In re Doctors Hosp. 1997, L.P.

Decision Date05 October 2006
Docket NumberBankruptcy No. 05-35291.,Adversary No. 05-3772.
Citation351 B.R. 813
PartiesIn re DOCTORS HOSPITAL 1997, L.P., Debtor. Charles R. Veldekens, Ashraf Veldekens, and Tidwell Properties, Inc., Plaintiffs, v. GE HFS Holdings, Inc., et al., Defendants.
CourtU.S. Bankruptcy Court — Southern District of Texas

Robert Smith Blanc, Gardere Wynne Sewell & Riggs, John F. Higgins, IV, James Matthew Vaughn, Joshua Walton Wolfshohl, Porter & Hedges LLP, Houston, TX, for Debtor.

MEMORANDUM OPINION ON CHARLES VELDEKENS, ASHRAF VELDEKENS, AND TIDWELL PROPERTIES, INC'S AMENDED MOTION TO ABSTAIN AND TO REMAND AND, ALTERNATIVELY, FOR A RECOMMENDATION FOR TEE WITHDRAWAL OF THE REFERRAL ORDER REFERRING THIS CASE TO BANKRUPTCY COURT BY THE UNITED STATES DISTRICT COURT

JEFF BOHM, Bankruptcy Judge.

I. INTRODUCTION

This adversary proceeding considers whether a bankruptcy court loses jurisdiction over a pending lawsuit, which was filed prior to the date of plan confirmation, upon confirmation of the plan. Stated differently: Is jurisdiction automatically extinguished upon confirmation of a plan? This Court believes the answer is in the negative. Assuming that this Court does have subject matter jurisdiction, the Plaintiffs nevertheless request this Court to abstain from adjudicating the dispute and to remand the suit to a Texas state court. The Court finds that it should not abstain and remand, but rather keep the suit and adjudicate the disputes. The purpose of this Memorandum Opinion is to explain how this Court has arrived at these conclusions.

The Court makes the following Findings of Fact and Conclusions of Law under Federal Rule of Civil Procedure 52 as incorporated into Federal Rule of Bankruptcy Procedure 7052. To the extent that any finding of fact is construed to be a conclusion of law, it is adopted as such. To the extent that any conclusion of law is construed to be a finding of fact, it is adopted as such. The Court reserves the right to make any additional findings and conclusions as may be necessary or as requested by any party.

II. FINDINGS OF FACT

The facts, either as stipulated to or admitted by counsel of record, or as determined from the record, in chronological order, are as follows:

A. Factual background

1. Plaintiffs Charles Veldekens (Mr. Veldekens) and Dr. Ashraf Veldekens (Dr. Veldekens) owned land located at 510 West Tidwell Road in Houston, Harris County, Texas and certain improvements on the land, including a hospital facility (all of which property and improvements are hereinafter collectively referred to as the Tidwell Property). [Docket No. 12, ¶ 13.]1

2. Mr. Veldekens and Dr. Veldekens purchased the Tidwell Property in 1992 for $7.3 million. [Docket No 63, p. 11:1-3.]

3. On or about January 23, 1998, Mr. Veldekens and Dr. Veldekens entered into a Lease Agreement with Doctors Hospital 1997, L.P. (the Debtor), whereby they leased the Tidwell Property to the Debtor. [Docket No. 63, p. 2:8-14, 18-19; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 1.] The Debtor is a Limited Partnership based in Houston, Texas that was founded in January of 1998 for the purpose of leasing and operating the hospital facility located on the Tidwell Property in north Houston. [Docket No. 6, ¶ 6.]

4. On or about May 18, 1998, the governing board of the Debtor held its monthly meeting, which was attended by Mr. Veldekens, among others. [Docket No. 63, p. 6:6-9; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Defs' Ex. 44A, p. 1.] John Styles, Jr. (Styles), a member of the governing board, provided an update on the ongoing construction and renovations at the Tidwell Property. [Docket No. 63, p. 6:6-9; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Defs' Ex. 44A, p. 1-2.] Additionally, Styles signed the Lease Agreement in his capacity as President of HealthPlus Corporation under the section in the Lease Agreement that states: "IN WITNESS WHEREOF, HealthPlus Corporation, a Delaware corporation, which owns all of the outstanding capital stock of North Houston HealthPlus, L.L.C., the general partner of [the Debtor], by its signature below joins herein for the purpose of agreeing to and acknowledging the representations and covenants applicable to it or made by it in this Lease." [Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 1, p. 39.]

