## IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

N o 02-20137

Summary Calendar

_______________

I N THE M ATTER O F :



### E QUALNET 

### C OMMUNICATIONS 

### C ORPORATION 

### ;

E RUDITE 

### C OMMUNICATIONS



### , I NC



### ., F ORMERLY 

### K

NOWN AS 

### E QUALNET 

### C ORPORATION 

### ;

R IDENT 

### C OMMUNICATIONS



### , I NC



### ., F ORMERLY 

### K

NOWN AS 

### USC T ELECOM



### , I NC



### .,

Debtors.



### RFC C APITAL 

### C ORPORATION



### ,

Appellee,

VERSUS



### E QUALNET 

### C OMMUNICATIONS 

### C ORPORATION 

### ;

E RUDITE 

### C OMMUNICATIONS



### , I NC



### ., F ORMERLY 

### K

NOWN AS 

### E QUALNET 

### C ORPORATION 

### ;

R IDENT 

### C OMMUNICATIONS



### , I NC



### ., F ORMERLY 

### K

NOWN AS 

### USC T ELECOM



### , I NC



### .,

Appellants.2 _________________________

Appeal from the United States District Court

for the Southern District of Texas

N o H-01-2024

_________________________ September 30, 2002

Before H IGGINBOTHAM , S MITH , and

C LEMENT , Circuit Judges.

J ERRY E. S MITH , Circuit Judge: *

Equalnet Communications, Erudite Communications, and Rident Communications

(“debtors”) appeal an order of t he district

court reversing three orders of the bankruptcy

court that had required RFC Capital Corporation (“RFC”) to extend debtor-in-poss ession

financing wit hout any security or administrative priority. Agreeing with the district court

that RFC never agreed to such an obliga tion,

we affirm.

I.

RFC served as a primary lender to the debtors before and after they filed a bankruptcy petition in August 2000. When the debtors filed

the petition, RFC had a secured claim against

them for $7,655,173. 1 After the petition was filed, t he debtors could not obtain unsecured

credit for their ordinary ope rat ing expenses

under 11 U.S.C. § 364(a). In four debtor-inpossession financing orders ( “DIP orders”),

t he bankruptcy court therefore authorize d

additional credit from RFC to the debtors and

gave RFC administrative priority un d er 11

U.S.C. § 364(c)(1).

In March 2001, the bankruptcycourt entered a sal e order authorizing the debtors to

sell their assets to CCC Globalcom Corp., Inc.

(“CCCG”), for $500,000 in cashand the assumption of RFC’s pre-petition secured claim.

The sale order stated that RFC’s claims over

$7.5 millio n would be treated as unsecu r ed

claims. In three subsequent funding o rders,

the bankruptcy court ordered RF C to extend

post-petition credit to the debto rs and, more

importantly, held that the sale order overrode

the DIP orders and stripped these post-petition

l oans of their administrative priority stat us,

thereby making them general unsecured loans.

RFC appealed to the district co u rt, which

rev ersed the funding orders. In a short opinion, the district court concluded that the bankruptcy court had misinterpreted the plain language of the sale order. The district court held

that the sectio n of the sale order limiting

RFC’s secured claims to $7.5 million referred

only to RFC’s pre-petition loans, not its post- * Pu rsuant to 5 T H C IR

. R. 47.5, the court has

determined that this opinion sh ould not be published and is not precedent except under the limited

circumstances set forth in 5 TH C IR

. R. 47.5.4.

1 The debtors’ unsecured creditors committees

disputed the amount of this claim and filed an adversary proceeding in the bankruptcy court against

RFC.3

petition loans. The district court therefore reinstated the administrative priority for these

post-petition loans. The debtors appeal this

ruling. 2

II.

The parties agree on the basic stan dard of

review for a bankruptcy appe al. “The court

reviews the findings of fact by the bankruptcy

court under the clearly erroneous standard and

decides issues of law de novo.” H aber Oil Co.

v. Swi nehart ( In re Haber Oil Co. ), 12 F.3d

426, 434 (5th Cir. 1994).

