Hawking v. Ford Motor Credit Co.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

__________________

No. 98-30991
__________________

MARGUERITE LEWIS HAWKING
Plaintiff

versus

FORD MOTOR CREDIT CO.; ET AL
Defendants
____________________

FIDELITY NATIONAL BANK
Plaintiff

versus

CONSOLIDATED LEWIS INVESTMENT CORP
Defendant - Counter
Claimant - Appellant -
Cross Appellee

and

MARGUERITE LEWIS HAWKING; ARTHUR CULLEN
LEWIS, III; ALEXIS VOORHIES LEWIS; PATRICIA
ANN LEWIS WILLIAMS
Defendants - Counter
Claimants - Cross
Appellees

versus

FORD MOTOR CREDIT CO.
Defendant - Counter
Defendant - Appellee -
Cross Appellant

____________________

In the Matter of: CONSOLIDATED LEWIS INVESTMENT CORP.

Debtor.

FORD MOTOR CREDIT CO.
 Appellee - Cross
Appellant

versus

MARGUERITE LEWIS HAWKING; ARTHUR CULLEN
LEWIS, III; ALEXIS VOORHIES LEWIS; PATRICIA
ANN LEWIS WILLIAMS

Cross Appellees

and

CONSOLIDATED LEWIS INVESTMENT CORP.

Appellant - Cross
Appellee
___________________________

Appeals from the United States District Court
for the Middle District of Louisiana

____________________________

May 4, 2000

Before GARWOOD, WIENER, and DENNIS, Circuit Judges.

WIENER, Circuit Judge:

At the core of this appeal is the question whether Appellee-

Cross Appellant Ford Motor Credit Corporation (“FMCC”), a

commercial lender, can be held liable for the alleged fiduciary

breach of a trustee who, purporting to act in his capacity as

trustee, took out a loan on behalf of the trusts under his control,

and then allegedly used the loan proceeds to satisfy his personal

debts. We conclude that Appellant-Cross Appellee Consolidated

Lewis Investment Corporation - Limited Partnership (“CLIC-LP”), a

Louisiana partnership in comendam that was formed to manage the

2
trusts’ affairs, has not come forward with evidence sufficient to

create a genuine issue of material fact regarding whether, at the

time it closed the loan in question, FMCC either knew or should

have known that the trustee was planning to breach his fiduciary

duty to the trusts. We therefore affirm the district court’s grant

of summary judgment in favor of FMCC.

In its cross-appeal, FMCC asks us to review of the bankruptcy

court’s order remanding claims by the former beneficiaries of the

trusts individually. As we lack jurisdiction over appeals from

such remand orders of the bankruptcy court, we dismiss FMCC’s

cross-appeal.

I.

FACTS AND PROCEEDINGS

A. Factual Background

Arthur C. Lewis, Jr. (“Lewis”) was a real estate developer in

Baton Rouge, Louisiana. In 1962 his mother, Ida Lewis, settled

four trusts (the “Trusts”), one each for the benefit of one of

Lewis’s four children (her grandchildren), namely: Marguerite Lewis

Hawking; Arthur Cullen Lewis, III; Alexis Voorhies Lewis; and

Patricia Ann Lewis Williams (the “Lewis heirs”). She appointed

Lewis as trustee of each trust.

With the exception of the identity of the beneficiary, the

trust instruments are identical: Each empowered Lewis to borrow

3
funds on its behalf and to pledge trust assets as collateral.1

Lewis managed the Trusts’ assets collectively, as though the four

Trusts were one. In 1980, Lewis approached FMCC seeking a loan on

behalf of the Trusts. FMCC performed extensive “due diligence”

investigation which included confirming that Lewis was authorized

to borrow and receive funds on behalf of the Trusts and to encumber

Trust property as security for such loans; that Lewis was an

“influential and prosperous property owner who has consistently

maintained a good credit record,” and about whom FMCC’s

investigation “revealed no derogatory information”; that the

Trusts’ combined net worth was $36 million; and that Lewis had a

personal net worth of $28 million.

