Opinion
Civil Action No. 01-620, Section"N"
July 3, 2001
ORDER AND REASONS
Before the Court are Pierre Lapeyre's and A.M. Dupont Corporation's cross-appeals from a decision rendered by the Bankruptcy Court after a consolidated trial of two adversary proceedings. For the following reasons the Bankruptcy Court's decision is AFFIRMED IN PART, and additional briefing is ordered.
A. Background
The Debtor, Pierre Lapeyre, is a shareholder and director of A.M. Dupont Corporation ("Dupont") and the owner of Euclid Engineering Company ("Euclid"). Dupont is a closely-held Louisiana corporation that was founded in 1938, and its principal revenues are oil and gas royalties and rental income. Dupont's management has always included members of various branches of the Dupont and Lapeyre families. From April 1982 until January 1995, Pierre Lapeyre served as the corporation's president.
In the late 1980s and early 1990s, Dupont's income steadily declined, due in part to the downturn in the oil industry. In the spring of 1992, Dupont was unable to fulfill its payments on a note in favor of Henry and J.B. Dupont. To avoid foreclosure the Dupont Corporation filed for bankruptcy on May 11, 1992. From the time of the filing until 1995, Lapeyre remained the president of Dupont. He was voted out in the wake of a family dispute in January 1995, and Dupont's bankruptcy case was eventually closed in 1996.
On February 10, 1995, Dupont sued Lapeyre in state court, alleging that he breached his fiduciary duties as president. Lapeyre filed for bankruptcy on December 4, 1998. The state court suit was removed to the bankruptcy proceeding in March 1999; and in April 1999, Dupont filed a Complaint to Determine Dischargeability of Debt against Lapeyre. The Bankruptcy Court held a consolidated trial on both of these proceedings, and both parties now appeal the Bankruptcy Court's decision.
B. Statement of Issues Presented and Standard of Review
Lapeyre argues that the Bankruptcy Court erred in finding:
(1) that he was liable for management fees paid by Dupont to Euclid Engineering Company and himself after Dupont filed for bankruptcy in 1992 ("post-petition fees");
(2) that he caused Dupont to reimburse Euclid and himself for improper expenses;
(3) that he breached his fiduciary duty by causing Dupont to make loans to Euclid and himself;
(4) that the total amount of damages should include interest on the loans;
(5) that his unpaid salary and fees should not offset the damages;
(6) that his unpaid onsite management and oil and gas management fees should not offset the damages; and
(7) that the damages were not dischargeable under 11 U.S.C. § 523 (a)(4).
Dupont asserts that the Bankruptcy Court erred in finding:
(1) that Lapeyre was not liable for management fees paid by Dupont to Euclid and Lapeyre before Dupont filed for bankruptcy ("pre-petition fees");
(2) that Lapeyre was not liable for money Dupont spent in research and development for the Exervision, an exercise machine Lapeyre invented;
(3) that $100,000 of the amount Lapeyre owed to Dupont was dischargeable;
(4) that Lapeyre did not owe interest from the date the sums were originally paid or from the date of the judicial demand; and
(5) that Lapeyre was not liable for all the costs and expenses of Dupont's Chapter 11 bankruptcy proceeding.
This Court reviews the Bankruptcy Court's findings of fact under the clearly erroneous standard, see Matter of Consol. Bancshares, Inc., 785 F.2d 1249, 1252 (5th Cir. 1986), and its conclusions of law de novo.Id. (citing Richmond Leasing Co. v. Capital Bank. N.A., 762 F.2d 1303, 1308 (5th Cir. 1985)).
C. Analysis 1. Pre-petition Fees
Until 1985, Dupont owned 50% of A.M. and J.C. Dupont ("AMJC"), which owned a department store in Houma, Louisiana. After 1985, Dupont became the 100% owner of AMJC; and Lapeyre took full responsibility for the store's operations. Dupont's primary demand in its state court suit was that it was entitled to recover excessive fees that had been improperly paid to Lapeyre for managing the store.
