Court Opinion

ID: 31868
Source: CourtListenerOpinion
Date Created: 2010-04-25 18:46:44+00
Date Added: 2024-06-11T11:50:02.700329
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
               IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT                  June 11, 2003

                                                         Charles R. Fulbruge III
                                                                 Clerk
                           No. 03-20121
                         Summary Calendar

IN THE MATTER OF: DIGICON, INC.,
also known as VERITAS DGC, INC.,

                                                              Debtor,

0CEAN MARINE SERVICES PARTNERSHIP
NO. 1; OCEAN MARINE SERVICES, INC.,

                                                         Appellants,

versus

DIGICON, INC., also known as
VERITAS DGC, INC.,

                                                            Appellee.

                      --------------------
          Appeal from the United States District Court
               for the Southern District of Texas
                         (H-02-CV-2191)
                      --------------------

Before DAVIS, WIENER, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:*

     Appellants Ocean Marine Services Partnership No. 1 and Ocean

Marine Services, Inc. (collectively, “Ocean Marine”) appeal from

the Bankruptcy Court’s Final Order of April 1, 2002, as affirmed by

the district court on appeal, granting the Debtor’s motion to show

cause and enjoining Ocean Marine from attempting to collect from

     *
        Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
Veritas any debt relating to the Appellant partnership.               We affirm

the Bankruptcy Court for essentially the same reasons as did the

district court in its patient, exhaustive, and eminently correct

Memorandum and Order of December 16, 2002.

       Having carefully reviewed the record on appeal, including the

writings of the Bankruptcy Court and the district court, and having

considered the arguments of appellate counsel as set forth in their

respective briefs, we conclude that any further writing by this

court would merely be duplicative of the explanations set forth in

the opinions of the Bankruptcy Court and the district court —— and

thus   a   waste    of   judicial   resources.     Instead,     we    adopt   the

Memorandum    and    Order   of   the   district   court   in   its   entirety,

incorporate it by reference, and append a copy hereto.

AFFIRMED.

                                        2
                 IN THE UNITED STATES DISTRICT COURT

                 FOR THE SOUTHERN DISTRICT OF TEXAS

                           HOUSTON DIVISION

OCEAN MARINE SERVICES, INC.,      §

and OCEAN MARINE SERVICES         §

PARTNERSHIP NO. 1,                §

                                  §

     Appellants,                  §

                                  §

v.                                §     CIVIL ACTION NO. H-02-2191

                                  §

DIGICON, INC.                     §

N/K/A VERITAS DGC, INC.,          §

                                  §

     Appellee.                    §

                        MEMORANDUM AND ORDER

     Pursuant to 28 U.S.C. § 158, Appellants Ocean Marine Services

Inc. and Ocean Marine Services Partnership No. 1 appeal the April

1, 2002, Order of the Bankruptcy Court for the Southern District of

Texas, which granted Debtor Digicon, Inc.’s (n/k/a Veritas DGC,
Inc.) Motion to Show Cause why Ocean Marine Services Inc. and Ocean

Marine Services Partnership No. 1 should not be held in contempt

and enjoined Ocean Marine Services Inc. and Ocean Marine Services

Partnership No. 1 “from attempting to collect on any debt relating

to Ocean Marine Services Partnership No. 1 from Veritas DGC, Inc.”

After having carefully reviewed the record and the applicable law,

the Court concludes that the Bankruptcy Court’s April 1, 2002,

Order should be AFFIRMED.

                      I.    Procedural History

     On January 31, 1990, Digicon, Inc. and Digicon Marine Inc., a

wholly owned subsidiary of Digicon, Inc., filed for bankruptcy

under Chapter 11.   A Second Amended Plan of Reorganization was

approved by the Bankruptcy Court on June 7, 1991, and such plan was

consummated on April 27, 1992.   A Final Closing Order nunc pro tunc

was issued by the Bankruptcy Court on July 31, 1996, reflecting a

closing date for the Chapter 11 proceeding of December 31, 1995.