After completing its due diligence, FMCC submitted a

1
Each trust instrument provides:

¶2.2. Without limitation upon any of the TRUSTEE’S other
powers given by law or by other provisions of this
instrument, and by way of illustration only, the TRUSTEE
is specifically given the power to do all of the
following acts from time to time in his discretion, and
without order or license of the Court:

* * *

¶2.9. To borrow money and, if the TRUSTEE sees fit, to
give security for such funds as may be borrowed in such
fashion as the TRUSTEE may see fit by mortgage, pledge,
or otherwise and, in connection with any security which
may be given, to give security for funds borrowed for a
term which may extend beyond the term of the trust. The
TRUSTEE may borrow money to be used for the joint benefit
of the beneficiary of this trust and for the benefit of
the beneficiaries of similar trusts, the corpus of which
consists of undivided interests of the same property as
the corpus of this trust . . . .

4
commitment letter to Lewis as trustee offering to make a $2.23

million loan to the Trusts. As proposed, the loan was to be an in

rem obligation of the Trusts, secured by collateral mortgages on

specified immovable property (“real estate”) owned by the Trusts.

Acting in his capacity as Trustee, Lewis formally accepted FMCC’s

proposal. To provide additional security to FMCC, Lewis and his

wife personally guaranteed the loan.

Prior to closing, Lewis assured FMCC, in writing, that “[t]he

proceeds of these loan funds will be applied to the reduction of

outstanding bank obligations owed by the Trusts,” and the Trusts’

attorney gave FMCC an opinion letter confirming that the loan “has

been duly authorized” and that the proceeds, “when delivered, will

constitute [a] valid and legally binding obligation[] of” the

Trusts. The loan was closed on December 29, 1980, and the loan

proceeds were then disbursed in accordance with the written

instruction of Lewis as Trustee.

Almost two years after the loan was closed, on October 7,

1982, Lewis effected a transfer of all real estate owned by the

Trusts to the newley-formed CLIC-LP. Trust properties mortgaged to

secure FMCC’s in rem loan were transferred to the partnership

subject to those encumbrances. Each Trust received a limited

partnership interest in exchange for the real estate it had

transferred. The general partner of CLIC-LP was a Louisiana

corporation of which Lewis was president. In that capacity he had

5
essentially the same control of the properties as he had when he

served as trustee of the Trusts. After this transfer, all periodic

loan payments to FMCC were made by CLIC-LP on behalf of the

Trusts.2 In June 1983, CLIC-LP repaid the loan in full. FMCC

released its lien on the subject properties and released Lewis and

his wife from their personal guarantees.

In July 1985, Lewis died; in September 1986, his wife died.

Pursuant to an express provision of the trust instruments the

Trusts terminated at the death of Lewis’s wife and all remaining

property of the Trusts was distributed to the respective

beneficiaries. As a result, the Lewis heirs, all majors, became

direct owners of the CLIC-LP limited partnership shares that had

formerly been held in trust for their benefit.

B. Procedural History

After Lewis died, Fidelity National Bank of Baton Rouge

(“Fidelity”) filed suit in Louisiana state court against, inter

alia, Lewis’s succession, the Lewis heirs, and CLIC-LP. The suit

was brought to collect outstanding debts that had been incurred,

guaranteed, or succeeded to by the various defendants. Shortly

thereafter, CLIC-LP filed for Chapter 11 bankruptcy protection.

More than one year after Fidelity filed its state-court

action, and after CLIC-LP had filed for Chapter 11 bankruptcy,

2
The loan was an interest-only (i.e., non-amortizing) loan;
therefore, CLIC-LP made a portion of the interest payments (those
coming due after the transfer) and it repaid the full principal
balance, or “balloon,” when it became due.

6
CLIC-LP amended its responsive pleading in the state-court action

that had been commenced against it by Fidelity. By the amendment,

CLIC-LP asserted (1) a reconventional demand against Fidelity, (2)

a cross-claim against Lewis’s succession, and (3) a third-party

demand against FMCC.3 CLIC-LP alleged that Lewis, as trustee of

the Trusts and as president of the corporate general partner of

CLIC-LP, had borrowed substantial sums of money on behalf of the

Trusts and the partnership but had used the loan proceeds for his

own purposes and for other purposes not in the best interests of

CLIC-LP or the Trusts; that Lewis had commingled CLIC-LP’s funds

with his personal funds and funds belonging to the Trusts; and that

Lewis had thereby violated both the CLIC-LP partnership agreement

and his fiduciary duty as trustee.

