration of the bankruptcy estate.” Id. at 426. Accordingly,
   the “trustee’s standing comes from the trustee’s duties to administer the
   bankruptcy estate, not from any pecuniary interest in the bankruptcy.” Id. at
   427. Similarly, in an earlier case, we held that “the bankruptcy trustee is the
   real party in interest with respect to claims falling within the bankruptcy
   estate.” United States ex rel. Spicer v. Westbrook, 751 F.3d 354, 362 (5th Cir.
   2014). Because a challenge to the validity of the 2010 Assignment is directly
   linked to the bankruptcy estate, Trustee Johnson has standing to raise
   questions about the legitimacy of the Assignment.

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                                     No. 20-61011

          Nevertheless, Johnson offers no substantive legal or factual reason
   why this panel should reverse the district court’s conclusion that the 2010
   Assignment is valid. On appeal, “the burden is on the appellants to show
   error.” Murphy v. St. Paul Fire & Marine Ins. Co., 314 F.2d 30, 31 (5th Cir.
   1963). Because Johnson has not met her burden of demonstrating that the
   district court erred, we affirm the district court’s conclusion that the 2010
   Assignment is valid.
                                          B.
          Trustee Johnson also asks this court to overturn the district court’s
   determination that the Edwards entities have a perfected security interest in
   the HIL loans. In response, the Edwards entities maintain they hold a
   perfected security interest in the HIL loans pursuant to the Rainbow Loan
   Agreement and the Custodial Agreement, emphasizing “the dispositive
   significance under the UCC of the custodian’s continuing possession of the
   tangible instruments at issue.”
          We look to state law to determine if a security interest is perfected.
   Matter of Locklin, 101 F.3d 435, 438 (5th Cir. 1996). Under the Mississippi
   U.C.C., a party has a perfected secured interest in a tangible instrument when
   another party has taken possession of the instrument “after having
   authenticated a record acknowledging that it will hold possession for the
   secured party’s benefit.” Miss. Code Ann. § 75-9-313(c)(2). Here, it is
   undisputed that Rainbow Group held a perfected security interest in the HIL
   loans, pursuant to this statutory provision, based on the Custodial Agreement
   and Rainbow Loan Agreement between the McCarley Firm, Rainbow Group,
   and CHFS. However, the critical question is whether Appellants EFP and
   BHT also possess a perfected security interest in the HIL loans under the
   same theory, given that the Custodial Agreement does not name these
   entities as beneficiary parties or lenders.

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                                        No. 20-61011

           Mississippi law states that “[i]f a secured party assigns a perfected
   security interest . . . , a filing . . . is not required to continue the perfected
   status of the security interest against creditors of and transferees from the
   original debtor.” Miss. Code Ann. § 75-9-310(c); see also id. cmt. 4
   (“Subsection (c) . . . . provides that no filing is necessary in connection with
   an assignment by a secured party to an assignee in order to maintain
   perfection as against creditors of and transferees from the original debtor.”).
   The statute confirms that Edwards did not have to amend or re-perfect the
   Custodial Agreement or security interest upon its assignment from Rainbow
   Group to the Edwards entities. As such, the Edwards entities would hold a
   perfected security interest in the HIL loans under a continuous possession
   theory.
           Nevertheless, the bankruptcy court determined that the analysis could
   not end there because the parties had “varied by agreement” the continuous-
   perfection provision of § 75-9-310(c), affirmatively requiring Edwards to re-
   perfect his security interest every time he assigned the note to a new entity
   under the terms of the Custodial Agreement. See Miss. Code Ann.
   § 75-1-302 (“Except as otherwise provided . . . , the effect of provisions of
   the Uniform Commercial Code may be varied by agreement.”).                         The
   bankruptcy court based this conclusion on Section 5.7 of the Custodial
   Agreement.14
           “Generally, courts look to the ‘four corners’ of the contract to
   ascertain its meaning.” Harrison Cty. Com. Lot, LLC v. H. Gordon Myrick,
   Inc., 107 So. 3d 943, 959 (Miss. 2013). However, “separate agreements
   executed contemporaneously by the same parties, for the same purposes, and

           14
              Section 5.7 of the Custodial Agreement states: “No party hereto shall sell,
   pledge, assign or otherwise transfer this Agreement without the prior written consent of
   the other parties hereto.”