     In June 1999, Ocean Marine Services, Inc. (“OMS”) and Ocean

Marine Services Partnership No. 1 (“the Partnership”) filed suit

against Veritas DGC, Inc., the successor in interest to Digicon

Marine Inc. and Digicon, Inc., in state district court.     In that

suit, OMS and the Partnership sought to compel Veritas, as the

successor in interest to Digicon, to eliminate the deficit in

                                  4
Digicon’s** capital account in the Partnership, a partnership which

was formed in 1975 between OMS and Digicon Marine, Inc., and which

ceased doing business in 1989.        In response, Veritas filed in

Bankruptcy Court a Motion to Show Cause why OMS and the Partnership

should not be held in contempt.   On April 1, 2002, after a hearing,

the Bankruptcy Court granted Veritas’s motion and enjoined OMS and

the Partnership from attempting to collect from Veritas any debt

related to the Partnership.     In so ruling, the Bankruptcy Court

entered the following written findings of fact and conclusions of

law:

            Ocean Marine Services Partnership No. 1 (“the
       Partnership”) was formed by written partnership agreement
       between Ocean Marine Services, Inc. and Digicon Marine,
       Inc. (“Digicon”) on or about April 17, 1975. Digicon was
       a wholly owned subsidiary of Digicon, Inc. (“Debtor”).

            Upon formation of the Partnership, Digicon made a
       $2.7 million capital contribution and Ocean Marine
       Services, Inc. contributed $27,000.      The Partnership
       owned and operated commercial ocean tug boats, the
       acquisition of which was financed by MARAD and secured by
       the vessels owned by the Partnership. At some point, the
       Partnership ceased payment of its indebtedness and MARAD
       began foreclosing on the vessels. On July 31, 1989, the
       Partnership ceased its business operations since at that
       time, all of its vessels had been either sold and/or
       foreclosed on by MARAD. Also at that time, Ocean Marine
       Services, Inc., the managing partner, began the winding
       up [of] the Partnership’s affairs which included: (1) the
       pending recovery of more than $500,000 in casualty
       insurance claims filed in 1985; (2) the audit of the
       Partnership by the Internal Revenue Service; and (3) the
       liability of the Partnership and its partners to MARAD
       for deficiencies after the foreclosure of the liens
       against the vessels. The Partnership Agreement provided

       **
       In July 1994, Digicon Marine, Inc. was merged into Digicon,
Inc., and no longer existed as a separate corporate entity.

                                  5
that upon completion of the winding up of the
Partnership, if there was a deficit in the capital
account of a partner, such partner would have to
contribute cash necessary to eliminate the deficit. See
Partnership Agreement § 10.04.

     Both Digicon, Inc. and Digicon Marine Services, Inc.
(along with other Digicon, Inc. subsidiaries) filed
Chapter 11 bankruptcy petitions on January 31, 1990, and
the cases were jointly administered.       Neither Ocean
Marine Services, Inc. nor the Partnership filed any
claims in the bankruptcy cases, nor did either entity
have   any   opposition   to   any   proposed   plan   of
reorganization.       The   Second   Amended    Plan   of
Reorganization was approved by the Court through
confirmation on June 7, 1991, discharging all prepetition
claims and providing for the rejection of all unassumed
executory contracts. Debtors filed a Post-Confirmation
Report representing full consummation of the Plan on
April 27, 1992.

      On February 21, 1991, the Internal Revenue Service
completed its audit of the Partnership’s final tax return
with no changes or adjustments made. In 1991, MARAD sued
the Partnership for recovery of deficiencies in the
United States District Court for the Southern District of
Texas, but the lawsuit was settled and subsequently
dismissed on July 16, 1992. Finally, on August 18 1997,
Ocean Marine Services, Inc, and the Partnership received
notice that the last of the insurance claims was being
paid.

     In the meantime, Digicon was merged into Debtor and
Digicon ceased as a corporate entity as of July 22, 1994.
Thereafter, Debtor was merged into Veritas DGC, Inc.
(“Veritas”).    Ocean Marine Services, Inc. and the
Partnership   have   notified   Veritas  of   the   final
dissolution of the Partnership and they have demanded
Veritas (as putative partner) eliminate its deficit
account in the Partnership. Veritas has refused, thus
leading to the underlying dispute.