The parties disagree, though, on whether

and to what deg ree we shoul d defer to the

bankrup t cy court’s interpretation of its own

orders. RFC contends that we should review

the bankruptcy court’s interpretation wholly

de novo without any deference. The debtors

think we should defer to the bankruptcy

court’s interpretation of its orders.

We stated the “ p roper reconciliation of

these two positions” in New Nat’l Gypsum Co.

v. Nat’l Gypsum Co. Settlement Trust ( In re

Nat’l Gy psum Co. )

, 219 F.3d 478, 484 (5th Cir. 2000). “[W]e should review de novo the

purely legal issues . . . but should defer to the

bankruptc y court’s reasonable resolution of

any ambiguities in the [orders].” Id. At the

same time, we explained that textual interpretati on of a court order is ultimately a legal

question, so the order “must be truly ambiguous . . . before we will defer.” Id.

As we explain below, the sale order is not

ambiguous, and “we will not defer to the bankruptcy co urt ’s interpretation of this unambiguous text.” I

d. at 489. We therefore review t he sale order and related documents

de novo

.

III.

The sale order is a consent order that we

review according to ordinary principles of contractual int erpretati on. U nited States v. ITT

Cont’l Baking Co.

, 420 U.S. 223, 236 (1975);

Eaton v. Courtaulds of N. Am., Inc.

, 578 F.2d

87, 90 (5th Cir. 1978). “Even in bankruptcy

proceedings, the courts of app e als look to

state law to decide contractual issues.” R iver

Prod. Co. v. Webb ( In re Topco, Inc. )

, 894

F.2d 727, 738 (5th Cir. 1990).

Texas contract law provides the guiding interp ret ive principles for this case. Most importantly, “[i]n the interpretation of contracts

the primary concern of the courts is to ascertain and to give effect to the intentions of the

parties as expressed in the instrument.” R&P

Enters. v. LaGuarta, Gavrel & Kirk, Inc.

, 596

S.W.2d 517, 518 (T e x. 1980). Moreover,

“[t]his court is bound to read all parts of the

contract together to ascertain the agreement of

the parties.

The contract must be cons i dered as a

whole.” F

orbau v. Aetna Life I

ns. Co. , 876

S.W.2d 132, 133 (Tex. 1994). If the contract 2 The debtors contend that the district court

lacked jurisdiction over RFC’ s appeal because

RFC did not file the appeal within ten days of the

entry of judgment. S ee F ED

. R. B ANKR

. P. 8002.

Although RFC filed a notice of appeal within ten

days of each of the three funding orders, the debtors argue that RFC really appeals the sale order,

not the funding orders.

T his argument is unpersuasive. RFC had no

reason to think that it would be required to lend to

the debtors on an unsecured basis without administrative pr iority until the bankruptcy court entered

the funding orders. RFC therefore timely appealed,

and the district court properly exercised jurisdiction over that appeal.4

incorporates othe r documents by reference, we

must examine those documents, as well, to ascertain the parties’ intent. O wen v. Hendricks

, 433 S.W.2d 164, 166 (Tex. 1968). Finally, a

con t ract contains an ambiguity only when its

t erms are objectively ambiguous, not si mply

because the pa r ties offer differing interpretations. Forbau , 876 S.W.2d at 134.

With these principles in mind, we conclude

that the sale order is unambiguou s and does

not strip RFC’s post-petition loans o f administrative priority status. The bankruptcy court

relied on paragraph 25 of the sale order t o

conclude that the sale order overrode the DIP

orders and reduced RFC’s post-petition loans

to general unsecured status. Paragraph 25

states in pertinent part that “[t]o the extent

that RFC asserts that its claim against the

Debtors is in excess of $7.5 millio n, RFC shall

be permitted to assert a deficiency claim

against the Debtors equal to the amount of its

alleged claim less $7.5 million (‘the RFC

Deficiency Clai m’). The RFC Deficiency

Claim, if allowed, shall only be allow ed as a

general unsecured claim.”

P aragraph 25 admittedly seems to lim i t

RFC to a secured claim of $7.5 millio n, but the

bankruptcy court failed to interpret paragraph

25 in the context of the contract as a whole.

In this context, paragraph 25 limit s only RFC’s

pre-petition secured claim, not its post-petition

administrative priority claim.

