In re Briscoe Enterprises Ltd., II, Civ. A. No. 4-91-457-A to 4-91-461-A.

• Decision Date: 14 April 1992
• Docket Number: Civ. A. No. 4-91-457-A to 4-91-461-A.
• Citation: 138 BR 795
• Parties: In re BRISCOE ENTERPRISES LTD., II, Debtor. HEARTLAND FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellant, v. BRISCOE ENTERPRISES LTD., II, Appellee.
• Court: U.S. District Court — Northern District of Texas

138 B.R. 795 (1992)

In re BRISCOE ENTERPRISES LTD., II, Debtor HEARTLAND FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellant, v. BRISCOE ENTERPRISES LTD., II, Appellee.

Civ. A. Nos. 4-91-457-A to 4-91-461-A.

United States District Court, N.D. Texas, Fort Worth Division.

April 14, 1992.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Marilyn Delores Garner, Patrick J. Neligan, Jr., Margaret A. Mahoney, Weil Gotshal & Manges, Dallas, Tex., for debtor, appellee.

Douglas Steward Lang, Holland Ann Neff, Belinda Lynn Reagan, Rosa Maria Orenstein, Gardere & Wynne, Dallas, Tex., for appellant.

MEMORANDUM OPINION AND ORDER

McBRYDE, District Judge.

This consolidated action encompasses appeals from five separate orders rendered by the United States Bankruptcy Court, Northern District of Texas, Fort Worth Division, the Honorable Massie Tillman presiding. The court, having reviewed the briefs of appellant, Heartland Federal Savings and Loan Association ("Heartland"), and appellee, Briscoe Enterprises Ltd., II ("debtor"), the record on appeal and applicable authorities, makes the following determinations:

I.

Jurisdiction

The appeals are from orders entered by the bankruptcy court on April 24, 1991 (one order), January 25, 1991 (three orders), and January 24, 1991 (one order). This court's jurisdiction exists pursuant to 28 U.S.C. § 158(a).

II.

Undisputed Facts

Debtor, a Texas limited partnership, owns a 784-unit apartment complex known as the Regalridge Square Apartments ("Regalridge") in Fort Worth, Texas. Regalridge houses low to moderate income families, many of whom receive rent subsidies. Regalridge was constructed in two phases with financing provided by Heartland's predecessor. In connection with the development of each phase, debtor executed a non-recourse note in the original amount of $9.5 million dollars and a deed of trust granting a lien in that portion of the property then being developed. Heartland is the owner and holder of the notes and deeds of trust, dated April 11, 1983, and January 31, 1984, respectively. Additional financing of $3.5 million dollars for each phase was provided by the City of Fort Worth ("City"), which retained inferior liens in the property.

Debtor defaulted on its notes by failing to make interest payments in October, November, and December 1988. It entirely ceased servicing its debt to Heartland in July 1989.

III.

Proceedings

A voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code was filed by debtor on December 29, 1989; and, it filed its plan of reorganization on June 11, 1990. On August 17, 1990, debtor filed an unsigned copy of its proposed disclosure statement. It filed its first amended plan of reorganization on November 16, 1990. The plan was later modified by the filing of debtor's second amended plan of reorganization on December 12, 1990, third amended plan of reorganization on December 20, 1990, and fourth amended plan of reorganization on January 22, 1991. Debtor filed its first amended disclosure statement on November 16, 1990, second amended disclosure statement on December 12, 1990, and third amended disclosure statement on December 20, 1990. The bankruptcy court approved the third amended disclosure statement following a hearing on December 21, 1990.

Beginning January 23, 1991, and continuing on four additional days, the bankruptcy court conducted a hearing to determine whether debtor's fourth amended plan should be confirmed. Before taking up the matter of plan confirmation, the bankruptcy court heard and considered various pending motions. First, the court considered and granted debtor's applications to approve the employment of an appraiser and an architect, nunc pro tunc. The court then considered and denied Heartland's motions for administrative claim and for deposit of consideration. During the confirmation hearing, the bankruptcy court heard the testimony of Anne Sadovsky, debtor's marketing agent, and approved debtor's application to employ her, nunc pro tunc. At the conclusion of the confirmation hearing on March 14, 1991, the bankruptcy court stated that the prospect of debtor's meeting the debt service requirement of the plan was "marginal." Nevertheless, on April 23, 1991, the bankruptcy court signed its findings of fact and conclusions of law and rendered its order confirming debtor's fourth amended plan of reorganization.¹

Heartland filed separate appeals from the bankruptcy court's orders (1) confirming debtor's fourth amended plan of reorganization, (2) employing and retaining James W. Daniels & Associates, Inc., as appraiser, (3) denying motion to allow administrative claim, (4) employing and retaining John R. Horton, Inc., as architectural design and supervision company, and (5) denying Heartland's motion for deposit of consideration.