     Veritas argues that the confirmed Chapter 11 Plan of
Reorganization discharged any monetary liability to Ocean
Marine Services, Inc. and the Partnership. Ocean Marine
Services, Inc. and the Partnership argue: (1) The
Partnership Agreement was an executory contract subject
to the confirmed Second Amended Plan of Reorganization
and after the Plan was fully consummated, Veritas acted

                           6
to assume it position of partner with all rights and
obligations arising under the Partnership Agreement; and
(2) Neither Ocean Marine Services, Inc. nor the
Partnership had a prepetition claim against Debtor as a
partner to eliminate any deficit capital account in the
Partnership since the claim did not arise until all
matters of dissolution had been settled and all
allocations of income, losses and deductions had been
allocated to the partners’ respective capital accounts in
accordance with the Partnership Agreement.

     With regard to whether the Partnership Agreement was
an executory contract, the court finds that it was not.
As of the date of filing of Debtor’s bankruptcy case,
[January] 31, 1990, the Partnership had already gone into
dissolution pursuant to Article X, § 10.01 of the
Partnership Agreement. There were no other performance
obligations under the Partnership Agreement other than
the winding up of the Partnership’s affairs. However,
even if the Partnership Agreement was executory in
nature, both Ocean Marine Services, Inc. and the
Partnership agree that the agreement was rejected. See
Brief of Ocean Marine Services, Inc. and the Partnership
on Accrual of Course of Action for Elimination of Deficit
Capital Account in the Partnership (Docket #1162).

      The next issue that arises is whether the
Partnership was revived or reaffirmed by Veritas’ or
Debtor’s acceptance of the insurance proceeds after Plan
confirmation. In other words, did the distribution of
insurance proceeds to the partners in proportion to their
historical capital accounts after dissolution and
rejection by the debtor serve to “revitalize” the defunct
and dissolved partnership?       Based on the admissions,
stipulations, and evidence (including correspondence
between counsel and/or parties during the post-
confirmation    time   period),    the   court  finds  the
distribution to be a fair settlement under the
circumstances.     There was no intent to recreate or
revitalize the old partnership or create a new business
entity. TEX. REV. PARTNERSHIP ACT, Article 6132b-2.03. See
Federal Sav. & Loan Ins. Corp. v. Griffin, 935 F.2d 691
(5th Cir. 1991) (noting that intent to form a partnership
is most important in determining whether a partnership
exists).

     Because the court finds that the Partnership
Agreement was not revitalized or reaffirmed, the court
must determine when the claim to eliminate the deficit

                            7
capital account of Ocean Marine Services, Inc. and the
Partnership actually arose.

        Pursuant to 11 U.S.C. § 101(5) a claim is defined
as a:

        (A)   right to payment, whether or not such
        right is reduced to judgment, liquidated,
        unliquidated, fixed, contingent, matured,
        unmatured,    disputed,  undisputed,    legal,
        equitable, secured or unsecured; or
        (B) right to an equitable remedy for breach
        of performance if such breach gives rise to a
        right of payment, whether or not such right to
        an equitable remedy is reduced to judgment,
        fixed,    contingent,   matured,    unmatured,
        disputed, undisputed, secured or unsecured.

     The term “claim” was intended to be defined very
broadly so that “all legal obligations of the debtor, no
matter how remote or contingent will be able to be dealt
with in the bankruptcy case.” H.R. Rep. No. 595, 95th
Cong., 1st Sess. 309 (1977), reprinted in 1978
U.S.C.C.A.N. 5787, 5963, 6266; S.Rep. No. 989, 95th
Cong., 2d Sess. 21-22 (1978), reprinted in 1978
U.S.C.C.A.N. 5787, 5808. The Fifth Circuit has adopted
a very broad definition of “claim” essentially adopting
the prepetition relationship test used in In re Piper
Aircraft Corp., 162 B.R. 619 (Bankr. S.D. Fla. 1994),
aff’d, 168 B.R. 434 (S.D. Fla. 1994), and in In re
National Gypsum Co., 139 B.R. 397 (N.D. Tex. 1992). See
Lemelle v. Universal Mfg. Corp., 18 F.3d 1268 (5th Cir.
1994). In both Piper and National Gypsum, the courts
held that if the claimant has some sort of relationship
with the Debtor at the time the wrongful conduct
occurred, the claim arises at the time of such conduct.
See Piper, 162 B.R. at 627 (holding that to have a claim,
“there must be some prepetition relationship, such as
contact, exposure, impact, or privity, between the
debtor’s prepetition conduct and the claimant); National
Gypsum (holding that claims include “prepetition conduct
that can be fairly contemplated by the parties at the
time of the Debtor’s bankruptcy).