At Dupont's January 20, 1986 board meeting, Lapeyre informed the directors that Euclid, Lapeyre's engineering company, would bill Dupont $163,966 for management fees incurred in connection with the department store in 1986 and 1987. The minutes of the meeting do not reflect that these payments were either approved or objected to, In subsequent years Dupont continued to pay management fees to either Lapeyre or Euclid, and Dupont now claims that Lapeyre breached his fiduciary duty in authorizing these payments on its behalf and in accepting them on behalf of himself and Euclid. In particular, it claims that Lapeyre's management fees were excessive because (1) the store employed a full time manager, (2) Lapeyre allegedly spent only three hours per month on the premises from 1989 to 1995, and (3) Albert Dupont, Dupont's current president, spends very little time managing the store's affairs. Essentially, Dupont argues that Lapeyre did not earn the management fees and was simply looting the corporation.
The Bankruptcy Court found that both § 12:91 of the Louisiana Revised Statutes and 11 U.S.C. § 523 (a)(4) provide a "recklessness" standard for breach of fiduciary duty. Applying this standard, the court did not find that Lapeyre's actions "quite rise to the required level." Opinion at 14. On appeal Dupont does not dispute the use of a "recklessness" standard, but it claims that the Bankruptcy Court applied the wrong burden of proof. Dupont argues that because Lapeyre was engaged in self-dealing with the corporation, he bears the burden of proving the good faith of the transaction and showing "its inherent fairness from the viewpoint of the corporation and those interested therein." Levy v. Billeaud, 443 So.2d 539, 543 (La. 1983). Dupont argues that Lapeyre failed to satisfy his burden of proof because he offered no reasonable explanation for his billing method, failed to articulate his hourly rate, and granted himself management fees solely at his own discretion.
The Court finds that the Bankruptcy Court did in fact apply the proper burden of proof, and the record establishes that this burden was satisfied. The Bankruptcy Court recognized that "although a director is allowed to deal with the corporation, the dealings will be subject to "rigorous scrutiny' and the director must prove that the contract was an arm's length transaction." Opinion at 12 (citing Church Point Wholesale Beverage Co., Inc. v. Voitier, 706 So.2d 1015 (La.App. 3rd Cir. 1998)). Applying this test the Bankruptcy Court compared the management fees paid both before and after Lapeyre became president of Dupont and found that, "except for 1986, 1987 and 1988, the fees paid after the Debtor became President did not significantly differ from those paid from 1980 through 1984." Opinion at 14. Because the payments to Lapeyre do not significantly differ from what was paid to third parties before Lapeyre took control of the corporation, the Court does not find that the Bankruptcy Court was clearly erroneous in determining that the charges were fair to Dupont.
2. Post-petition fees
Although the Bankruptcy Court found no problem with the fees paid to Euclid and Lapeyre before Dupont filed for bankruptcy, it found that management fees paid after Dupont filed its bankruptcy petition were improper under 11 U.S.C. § 549, which allows a bankruptcy trustee to recover payments that are not authorized by the bankruptcy court. 11 U.S.C. § 549(a)(2000). Although Dupont did not specifically raise the authorization issue in its complaint, the Bankruptcy Court found that the issue was tried with the implied consent of the parties and held Lapeyre liable for all post-petition management fees.
On appeal Lapeyre argues that the post-petition authorization issue was not addressed at trial and therefore the Bankruptcy Court's ruling on that issue was improper. Specifically, Lapeyre submits that there was no direct evidence concerning (1) whether or not the Dupont bankruptcy court ever authorized the payment of fees, (2) whether or not Lapeyre or Euclid were professionals within the meaning of § 328, and (3) whether the compensation of Euclid was disclosed in considering Dupont's reorganization plan. Dupont claims that its "witnesses established that post-petition management fees were paid to [Lapeyre] and/or Euclid with [Dupont's] funds without prior Bankruptcy Court approval." Appellee Br. at 10. However, Dupont does not indicate who these witnesses are or what they said.
Rule 8010 of the Federal Rules of Bankruptcy Procedure provides that the parties' appellate briefs "shall contain the contentions of the appellant with respect to the issues presented, and the reasons therefor, with the citations to . . . parts of the record relied on."