CLIC-LP contended that both Fidelity and FMCC were solidarily

liable with Lewis’s succession for the damages that resulted from

Lewis’s malfeasance.4 The gravamen of CLIC-LP’s claim against FMCC

was that FMCC knew —— or at least should have known —— that Lewis

was planning to misuse the proceeds of FMCC’s loan in violation of

3
CLIC-LP also sued Hibernia National Bank as successor to
Fidelity for Fidelity’s alleged wrongdoing and also for Hibernia’s
own alleged transgressions. For clarity, we will refer to both
entities as Fidelity.
4
CLIC-LP alleged that Fidelity knew or should have known that
Lewis was repeatedly commingling funds in his account at that bank
and further that Fidelity encouraged this conduct to facilitate
Lewis’s repayment of his personal debts to Fidelity. CLIC-LP has
settled with Fidelity; that controversy is not before us in this
appeal.

7
his fiduciary duty. And, CLIC-LP urged, because Lewis had breached

his fiduciary duty to the trusts by pledging their assets to borrow

money nominally for the trust but in fact for himself, the loan by

FMCC was not a valid obligation of the Trusts. Thus, reasons CLIC-

LP, because the Trusts should never have been obligated to repay

the loan, when they did so it constituted the “payment of a thing

not due,”5 making the repayment recoverable under the Louisiana

Civil Code as a quasi-contractual obligation.

The claims asserted by CLIC-LP’s amended pleading, if

successful, would inure to the benefit of the bankruptcy estate,

making these claims at least “related to” CLIC-LP’s Chapter 11

bankruptcy.6 Thus, as a result of CLIC-LP’s pleading amendment,

the state-court action became removable to federal court pursuant

to 28 U.S.C. §1452(a).7 Both Fidelity and FMCC removed the case to

federal district court and the district court referred it, as an

adversary proceeding, to the bankruptcy court overseeing CLIC-LP’s

Chapter 11 bankruptcy. (While the adversary proceeding was pending

in the bankruptcy court, CLIC-LP and the Lewis heirs settled with

Fidelity.)

5
See La. Civ. Code art. 2301 et seq.
6
See 28 U.S.C. §1334(b); Randall & Blake, Inc. v. Evans, 196
F.3d 579 (5th Cir. 1999).
7
28 U.S.C. §1452(a) provides: “A party may remove any claim or
cause of action in a civil action . . . to the district court for
the district where such civil action is pending, if such district
court has jurisdiction of such claim or cause of action under
section 1334 of [Title 28].”

8
 After years of delay and extensive procedural wrangling, which

we need not recount for purposes of this appeal, FMCC amended the

answer it had filed in response to CLIC-LP’s third-party demand.

By this amendment, FMCC added, inter alia, (1) a counterclaim

against CLIC-LP and (2) a third-party demand against the Lewis

heirs. FMCC sought a declaratory judgment decreeing who between

the Lewis heirs and CLIC-LP owned the cause of action against FMCC,

assuming any cause of action had been stated. By joining all

potential claimants, FMCC was attempting to avoid the risk of

inconsistent verdicts and multiple liability that might attend

piecemeal litigation.

Ultimately the bankruptcy court issued one judgment and one

report and recommendation. In its judgment, the bankruptcy court

ruled first that if any cause of action against FMCC exists in

favor of CLIC-LP and the Lewis heirs, it consists of two separate

claims: (1) a claim of the former beneficiaries of the previously-

expired Trusts, i.e., the Lewis heirs, for any damages incurred

prior to October 7, 1982, the date on which the Trusts transferred

their real estate to CLIC-LP; and (2) a claim of CLIC-LP for any

damages incurred from that date forward. Second, the bankruptcy

court severed the Lewis heirs’ pre-October 1982 claim from CLIC-

LP’s post-October 1982 claim and remanded the heirs’ claim to the

state court from which the lawsuit initiated there by Fidelity had

been removed. The bankruptcy court held in the alternative that it

9
would abstain from further proceedings regarding the Lewis heirs’

pre-October 1982 claim.