     In the case at bar, Ocean Marine Services, Inc. and
the Partnership’s claim arose from the Debtor’s allegedly
negative capital account. This negative capital account
existed on the date the bankruptcy was filed. The exact

                              8
     amount of this capital account may not have been known,
     however, the potential claim did exist and claimants
     could have and should have filed a contingent claim.
     Again, the Partnership only had three things to do to
     wind up partnership affairs: (1) the pending recovery of
     more than $500,000 in casualty insurance claims filed in
     1985; (2) the audit of the partnership by the IRS; and
     (3) the liability of the partnership and its partners to
     MARAD for deficiencies after the foreclosure of the liens
     against the vessels. The claim for accounting and the
     possibility of the receipt of insurance proceeds existed
     prepetition and should have been filed as a contingent or
     unliquidated claim. The confirmed Second Amended Plan of
     Reorganization   discharged   all   prepetition   claims.
     Therefore, the claim is barred. Veritas now enjoys all
     rights of the Debtor under its confirmed plan. Veritas
     should take (and maintain) its interest in the property
     free of claims of creditors and former partners.

Supplemental Findings of Fact and Conclusions of Law on Debtor’s

Motion to Show Cause (Bankruptcy Document No. 1165).

                           II.   Issues

     Appellants set forth five issues for review in this appeal:

     1.   The Partnership Agreement was an executory contract
          on the date the bankruptcy petition was filed, and
          the bankruptcy Court erred in holding it was not an
          executory contract.

     2.   The Partnership Agreement was an executory contract
          that was neither listed in the bankruptcy; assumed
          by the Debtor in the Plan of Reorganization; nor
          rejected   by   the   Debtor   in   the   Plan   of
          Reorganization, as confirmed, and the Bankruptcy
          Court erred in holding that the Partnership
          Agreement had been rejected.

     3.   The Bankruptcy Court erred in holding that the
          obligations of the debtor/partner, Veritas, as
          successor-in-interest to the debtor/partner, to
          eliminate its deficit capital account, was a claim
          of the Partnership and OMS that accrued as of the
          date of the filing of the petition in bankruptcy.

                                 9
     4.     The Bankruptcy Court erred in holding that Veritas
            has an interest in, and right to, a share of the
            casualty insurance proceeds of the Partnership
            independent of, and without claim of, OMS and the
            Partnership.

     5.     Alternatively, if Veritas has no obligation to
            eliminate its deficit capital account to the
            Partnership then it has no right to participate in
            the dissolution/liquidation distribution as a
            partner, and the Partnership and OMS are entitled
            to pursue their claim against Veritas for the
            recovery of the proceeds distributed to Veritas as
            a partner subject to its elimination of its capital
            account.

Appellant’s Brief (Document No. 6) at 7.

                          III.   Discussion

     Bankruptcy Rule 8013 sets forth the standard of review of

orders and judgments issued by the bankruptcy courts.     Rule 8013

provides:

     On an appeal the district court or bankruptcy appellate
     panel may affirm, modify, or reverse a bankruptcy judge’s
     judgment, order, or decree or remand with instructions
     for further proceedings. Findings of fact, whether based
     on oral or documentary evidence, shall not be set aside
     unless clearly erroneous, and due regard shall be given
     to the opportunity of the bankruptcy court to judge the
     credibility of the witnesses.

Moreover, a district court reviews a bankruptcy court’s legal

conclusions de novo.   Matter of Foster Mortgage Corp., 68 F.3d 914,

917 (5th Cir. 1995).     A finding of fact premised on an improper

legal standard or on a proper legal standard improperly applied

“loses the insulation of the clearly erroneous rule.”     Matter of

                                  10
Missionary Baptist Foundation of America, 818 F.2d 1135, 1142 (5th

Cir. 1987) (citations omitted).