The Court finds that evidence on the authorization issue is all that is necessary to support the Bankruptcy Court's holding under § 549, and after examining the record the Court finds that the post-petition authorization issue was in fact raised at trial:
Q. Mr. Lapeyre, there is no and was never rendered any order of the bankruptcy court approving you to be paid $5,000 a month as management fees, was there?
A. I didn't see an order, but Mr. Stacey was our attorney and it was an agreement between — he was representing the court, as far as I understood.
Q. If there had been such an order, you would have brought it to court today?
A. Today? Well, I would have given it to Mr. Hof, yes.
Tr. 4/5/2000 at 65. In addition, Lapeyre stated that "those bills [for post-petition management fees] were part and parcel of the bankruptcy reports. They were never questioned by the trustee,
by the attorneys, by Judge Brown or anybody." Tr. 4/5/2000 at 61. Accordingly, the Court finds that the post-petition fee issue was tried with the implied consent of the parties.
Lapeyre also argues that any recovery under § 549 has prescribed. Because Dupont alleges that the management fees were improper in both its removed state court proceeding and its federal discharge proceeding, the Court must consider whether prescription is available under both state and federal law. The Court concludes that it is not.
Under federal law Lapeyre's affirmative defense of prescription has been waived because he failed to plead it. See FED. R. Civ. P. 8(a);Matter of Quenzer, 19 F.3d 163, 164 (5th Cir. 1993) (holding it is well established that an issue is not preserved for appeal when it was not presented to or considered by the bankruptcy court); Davis v. Huskipower Outdoor Equip. Corp., 936 F.2d 193, 198 (5th Cir. 1991) (holding that it was unnecessary to consider the defendant's prescription argument because it waived the defense by failing to plead it); Seatrax. Inc. v. Sonbeck Intern., Inc., 200 F.3d 358, 365 (5th Cir. 2000).
The Louisiana Code of Civil Procedure allows a party to raise the peremptory exception of prescription for the first time in an appellate court "if [the exception is] pleaded prior to a submission of the case for a decision, and if proof of the ground of the exception appears of record." LA. CODE CIV. PROC. ANN. art. 2163 (West 1961). In the instant case, Lapeyre
failed to raise the issue of prescription by any means other than post-trial and appellate brief. Although an exception of prescription may be filed for the first time in an appellate court, it must be presented in a formal pleading prior to the submission of the case for a decision. The peremptory exception of prescription cannot be injected as an issue in the case solely by brief or oral argument.Sowers v. Dixie Shell Homes of Am., Inc., 762 So.2d 186, 189 (La.Ct.App. 2 Cir. 2000). See, also, Steed v. St. Paul's UMC, 728 So.2d 931, 940 (La.Ct.App. 2 Cir. 1999); Hayes v. Hayes, 607 So.2d 3, 5 (La.Ct.App. 2 Cir. 1992). Because Lapeyre did not file a "formal pleading raising the exception at either the trial or appellate court, this argument is not before this court at this time." Sowers, 762 So.2d at 189.
In light of Rule 8(a) and article 2163, the Court does not find the affirmative defense of prescription bars Dupont's claim for post-petition management fees under either state or federal law. Accordingly, the Court upholds the Bankruptcy Court's ruling that the post-petition management fees are improper.
3. Expenses
During his tenure as president of Dupont, Lapeyre reimbursed himself for certain expenses allegedly incurred on Dupont's behalf. At trial, Lapeyre argued that all his expenses were legitimate because they were supposedly reviewed and authorized by Frank Kolwe, Dupont's accountant. However, according to Charles Theriot, Dupont's expert witness in accounting, there was insufficient documentation, or none at all, for Lapeyre's alleged expenses. Because of the lack of documentation, the Bankruptcy Court awarded Dupont $67,481 in undocumented secretarial services, $28,370 in undocumented automobile expenses and $10,908 in undocumented travel expenses.
Lapeyre did not document the reimbursed expenses at trial and does not do so now. He argues that the Bankruptcy Court's decision should be reversed because the expenses were reasonable and because "there was no evidence to show that these services were not performed for the benefit of [Dupont]." Appellant Br. at 9. However, in light of the fact that Lapeyre cannot document any of these expenses, the Court affirms the Bankruptcy Court's holding that Lapeyre improperly charged Dupont for his secretarial, automobile and travel costs.
