In re Cypresswood Land Partners, I
| Decision Date | 20 January 2009 |
| Docket Number | No. 07-32437-H4-11.,07-32437-H4-11. |
| Parties | In re CYPRESSWOOD LAND PARTNERS, I, Debtor. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas |
This case illustrates the risk that litigants take in opposing confirmation of a plan "on the cheap." In the case at bar, the two litigants who opposed the debtor's plan chose to bring no witnesses to the confirmation hearing or to introduce any of their own exhibits. Indeed, one of them chose not to file a written objection. Rather, they simply sent their counsel to the confirmation hearing hoping that their arguments alone could persuade this Court to deny confirmation of the proposed plan. This strategy failed. When the Debtor objected to their opposing confirmation by arguing that they both lacked standing, this Court sustained the objection on the grounds that one litigant had failed to prove up that it was a party-in-interest and that the other had failed to file a written objection.
This case also concerns a number of unresolved issues in Fifth Circuit jurisprudence, including what constitutes a "party-in-interest" under 11 U.S.C. § 1109(b), whether a non-voting class may be deemed to have accepted a Chapter 11 plan, and whether and to what extent the "new value exception" relating to 11 U.S.C. § 1129(b)(2)(B)(ii) should be recognized.
On December 19, 2008, this Court held a hearing on the Debtor's First Amended Disclosure Statement [Docket No. 166] and First Amended Liquidating Plan of Reorganization [Docket No. 165], as modified by non-material modifications filed on December 17, 2008. [Docket No. 189.] At the close of the hearing, the Court took the matters under advisement. On December 29, 2008, this Court held a telephonic hearing to ask certain questions about various issues relating to the hearing held on December 19, 2008. On December 30, 2008, this Court issued oral findings of fact and conclusions of law in open court approving the First Amended Disclosure Statement and confirming the First Amended Liquidating Plan of Reorganization, as modified by non-material modifications filed on December 17, 2008 and additional non-material modifications made pursuant to the Court's ruling.
The Court now memorializes its oral findings of fact and conclusions of law with the written findings of fact and conclusions of law set forth herein. To the extent that the oral findings of fact and conclusions of law conflict, or are inconsistent with, any of the written findings of fact and conclusions of law set forth in this Memorandum Opinion, the latter shall govern. Further, to the extent that the written findings of fact and conclusions of law set forth herein do not memorialize all of the oral findings of fact and conclusions of law, then those oral findings of fact and conclusions of law not memorialized herein are incorporated herein as if fully set forth in writing so long as they do not conflict, or are inconsistent, with the written findings of fact and conclusions of law.
The Court makes these findings of fact and conclusions of law pursuant to Federal Bankruptcy Rules 7052 and 9014. To the extent that any finding of fact is construed as a conclusion of law, it is adopted as such. Moreover, to the extent that any conclusion of law is construed as a finding of fact, it is adopted as such. The Court reserves its right to make additional findings of fact and conclusions of law as it deems appropriate or as may be requested by any of the parties.1
1. Cypresswood Land Partners, I (the Debtor) is a Texas joint venture that has two 50% partners: Stephen A. Morrow (Morrow) and Redwood Properties, LLC (Redwood). [Ex. No. 2, pp. 4, 8, and 9] and [Ex. No. 5, p. 7.] Morrow and Redwood formed the Debtor for the purpose of buying, developing, and selling approximately 23 acres located in Harris County, Texas (the Property). [Ex. No. 2, p. 8.] The Property consists of four tracts: (1) approximately 6.210 acres (the 6.210 Acre Tract); (2) approximately 11.814 acres (the 11.814 Acre Tract); (3) approximately 3.599 acres (the 3.599 Acre Tract); and (4) approximately .8760 acres (the .8760 Acre Tract). [Ex. No. 4, p. 2.] Unfortunately for the Debtor, it was unable to develop and sell the Property as quickly as the Debtor had expected.
2. On April 4, 2007, Morrow, in his capacity as a 50% venturer of the Debtor, filed an involuntary Chapter 11 petition against the Debtor. [Docket No. 1.]
3. On April 5, 2007, Morrow filed an amended involuntary Chapter 11 petition against the Debtor. [Docket No. 2.]
4. On April 27, 2007, Redwood, in its capacity as the other 50% venturer of the Debtor, filed a pleading entitled: "Answer in Opposition to Involuntary Petition, Subject to Motion to Dismiss or Abstain." [Docket No. 7.] In this pleading, Redwood requested the Court to deny Morrow's request for the entry of an order for relief. The attorney who filed this pleading was Keavin D. McDonald (McDonald). McDonald has represented Redwood throughout this case and has frequently appeared at hearings held in this case.
5. At separate hearings on June 1, 2007 and June 11, 2007, counsel for Morrow and counsel for Redwood represented to this Court that these two parties, plus certain creditors of the Debtor, had been conducting negotiations regarding the future of the Debtor. [Courtroom Minutes from the docket sheet for the hearings held on June 1, 2007 and June 11, 2007.] At their request, this Court continued the hearing on the Motion to Dismiss or Abstain. [Tape recording of hearing from June 11, 2007.]
