This case arises from a bankruptcy dispute about a house in Louisiana that Plaintiffs-Appellees Jerry and Sheila Hollander sold to Defendants-Appellants Robert and Rhonda Sigillito. The Sigillitos sued the Hollanders seeking rescission, damages, and attorneys’ fees under state law redhibition and fraud statutes. The bankruptcy court ruled in the Sigillitos’ favor on the redhibition theory and issued a judgment in their favor for damages. However, the bankruptcy court ultimately found against them on their fraud claim and therefore did not grant attorneys’ fees. In this appeal, the Sigillitos challenge the bankruptcy court’s findings with respect to fraud and attorneys’fees.
The Sigillitos appealed the bankruptcy court’s memorandum opinion and amended judgment to the district court. The Sigillitos argued that the bankruptcy court erred by not granting them attorneys’ fees on the basis of fraud. Therefore, the court remanded the case to the bankruptcy court to determine whether the Sigillitos had proved their claim for fraud, and thus whether they would be entitled to recover attorneys’ fees under that theory. The court, however, rejected the Sigillitos’ other arguments. On remand, the bankruptcy court considered the Sigillitos’ fraud claim, relying on Josephs v. Austin, 420 So. 2d 1181 (La. App. 5 Cir. 1982), a case holding that fraud must be “clearly and convincingly established and not merely by a preponderance of the evidence.” Id. at 1184. On that basis, the
bankruptcy court determined that although the Hollanders’ failure to disclose the condition of their house was deceptive, it was not fraud under Louisiana law because the Hollanders’ intent was to avoid “chilling” future sales of their house rather than to take an unjust advantage.
The Sigillitos again appealed the bankruptcy court’s decision to the district court. They primarily took issue with the bankruptcy court’s distinction between fraud and false pretenses, arguing that the bankruptcy court’s finding as to the first necessitated the second. The district court disagreed. The district court also relied on Josephs, explaining that “the burden of proof is different with respect to non-dischargeability and state law fraud. Non-dischargeability must be proven by a preponderance of the evidence . . . [b]y contrast, proof of fraud must be made by clear and convincing evidence.” The district court then considered and rejected the Sigillitos’ argument that the findings underlying the bankruptcy court’s nondischargeability analysis required a finding of fraud. Rather, the district court held, it was not clearly erroneous for the bankruptcy court to find that the Hollanders believed in good faith that the defect was remedied by their repair efforts. The Sigillitos appealed.
The case on which both the district and the bankruptcy courts relied for the proposition that fraud requires clear and convincing evidence, Josephs v. Austin, 420 So. 2d 1181 (La. App. 5 Cir. 1982), has been superceded, and those courts erred in relying on it.
Reversed and Remanded.