4. Loans
According to a July 25, 1983 corporate resolution, the directors of Dupont were authorized to take loans from the company for up to $100,000. Lapeyre took liberal advantage of this policy. In December 1988, Kolwe suggested that Lapeyre sign a promissory note in favor of Dupont for $91,485.40, the amount of his personal indebtedness at that time. The note carried an interest rate of 9% per year. After signing the note, Lapeyre caused Dupont to lend additional amounts to both himself and to Euclid. At the time of Dupont's state court suit, the balance on the notes, including interest, was $258,605 for Lapeyre and $114,371 for Euclid. Pl. Ex. 12. The Bankruptcy Court held that the loans to Lapeyre for any amount over $100,000 were "clearly unauthorized, and the taking of these funds breached [Lapeyre's] fiduciary duty." Opinion at 17. In addition, the court found that no loans to Euclid were authorized.
Lapeyre does not dispute the existence of these loans or the fact that he must repay them. However, he disputes the Bankruptcy Court's imputation of a loan payment to Euclid, its refusal to apply certain offsets to the loans, and its interest calculation. Dupont also contests the Bankruptcy Court's resolution of the loan issue and appeals the court's determination that the first $100,000 in loans are dischargeable.
a. Imputation of Payment
On December 31, 1988, Euclid executed a note in favor of Dupont for $128,679 at 9% interest. In December 1989, Euclid issued a check to Dupont in the amount of $96,338 which bore no instruction as to how it should be applied. Kolwe applied the check to Euclid's debt. At trial Lapeyre testified that the payment should have been applied to Lapeyre's balance, not Euclid's.
According to article 1864 of the Louisiana Civil Code, a debtor has the authority to direct to which debt his payment should be imputed. However, if he fails to do so, the creditor may impute the payment. If the debtor, after learning how the payment has been imputed, remains silent and fails to notify the creditor that it has been improperly applied, the imputation will stand. See La. Civ. Code art. 1867; Marks v. Deutsch Constr. Co., 258 So.2d 676, 678 (La.Ct.App. 4 Cir. 1972) (stating that "[w]hen a creditor imputes the payment and informs the debtor of the imputation by a statement of account, the debtor who accepts the statement or receipt without objection or is silent is estopped from questioning the imputation"). Louisiana law also provides for tacit consent to imputation of a payment if there has been silence over a long period of time and inspections by the debtor of the books of the creditor with no objection. See Cont'l Cas. Co. v. Associated Pipe and Supply Co., 310 F. Supp. 1207, 1224 (E.D.La. 1969), aff'd in part, vacated in part on other grounds, 447 F.2d 1041 (1971). Lapeyre offered no evidence that he objected to Kolwe's application of the payment to Euclid's debt at any time between the payment in 1989 and the trial in 2000. Accordingly, the Bankruptcy Court was correct in applying the December 1989 payment to Euclid's debt instead of Lapeyre's.
b. Offsets
Lapeyre submits that various payments Dupont owed Euclid and himself should be offset against the loan amounts he owes Dupont. Lapeyre first argues that he is entitled to offsets of $96,202 in unpaid salary and $28,579 in advances made by Euclid to Dupont. The Bankruptcy Court recognized that Lapeyre was entitled to these amounts, but determined that these amounts were accounted for in Dupont's petition for damages. Opinion at 20. Lapeyre contends that he did not get the benefit of these payments in the total amount awarded.
The Court finds that the $28,579 in advances from Euclid were taken into account by the Bankruptcy Court. Euclid owes Dupont $83,037 in principal and $31,334 in interest, for a total of $114,371. See P1. Ex. 12. When the $28,579 in advances are subtracted from this amount, Euclid is left with a total debt of $85,792, which is what the Bankruptcy Court awarded.