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                                     No. 20-61011

   as part of the same transaction, are to be construed together.” Sullivan v.
   Mounger, 882 So. 2d 129, 135 (Miss. 2004). Accordingly, we must review the
   Custodial Agreement and the Rainbow Loan Agreement for the HIL loans in
   conjunction with one another. Section 5.7 of the Custodial Agreement
   mandates that parties to the agreement may not “transfer this Agreement
   without the prior written consent of the other parties” Section 9.6 of the
   Rainbow Loan Agreement states that the original lender may at any time
   assign or transfer the rights and duties of lender to another party and that
   party would be “DEEMED TO BE THE ‘LENDER’ UNDER THIS
   AGREEMENT AND THE OTHER LOAN DOCUMENTS WITH THE
   AUTHORITY TO EXERCISE SUCH RIGHTS IN THE CAPACITY OF
   THE LENDER.” The agreement does not require the lender to seek
   approval or sign-off or to even notify the other parties prior to re-assignment.
          Read in conjunction with one another, these contract provisions
   support the district court’s determination that “everyone would have to
   agree in writing before they could change the custodian of the mortgages. The
   lender can change at any time. The custodian can’t.” This reading of the
   contractual provisions is further supported by the trial testimony of Harold
   McCarley, Jr., the custodian of the loan documents. McCarley stated that
   “he understood he was the bailee of the Home Improvement Loans for the
   ‘lender’ under the Custodial Agreement and that at some point, the ‘lender’
   changed from Rainbow Group, Ltd. to Beher Limited.” McCarley also
   testified that he “took instruction from Edwards as to the identity of the
   lender.” For these reasons, we affirm the district court’s conclusion that the
   Edwards entities have a perfected security interest in the Home
   Improvement Line notes.

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                                     No. 20-61011

                                          V.
          The Edwards entities argue that the bankruptcy court erred in
   concluding that, because the Edwards entities could not trace the assets
   stolen by Dickson to the funds recovered by the Trustee, EFP and BHT do
   not hold a security interest in those funds. The Edwards entities also contend
   that they should maintain their security interest in the stolen funds, despite
   those funds having been co-mingled, based on the application of “equitable
   principles” under the terms of the Mississippi U.C.C.
          The district court opinion did not reach the tracing issue, so we review
   the bankruptcy court’s decision on this matter directly. Under Mississippi’s
   governing rules for security interests in commingled goods, when goods
   become commingled—that is, when identity of the collateral has become
   lost—the security interest no longer exists in the commingled goods. See
   Miss. Code Ann. § 75-9-336(b) (“A security interest does not exist in
   commingled goods…”). Since the original goods can no longer be identified,
   the rules pertaining to security interests in those goods (including particularly
   transfer or creation of a security interest in those original goods) are
   inapplicable, even though the goods still exist in some form. See id. cmt. 3
   (“[T]he security interest in the specific original collateral alone is lost once
   the collateral becomes commingled goods, and no security interest in the
   original collateral can be created thereafter…”).           However, a security
   interest remains attached to “[p]roceeds that are commingled with other
   property . . . to the extent that the secured party identifies the proceeds by a
   method of tracing, including application of equitable principles, that is
   permitted under law.” Id. § 75-9-315(b)(2).
          Pursuant to the express language of Mississippi’s statute, the burden
   lies with the secured party—the Edwards entities—to identify the proceeds
   in question “by a method of tracing.” However, EFP and BHT do not

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                                     No. 20-61011

   provide this court with “a method of tracing” to identify the proceeds in
   question. Instead, they ask this court to apply “equitable principles” to
   retain their secured interest in the comingled funds. Yet, the Edwards
   entities offer no explanation or pertinent caselaw on how the application of
   equitable principles might serve as a method of tracing the funds, other than
   simply to state that such principles would mandate the security interest
   remain intact.
          We        have   previously     explained     that     “adherence      to
   specific equitable principles, including rules concerning tracing analysis are
   ‘subject to the equitable discretion of the court.’” United States v. Durham,
   86 F.3d 70, 72 (5th Cir. 1996) (quoting In re Intermountain Porta Storage,
   Inc., 74 B.R. 1011, 1016 (D.C. Colo. 1987)). However, “when performing a
   judicial function by interpreting a state statute—which limits his discretion
   and is not merely a standardless grant of authority—a judge acts to implement
   state policy rather than create policy.” Boston v. Lafayette Cty., Miss., 743 F.
   Supp. 462, 470 (N.D. Miss. 1990). Creating new policy about the application
   of equitable principles in this matter is not the appropriate role of this court.
   For this reason, we affirm the bankruptcy court’s holding that the Edwards
   entities failed to meet their burden of tracing the recovered funds.
                                         VI.
                                          A.
          Trustee Johnson challenges the district court’s decision to vacate and
   remand the bankruptcy court’s ruling that Edwards’s post-petition conduct
   was violative of federal law. Specifically, Johnson argues that the bankruptcy
   court was correct in determining that Edwards’s attempts to acquire
   information about Dickson and CHFS’s operations in South America, after
   the bankruptcy proceedings began, amounted to a violation of the automatic
   stay imposed pursuant to 11 U.S.C. § 362(a)(3). Accordingly, Trustee