6. At a hearing on June 18, 2007, counsel for Morrow and counsel for Redwood announced that these two parties had reached an agreement that Redwood would drop its opposition to the involuntary petition, that Morrow would replace Redwood as the managing venturer of the Debtor, and that an order for relief would be submitted whereby the Debtor would voluntarily prosecute a plan of reorganization under Chapter 11.
7. On June 22, 2007, this Court signed an Order for Relief expressly setting forth that the Debtor's case would proceed under Chapter 11 of the Bankruptcy Code (the Order for Relief). [Docket No. 12.]
8. On July 12, 2007, the Debtor filed its Application for an Order Authorizing the Retention of the law firm of Beirne, Maynard & Parsons, LLP as counsel to the Debtor. [Docket No. 27.]
9. On July 17, 2007, this Court signed an Order approving the Debtor's Application to Employ the law firm of Beirne, Maynard & Parsons, LLP as counsel to the Debtor. [Docket No. 34.]
10. On July 20, 2007, the Debtor filed its original Schedules and Statement of Financial Affairs. [Docket Nos. 42 and 44; Ex. Nos. 4 and 5.] In Schedule A, the Debtor represented that the current value of each of the four tracts was, to use the Debtor's words, "the book value (original purchase price)." With respect to the 6.210 Acre Tract, the Debtor represented that the value was $3,584,000.00. With respect to the 11.814 Acre Tract, the Debtor represented that the value was $5,103,663.00. With respect to the 3.599 Acre Tract, the Debtor represented that the value was $1,350,000.00. With respect to the .8760 Acre Tract, the Debtor represented that the value was $324,012.00. The sum of these four figures is $10,361,675.00.
11. On July 27, 2007, the Debtor filed its Application for an Order Authorizing the Retention and Employment of Yancey-Hausman Interest, Inc. (YHI) as Real Estate Broker for the Debtor. [Docket No. 50.] This application expressly set forth that YHI would undertake the following services for the Debtor: (a) market the Property to facilitate the sale thereof; (b) take all necessary actions to sell the Property to prospective purchasers; (c) negotiate the business terms of such sale transactions on behalf of the Debtor; and (d) accept a deposit or other funds from any prospective purchaser of the Property. The Debtor filed this Application in order to accomplish the objective of selling the Property for the benefit of the Debtor's estate and its creditors.
12. On August 8, 2007, this Court granted the Debtor's Application to Employ YHI. [Docket No. 54.] Unfortunately, between August 8, 2007 and December 19, 2008 (i.e. the date of the confirmation hearing), YHI, despite extensive efforts, was unable to locate any non-insider third party who was willing to purchase the Property. Based upon the very credible testimony of David Lee Carter (Carter), the Vice-President of investments at YHI, the Court finds that the actions taken by YHI to market and sell the Property included, but were not limited to, the following: (a) YHI advertised not only with on-site property signs, but also did an email marketing campaign every two weeks to the brokerage community in the greater Harris County, Texas area; (b) YHI advertised on Co-Star, which is a real estate media outlet; (c) YHI advertised on Loop Net, which is another real estate media outlet; (d) YHI advertised both in Las Vegas and in San Antonio at the conventions of the International Council of Shopping Centers; and (e) YHI advertised at the Commercial Real Estate Exposition in Houston. Further, YHI performed a cost analysis for developing the Property, and concluded that the approximate cost of such development would be approximately $2.0 million to $2.5 million, an amount which the Debtor could not afford—thereby leaving YHI with no choice but to market the Property in its present condition (i.e. virtually undeveloped).2 Initially, YHI marketed the Property at $12.00 per square foot, but received no offers. Eventually, YHI removed the asking price of $12.00 per square foot and...
To continue reading
Request your trial
-
Elbar Invs., Inc. v. Okedokun (In re Okedokun), Case No. 16-35021-H4-7
...to it; or (c) it asserts an injury outside the zone of interest the statute was designed to protect. In re Cypresswood Land Partners, I , 409 B.R. 396, 416–17 (Bankr. S.D. Tex. 2009) (quoting In re A.P.I. Inc. , 331 B.R. 828, 857–58 (Bankr. D. Minn. 2005) ).1. Elbar's Constitutional Standin......
-
In the Matter of Tci 2 Holdings Llc
...adequate disclosure requirements of § 1125." In re PWS Holding Corp., 228 F.3d 224, 248 (3d Cir.2000). In re Cypresswood Land Partners, I, 409 B.R. 396, 424 (Bankr.S.D.Tex.2009) ("Bankruptcy courts limit their inquiry under § 1129(a)(2) to ensuring that the plan proponent has complied with ......
-
In re Cape Quarry, LLC
...holds a claim that has arisen from post-petition events. See 11 U.S.C. §§ 101(A) & (B); see also In re Cypresswood Land Partners, I, 409 B.R. 396, 415-16 (Bankr. S.D. Tex. 2009). Therefore, Quarry Aggregates is not a creditor of the Debtor. The only connection between Quarry Aggregates and ......
-
In re Couture Hotel Corp.
...on different collateral or of different priority on the same collateral are separately classified. See In re Cypresswood Land Partners, I, 409 B.R. 396, 435 (Bankr.S.D.Tex.2009) ( “[S]ecured creditors can, and usually must, be classified separately because each creditor has unique collatera......