The Bankruptcy Court held that the $96,202 in unpaid salary was "already accounted for in Theriot's figures." Opinion at 20. Dupont originally sought recovery for $334,339 in pre- and post-petition management fees. See P1. Ex. 12. This figure reflects $430,541 in total management fees minus $96,202 in unpaid salary to Lapeyre. Id. Because it found the pre-petition fees were proper, the Bankruptcy Court only awarded post-petition fees in the amount of $105,725. The question on appeal is whether the Bankruptcy Court's award of post-petition fees has been offset by Lapeyre's unpaid salary. The Court finds that the record is unclear on this issue. Accordingly, the Court orders the parties to submit additional briefing addressing (1) whether the $96,202 salary was authorized and (2) whether the amount was taken into account by the Bankruptcy Court.
Lapeyre also claims he is entitled to an offset of $18,000 for unpaid on-site management and oil and gas management fees incurred between July and December of 1996. However, the Bankruptcy Court held that he presented no evidence at trial that these fees were incurred. Since Lapeyre does not point to any evidence refuting the Bankruptcy Court's holding, the Court upholds the determination that Lapeyre is not entitled to an offset for management fees.
Finally, Lapeyre claims he is entitled to offsets of $3,000 for unpaid secretary/treasurer salary and $137,679 in unpaid management fees. Both of these payments were incurred after Dupont filed for bankruptcy protection, and the Bankruptcy Court refused to allow offsets on the grounds that the payments were neither disclosed in Dupont's bankruptcy plan nor authorized by the Dupont bankruptcy court. Lapeyre argues that denial of these offsets is improper because no evidence of disclosure was introduced at trial. However, since Lapeyre has offered no evidence that these payments were authorized, this Court will not reverse the Bankruptcy Court's holding that they were not.
c. Loan Interest
In addition, Lapeyre claims that the Bankruptcy Court erred in awarding interest on the improper loans. It is undisputed that Lapeyre and Euclid signed their initial notes at an interest rate of 9%. Lapeyre, however, attempts to characterize anything in excess of these initial notes as interest-free "advances." However, according to the testimony of Dupont's accountant, all additional loan amounts were added to the initial note, despite the fact that "the interest was never booked on the company's records formally." Tr. 4/5/2000 at 129-130. Since Lapeyre has offered no evidence that he was entitled to take interest free advances, the Court does not find that the Bankruptcy Court erred in imposing interest.
d. Dischargeable Loans
Finally, the Bankruptcy Court held that the first $100,000 in loans to Lapeyre was dischargeable because it was authorized by the July 25, 1983 corporate resolution. Dupont argues that even the first $100,000 in Lapeyre's loans constitutes a breach of his fiduciary duty because he failed to get corporate approval and failed to prove that the loan was an arms-length transaction. However, Dupont has not identified any restrictions to the 1983 corporate resolution and the Court fails to see how taking out an authorized loan could be a breach of Lapeyre's fiduciary duty.
5. The Exervision
In 1986, Lapeyre obtained a patent for an exercise machine called the Exervision. On December 24, 1986, Lapeyre and Dupont entered into a franchise agreement under which Dupont would pay research and development costs in return for an exclusive franchise to market the Exervision in Louisiana and a percentage of sales profits generated in Louisiana. By unanimous vote at its January 19, 1987 meeting, the Dupont board approved payment of research and development costs for a prototype of the Exervision. The projected costs were estimated to be $250,000, but Dupont ultimately paid $459,710.
Like the management fees, the Exervision contract constituted self-dealing with the corporation; and Louisiana law provides that:
No contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other business, nonprofit or foreign corporation, partnership, or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the common or interested director or officer was present at or participated in the meeting of the board or committee thereof which authorized the contract or transaction, or solely because his or their votes were counted for such purpose, if:
(1) The material facts as to his interest and as to the contract or transaction were disclosed or known to the board of directors or the committee, and the board or committee in good faith authorized the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or
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(3) The contract or transaction was fair as to the corporation as of the time it was authorized, approved or ratified by the board of directors, committee, or shareholders.
LA. REV. STAT. ANN. § 12:84 (West 1994).
Dupont submits that the Exervision contract was illegitimate because Lapeyre failed to disclose an accurate amount for the total research and development costs, Euclid's financial difficulties, and his unsuccessful attempts to attract other companies to invest in the machine. In addition, Dupont faults Lapeyre for failing to inform them that the patent would expire before the franchise agreement would expire and that he was spending Dupont's money to perfect and maintain the patent in other countries.