5. On or about June 10, 1998, Mr. Veldekens attended another monthly meeting of the Debtor's governing board. [Docket No. 63, p. 6:13-16; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Defs' Ex. 44B, p. 1.] Styles provided an update of the ongoing construction and renovations on the Tidwell Property and expressed concern about problems that the Debtor was experiencing with the Veldekens. [Docket No. 63, p. 6:21-24; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Defs' Ex. 44B, p. 1, part III.] Specifically, the minutes of the June 10, 1998 meeting reflect that Styles reported that the Debtor was "[a]ttempting to put the Professional Office Building to bed," and that "[w]e are fully prepared to change plans and build on the land we own across the street if the issues of land for the proposed cannot be resolved with the Veldekens in the next few days." [Docket No. 63, pp. 6:24-25, 7:1-4; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Defs' Ex. 44B, p. 1, part III(A)(8).]

6. On or about July 27, 1998, the Debtor borrowed $7 million from HCFP Funding II, Inc. (the Loan) pursuant to a Loan Agreement. [Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 12.] Defendant, GE HFS Holdings, Inc. (GE) was the most recent holder and owner of the Loan Agreement and all other instruments at issue in this Adversary Proceeding. [Docket No. 63, p. 8:25, 9:1-6; see Docket No. 63, p. 2:21-24.]

7. On or about July 27, 1998, Mr. Veldekens, Dr. Veldekens, and the Debtor executed the Assignment of Leases, Rents and Profits in favor of HCFP Funding II, Inc. [Docket No. 63, p. 3:3-6; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 3.]

8. On or about July 27, 1998, Mr. Veldekens, Dr. Veldekens, and the Debtor executed a Deed of Trust and Security Agreement for the benefit of HCFP Funding II, Inc. [Docket No. 63, p. 3:7-11; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 4.] GE was the most recent holder and owner of the Deed of Trust and Security Agreement. [Docket No. 63, pp. 8:25, 9:1-6; see Docket No. 63, p. 2:21-24.]

9. On or about July 27, 1998, Mr. Veldekens and Dr. Veldekens, as guarantors, also executed a Limited Guaranty Agreement with HCFP Funding II, Inc. [Docket No. 63, pp. 2:15-18, 3:24-25, 4:1-2; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 2.], which specifies the following:

D. The proceeds from the Loan shall be used by [the Debtor] to construct new improvements on, and substantially renovate existing improvements on, the Facility and upon [the Tidwell Property], and therefore [Mr. Veldekens and Dr. Veldekens], as owner of the fee simple interest in the Property, will receive substantial benefits and increase in the value of its property from the making of the Loan to the [the Debtor].

E. In consideration of the benefits to be received by the [Mr. Veldekens and Dr. Veldekens] by the making of the Loan to the [the Debtor] and subject to the express limitation on personal liability set forth in Section 22, the [Mr. Veldekens and Dr. Veldekens have] agreed to execute and deliver to [HCFP Funding II, Inc.] this Guaranty.

[Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 2, Recitals D, E.] GE was the most recent holder and owner of the Limited Guaranty Agreement. [Docket No. 63, pp. 2:21-24, 8:25, 9:1-6.]

10. On or about November 6, 1998, Mr. Veldekens, Dr. Veldekens, and the Debtor executed the First Amendment to Deed of Trust and Security Agreement for the benefit of HCFP Funding II, Inc. [Docket No. 63, p. 3:12-15; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 5.] GE was the most recent holder and owner of the First Amendment to Deed of Trust and Security Agreement. [Docket No. 63, pp. 8:25, 9:1-6; see Docket No. 63, p. 2:21-24.]

11. On or about December 22, 1999, Mr. Veldekens, Dr. Veldekens and the Debtor executed the Second Amendment to Deed of Trust and Security Agreement for the benefit of Heller Healthcare Finance, Inc. [Docket No. 63, p. 3:16-19; Dec. 2, 2005 Hrg. on Veldekens' Application for Prelim. Inj., Joint Ex. 6.] Heller Healthcare Finance, Inc. was the successor to HCFP Funding II, Inc. and became the holder of the instruments HCFP Funding II, Inc. originally held. [Docket No. 63, p. 3:19-23; see Docket 71, Ex. 2, ¶ 11.] GE was the most recent holder and owner of the Second Amendment to Deed of Trust and Security Agreement. [Docket No. 63, pp. 8:25, 9:1-6; see Docket No. 63, p. 2:21-24.]

12. Since purchasing the Tidwell Property in 1992 for $7.3 million, Mr. Veldekens and Dr. Veldekens received income therefrom in the form of lease payments from the Debtor and fees from sitting on the governing board, among other income. [Docket No. 63, p. 11:1-6.] The amount of income that they received totaled approximately $10.3 million. [Docket No. 63, p. 11:6-8.]

13. Mr. Veldekens and Dr. Veldekens transferred title to the Tidwell Property to Plaintiff Tidwell Properties, Inc. by a warranty deed filed in Harris County, Texas on December 26, 2002. [Docket No. 12, ¶ 13.] Pursuant to Federal Rule of Evidence 201(a), (b), and (c),2 this Court takes judicial notice of the Texas Secretary of State Business Organization records, which indicate that Mr. Veldekens is the registered agent and sole officer and director of Tidwell Properties, Inc.

B. Procedural background

14. On April 6,...

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