In its report and recommendation, the bankruptcy court

recommended to the district court that it grant summary judgment in

favor of FMCC and dismiss CLIC-LP’s complaint. The district court

adopted the bankruptcy court’s report and recommendation and

granted summary judgment in favor of FMCC. It also affirmed the

bankruptcy court’s judgment remanding the Lewis heirs’ claims

against CLIC-LP, or in the alternative, abstaining from exercising

jurisdiction over those claims. CLIC-LP timely appealed the

district court’s grant of summary judgment, and FMCC cross-appealed

that court’s remand and alternative abstention, arguing that the

bankruptcy court erred reversibly by severing the cause of action

brought by CLIC-LP into two claims and remanding one of them, the

Lewis heirs’ claim, to state court.

II.

ANALYSIS

A. Jurisdiction & Standard of Review

We have jurisdiction over appeals from final judgments of the

district courts in bankruptcy cases under 28 U.S.C. §158(d). We

review the district court’s grant of summary judgment de novo.8

B. Summary Judgment Burden

8
See Interlogic Trace, Inc. v. Ernst & Young, LLP, 200 F.3d
382, 386 (5th Cir. 2000).

10
 Summary judgment is appropriate only if “there is no genuine

issue as to any material fact and . . . and the moving party is

entitled to judgment as a matter of law.”9 All inferences drawn

from the underlying facts must be viewed in the light most

favorable to the nonmoving party,10 here CLIC-LP. If, however, the

evidence submitted by the nonmoving party is merely colorable or is

not significantly probative, summary judgment may be granted11

because “[w]here the record taken as a whole could not lead a

rational trier of fact to find for the non-moving party, there is

no ‘genuine’ issue for trial.”12 Finally, once a motion for summary

judgment has been made and supported the party opposing the motion

“may not rest upon the mere allegations or denials of the adverse

party’s pleading, but . . . must set forth specific facts showing

that there is a genuine issue for trial. If the adverse party does

not so respond, summary judgment, if appropriate, shall be entered

against the adverse party.”13

Even though in this case federal jurisdiction is grounded in

9
Fed. R. Civ. P. 56(c).
10
See, e.g., Poller v. Columbia Broadcasting System, Inc., 368
U.S. 464, 473 (1962).
11
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50
(1986).
12
Matsushita Electric Industrial Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986) (citing First National Bank of
Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968)).
13
Fed. R. Civ. P. 56(e).

11
bankruptcy, resolution of the adversary claims between CLIC-LP and

FMCC depends on construction of Louisiana law. Jurisdiction is not

at issue so the first step in our summary judgment review is to

isolate the relevant legal principles of Louisiana law.14 Once we

have narrowed the legal inquiry, which in turn will enable us to

identify those facts that are material, our second step will be to

determine whether, as the bankruptcy and district courts found,

CLIC-LP has failed to make a showing sufficient to establish the

existence of an element essential to its case. “[I]n such a

situation, there can be ‘no genuine issue as to any material fact,’

since a complete failure of proof concerting an essential element

of the nonmoving party’s case necessarily renders all other facts

immaterial.”15

C. CLIC-LP’s Arguments

CLIC-LP’s first argument can be disposed of quickly as it is

based on a fallacious notion of the judicial function. CLIC-LP

suggests that between the Lewis heirs, who it says were completely

innocent and unaware of Lewis’s alleged fiduciary breach, and FMCC,

which it says could have (and, the heirs assert, should have)

ascertained that Lewis was planning to breach his fiduciary duty,

14
See generally, Songbird, Inc. v. Bearsville Records, Inc.,
104 F.3d 773, 776-77 (5th Cir. 1997) (detailing special Erie
considerations necessary when a federal court applies Louisiana
law).
15
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (5th Cir.
1986).

12
FMCC is the more culpable and therefore should bear the loss

resulting from Lewis’s alleged misconduct. We are not, however,

free to settle accounts among litigants based solely on our

subjective sense of what is “just”; rather, our task is to apply

the law. We therefore reject CLIC-LP’s suggestion that, as the

least-culpable party, it is entitled to recover.

CLIC-LP next urges that, under Louisiana law, its repayment of

the $2.23 million loan constituted “payment of a thing not due”

entitling it to repayment from FMCC. But CLIC-LP misapprehends the

legal doctrine on which it relies.

