T-H New Orleans Ltd. Partnership, Matter of

Decision Date09 July 1997
Docket NumberNo. 95-31233,T-H,95-31233
Citation116 F.3d 790
Parties38 Collier Bankr.Cas.2d 458, 31 Bankr.Ct.Dec. 114, 11 Tex.Bankr.Ct.Rep. 225 In the Matter ofNEW ORLEANS LIMITED PARTNERSHIP, Debtor. FINANCIAL SECURITY ASSURANCE INC., Appellant-Cross-Appellee, v. NEW ORLEANS LIMITED PARTNERSHIP, Appellee-Cross-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Martin J. Bienenstock, Weil, Gotshal & Manges, New York City, Eugene R. Preaus, Preaus, Roddy & Krebs, New Orleans, LA, for Appellant-Cross-Appellee.

Rudy Joseph Cerone, B. Franklin Martin, III, McGlinchey, Stafford & Lang, New Orleans, LA, for Appellee-Cross-Appellant.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before WISDOM, SMITH and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

This Court visits this case for a second time. 1 The Appellant, Financial Security Assurance,

Inc. ("FSA"), appeals the bankruptcy court's ruling that it was not entitled to postpetition preconfirmation interest from the petition date notwithstanding FSA's overcollateralization at confirmation; the value assigned to the collateral; the appropriate confirmation interest rate; and confirmation of the bankrupt's Chapter 11 plan. On appeal, FSA asserts a myriad of errors by the bankruptcy court. T-H New Orleans Limited Partnership ("T-H NOLP") asserts two cross-issues. Finding no reversible error, we affirm.

FACTS AND PROCEDURAL HISTORY

In June of 1988, T-H NOLP acquired a Days Inn Hotel (the "Hotel") in New Orleans, Louisiana and has operated the Hotel continuously since that date. T-H NOLP is a limited partnership with a corporate general partner, Tollman-Hundley New Orleans Corp., and five individual limited partners. The day-to-day management and operations of the Hotel property are carried out by the individuals employed by T-H NOLP. T-H NOLP is also a member of the Tollman-Hundley Hotels group of companies.

In February 1989, T-H NOLP sought to restructure the under-lying mortgage debt on the Hotel through a mortgage bond financing transaction involving T-H NOLP and six other hotels owned by separate Tollman-Hundley partnerships. As part of the refinancing, T-H NOLP and the six other hotel partnerships, all controlled by Monty Hundley and Stanley Tollman, obtained separate but cross-collateralized and cross-guaranteed first mortgage loans, which were secured by the Hotel and other hotels as well as the revenues generated therefrom, in the amount of $87,000,000 from a newly created business trust (the "Issuer"). T-H NOLP executed various agreements including a Mortgage Note and Loan Agreement, and a Collateral Mortgage Note.

To raise the necessary money to make the mortgage loans to T-H NOLP and the other hotels, the Issuer issued $87,000,000 in bonds, the payment of which was guaranteed by a surety bond issued by FSA. In return, the Issuer of the bonds assigned to FSA all its rights and interest in the security agreements, and authorized FSA to be its attorney-in-fact in order to take whatever actions FSA deemed necessary to exercise its rights under the mortgage loans and related collateral.

By 1990, T-H NOLP and the six other partnerships were in default on the loans, and FSA stepped into the shoes of the bond Issuer. After the parties were unable to reach a settlement, FSA accelerated the mortgage note and demanded payment of all amounts due under the loan agreement and guarantee. On February 25, 1991, T-H NOLP filed for bankruptcy under Chapter 11 of the Bankruptcy Code; the other six hotel partnerships also filed for bankruptcy. At the time T-H NOLP filed bankruptcy, FSA's allowed claim was $18.424 million.

Subsequent to the bankruptcy filing, FSA filed a motion for adequate protection or segregation of hotel receipts. The bankruptcy court granted FSA's motion, finding that it had a security interest in the Hotel's prepetition and postpetition revenues from its operations, and ordered that the Hotel's business revenues be segregated. The bankruptcy court also entered a cash collateral order (dated May 1, 1992) which provided that T-H NOLP make payments from the Hotel's net revenues in order to reduce its obligation to FSA.

On appeal, this Court in In re T-H New Orleans Limited Partnership, 10 F.3d 1099 (5th Cir.1993) ("T-H NOLP I") held that T-H NOLP's postpetition Hotel revenues were "rents" under Louisiana law and, therefore, were subject to FSA's prepetition security agreement under § 552(b) of the Bankruptcy Code and must be segregated. The Court remanded the case with instructions for further proceedings consistent with its opinion.

