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In the Matter of Plantation Acceptance Corporation, Debtor. Heller Financial, Inc. v. Plantation Acceptance Corp.
Citations: 836 F.2d 962; 1988 U.S. App. LEXIS 1461; 1988 WL 2741Docket: 86-3891
Court: Court of Appeals for the Fifth Circuit; February 5, 1988; Federal Appellate Court
The United States Court of Appeals for the Fifth Circuit affirmed the district court's reversal of the bankruptcy court's dismissal of Heller Financial, Inc.'s involuntary bankruptcy petition against Plantation Acceptance Corporation (PAC). Heller had loaned funds to PAC, secured by its accounts receivable, but PAC defaulted on repayments. After discussions about the default and unauthorized sales of pledged notes, PAC's president, Charles Mannina, acknowledged the issues and expressed his intent to exit the loan business. In subsequent meetings, the parties reached a Voluntary Foreclosure and Repossession Agreement, releasing Mannina from personal liability while reserving PAC's liability. Heller filed the bankruptcy petition to recover alleged preferential payments made by PAC to other creditors, but the bankruptcy court ruled Heller lacked standing, determining that the transfer of collateral constituted a dation en paiement, which extinguished the debt and violated Louisiana law. The district court found legal errors in this ruling. The Court of Appeals emphasized that a dation en paiement requires mutual consent, and the debtor must prove such consent. Without evidence of mutual agreement for the transfer as full payment, the dation en paiement doctrine does not apply. The record lacks evidence of mutual consent between Heller, PAC, and Mannina to release them from debt responsibilities. Contrary evidence, including written communications and Mannina's testimony, confirms that Heller did not waive any rights regarding debts or agreements. The district court correctly determined that the transaction did not qualify as a dation en paiement. The application of the Louisiana Deficiency Judgment Act by the bankruptcy court remains unclear; however, it is established that the Act requires a sale initiated by a creditor, which was not the case here as the liquidation was proposed by Mannina. Even if the transfer and liquidation were considered a sale, the Act would not apply since Mannina was the debtor. PAC’s claim of undue coercive influence by Heller regarding the foreclosure agreement was not raised in prior courts and will not be considered on appeal. Heller retains standing to petition for PAC's involuntary bankruptcy, and the district court's judgment is affirmed. The provisions of the Deficiency Judgment Act prohibit deficiency judgments if a sale occurs without appraisal, emphasizing that such a waiver cannot be made by a debtor and applies only to obligations arising after August 1, 1934. The implications of the 1986 amendment to the Act are not addressed due to the court’s ruling.