Dupont's primary evidence concerning inadequate disclosure is the testimony of its expert witness, Charles Theriot, who compared Dupont's franchise agreement to that of a Fortune 500 company. Clearly, a Fortune 500 company faces many more complex concerns than a small, closely-held corporation. The Court does not find that the Bankruptcy Court erred in declining to hold Dupont to the same requirements.
In addition, the Bankruptcy Court held that "the information concerning the franchise agreement and the estimated costs for research and development was disclosed to the Board prior to entering the agreement." Opinion at 16. The Court finds that ample evidence in the record supports this determination. First, Albert Dupont testified that Lapeyre informed Dupont's board of the basis of the patent and that, in consideration for the funding of the research costs, Dupont would be granted an exclusive Louisiana franchise to market the device covered by the patent and to obtain 100% of the net after-tax profits generated in the State of Louisiana. Tr. 4/6/2000 at 78. Albert Dupont further testified that, in addition to making a profit on the sale of the Exervision, the investment was intended to minimize federal income taxes. Id. at 82-83. Finally, Dupont was informed of the project's progress at every board meeting for the next two years; and all research and development costs were shown on all financial statements which were reviewed periodically by the Board of Directors. Id. at 83-87.
In light of the information that was provided to Dupont's board, the Court does not find that Lapeyre failed to disclose any material facts. Although the research and development costs exceeded Lapeyre's estimate and although Dupont's investment in the Exervision was ultimately unsuccessful, a "subsequent unforeseeable economic turndown should not be used to second guess the wisdom of the transaction." Dunbar v. Williams, 554 So.2d 56, 63 (La.App. 4 Cir. 1988). Accordingly, the Court upholds the Bankruptcy Court's determination that Dupont entered into the Exervision contract after full disclosure.
6. Expenses of Dupont's Chapter 11 Proceeding
The Bankruptcy Court denied Dupont's request that Lapeyre be assessed the costs and fees incurred in connection with Dupont's bankruptcy filing. The court held that the direct cause of Dupont's bankruptcy filing was the threatened foreclosure by Henry and J.B. Dupont and the indirect cause was the decline in the area economy. Opinion at 20. Although the court found it was possible that some of Lapeyre's business judgments were flawed and that many of his actions breached his fiduciary duty, it did not find that the evidence supported a conclusion that Lapeyre's fiduciary breaches caused the filing.
Dupont argues that it would have had the funds to pay Henry and J.B. Dupont if Lapeyre had not paid himself and Euclid unauthorized management fees, research and development costs, and unauthorized loans. Dupont cites Theriot's expert opinion that there would not have been a need for a Chapter 11 filing if not for these expenditures. Tr. 4/6/2000 at 153. However, the Bankruptcy Court did not accept that opinion: "I don't think there was any testimony to that. I think that was my question, and I think Mr. Hof refutes that because it's over a period of years and it's not fair. . .." 153 at 1.7-10. Because Dupont had been losing money for a number of years before it filed for bankruptcy and because its financial decline is linked to a downturn in the oil industry, the Bankruptcy Court did not clearly err in finding that Lapeyre's actions were not the principal cause of Dupont's bankruptcy.
7. Interest
The Bankruptcy Court awarded Dupont (1) $105,725 in unauthorized post-petition fees, (2) $244,397 in improper loans, (3) $106,759 in improper expense reimbursements, and (4) $14,400 in unpaid rent. Dupont now argues that the Bankruptcy Court erred in failing to award prejudgment interest under La. Rev. Stat. § 13:4203, which authorizes the recovery of prejudgment interest for delictual actions. LA. REV. STAT. ANN. § 13:4203 (West 2001).