Uncertainty over the amount of RFC’s prepetition claim threatened the sale of the debtors’ assets to CCCG. The unsecured creditors

committees had filed an adversary proceeding

to challenge the amount of RFC’s pre-petition

secured claim. The parties set aside the dispute for the sake of consummating the sale.

Thus, paragraph 33 of the sale order’s finding of facts states that “[t]he claim of RFC is

fixed, f o r the purposes of this Sale Order

, at

$7,500,000” (emphasis added), without prejudicing in any way the adversary proceeding. 3

Likewise, section 2.2(c) of the Asset Purchase

Agr eement (“APA”), which the sale order

incorporates by reference, limit s RFC’s claim

to t he lesser of $7.5 million or the amount

determined in the advers ary proceeding.

Section 2.2(c) initially required the debtors to

request a final order from the bankruptcy court

approving a compromise amount between the

unsecured creditors committees and RFC.

Yet, once it appeared that the committees and

RFC would not settle the adve r sary proceeding, the debtors and CCCG amended section

2.2(c) expressly to disclaim an y prejudice to

the adversary proceeding.

These contractual

provisions demonstrate

that paragraph 25 refers only to RFC’s prepetition secured claim, not its post-petition administrative priority claim. Paragraph 25

merely carried out the deal-making compromise between the debtors and CCCG by allowing CCCG to purchase debtors’ assets without

the risk of an unexpectedly large claim by

RFC.

A supple ment al order concerning the procedures for the asset sale entered in April 2001

also evidences that paragraph 25 did not strip

RFC’s post-peti t i on loans of administrative

priority status. The order stated that CCCG’s

assumption of RFC’s pre-petition loans “in the

approximate amount of $7.5 millio n

. . . shall

3 The sale order contains two sets of sequen

tially numbered paragraphs. The first set expresses the bankruptcy court’s findings of facts, the second set its order. We cite the latter by paragraph

number alone and the former by paragraph number

and the phrase “findings of fact.”5

be treated as consideration to the Debtors’

estates in the amount of $7.5 millio n solely for

the p urposes of the sale of the Debtors’

asse t s ” (emphasis added). The order also

stated that “RFC shall comply with the various

debtor-in-possession orders entered in this

case.” Although not a part of the sale order,

this language from the supplemental order

d emo nstrates that the parties and the bankruptcy court believed that the DIP orders, i.e.,

RFC’s obligation to loan to the debtors and its

right to administrative priority, re m ained in

effect after the sale order.

The debtors also argue that paragraph 27 of

the sale order amends or vacates the DIP orders. Paragraph 27 states, in pertinent part,

that “all orders of this court

. . . shall be

deemed amended and/or vacated to the extent

requ ired to permit consummation of the Acquisition. To the extent such other . . . orders

are inconsistent with this Order or the [APA],

this Orde r and the [APA] shall in such cases

govern.” As we have explained, however, paragraph 25 una mbiguously covers only RFC’s

pre-petition claims, n ot i ts post-peti ti on

administrative priority claims. Thus, the sale

order and the DIP orders do not conflict, and

paragraph 27 does not amend or vacate the

DIP orders.

Finally, we note the improbable nature of

the debtors’ theory. A claim with administrative priority under § 364(c)( 1) is one of the

most valuable claims under th e Bankruptcy

Code; it takes priority over almost every other

kind of cla im, including administrative claims

under § 503(b) and § 507(b). A general unsecured cla im, o n t he other hand, is one of the

m ost worthless claims under the Code; unsecured credito rs o ften receive mere pennies

on the dollar, if that. RFC surely would not have agreed to surrender it s administrative priority claim for a

general uns ecured claim without some very

good reason, yet the debto r s have singularly

failed to adduce any such reason. This failure

strongly sug gest s that RFC did not, in fact,

ever surrender its administrative priority claim,

but rather lost the claim beca use of the

mistaken interpretation of the bankruptcy

court. As the district court explained, however, “[t]he bankruptcy court can n ot transform

the loans from an administrative expense into

an unsecured interest without the lender’s consent.” The district court properly held that the

loans made by RFC under the DIP orders have

administrative priority.

The judgm

ent of the di stri ct court, reversing the orders of the bankruptcy court, is

AFFIRMED.