The articles governing the payment of a thing not due are

found in Title V of Book III of the Civil Code, articles 2031-

2314.16 CLIC-LP rests its argument on the first two of these

articles:

Art. 2301. He who receives what is not due to him,
whether he receives it through error or knowingly,
obligates himself to restore it to him from whom he has
unduly received it.

Art. 2302. He who has paid through mistake, believing
himself a debtor, may reclaim what he has paid.

By its plain terms, article 2301 imposes the obligation to restore

only on one who has received what “is not due to him.” And, to

recover under article 2302, the claimant must have paid “through

mistake.” Consequently, if (1) there was a valid obligation,

16
These articles were revised by Acts 1995, No. 1041, §1, eff.
January 1, 1996. The pre-revision articles would, if applicable,
govern this case. See La. Civ. Code art. 6.

13
making the loan payments received by FMCC something other than a

payment that “is not due to [it],” and (2) the loan payments by

CLIC-LP were made other than “through mistake,” these Code articles

are not even potentially applicable.

As we understand CLIC-LP’s argument, its “mistake” was the

erroneous conclusion that the Trusts (and therefore CLIC-LP as

successor of the Trusts)17 were contractually bound to repay the

loan. Thus the applicability of the above-quoted Civil Code

articles turns on whether the Trusts owed a legal obligation to

FMCC. If such an obligation existed, then as a matter of law FMCC

could not have received a thing not due, so CLIC-LP could not have

paid through mistake. This would render both article 2301 and 2302

inapplicable. Indeed, under the circumstances, CLIC-LP’s only

recourse would be against the Succession of Lewis, the party who

benefitted from the loan proceeds.18

To support its assertion that it was not obligated to repay

the loan, CLIC-LP refers us almost exclusively to cases construing

the Louisiana Business Corporations law. 19 These cases stand for

the unexceptional proposition that when an agent purports to act on

17
CLIC-LP has never sought to recoup its repayment of the loans
on the ground that the Trusts, not CLIC-LP, was the true obligor;
CLIC-LP acknowledges that when it repaid FMCC it did so as
successor to and on behalf of the Trusts.
18
See La. Civ. Code art. 2310 (1995); LEVASSEUR, LOUISIANA LAW OF
UNJUST ENRICHMENT AND QUASI-CONTRACTS 168 (1991).
19
See La. Rev. Stat. §12:1 et seq.

14
behalf of a corporation, but in so doing exceeds the scope of his

mandate —— acts ultra vires —— the agent does not bind the

corporation.20

CLIC-LP would have us liken Lewis to the corporate agents in

these cases, suggesting that because Lewis had no authority to

pledge trust assets to secure his personal obligations, his act ——

signing the loan documents in his capacity as trustee —— was ultra

vires. CLIC-LP thus concludes that neither it nor the Trusts were

ever obligated to repay the loan.21

What CLIC-LP fails to recognize is that, unlike the corporate

agents in the cases it cites, Lewis had actual authority to borrow

money on the Trusts’ behalf. The Trust instruments could not have

been clearer in this regard, expressly empowering Lewis “to borrow

money and, if [Lewis] sees fit, to give security for such funds as

20
See, e.g., Buckley v. Woodlawn Development. Corp., 98 So. 2d
92 (La. 1957); Jones v. Shreveport Lodge No. 122, B.P.O.E., 60 So.
2d 889 (La. 1952); Lilliedahl & Mitchel, Inc. v. Avoyelles Trust &
Savings Bank, 352 So. 2d 781 (La. App. 3d Cir. 1977).
21
CLIC-LP also relies on two cases construing La. Civ. Code
art. 2301, Roney v. Payton, 159 So. 469 (La. App. 1935) and Smith
v. Phillips, 143 So. 47 (La. App. 1932). In Roney, an agent paid
a personal obligation with his principal’s funds. The recipient of
that payment was appraised of facts that “clearly showed” that an
agent made the subject payment to satisfy his personal obligation
and that the principal was not a party to the transaction. As
discussed more fully in the context of CLIC-LP’s third argument,
neither of these facts can be shown here. Therefore we find Roney
distinguishable.
The Smith case deals with the situation where one satisfies an
obligation that was, at the time of the payment, valid, but that
was later invalidated. If we were to accept CLIC-LP’s argument, we
would conclude that the obligation in this case was void ab initio.
Thus, Smith sheds no light on this case.