Apparently the bankruptcy court did not sign a separate order approving the application to employ marketing agent, nunc pro tunc, as it had on the applications to approve employment of an appraiser and an architect. The docket sheet reflects, and the record on appeal contains, only a proceeding memorandum noting that the application was granted. Presumably, for that reason Heartland did not file a separate appeal as it did with regard to the other applications and motions heard at the confirmation hearing. In any event, Heartland did include the approval of the marketing agent's employment as an issue on appeal of the plan confirmation and debtor has not complained of the procedure followed.

IV.

The Plan

Debtor's plan is typical of Chapter 11 reorganization plans in that it begins with a list of definitions of terms used in the plan (Article I), certain general terms and conditions (Article II), and the classification of claims and interests (Article III). Article IV describes the treatment of the six classes of claims, to wit:

Class 1 allowed administrative claims;

Class 2 allowed priority claims;

Class 3 allowed City claim;

Class 4 allowed Heartland claim;

Class 5 allowed unsecured claims; and

Class 6 holders of interests in the debtor.

In particular, it provides that City's claim is to receive the same treatment as the Class 5 unsecured claims. Holders of Class 5 claims are to receive a pro rata share of the beneficial interests in the Regalridge trust, hereinafter described, evidenced by certificates of beneficial interest. The Regalridge trustees are to make periodic cash payments on at least an annual basis when they, in their discretion, determine that the trust has available net cash flow that is not required to be reserved for another purpose.

As for Heartland's claim, the plan provides that the secured portion thereof shall be paid in monthly installments of principal and interest as though amortized over thirty years from the effective date of the plan, with interest at the rate provided in the January 31, 1984, promissory note executed by debtor. The secured claim is to be paid in full upon the sale of the property or the expiration of fifteen years, whichever shall first occur. If Heartland fails to make a timely § 1111(b) election, the unsecured portion of its claim is to receive the same treatment as Class 5 unsecured claims. Article IV further provides that Heartland will retain its lien in the property and that

all other terms and conditions of the treatment of Heartland\'s claim described in the plan and the lien securing same shall be similar to the original terms of Heartland\'s note and lien, except where inconsistent with the letter and spirit of this plan.

Fourth Amended Plan of Reorganization at 12, ¶ 4.4.c. The plan does not contain as an exhibit or otherwise the note and deed of trust, or any of the terms thereof, to be executed in favor of Heartland.

Articles V and VI describe plan implementation and formation of the Regalridge trust, to which ownership of the property is to be transferred. The trust is to be governed by three trustees to be selected, one each, by the Fort Worth NAACP, City, and Heartland. The Fort Worth NAACP is not a creditor of debtor. The plan provides that the trustees will have exclusive power and control over the operation of Regalridge and that they will not be subject to any court supervision.

Articles VII through XIV contain the remaining plan provisions. None of these is particularly pertinent to the issues raised on appeal, except that paragraph 8.2 of Article VIII does provide that the plan may be modified following confirmation after notice and hearing.

V.

Issues on Appeal

Heartland asserts fifty-one issues on appeal, many of which appear to present different shades of the same matter. Heartland's issues are:

1. Whether the Bankruptcy Court erred in confirming the Debtor's Fourth Amended Plan of Reorganization.

2. Whether the Bankruptcy Court erred in finding that the Debtor's Plan complied with each and every one of the requirements for confirmation under § 1129(a)(1)-(11) and § 1123 of the Bankruptcy Code.

3. Whether the Bankruptcy Court erred in finding and concluding that the Debtor had met its burden of proof on the requirements of § 1129(a) and § 1123 by the preponderance of the evidence.

4. Whether the Bankruptcy Court erred in finding that the Debtor's Plan met each of the requirements for confirmation under § 1129(b).

5. Whether the Bankruptcy Court erred in finding that the Debtor had met its burden of proof on the requirements of § 1129(b) by clear and convincing evidence.

6. Whether the Bankruptcy Court erred in approving the applications to employ professionals nunc pro tunc.

7. Whether the Bankruptcy Court erred in approving the payments made to professionals.

8. Whether the Bankruptcy Court was clearly erroneous in its findings.

9. Whether the Bankruptcy Court erred in entering the following orders on January 25, 1991: (a) Order Employing and Retaining John R. Horton, Inc. as Architectural Design and Supervision Company; (b) Order Employing and Retaining James W. Daniels...