A.    The Bankruptcy Court did not err in concluding that the
      Partnership Agreement was not an executory contract.

      Under the Bankruptcy Code, executory contracts of the debtor

may be assumed or rejected.              11 U.S.C. § 365(a) (“Except as

provided    for   in    sections   765    and   766    of   this   title   and   in

subsections (b), (c), and (d) of this section, the trustee, subject

to   the   court’s     approval,   may   assume   or    reject     any   executory

contract or unexpired lease of the debtor.”)                While the Bankruptcy

Code does not define “executory contract”, the Fifth Circuit has,

in the bankruptcy context, considered a contract to be executory if

“performance remains due to some extent on both sides” and “if[,]

at the time of the bankruptcy filing, the failure of either party

to complete performance would constitute a material breach of the

contract, thereby excusing the performance of the other party.”

Matter of Murexco Petroleum, Inc., 15 F.3d 60, 62-63 (5th Cir.

1994).     A contract is not executory if the only performance

required by one side is the payment of money.                  In re Placid Oil

Co., 72 B.R. 135, 138 (Bankr. N.D. Tex. 1987); see also In re Cox,

179 B.R. 495, 498 (Bankr. N.D. Tex. 1995); In re MCorp Financial,

Inc., 122 B.R. 49, 52 (Bankr. S.D. Tex. 1990).

      The Bankruptcy Court’s determination that the Partnership

Agreement was not executory is not a clearly erroneous finding of

fact or an erroneous conclusion of law.           The parties do not dispute

that the Partnership ceased doing business and was dissolved in

                                         11
1989, before Digicon filed for bankruptcy.             Under the terms of the

Partnership         Agreement,   OMS,   as   the   managing     partner   of   the

Partnership, was required to wind up the Partnership’s affairs.

This included, as found by the Bankruptcy Court, completion of an

IRS audit, resolving the deficiencies owed by the Partnership to

the mortgagor of the Partnership’s vessels, and pursuing pending

casualty         insurance   claims.     Digicon     had   no    countervailing

obligations to perform upon the partnership’s dissolution under the

terms of the Partnership Agreement.           Digicon’s only obligation was

to eliminate the deficit in its capital account, essentially an

obligation to pay money. See Appellant’s Brief (Document No. 6) at

23.***

         Because at the time of Digicon’s bankruptcy filing Digicon’s

only remaining obligation under the terms of the Partnership

Agreement was to pay money towards any negative capital account

         ***
               In their brief, Appellants state:

              Each of the partners, as of the date of the filing
         of the petition in bankruptcy, had significant, material
         obligations yet to be performed under the Partnership
         Agreement.     OMS had to settle the audit of the
         Partnership by the Internal Revenue Service,; prosecute
         the defense of the litigation against the Partnership and
         the partners brought by MARAD on the deficiency of over
         $8,219,825.00; to secure the payment and receipt of all
         outstanding    accounts    receivable,   including    the
         outstanding casualty insurance proceeds; account for all
         assets of the Partnership upon liquidation, including the
         recovery of partner deficit capital accounts; and pay the
         liquidation distribution due to the partners pursuant to
         the Partnership Agreement. The debtor/partner had the
         obligation, upon final dissolution and liquidation, to
         eliminate its deficit capital account in the Partnership.

                                        12
that may have existed, the contract was not executory.                   Thus, the

Bankruptcy Court did not err in so finding.

B.    The Bankruptcy Court did not err in concluding that the
      Partnership Agreement was rejected.

      Notwithstanding the finding that the Partnership Agreement was

not   executory     in     nature,    the      Bankruptcy    Court    determined,

alternatively,      that    even     if   Partnership       Agreement    could       be

considered    executory,      it   was    an    executory    contract    that    was

rejected by the bankruptcy trustee.                 That finding is also not

clearly erroneous.

      In Defendants’ Response to the Debtor’s Motion to Show Cause,

OMS and the Partnership stated on numerous occasions that the

Debtor   (Digicon    and     Digicon      Marine,   Inc.)     had    rejected    the

Partnership Agreement. See Defendants’ Response to Debtor’s Motion

to Show Cause (Bankruptcy Document No. 1147) at 4 (“The executory

Partnership Agreement had been rejected by Debtor as a result of

the confirmation of the Second Amended Plan of Reorganization.”);

Defendants’    Reply     Brief     (Bankruptcy      Document    No.     1151    at   1

(“Digicon Marine, Inc. rejected its interests and obligations under

the Partnership Agreement pursuant to the confirmation of the

Second Amended Plan of Reorganization.”).                   Such statements, as

found by the Bankruptcy Court, constitute admissions by OMS and the

Partnership that the Partnership Agreement was rejected.                  Based on

OMS’s and the Partnership’s admissions, the Bankruptcy Court did

                                          13
not clearly err in finding that the Partnership Agreement, to the

extent it could have been considered executory, was rejected.