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                                     No. 20-61011

   Johnson urges this court to reinstate the award of damages granted by the
   bankruptcy court pursuant to 11 U.S.C. §§ 362(k) and 105(a). In response,
   EFP and BHT contend the bankruptcy court applied erroneous standards
   when considering Johnson’s claims and, moreover, that the court’s damages
   award was based on speculation or conjecture.
          A bankruptcy petition automatically stays numerous proceedings
   against the debtor and the estate. See 11 U.S.C. § 362(a). “[A]n individual
   injured by any willful violation of a stay provided by this section shall recover
   actual damages, including costs and attorneys’ fees, and, in appropriate
   circumstances, may recover punitive damages.” Id. § 362(k)(1). Though we
   have previously held that both debtors and creditors have prudential standing
   to sue under § 362(k), we have expressly declined to consider the question of
   whether bankruptcy trustees have prudential standing to assert an automatic-
   stay violation claim. See St. Paul Fire & Marine Ins. Co. v. Labuzan, 579 F.3d
   533, 543, 545 (5th Cir. 2009).
          As the district court explained, the bankruptcy court “sidestepped the
   question of the Johnson’s standing under § 362(k) to pursue damages for an
   automatic stay violation,” instead determining that it “could sanction Dr.
   Edwards under its contempt power.” See 11 U.S.C. § 105(a). Although the
   bankruptcy court cited its § 105 contempt power as the source of its authority
   to make this ruling, it analyzed the issue under § 362(k). To establish civil
   contempt under § 105, however, Edwards’s conduct must have been shown,
   “by clear and convincing evidence,” to be in violation of “a definite and
   specific order of the court requiring him to perform or refrain from
   performing a particular act or acts with knowledge of the court’s order.”
   Piggly Wiggly, 177 F.3d at 382. Here, there is no finding by “clear and
   convincing evidence” that Edwards’s post-petition conduct met this
   threshold. Accordingly, we affirm only the district court’s decision to vacate
   the bankruptcy court’s ruling on this matter.

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                                          No. 20-61011

                                                B.
           Trustee Johnson further suggests that Edwards’s failure to provide to
   the bankruptcy court, as well as Johnson’s, the information and/or physical
   materials he acquired as a result of his independent inquiries “constituted
   a . . . disruption of the bankruptcy process” that amounted to an improper
   conversion of estate property.             Under Mississippi law, “[c]onversion
   requires the intent to exercise dominion or control over goods inconsistent
   with the true owner’s rights and is a result of conduct intended to affect
   property.” Greenlee v. Mitchell, 607 So. 2d 97, 111 (Miss. 1992). Conversion
   is deemed to have occurred once an individual has taken possession of an item
   from its owner. Walker v. Brown, 501 So. 2d 358, 361 (Miss. 1987). “It is
   elementary that ownership is an essential element of conversion.” Cmty.
   Bank, Ellisville, Mississippi v. Courtney, 884 So. 2d 767, 772 (Miss. 2004).
           The district court determined that the bankruptcy court had
   committed a “clear error” in determining that Edwards’s receipt of the CDs
   constituted a conversion of estate property. The district court reasoned that
   because the CDs did not come from CHFS or the Trustee, but rather from
   Meehan, a non-party in this matter who willfully provided the discs to
   Edwards, the physical CDs themselves were not the tangible property of the
   estate.15 We agree. Because Edwards could not have converted estate
   property if the property in question did not belong to the estate, we affirm the
   district court’s reversal of the bankruptcy court on this issue.

           15
             Trustee Johnson also alleges that an action for conversion is appropriate in this
   case due to Edwards’s possession of intangible information that was stored on the CDs he
   received from Meehan. However, Mississippi law is clear that this type of intangible
   property cannot constitute the basis for a conversion claim. See Holbert v. Wal-Mart Assocs.,
   2011 WL 3652202, at *3–4 (S.D. Miss. Aug. 18, 2011); Directv, Inc. v. Hubbard, 2005 WL
   1994489, at *4 (N.D. Miss. Aug. 17, 2005).

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                                    No. 20-61011

                                        VII.
          For the foregoing reasons, we AFFIRM the district court’s decision
   in part, REVERSE in part, and REMAND the case for reconsideration of
   the issue of the collections of Mortgage Portfolio #7.

                                         26