Dworsky v Canal Street Ltd. Partnership, 110801 FED8, 01-6019

Docket Nº:01-6019
Party Name:Dworsky v Canal Street Ltd. Partnership
Case Date:October 02, 2001
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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IN RE: CANAL STREET LIMITED PARTNERSHIP DEBTOR.

ROSS DWORSKY, APPELLANT,

v.

CANAL STREET LIMITED PARTNERSHIP, APPELLEE.

No. 01-6019 MN

United States Bankruptcy Appellate Panel FOR THE EIGHTH CIRCUIT

Submitted: October 2, 2001

November 8, 2001

Appeal from the United States Bankruptcy Court for the District of Minnesota

Before Koger, Hill and Schermer, Bankruptcy Judges.

Schermer, Bankruptcy Judge.

The creditor, Ross Dworsky, ("Creditor") appeals the bankruptcy court's(FN1) order denying the Application of Creditor for Order Reopening Chapter 11 Case. We have jurisdiction over this appeal from the final order of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.

ISSUE

The issues on appeal are: (1) whether the Creditor has standing to appeal from the bankruptcy court's order denying his Application for Order Reopening the Chapter 11 case; (2) whether a hearing must be granted upon application to reopen a closed chapter 11 case; (3) whether the bankruptcy court abused its discretion when it denied Creditor's Application for Order Reopening the Chapter 11 case; and (4) whether Local Rule 5010-1 adopted by the Bankruptcy Court for the District of Minnesota is unconstitutional because it allows the court to rule on the application without conducting a hearing. We conclude that: (1) the Creditor has standing to appeal the bankruptcy court's order; (2) a hearing is not required for a bankruptcy court to rule on an application to reopen a closed chapter 11 case; (3) the court did not abuse its discretion when it denied the Creditor's Application for Order Reopening the Chapter 11 case; and (4) Local Rule 5010-1 is constitutional.

BACKGROUND

Canal Street Limited Partnership ("Debtor") was formed in 1985 for the purpose of acquiring, renovating, and operating a multi-use office building known as the Crown Roller Mill Building ("Crown Roller Mill"). The Crown Roller Mill is owned by the Debtor and is its only significant asset. Some of the financing for the acquisition, renovation and operation of Crown Roller Mill was provided by the issuance and sale of Commercial Development Revenue Bonds ("Canal Bonds"). National City Bank of Minneapolis ("NCB") was named trustee in connection with the issuance of the Canal Bonds pursuant to the terms of an Indenture of Trust between MCDA and NCB.

On September 14, 1990, an involuntary bankruptcy petition was filed against the Debtor and on October 1, 1990, an order for relief under chapter 11 of the Bankruptcy Code was entered. That chapter 11 proceeding resulted in confirmation of the Debtor's Plan of reorganization on October 16, 1991. On January 4, 1996, the Debtor filed a second chapter 11 and on May 8, 1996, the Debtor's Second Amended Plan of Reorganization (the "Plan") was confirmed. The Debtor's Plan preserved certain pre-existing rights, duties, and remedies running between the Debtor and the members of the class of bondholders that had been fixed by the first confirmed plan. The terms clearly contemplated that upon default by the Debtor, bondholders' interests could be advanced by foreclosure of the mortgage that secured the original bond issue. After substantial consummation of the Plan, the chapter 11 case was closed by an order and final decree entered on August 13, 1996.

Some time after the 1996 chapter 11, the Creditor purchased approximately 50% of the outstanding Canal Bonds from parties who were bondholders in the 1996 chapter 11, subject to all post-confirmation rights and obligations. It is the Creditor's belief that Debtor has materially defaulted under the terms of the 1996 Plan by not making distributions to holders of its revenue bonds from Excess Cash Flow, a defined term in the Plan meaning revenue from the Crown Roller Mill minus operating expenses, current and prior taxes, and certain required reserves. The Creditor asserted that this default is sufficient cause to reopen the closed chapter 11 case, notwithstanding the passage of five years. On February 28, 2001, the Creditor requested that the United States Bankruptcy Court for the District of Minnesota reopen Debtor's 1996 chapter 11 case in order to convert to chapter 7 or to dismiss. Pursuant to Local Rule 5010-1, a request to reopen a case shall be made by application. This rule also provides that the court may rule on the application without conducting a hearing.

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