       In addition to the admissions by OMS and the Partnership that

the Partnership Agreement had been rejected, the bankruptcy record

shows that as part of the Second Amended Plan of Reorganization,

which was approved by the Bankruptcy Court, all executory contracts

that    had    not   been   specifically    assumed    by   the   trustee    were

rejected.      The Second Amended Plan of Reorganization provided in

this respect:

       Section 11.2.      Other Executory Contracts.       Those
       executory contracts and unexpired leases listed on the
       schedule of Executory Contracts Affirmed (filed with the
       Disclosure Statement, and hereby incorporated into this
       Plan by reference) are hereby assumed.         All other
       executory contracts and unexpired leases are rejected.
       All damages, if any, suffered by any Person as party to
       any such executory contract or unexpired lease rejected
       hereby shall be Class 7.1, 7.2, 7.3, 7.8, 8.1, 8.2 or 8.3
       Claims in accordance with the criteria for such Class
       membership, to the extent such Claims are filed before
       the Rejection Damages Bar Date and are allowed by the
       Court.

Second Amended Plan of Reorganization (Bankruptcy Document No. 677)

at 30.

       While Appellants cite and rely on the case of Matter of

O’Connor, 258 F.3d 392 (5th Cir. 2001) for the proposition that

boilerplate language rejecting all unassumed executory contracts is

insufficient as a matter of law to support the Bankruptcy Court’s

conclusion that the Partnership Agreement was rejected, in O’Connor

the    issue   was   not    whether   boilerplate     language    in   the   plan

rejecting executory contracts was enforceable, but whether the

                                       14
boilerplate language assuming executory contracts was enforceable.

The Fifth Circuit held: “The bankruptcy court’s interpretation is

consistent with the conclusion by other courts that an executory

contract may not be assumed either by implication or through the

use of boilerplate plan language.”       Id. at 401 (emphasis in

original).   No parallel holding has been made by any Court in this

Circuit relative to the rejection of executory contracts; and, in

fact, other courts have specifically upheld the rejection of

executory contracts and unexpired leases by use of such boilerplate

plan language.   See e.g., In re Victory Markets, 221 B.R. 298, 303

(2nd Cir. BAP 1998).

     Given the admissions of OMS and the Partnership as to the

rejection of the Partnership Agreement, as well as terms of the

Second Amended Plan of Reorganization, the Bankruptcy Court did not

err in concluding that the Partnership Agreement, if it were

construed as an executory contract, was rejected.

C.   The Bankruptcy Court did not err in concluding that the claim
     related to the deficit capital account arose pre-petition, and
     should have been asserted by OMS and the Partnership in the
     bankruptcy proceeding.

     Given that the Partnership Agreement was not an executory

contract, or alternatively that the Partnership Agreement was

rejected, the Bankruptcy Court determined, properly, that OMS and

the Partnership, given their actual knowledge of the bankruptcy

proceedings, were required to file a claim against the bankruptcy

                                15
estate          for   any    amounts        that   Digicon    owed,     pursuant     to    the

Partnership           Agreement,       to    offset     the   deficit    in   its    capital

account.          OMS and the Partnership claim that they were not given

formal notice of the bankruptcy proceedings, and that Digicon

failed to list its interest in the Partnership, failed to list OMS

as   a     creditor         of   the   bankruptcy        estate,   failed     to    list   the

Partnership’s liabilities, and failed to list the Partnership as a

contractual obligation.                The Bankruptcy Court found, however, and

the record fully supports the finding, that OMS and the partnership

had actual notice of the Bankruptcy proceedings, that no claim was

asserted by either OMS or the Partnership against the bankruptcy

estate, and that neither OMS or the Partnership objected to the

administration of the bankruptcy estate or to the terms of the

Second Amended Plan of Reorganization.