15
may be borrowed . . . by mortgage, pledge, or otherwise.”22 On the

summary judgment record before us, the evidence indicating that

this was precisely the power that Lewis purported to exercise in

his dealings with FMCC is overwhelming and uncontroverted.

This leads us to conclude that the Trusts were legally

obligated to repay FMCC, so we are not faced with the payment of a

thing not due, and articles 2301 and 2302 do not apply.23 To be

sure, if the beneficiaries could show that Lewis abused his

authority and his abuse rose to the level of a fiduciary breach,

then the beneficiaries could recover against Lewis; it does not

follow, however, that the beneficiaries could necessarily recover

from FMCC as well.

CLIC-LP’s third argument is that FMCC aided Lewis in breaching

his fiduciary duty, and FMCC is therefore solidarily liable with

Lewis’s succession for the damages resulting from that breach.

Louisiana law is not clear as to just what CLIC-LP would have to

prove to recover from FMCC on this theory. The two possibilities

are: (1) the standard set forth in the Louisiana version of the

Uniform Fiduciaries Act, under which CLIC-LP would have to show

that FMCC’s actions were taken other than “in good faith”; and (2)

22
The relevant provisions of the Trust instruments are set out
more fully above. See supra n.1.
23
Accord McKinney Saw & Cycle v. Barris, 626 So. 2d 786, 790
(La. App. 1993) (holding that article 2302 has no application to
where the payment in question was made to satisfy a valid
judgment).

16
the majority common-law trust standard, under which CLIC-LP would

have to show that, as one alleged to have aided the trustee in his

breach, FMCC had either actual or constructive knowledge that the

trustee was planning to commit a breach of trust.

Louisiana has adopted the Uniform Fiduciaries Act (the

“Act”),24 a statute that governs the potential liability of persons

entering into specified transactions with a fiduciary. The general

purpose of the Act is

to establish uniform and definite rules in place of the
diverse and indefinite rules now prevailing as to
‘constructive notice’ of breaches of fiduciary
obligations. In some cases there should be no liability
in the absence of actual knowledge or bad faith; in
others there should be action at peril. In none of the
situations here treated is the standard of due care or
negligence made the test.25

CLIC-LP asserts that the Act does not apply here because FMCC is

not a bank. Although some sections of that Act do apply only to

transactions between banks and fiduciaries,26 La. Rev. Stat.

§9:3802, the provision that, if applicable, sets the standard

against which FMCC’s conduct vis-à-vis the trustee must be judged,

expressly applies to any “person” —— a term defined to include

corporations (not just banks) —— that transacts with a fiduciary.

That section provides:

24
La. Rev. Stat. §9:3801 et seq.
25
Commissioner’s Prefatory Note on Uniform Act, reprinted in
the Louisiana Revised Statutes annotated volumes directly before
La. Rev. Stat. §9:3801.
26
See, e.g., La. Rev. Stat. §9:3807.

17
 A person who in good faith pays or transfers to a
fiduciary any money or other property which the fiduciary
as such is authorized to receive, is not responsible for
the proper application thereof by the fiduciary; and any
right or title acquired from the fiduciary is
consideration of such payment or transfer is not invalid
in consequence of a misapplication by the fiduciary.27

As detailed above, the fiduciary in this case (Lewis) was

authorized to receive funds on behalf of the trust. Under the Act,

therefore, FMCC’s “is not responsible for the proper application”

