Humberto Saenz, Jr. v. Jose Gomez, 899 F.3d 384

In 2004 Humberto Saenz, Jr. (as president of Estrella Ventures, LLC) signed a Pizza Patrón Franchise Development Agreement prohibiting transfers without franchisor consent.
By 2009 Saenz owned multiple Pizza Patrón locations encumbered by cross‑collateralized IBC loans; he agreed to sell the Rio Grande City store to Jose Maria Gomez for $350,000.
Saenz provided Gomez (and Lone Star Bank for an SBA loan) income statements and a Certification of No Change that the bankruptcy court found were falsified; Saenz also represented he was a Pizza Patrón corporate representative.
Gomez obtained financing, purchased the store, suffered operating losses and closed the store; IBC lost nearly $200,000 after Saenz’s loan payments and disclosures were inaccurate.
Gomez sued for fraudulent misrepresentation, common law fraud, breach of contract, and conversion; after Saenz’s Chapter 7 filing the adversary proceeding resulted in a $412,500 judgment excepted from discharge under 11 U.S.C. § 523(a)(2)(A).
The bankruptcy and district courts found Saenz and Estrella liable for fraud and that the debt was nondischargeable; the Fifth Circuit affirmed, finding no clear error in factual findings and that parties consented to the bankruptcy court’s jurisdiction.

Issue	Plaintiff's Argument (Gomez)	Defendant's Argument (Saenz/Estrella)	Held
Did Saenz make material false representations?	Saenz provided false income statements and held himself out as a Pizza Patrón corporate rep to induce purchase.	Denied making such representations; claimed documents were accurate or merely sales-related.	Court: Credited Gomez; documents and witness testimony show falsity.
Was Gomez’s reliance justifiable?	Gomez relied on Saenz’s statements and forged documents; Saenz concealed facts to prevent scrutiny.	Gomez was sophisticated and should have discovered red flags; reliance unjustified.	Court: Reliance was justifiable given Saenz’s misrepresentations and concealment.
Did Saenz’s misrepresentations proximately cause Gomez’s losses?	But for the false income statements and corporate status claim, Gomez would not have bought the store.	Losses resulted from business failure, not misrepresentations; any authorization issues could have been cured.	Court: Causation met—misrepresentations induced purchase and foreseeable losses.
Was the debt nondischargeable under 11 U.S.C. § 523(a)(2)(A)?	The elements of actual fraud (representation, knowledge, intent, justifiable reliance, proximate loss) are satisfied.	Bankruptcy court erred; evidence insufficient to except debt from discharge.	Court: Affirmed nondischargeability; § 523(a)(2)(A) elements proved.

Stern v. Marshall, 564 U.S. 462 (addressing bankruptcy adjudication and Article III limits)
Exec. Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (bankruptcy core/noncore framework and final judgment authority)
Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (parties may consent to bankruptcy adjudication of Stern claims)
In re Vitro S.A.B. de C.V., 701 F.3d 1031 (Fifth Circuit standard of review for bankruptcy appeals)
In re Mercer, 246 F.3d 391 (elements and burden for fraud and nondischargeability under § 523)
In re Acosta, 406 F.3d 367 (clear‑error review of bankruptcy factual findings)
Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581 (scope of "actual fraud" under § 523(a)(2)(A))
Matter of Delta Produce, L.P., 845 F.3d 609 (consent to bankruptcy court adjudication and related jurisdictional analysis)