         OMS and the Partnership urge in this appeal, as they did

before the Bankruptcy Court, that their actual knowledge of the

bankruptcy proceedings did not compel them to file a claim in the

Bankruptcy Court because they had no claim against Digicon for the

deficit in Digicon’s capital account until after OMS wound up all

other affairs of the partnership.                       OMS and the Partnership argue,

based on Texas law and the language of the Partnership Agreement,****

         ****
        Partnership Agreement, Article X § 10.04: “Elimination of
Deficit in Capital Account. If, after completion of the matters
discussed in Section 10.02 and 10.03, there is a deficit in the
capital account of either Partner, the Partner shall forthwith
contribute cash to the Partnership in the amount necessary to
eliminate such deficit.”

                                                   16
that their claim against Digicon did not arise until (i) after the

IRS had completed the audit of the partnership (February 21, 1991),

(ii) after the partnership’s debt on the mortgage deficiencies had

been settled (July 16, 1992), and (iii) after the amounts available

from the partnership’s pending casualty insurance claims were

recovered      (August   1997).   By    time   all   of   those   events   had

transpired, the Bankruptcy case had been closed, and thus, OMS and

the Partnership argue, their claim is a post-petition claim for

which they can still recover.

     The Bankruptcy Code defines a claim against the bankruptcy

estate quite broadly, and includes contingent and unliquidated

claims.      OMS’s and the Partnership’s claim against Digicon for the

deficit in Digicon’s capital account, even though it may not have

accrued under Texas law or the Partnership Agreement when Digicon

filed for bankruptcy, was nonetheless a claim that could have and

should have been anticipated.          When Digicon filed for bankruptcy

protection, the Partnership already had been dissolved and there

was a significant deficit in Digicon’s capital account that was

well known to OMS and the Partnership.               See Appellant’s Brief

(Document No. 6) at 14.*****      Because OMS and the Partnership well

     *****
             Appellants state in their Appellate Brief:

     Throughout the period from April, 1975 to July 31, 1989,
     the partnership operated at a loss and DMI received 99%
     of the partnership losses and 99% of the investment tax
     credits, for income tax purposes. OMS, pursuant to the
     agreement, was allocated 1% of the partnership losses and
     investment tax credits.     As a result, DMI received
     $14,137,267.00, more in tax loss benefits than did OMS

                                       17
knew that a deficit existed in Digicon’s capital account when

Digicon filed for bankruptcy, for purposes of the Bankruptcy Code

OMS and the Partnership at that time had a “claim” against the

bankruptcy estate within the meaning of § 101(5).   The Bankruptcy

Court did not clearly err in so finding or err, as a matter of law,

in so concluding.

D.   Issues related to the Debtor’s acceptance of the insurance
     proceeds were waived by OMS and the Partnership when they were
     not raised in the Bankruptcy Court.

     In their final two appellate issues, OMS and the Partnership

maintain that the Bankruptcy Court erred in concluding that Veritas

was entitled to the insurance proceeds without regard to its

failure to eliminate the deficit in Digicon’s capital account in

the Partnership.    OMS and the Partnership make their argument as

follows:

          Veritas, as the successor-in-interest to           the
     debtor/partner DMI, had no claim or property right to   the
     casualty insurance proceeds of the Partnership.         The
     subject casualty insurance proceeds were assets of      the
     Partnership. A partner has no claim to assets of        the
     Partnership   independent   of   its  interest   in     the
     Partnership.

          Veritas had no claim to the insurance proceeds
     independent of its interest in the Partnership and had no
     right thereto without the attendant obligation imposed by

     over the same period. This disproportionate allocation
     of tax benefits to DMI resulted, as of July 31, 1989, as
     reported   on  the   Partnership’s   1988  fiscal   year
     partnership return of income, in the capital account of
     DMI being reduced to a negative sum, (($11,531,528.00).

                                 18
     the Partnership to eliminate its capital account deficit.
     It was entitled to a liquidation distribution pursuant to
     Article X, Section 10.05 of the Partnership Agreement
     only after satisfaction of its capital account deficit
     cash contribution mandated by Section 10.04. As property
     of the Partnership, Veritas had no right to the insurance
     proceeds.    Veritas only had a right to receive a
     liquidation distribution that would necessarily have
     included the insurance proceeds pursuant to the
     Partnership Agreement as a partner in the Partnership.
     Veritas had absolutely no right to claim the benefits of
     its interest in the Partnership without its attendant
     obligations, and the obligation to eliminate the capital
     account deficit was a condition precedent to the right to
     receive a liquidation distribution.

