S. Texas Wildhorse Desert Invs. v. Texas Commerce

• Decision Date: 19 August 2004
• Docket Number: No. CIV.A.M-03-343.,CIV.A.M-03-343.
• Citation: 314 B.R. 107
• Parties: S. TEXAS WILDHORSE DESERT INVS., INC., Debtor/Appellee, v. TEXAS COMMERCE BANK-RIO GRANDE VALLEY, N.A., et al., Defendants/Appellees, James Hodge et al., Intervenors/Appellants.
• Court: U.S. Bankruptcy Court — Southern District of Texas

314 B.R. 107

S. TEXAS WILDHORSE DESERT INVS., INC., Debtor/Appellee, v. TEXAS COMMERCE BANK-RIO GRANDE VALLEY, N.A., et al., Defendants/Appellees James Hodge et al., Intervenors/Appellants.

No. CIV.A.M-03-343.

United States Bankruptcy Court, S.D. Texas, Brownsville Division.

August 19, 2004.

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Katie Pearson Klein, Dale & Klein, McAllen, TX, John Douglas Barrow, Attorney at Law, Corpus Christi, TX, for Plaintiff.

Paul Gabriel, Attorney at Law, Susan Rees Williams, Williams & Williams, McAllen, TX, for Intervenor-Plaintiffs.

Shelby A. Jordan, Jordan, Hyden, et al., Corpus Christi, TX, Michael J. Urbis, Jordan, Hyden, et al., Brownsville, TX, for Defendant Texas Commerce Bank.

Javier Rene Correa, Attorney at Law, Weslaco, TX, for Rene Correa, Administrator of the Estate of Arthur J. Shwery Deceased, et al.

MEMORANDUM OPINION AND ORDER

HANEN, District Judge.

This case is an appeal from a decision of the Bankruptcy Court. In the proceedings below, the appellants (hereinafter "Hodges") filed proofs of claim premised on South Texas Wildhorse Desert Investments, Inc.'s (hereinafter "Debtor") alleged acts of tortious interference with contract and tortious interference with inheritance. Bankruptcy Judge Richard S. Schmidt denied these claims on the merits. For the reasons elaborated below, this Court DENIES the Debtor's Motion to Dismiss Appeal From Order Confirming Plan of Reorganization, but AFFIRMS the Bankruptcy Court's denial of the Hodges' claims and DENIES the relief sought by the Hodges in their appeal concerning the same. In addition, the Court also DENIES all other pending motions as being moot.

I. BACKGROUND

A. Procedural History

The procedural history of this case is extensive and complicated, dating back to litigation that arose concerning the estate of Arthur J. Shwery, who passed away in 1981. Docket No. 5 at 4. Fortunately, the portion of this saga that is directly relevant to the present appeal only stretches back a few years. The relevant procedural background is set forth below.

The Hodges' twin tortious interference claims against the Debtor were first raised in Hidalgo County Court at Law No. 1 during probate proceedings initiated upon the demise of Shwery (Cause No. 14,679-A). These claims were also asserted against Debtor's sole shareholder, Ramon Garcia. On August 31, 2001, the probate court granted summary judgment in favor of the Debtor, determining that a disputed 3/17 interest in a parcel of real property belonged to the Debtor rather than the Hodges and issuing a take-nothing judgment on the latter's tortious interference claims. The judgment did not address the Hodges' claims as they concerned Garcia. Almost two years later, on June 17, 2003, the probate court sua sponte ordered the estate closed. Although the Hodges eventually filed two appeals — one concerning the 3/17 interest and another concerning closure of the probate estate — with the Thirteenth Court of Appeals (Cause Nos. 13-01-823-CV, 13-03-460-CV), they moved for dismissal of the same on September 4, 2003. On October 27, 2003, the appellate court granted the Hodges' motion and dismissed both appeals. See Correa v. S. Texas Wildhorse Desert Invs., Inc., Nos. 13-01-823-CV, 13-03-460-CV, 2003 WL 22430213, at ^*1 (Tex.App. — Corpus Christi Oct.27, 2003, no pet.) (per curiam) (unpublished opinion) (dismissing appeals).

Meanwhile, back on November 21, 2001, the Debtor filed a bankruptcy petition in the federal Bankruptcy Court (Cause No. 01-23901). The Hodges' allegations of tortious interference were reasserted in the bankruptcy proceeding as a result. On July 1, 2003, after the probate estate had been closed, but while the Hodges' state court appeals remained pending, the Bankruptcy Judge issued three interrelated rulings. Judge Schmidt entered: (1) an Order Sustaining Debtor's Objections to Claims and Disallowing Claims For All Purposes; (2) Findings of Fact and Conclusions of Law (with Respect to Debtor's Objections to Claims and Motion to Estimate Claims); and (3) an Order Confirming [Debtor's] Plan [of Liquidation]. The disallowed claims were those for tortious interference asserted by the Hodges. The Bankruptcy Court denied them on the merits.

