In re Block Shim Dev. Company-Irving

In re Block Shim Dev. Company-Irving

Opinion

 [*290]  DUHE, Circuit Judge:

Appellants Ronit Inc. and Michael Block seek reversal of the district court's ruling upholding the Second Amended Reorganization Plan of the partnership of Block Shim Development Company-Irving ("Block Shim"). Appellants also seek review of the district court's dismissal of part of their appeal. We affirm.

Block Shim, a general partnership composed of appellant Ronit, appellee Stemson Corporation, and Ronville, Inc., involuntarily entered chapter 11 bankruptcy in 1989. Appellants Michael A. Block and Ronit, along with other creditors, timely filed proofs of claim with the bankruptcy court. Stemson, acting on behalf of Block Shim, submitted the Second Amended Plan of Reorganization now in question. After a hearing, the bankruptcy court accepted the plan over appellants' objections, and accordingly divided creditors' claims into five prioritized classes. Among them, class 2 pertained to the allowed secured claims of Block [**2]  Shim's largest creditor, the Sandfield group; class 3 to the allowed unsecured claims of creditors, Saraband, Inc. and Mandolin Corporation; and class 4 to the allowed unsecured claims of all other creditors, namely Touche & Ross, Block Shim's accounting firm.

Essentially, the plan called for Block Shim to partially distribute its property and to use the proceeds to pay off and restructure its debts. The plan also redistributed partnership interests to reflect the actual capital contributions of the partners during restructuring. Ronit and Stemson's ownership interests would decrease while Ronville's interest would increase.

Pursuant to the plan, Block Shim transferred what was known as the Woodhall property and an easement, and a portion of the Sandfield property. Newco, a corporation owned by class 3 creditors, received this property in return for $ 1,500,000 and forgiveness of a $ 1,260,321 debt. Newco dissolved soon thereafter, and its owners sold a parcel of the transferred land to Laredo National Bank. Continuing to abide by the plan, Block Shim executed a promissory note, deed of trust, and guaranties by the partners for $ 800,000 in favor of the Sandfield group, and agreed [**3]  to fulfill any further obligations to the group once it sold the remaining portions of the Sandfield property. In return, the Sandfield group released its interest in the transferred property and accepted a new note that would mature two years later than its earlier note.

Without seeking to stay the bankruptcy court's order, Ronit and Block appealed the decision to implement the plan. The district court dismissed part of that appeal as moot, finding that Block Shim already had conveyed significant assets of its estate to extinguish the principal claim against it. In re Block Shim Dev. Co.-Irving, 113 Bankr. 256, 261 (N.D.Tex.1990). The district court affirmed the remaining issues of fairness on their merits. In re Block Shim Dev. Co.-Irving, 118 Bankr. 450, 456 (N.D.Tex.1990).

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