Court Opinion

ID: 991091
Source: CourtListenerOpinion
Date Created: 2013-07-03 23:31:36.419846+00
Date Added: 2024-06-11T09:14:40.790851
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: SHENANDOAH NURSING HOME
PARTNERSHIP,
Debtor.

CONTINENTAL SECURITIES
CORPORATION,                                                        No. 96-1533
Creditor-Appellant,

v.

SHENANDOAH NURSING HOME
PARTNERSHIP,
Debtor-Appellee.

Appeal from the United States District Court
for the Western District of Virginia, at Harrisonburg.
James H. Michael, Jr., Senior District Judge.
(CA-95-81-H, BK-94-481-5-WA-11)

Argued: December 2, 1996

Decided: December 24, 1996

Before RUSSELL, MICHAEL, and MOTZ, Circuit Judges.

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Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Joseph J. Wielebinski, MUNSCH, HARDT, KEPF,
HARR & DINAN, P.C., Dallas, Texas, for Appellant. William Enten-
mann Shmidheiser, III, WHARTON, ALDHIZER & WEAVER,
P.L.C., Harrisonburg, Virginia, for Appellee. ON BRIEF: Stephen C.
Stapleton, MUNSCH, HARDT, KEPF, HARR & DINAN, P.C., Dal-
las, Texas; Augustus C. Epps, Jr., Andrew J. Dolson, CHRISTIAN &
BARTON, L.L.P., Richmond, Virginia, for Appellant.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Continental Securities Corporation ("CSC") appeals the district
court's order affirming the bankruptcy court's confirmation of Shen-
andoah Nursing Home's reorganization plan.

Shenandoah Nursing Home Partnership was formed on April 3,
1986 to construct, own, and operate a nursing home in Fishersville,
Virginia. The partnership had difficulty gaining funding or complet-
ing the construction and in June of 1990 was forced to bring in Ray-
mond Eavers as a partner. Soon thereafter, in December of 1990, the
partnership borrowed $2,339,900 from Continental Securities Corpo-
ration ("CSC") at an interest rate of 11.25% per annum through the
date of final endorsement, and 11% per annum thereafter. The loan
was secured by a Deed of Trust on the nursing home. The loan also
included a so-called "lock-out" provision, which stated that
"[p]repayment in whole or in part is prohibited prior to December 1,
2001." The lock-out provision included no stated penalty for pre-
payment.

On February 9, 1991 one of the Shenandoah partners, Byron Sam-
ple, died. The partnership elected not to continue, and under Virginia
law the partnership dissolved. But, the "winding up" process was con-
tentious, and during state court proceedings the remaining partners
decided that they could not settle all of Shenandoah's obligations

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without filing for bankruptcy in federal court. On July 1, 1994 Shen-
andoah filed a voluntary petition for bankruptcy under Chapter 11.
See 11 U.S.C. § 1101 (1994) et seq. On July 31, 1995 the bankruptcy
court entered an order confirming the second amended plan of reorga-
nization ("plan"). The plan "accelerated" CSC's loan: CSC was to be
paid the principal of the loan, as well as all interest accrued between
the filing of the Chapter 11 petition and the plan's confirmation date.

CSC strongly objected to the plan because it violated the "lock-out"
provision in the loan, and did not recompense CSC for its lost future
interest, or grant any penalty or damages for the violation of the lock-
out provision. On this basis, CSC moved for reconsideration and a
stay before the bankruptcy court. After the bankruptcy court denied
CSC's motions, CSC appealed to the district court. On September 11,
1995, the district court also denied CSC's motion for a stay.
Continental Sec. Corp. v. Shenandoah Nursing Home , 188 B.R. 205
(W.D. Va. 1995). On October 3, 1995, we denied Continental's appli-
cation for a writ of mandamus. In re Continental Sec. Corp., No. 95-
2683 (4th Cir. Oct. 3, 1995). The next day, CSC sent an accounting
to Shenandoah requesting payment under the plan for the principal
and the accrued interest under the loan. Shenandoah paid in full the
amount requested by CSC.

CSC then appealed the confirmation of the plan to the district
court. On March 8, 1996, the district court upheld the bankruptcy
court's order confirming the plan. Continental Sec. Corp. v. Shenan-
doah Nursing Home, 193 B.R. 769 (W.D. Va. 1996). CSC has now
appealed to this court.

The bulk of CSC's claims involve its loss of future interest under
the loan. CSC asserts that the bankruptcy court did not have authority
to confirm a reorganization plan that violated the lockout provision,
and that even if it could, the court erred by holding that CSC was not
an "impaired" creditor under the plan. CSC argues that if the bank-
ruptcy court had correctly held it was an "impaired" creditor the plan
could not have been confirmed under 11 U.S.C. § 1129 (1994)
because no impaired creditor accepted the plan. Alternatively, CSC
maintains that the plan failed under § 1129 because it was filed in bad
faith, and violated federal law. Both the bankruptcy court and the dis-
trict court rejected these arguments.

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We have reviewed the record carefully and, after having consider-
ing the extensive briefs and arguments of counsel, we agree with the
district court's thorough opinion with respect to the issues before us.
Therefore the judgment of the district court is hereby

AFFIRMED.

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