of the loan proceeds if FMCC acted “in good faith.” Under the a

Act, “[a] thing is done ‘in good faith’ . . . when it is in fact

done honestly, whether it be done negligently or not.”28

The Louisiana courts have not yet had occasion to put a

judicial gloss on the phrase “good faith” in the context of the

Act, but the language of the Act itself and case law from other

jurisdictions —— which are particularly persuasive authority when

construction of a Uniform Act is at issue —— indicate that the Act

imposes a greater burden on the plaintiff in a suit to recover from

one alleged to have aided a fiduciary in a breach-of-trust than

does the common-law standard of actual or constructive knowledge.29

27
La. Rev. Stat. §9:3202. This section is identical to §2 of
the Uniform Fiduciaries Act, 7A Uniform Law Annotated, Maser
Edition at506 (1999 Master Edition).
28
La. Rev. Stat. §9:3801(5).
29
See, e.g., Bogert and Bogert, The Law of Trusts and Trustees
§902 (1995) (“The Uniform Fiduciaries Act expressly denies the
existence of a duty on the part of one paying money or delivering
other property to the trustee to see to its application by the
trustee.”); Trenton Trust Company v. Western Surety Co., 599 S.W.2d
481, 492 (Mo. 1980) (en banc) (“The mere failure to make inquiry,

18
 It is therefore not surprising that CLIC-LP insists that we

should apply the common-law standard. CLIC-LP maintains that if it

can show that FMCC either knew or should have known that Lewis was

planning to breach his fiduciary duty, then FMCC could be held

liable for the damages that result from that breach. CLIC-LP has

not cited any Louisiana jurisprudence adopting the common-law

actual-or-constructive-knowledge standard and our independent

research has revealed none. But CLIC-LP’s assertion does comport

with the general rule set forth in the Restatement (Second) of

Trusts:

If a third person pays or conveys to the trustee money or
other property which the trustee as such is authorized to
receive, and the trustee misapplies the money or other
property, the third person is liable for participation in
the breach of trust, if, but only if, when he made such
payment or conveyance he had notice that the trustee was
misapplying or intending to misapply the money or other
property.30

A person is deemed to have “notice,” under the Restatement, if “he

knows or should know of the breach of trust.”31 The leading

treatises state the general rule similarly.32

even though there may be suspicious circumstances, does not”
indicate the absence of good faith as defined in the Act “unless
such failure is due to the deliberate desire to evade knowledge
because of a belief or fear that inquiry would disclose a vice or
defect in the transaction, that is to say, where there is an
intentional closing of the yes or stopping of the ears.”).
30
RESTATEMENT (SECOND) OF TRUSTS §321.
31
Id. at §297.
32
See BOGERT & BOGERT, THE LAW OF TRUSTS AND TRUSTEES §901 (1995);
FRATCHER, SCOTT ON TRUSTS §321 (1989).

19
 Lacking adequate guidance in this area of state law, we will

indulge, for the sake of argument, CLIC-LP’s suggestion that the

more liberal common-law standard applies. Under it, the appropriate

inquiry is whether CLIC-LP has set forth specific facts showing

that FMCC at least should have known that Lewis was planning to

breach his fiduciary duty.

Two documents in the record are proffered by CLIC-LP as

creating a genuine issue of material fact on this point. The first

is a sixteen-page loan proposal summary, an internal FMCC

memorandum that sets forth the terms of a proposed loan to the

Trusts, detailing the creditworthiness of the borrower (the Trusts)

and the guarantors (Lewis and his wife), and recommending approval

of the loan. CLIC-LP maintains that, after reviewing this

document, a fact finder could reasonably conclude that FMCC knew

that the purpose of the loan was to pay off the debts of the “Lewis

entities,” and that Lewis habitually used the term “Lewis entities”

in reference to all of the legal entities under his control —— a

universe that included businesses and properties in addition to

those forming the Trusts’ res.

Our scrutiny of this memorandum reveals that in the section

summarizing the proposal, the purpose of the loan was clearly

stated to be “[p]rovid[ing] funds to liquidate Borrower’s short

term debt with commercial banks.”33 The Borrower is expressly

33
Emphasis added.

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identified as “Trust C - Arthur Cullen Lewis, Jr., Trustee.” The

loan memorandum also discusses the financial condition of Lewis’s

business affairs, including the financial wherewithal of

enterprises other than the trust —— explaining the unremarkable

reference to the “Lewis entities.” As Lewis and his wife gave

their personal guarantees it is only natural that FMCC would

investigate all of Lewis’s many business affairs.