                                   * * *

          In the alternative, as above-stated, Veritas has no
     interest in the casualty insurance proceeds of the
     Partnership other than as a partner in the Partnership.
     The proceeds are Partnership assets, and Veritas has no
     independent property interest in them as a matter of law.
     Veritas would only be entitled to the proceeds as a
     partner through a liquidation distribution pursuant to
     the winding up of the Partnership in accordance with the
     terms of the Partnership Agreement.       That right is
     subject to the requirement that the partner satisfy its
     deficit capital account with the Partnership.

Appellants’ Brief (Document No. 6) at 31-33 (record references and

citations omitted).

     Neither issue raised by OMS and the Partnership relative to

the insurance proceeds was presented to the Bankruptcy Court for

consideration in the manner set forth in this appeal.           Rather, the

record shows that OMS and the Partnership argued to the Bankruptcy

Court that Digicon had rejected the Partnership Agreement, and that

Veritas, by virtue of its acceptance of the casualty insurance

proceeds,   made   itself   a   putative   partner   in   the   Partnership

                                    19
Agreement.       Veritas argues that the issues presented herein,

because they were not presented to the Bankruptcy Court, have been

waived for purposes of this appeal.

     Issues and arguments that are not raised with the bankruptcy

court cannot be pursued in an appeal of a bankruptcy court’s order.

In Matter of Fairchild, 6 F.3d 1119, 1128 (5th Cir. 1993), the Fifth

Circuit made it clear that

     [c]iting cases that may contain a useful argument is
     simply inadequate to preserve that argument for appeal;
     “to be preserved, an argument must be pressed, and not
     merely intimated.” In short the argument must be raised
     to such a degree that the trial court may rule on it[.]

Given the new position adopted on appeal by OMS and the Partnership

relative   to     Veritas’s      acceptance    of   the    casualty     insurance

proceeds, a position and argument that was not raised in the

Bankruptcy      Court,   these     issues,    identified     by   OMS   and   the

Partnership in their Brief as issues 4 and 5 (or D and E) have been

waived for purposes of this appeal.            Fairchild, 6 F.3d at 1128.

     Even if the issues had not been waived, the Bankruptcy Court

did not err in concluding that Veritas, as the Debtors’ successor-

in-interest, enjoys all the rights and benefits of the Debtors

under the terms of the Second Amended Plan of Reorganization,

including the rejection of the Partnership Agreement, and the

discharge of any debts or obligations arising under the Partnership

Agreement.      As set forth above, any obligation on the part of

Digicon to eliminate the deficit in its capital account in the

                                       20
Partnership was a “claim” against the bankruptcy estate within the

meaning of 11 U.S.C. § 101(5) when Digicon filed for bankruptcy.

OMS’s and the Partnership’s failure to assert their claim against

the bankruptcy estate, as well as the terms of the Second Amended

Plan of Reorganization, operated as a discharge of that obligation.

See   Second    Amended    Plan     of        Reorganization,   Section     2.11

(classifying claims held by Digicon, each Debtor Subsidiary and

each Non-Debtor Subsidiary as a Class 11 Claim); Section 3.11

(providing for the cancellation of Class 11 Claims); Section 15.7

(general discharge of debtors).                Veritas’s acceptance of the

casualty insurance proceeds, for whatever reason and in whatever

capacity, did not and could not revive a debt that had already been

discharged.     As such, the Bankruptcy Court’s determination that

Veritas could take and maintain its interest in the casualty

insurance     proceeds    free    from    any     claim   arising   under    the

Partnership Agreement was not erroneous.

                                  IV.    Order

      Based on the foregoing, and the conclusion that the Bankruptcy

Court’s Order of April 1, 2002, and the attendant findings of fact

and conclusions of law are not clearly erroneous, it is

      ORDERED that the April 1, 2002 Order of the Bankruptcy Court

is AFFIRMED.

      The Clerk shall notify all parties and provide them with a

true copy of this Order.

                                         21
SIGNED at Houston, Texas, on this 13th day of December, 2002.

                                   EWING WERLEIN, JR.
                              UNITED STATES DISTRICT JUDGE