On February 24, 1994 T-H NOLP filed its amended disclosure statement and amended plan of reorganization. The bankruptcy court approved the amended disclosure statement in June 1994. On July 15, 1994, FSA filed an objection to plan confirmation, and T-H NOLP filed an objection to FSA's claim.

The bankruptcy court, early in the case, found that the appraised value of the Hotel was $12.2 million; this valuation was based upon an appraisal report as of July 1, 1991 which was commissioned by FSA. FSA's motion for adequate protection was based upon this appraised value. Subsequently, the bankruptcy court held a hearing to determine the fair value of the Hotel and found, after considering the evidence presented by T-H NOLP and FSA, that, as of July 14, 1994, the fair value of the Hotel was $13.7 million. 2 Accordingly, the bankruptcy court found that the value of FSA's security interest in the Hotel was $13.7 million. The bankruptcy court also found that based on the uncontroverted testimony, the fair value of the Hotel would increase over the two year period following confirmation of T-H NOLP's proposed amended plan.

The bankruptcy court also held a hearing on FSA's allowed claim. FSA stipulated for purposes of the confirmation hearing that its allowed claim as of the petition date was $18,424,000. T-H NOLP presented evidence showing that it had made postpetition cash collateral payments of $4,675,945 through the end of September, 1994. 3 Thus, the bankruptcy court, after accounting for the postpetition rent payments (pursuant to the May 1, 1992 cash collateral order) on FSA's claim and not including any potential entitlement to postpetition preconfirmation interest, found that FSA's claim amounted to $13,748,055 as of September 30, 1994. 4

The bankruptcy court therefore found that because FSA's claim of $13,748,055 was greater than the fair value of the Hotel ($13.7 million), thus making FSA's claim undersecured, FSA was not entitled to postpetition, preconfirmation interest on its claim under § 506(b) of the Bankruptcy Code until the time when the value of its collateral exceeded the amount of its claim. At that point, FSA would be entitled to interest at the contract rate on its claim to the extent that the value of the collateral exceeds its allowed claim, i.e. the equity cushion, and that any postpetition interest was limited to the equity cushion created by the monthly accrual of net rents generated by the Hotel.

Finally, with respect to T-H NOLP's amended plan of reorganization (the "Plan"), FSA was the only creditor to object to confirmation of the Plan and to vote to reject the amended Plan. 5 FSA argued against Plan confirmation on several grounds which are addressed in each of its issues on appeal. All other classes of creditors either voted affirmatively to accept the amended Plan or were On March 30, 1995, the bankruptcy court entered an order confirming T-H NOLP's amended Plan under the cramdown provisions of Chapter 11. The bankruptcy court also determined that the proper postconfirmation interest rate was 11.5 percent. On June 27, 1995, the bankruptcy court denied FSA's motion for reconsideration or new trial.

deemed to have accepted the amended Plan. Thus, T-H NOLP sought confirmation of its amended Plan under the "cramdown" provisions of Chapter 11 of the Bankruptcy Code. Following three days of confirmation hearings, the bankruptcy court on March 27, 1995, entered an order denying Plan confirmation. 6

Both FSA and T-H NOLP appealed to the district court for a review of the bankruptcy court's decisions. The district court affirmed. This appeal ensued. We now address FSA's and T-H NOLP's arguments raised before this Court.

DISCUSSION

This Court, acting as a second review court, reviews the bankruptcy court's findings of fact under the clearly erroneous standard, and the bankruptcy court's conclusions of law de novo. In re United States Abatement Corp., 79 F.3d 393, 397 (5th Cir.1996). We also note that while FSA listed in its brief fourteen issues on appeal, FSA only discusses six of them in the corpus of its brief. Federal Rule of Appellate Procedure 28(a)(6) provides that "[t]he argument must contain the contentions of the appellant on the issues presented, and the reasons therefor...." Pursuant to Rule 28, this Court has found "that contentions not briefed are waived and will not be considered on appeal." Trust Co. of Louisiana v. N.N.P., Inc., 104 F.3d 1478, 1485 (5th Cir.1997) (citing Zeno v. Great Atlantic & Pacific Tea Co., 803 F.2d 178 (5th Cir.1986)). Thus, the only issues that this Court will consider on appeal are those that were actually briefed by the parties in accordance with Rule 28.

1. FSA's Entitlement to Postpetition Interest

FSA asserts that the value of the Hotel was increasing during the bankruptcy proceedings, and that its claim was decreasing due to the monthly cash collateral payments. Thus, at some point between September 1994 and the March 30, 1995 confirmation order the value of the property became greater than its claim. There-fore, FSA argues that since the collateral's value exceeded its claim on the day the Chapter 11 plan was confirmed or became effective, it was entitled to postpetition interest under § 506(b) to the extent of its contract rate for the entire postpetition period. FSA also argues that it should...

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