On July 10, 2003, the Hodges timely filed a Motion For Reconsideration concerning the Bankruptcy Court's denial of their claims premised on tortious interference and the findings of fact and conclusions of law that undergirded the Bankruptcy Court's denial. A hearing on the Hodges' Motion For Reconsideration was held on July 23, 2003. Subsequently, on July 30, 2003, the Bankruptcy Court issued an order that amended the original July 10, 2003 Findings of Fact and Conclusions of Law in a few respects. However, the remainder of the Hodges' Motion for Reconsideration, including those portions related to their tortious interference claims, was denied. On August 8, 2003, the Hodges filed a Notice of Appeal.

B. Appellate Procedural Posture

During the course of the bankruptcy proceedings, a separate adversary proceeding was also initiated concerning the aforementioned parcel of property in which the Debtor was found to possess a 3/17 interest (Cause No. 03-7008). Texas Commerce Bank — Rio Grande Valley (hereinafter "Bank") was determined to be owner of the other 14/17 interest.¹ On July 30, 2003, the Bankruptcy Court issued an Order for 11 U.S.C. § 363(h) Sale and Approval of Settlement Between Debtor and Bank, and subsequently issued an Order Denying Stay of 11 U.S.C. § 363(h) Sale of Property and of Order Disallowing Claims for All Purposes, and Setting Bond to Effectuate Stay of Such Proceedings Pending Appeal on August 28, 2003.

Two separate appeals to the District Court were taken from the Bankruptcy Court's rulings in the bankruptcy case proper and the adversary proceeding thereafter. These appeals were docketed separately from one another and assigned to two different District Courts. See Docket No. 6 at ¶ 1 (noting docketing of two separate appeals); Docket No. 21 at ¶¶ 2, 5 (stating that the district clerk's office did this of its own accord without knowledge of counsel). The "first" appeal to the District Court, which concerned the § 363(h)-related rulings was docketed as Cause No. M-03-317. The "second" appeal, Cause No. M-03-343, is the present one.

On February 18, 2004, the Hodges conceded that their appeal of the Bankruptcy Court's decision regarding the § 363(h) sale was moot. In response, United States District Judge Keith P. Ellison dismissed Cause Number M-03-317 the following day. Accordingly, the claims disposed of by Judge Ellison are not before this Court; however, determining precisely what was before the District Court and declared moot in M-03-317 is obscured by the Hodges' briefing. The Hodges' initial briefs in both M-03-317 and this case are identical in content. See generally Docket No. 20. Subsequent briefing by the Hodges, however, indicates that the issues before this Court on appeal relate solely to: (1) the denial of the Hodges' claims premised on tortious interference; and (2) the confirmation of the Debtor's liquidation plan. Docket No. 21 at ¶¶ 2, 4. For all practical purposes, both issues are one, as the necessity of revisiting the Debtor's liquidation plan is entirely contingent on the viability of the Hodges' claims for tortious interference. See id. at ¶ 6 ("Hodge therefore asserts that the Bankruptcy Court's ruling which improperly devalued their claims can be addressed and correct[ed] by this Court and funded by the plan."); see also Docket No. 6 (complaining on page ii of Appellants' Brief of "the Bankruptcy Court's confirmation of Debtor's Chapter 11 Plan of Reorganization to the extent that it addresses the issues appealed") (emphasis added).

II. DISCUSSION

The Debtor has articulated two distinct procedural obstacles to this Court's consideration of the Hodges' appeal. The first, which challenges this Court's jurisdiction, is without merit. The second challenge, which essentially boils down to a claim of res judicata (or claims preclusion), is meritorious. In the alternative, the Court affirms the Bankruptcy Court's denial of the Hodges' tort claims.

A. Timeliness of the Notice of Appeal and Appellate Jurisdiction

Debtor maintains that the Hodges' Appeal of the Bankruptcy Court's Order Confirming Debtor's Plan of Reorganization was untimely filed. Docket No. 2 at ¶¶ 1-3. Citing Bankruptcy Rules 8001, 8002, and 9023, as well as In re Robinson, 640 F.2d 737, 738 (5th Cir.1981), Debtor maintains that the alleged untimeliness of this appeal deprives the Court of jurisdiction. Docket No. 2 at ¶¶ 1-3. Accordingly, the Debtor requests dismissal of the appeal concerning the aforesaid order. Id. at ¶ 4.

The Debtor does not contest the fact that the Hodges' July 10, 2003 Motion For Reconsideration was timely filed. As previously noted, the Hodges' expressly requested that the Bankruptcy Court reconsider denial of their claims premised on tortious interference and the findings of fact and conclusions of law that undergirded the Bankruptcy Court's denial. Although the Hodges did not expressly request reconsideration of the Debtor's plan, the Hodge's Motion For Reconsideration did request that the Bankruptcy Court's order confirming the Debtor's plan be abated until their claims were reconsidered. The obvious reason for this abatement request is that, if the Bankruptcy Court had decided to recognize the Hodges' claims, the plan would have had to be modified. On July 30, 2003, the Bankruptcy Court denied the Hodges' Motion For Reconsideration.² On August 8, 2003, the Hodges filed notice of the instant appeal, which explicitly referenced the Bankruptcy Court's denial of the tort claims, the findings of fact and conclusions of law underlying said denial, the order granting in part and denying in part the motion for reconsideration, and the order confirming Debtor's plan.

Rule 8002(a)...