Whitney Bank v. SCC Kyle Partners, Ltd.

518 B.R. 393, 2014 U.S. Dist. LEXIS 132274, 2014 WL 4716478
CourtDistrict Court, W.D. Texas
DecidedSeptember 19, 2014
DocketCause No. A-13-CV-756-LY; Bankruptcy No. 12-11978-HCM
StatusPublished

This text of 518 B.R. 393 (Whitney Bank v. SCC Kyle Partners, Ltd.) is published on Counsel Stack Legal Research, covering District Court, W.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Whitney Bank v. SCC Kyle Partners, Ltd., 518 B.R. 393, 2014 U.S. Dist. LEXIS 132274, 2014 WL 4716478 (W.D. Tex. 2014).

Opinion

MEMORANDUM OPINION AND ORDER

LEE YEAKEL, District Judge.

Before the court is the above styled and numbered consolidated bankruptcy appeal.1 Appellant Whitney Bank, Successor by Merger to Whitney National Bank, Individually and as Agent for Certain Pre-petition Lenders, (“Whitney Bank”) contends that the bankruptcy court erred in [397]*397rendering two orders: (1) Order Confirming [Kyle Partners’] Second Amended Plan of Reorganization Under Chapter 11, Title 11, United States Code signed July 1, 2013 (Bankruptcy Docket No. 133) (“Confirmation Order”),2 and (2) Order Denying Whitney Bank’s Objection to Claim of Seton Family of Hospitals’ amended proof of claim in the amount of $500,000, against Appellee Debtor SCC Kyle Partners, Ltd., (“Kyle Partners”) signed October 25, 2013 (Bankruptcy Docket No. 185).3 The court ordered briefing and on November 1, 2013, and April 22, 2014, heard oral argument. Having considered the parties’ briefing and arguments, the bankruptcy court’s orders and case file, and the applicable law, the court affirms the bankruptcy court’s rulings.

I. Background

Kyle Partners’ Property Development and Seton Hospital Pledge, and Whitney Bank’s Financing

In 2007, Kyle Partners obtained an $18 million loan from Whitney Bank and applied the proceeds to purchase a 147-acre tract of land (the “Property”) in the City of Kyle, Texas (the “City”) for $27 million. Kyle Partners planned to develop the Property as the “Village at Kyle,” a 900,-000-square-foot commercial retail project. To secure the loan, Kyle Partners executed a deed of trust on the Property in favor of Whitney Bank. Whitney Bank also committed to provide Kyle Partners with additional funding of up to $122 million for construction and development of the project. Kyle Partners’ limited partners funded the project with $11 million.

In September 2007, Kyle Partners and Seton Hospital4 entered into economic-development incentive agreements with the City and Hays County, the county in which the City is located. Under these agreements, the City was to provide development reimbursements and economic incentives to Seton Hospital to build a hospital in Kyle and to Kyle Partners to build the Village at Kyle. These agreements provided Kyle Partners with a percentage of the sales-tax revenue that would be collected from the retail businesses that located in the Village at Kyle.

In October 2007, Kyle Partners entered into a First Amended and Restated Construction Loan Agreement with Whitney Bank. In the agreement, Kyle Partners allocated $2,000,000 of the loan proceeds as a gift to Seton Hospital, to be paid once construction began on the hospital. Although construction on the hospital began in April 2008, Kyle Partners made no gift to Seton Hospital.

On August 5, 2008, Scott Deskins, president of Kyle Partners, executed a “Seton Medical Center Hays, a member of the [398]*398Seton Family of Hospitals, Seton Hays Foundation Pledge” form on behalf of Kyle Partners. The form provided, “It is my/ our pleasure to pledge $1,000,000.00 to the Seton Hays Foundation. Payment will be made by check. My check in the amount of $1,000,000.” Immediately following this clause and handwritten on the form is, “will be paid by year end 2008.” The form provides, “Checks made payable to The Seton Hays Foundation.” Following the signature and date lines on the form appears the following, “I/we” then handwritten is, “Do Give” after which the form continues, “permission for public recognition of my contribution.” Immediately following and handwritten in is the clause, “and reserve naming the grand entrance and lobby.” Further, the form included, “For more information please contact: Gerald Hill, Executive Director [email and phone number].” At the bottom of the form was the following printed paragraph,

I/We understand that The Seton Hays Foundation will use my gift to help defray the cost to plan, construct, equip facilities and/or fund ongoing programs at Seton. The Seton Hays Foundation affirms that no goods or services were provided to the donor in exchange for their contribution. Please consult your tax advisor as to the deductibility of your donation.

On January 12, 2009, Kyle Partners paid $500,000 of the pledge to the Foundation. Kyle Partners’ position is that it did not pay the pledge in full because Whitney Bank had stopped supplying funding to Kyle Partners. Kyle Partners did not pay any additional amount in connection with the pledge. The Seton Hospital in Kyle opened in October 2009, and the grand entrance and lobby have yet to be named.

Whitney Bank contends that, in August 2009, the value of the Property was less than the outstanding amount owed to Whitney Bank. The bank stopped advancing funds to Kyle Partners and did not make the construction loan. As only the commercial retail project’s infrastructure was complete, Kyle Partners began selling off tracts of the Property.

In March 2011, Kyle Partners modified and restructured its loan with Whitney Bank. That loan matured on January 2, 2012. Kyle Partners defaulted, and Whitney Bank posted the Property for foreclosure.

To avoid the impending foreclosure sale, Kyle Partners filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The bankruptcy court designated Kyle Partners as a “single asset real estate debtor.” See 11 U.S.C. § 101(51B). Kyle Partners listed Whitney Bank as the o'nly creditor holding a secured claim in the amount of $13,793,058.37 and listed “Seton Hospital” as a creditor holding an unsecured nonpriority claim, contingent and unliquidated, for a “Pledge” in the amount of $500,000.5

Whitney Bank filed a Proof of Claim on January 4, 2013, and Seton Hospital filed a Proof of Claim on December 18, 2012, which it amended on January 15, 2013.

Reorganization Plan and Whitney Bank’s Objection to Seton Hospital’s Proof of Claim

Kyle Partners filed a Proposed Amended Chapter 11 Plan of Reorganization (the “Proposed Amended Plan”) that the bankruptcy court approved on January 22, 2013.6 The court established February 25, 2013, as the deadline for creditors to vote [399]*399to accept or reject the plan and to file any objections to the plan.

The Proposed Amended Plan included six classes of claims. Whitney Bank’s secured claim was the only Class III secured claim against Kyle Partners. Whitney Bank raised several objections and voted to reject the Proposed Amended Plan. See 11 U.S.C. § 1129(a)(8) (court shall confirm the plan only if all requirements are met; (a)(8) requires each class of creditors to accept the plan or determine each class is not impaired under the plan). Due to Whitney Bank’s rejection vote, Kyle Partners requested that the bankruptcy court proceed to confirm the Proposed Amended Plan by finding that a cramdown of Whitney Bank’s secured claim is appropriate. See id.

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Bluebook (online)
518 B.R. 393, 2014 U.S. Dist. LEXIS 132274, 2014 WL 4716478, Counsel Stack Legal Research, https://law.counselstack.com/opinion/whitney-bank-v-scc-kyle-partners-ltd-txwd-2014.