The second document proffered by CLIC-LP in support of its

position that FMCC should have known of Lewis’s planned breach is

a letter that Lewis sent to FMCC directing FMCC to wire the loan

proceeds to “the account of A. C. Lewis, Jr., Account No. [omitted]

with Fidelity[.]” The letter goes on to say that “[f]or and in

consideration of the Loan made by [FMCC], the undersigned hereby

authorizes, requests and directs [FMCC] shall not be held

accountable for making the advance under the Loan to said account

of A. C. Lewis, Jr.” The letter is signed by Lewis “as trustee.”

By the terms of the letter, Lewis’s hold harmless covenant is

granted in consideration of FMCC’s making the loan to the Trusts,

not for disbursing the proceeds to the specified account.

Asking rhetorically why any borrower would send such a letter,

CLIC-LP argues that a jury could reasonably infer from its contents

that FMCC should have known that Lewis was planning to breach his

fiduciary duty.34 We note, however, that before it got this letter

34
CLIC-LP cites to other facts which, it urges, could lead a
rational fact finder to infer that FMCC should have known about

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FMCC had received another letter from Lewis specifically declaring

that “[t]he proceeds of these loan funds will be applied to the

reduction of outstanding bank obligations owed by the Trusts.”

FMCC adduced summary judgment evidence disputing the

contention that it either knew or should have known that Lewis was

planning to misapply the loan proceeds. This evidence consisted of

affidavits from various FMCC personnel, including loan officers and

the attorney representing FMCC in the subject transaction, stating

that neither Lewis nor Lewis’s agents ever told them or even gave

them any reason to suspect that Lewis planned to breach his duty to

the Trusts. In addition, FMCC submitted the affidavit of the

attorney at law who represented Lewis in both personal and business

ventures, including in his various representative capacities such

as corporate president and trustee of the Trusts. Lewis’s lawyer

averred that Lewis never told him or even suggested that the

proceeds of the loans would be used for anything other than payment

of the Trusts’ legitimate obligations. Further, Lewis’s attorney

swore that he had no independent knowledge (or even a suspicion)

that Lewis intended to breach his fiduciary duty. The sworn

statements of these witnesses stand uncontroverted.

Having carefully reviewed the summary-judgment evidence, we

Lewis’s nefarious intentions. For example, CLIC-LP urges that
because the loan was an in rem obligation of the Trusts, FMCC
should have known of Lewis’s plot. We find this “evidence” even
more specious than that discussed in the body of this opinion, and
question whether it is even relevant.

22
conclude, like the district and bankruptcy courts before us, that

even when we view the evidence and reasonable inferences that can

be drawn from it in the light most favorable to CLIC-LP, the record

does not support the position advanced by CLIC-LP sufficiently to

create a genuine dispute of material fact.35 As the Supreme Court

has held, when evidence submitted by the nonmoving party is merely

colorable or is not significantly probative, summary judgment may

be granted36 because “[w]here the record taken as a whole could not

lead a rational trier of fact to find for the non-moving party,

there is no ‘genuine’ issue for trial.”37 We agree with the

district court’s grant of summary judgment to FMCC.

D. FMCC’s cross appeal

FMCC argues that the bankruptcy court abused its discretion

when it remanded to state court the Lewis heirs’ claims against

FMCC, rather than disposing of those claims by granting summary

judgment in FMCC’s favor. Unfortunately for FMCC, the statute

authorizing that remand, 28 U.S.C. §1452(b), precludes appellate

35
See Fontenot v. Upjohn Co., 780 F.2d 1190 (5th Cir. 1986)
(Rubin, J.) (“Absent evidence, direct, circumstantial, or
inferential, that would create a genuine issue of fact, and absent
any suggestion concerning the utility of additional time for
further discovery, the [summary judgment] motion should be
granted.”).
36
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50
(1986).
37
Matsushita Electric Industrial Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986) (citing First National Bank of
Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968)).

23
review of such orders in bankruptcy cases.38 As we do not have

jurisdiction over the substance of FMCC’s cross appeal, we must

dismiss it.

III.

CONCLUSION

For the forgoing reasons, we affirm the district court’s grant

of summary judgment in favor of FMCC and dismiss FMCC’s cross

appeal challenging the bankruptcy court’s disposition of the Lewis

heirs’ claims by remanding them to state court.

APPEAL AFFIRMED; CROSS APPEAL DISMISSED

38
See Sykes v. Texas Air Corp., 834 F.2d 488 (5th Cir. 1987).

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