The Court does not find that § 13:1403 applies to the post-petition fees, which were awarded solely under federal bankruptcy law, or to the improper loans, for which an appropriate interest rate has already been taken into account. The only amounts that might be subject to prejudgment interest are the improper expense reimbursements and the unpaid rent, which were awarded under a breach of fiduciary duty theory. However, the Court does not find that Lapeyre's breaches of fiduciary duty are delictual actions, as required by § 13:4203. "The distinction between damages ex delictu and damages ex contractu is that the latter ensue from the breach of a special obligation, and the former from the violation of a general duty." delaVergne v. delaVergne, 99-0364 (La.App. 4 Cir. 11/17/99), 745 So.2d 1271, 1276. "The breach of a fiduciary duty is the breach of a special obligation, although the same act may constitute the breach of a general obligation as well." Id. In the case at bar, the Bankruptcy Court based Lapeyre's liability entirely on the fiduciary relationship between Lapeyre and Dupont. The court did not find liability on the alternative basis of breach of a general obligation. Accordingly, the Court does not find that Dupont has been awarded damages for a delictual action, and prejudgment interest under § 13:4203 is not available.
8. Dischargeability
Finally, Lapeyre challenges the Bankruptcy Court's determination that his debt to Dupont is not dischargeable under § 523(a) of the Bankruptcy Code, which provides that:
(a) A discharge under Section 727, 1141, 1228(a), 1228(b), or 1238(b) of this title does not discharge an individual debtor from any debt —
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(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.
Lapeyre argues that he did not have a fiduciary relationship with Dupont within the meaning of § 523. The definition of "fiduciary" under § 523(a)(4) is controlled by federal common law and is narrower than the concept of fiduciary under the general common law. However, state law is important in determining whether or not a trust obligation exists. See Angelle v. Reed, 610 F.2d 1335, 1339 (5th Cir. 1980). Generally, the Fifth Circuit holds that under § 523(a)(4) the term ""fiduciary' is limited to instances involving express or technical trusts." Matter of Miller, 156 F.3d 598, 602 (5th Cir. 1998) (quotingTexas Lottery Comm'n v. Tran, 151 F.3d 339, 342 (5th Cir. 1998)). Technical trusts include "relationships in which trust-type obligations are imposed pursuant to statute or common law." Matter of Bennett, 989 F.2d 779, 784 (5th Cir. 1993). In Moreno v. Ashworth, 892 F.2d 417, 421 (5th Cir. 1990), the Fifth Circuit held that an officer of a corporation owed common law fiduciary duty to corporation and stockholders sufficient to satisfy the technical trust requirements of section 523(a)(4).
Because the Bankruptcy Court based its holding on Moreno and Moreno remains good law in this circuit, the Court is unable to hold that the Bankruptcy Court erred in applying it. Accordingly, the Court upholds the Bankruptcy Court's determination that Lapeyre's debts to Dupont are non-dischargeable.
D. Conclusion
For the reasons stated above, the Court AFFIRMS the Bankruptcy Court's determinations
(1) that Lapeyre is not liable for pre-petition management fees;
(2) that Lapeyre is liable post-petition management fees;
(3) that Lapeyre is liable for $67,481 in undocumented secretarial services, $28,370 in undocumented automobile expenses, and $10,908 in undocumented travel expenses;
(4) that, with respect to the loans,
(a) Lapeyre's balance is $258,605 and Euclid's balance is $85,792;
(b) the first $100,000 in loans to Lapeyre is dischargeable;
(c) Lapeyre's total liability is $244,397 ($258,605 + $85,792 — $100,000); and
(d) Lapeyre owes 9% interest on that balance;
(5) that Euclid's $28,579 in advances have been taken into account in determining the final amount of damages;
(6) that Lapeyre's onsite management and oil and gas management fees should not offset the damages;
(7) that Lapeyre was not liable for Dupont's losses in connection with the Exervision;
(8) that Lapeyre is not liable for the expenses Dupont incurred in its own Chapter 11 proceeding;
(9) that Lapeyre does not owe prejudgment interest on the damages; and
(10) that Lapeyre's debt to Dupont is non-dischargeable.
In addition, the Court orders additional briefing on the question of Lapeyre's $96,202 in unpaid salary. Accordingly, IT IS ORDERED that the parties submit additional briefing no later than 5:00 on Tuesday, July 10, 2001 on the issues of (1) whether the $96,202 salary was authorized and (2) whether the amount was taken into account by the Bankruptcy Court.
New Orleans, Louisiana, this 3rd day of July, 2001.