In re Bigler LP v. Amegy Bank Nat'l Ass'n

IN RE: BIGLER LP BIGLER LAND, LLC BIGLER PETROCHEMICAL, LP BIGLER PLANT SERVICES, LP BIGLER TERMINALS, LP Debtors ASHLEY ELIZABETH SCIANNA ARORA INVESTMENT TRUST STEPHANIE ELIZABETH SCIANNA INVESTMENT TRUST, SIM-TEX, L.P., Plaintiffs, v. AMEGY BANK NATIONAL ASSOCIATION, Defendant.

CASE NO. 09-38188

CASE NO. 09-38189

CASE NO. 09-38190

CASE NO. 09-38192

CASE NO. 09-38194

ADVERSARY NO. 10-03029

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

Entered June 9, 2011

Jointly Administered Under

MEMORANDUM OPINION REGARDING AMEGY BANK

NATIONAL ASSOCIATIONS COUNTERCLAIM

[Adv. Docket No. 19]

I. Introduction

On April 1 and 21, 2011, the Court held a hearing on Amegy Bank National Association's Counterclaim for Attorneys' Fees. [Adv. Docket No. 19]. The Court heard testimony from one witness, Charles Scianna (Scianna), who is the trustee of the Plaintiff trusts and the founder and owner of Sim-Tex, L.P. No exhibits were introduced into evidence.

The Court now makes findings of fact and conclusions of law pursuant to FederalBankruptcy Rule 7052. To the extent that any finding of fact is construed as a conclusion of law, it is adopted as such; and to the extent any conclusion of law is construed as a finding of fact, it is also adopted as such. This Court reserves the right to make additional findings and conclusions as it deems appropriate or as any party may request.

II. Findings of Fact

1. On January 23, 2010, the Ashley Elizabeth Scianna Arora Investment Trust and the Stephanie Elizabeth Scianna Investment Trust (the Trusts) initiated this adversary proceeding against Amegy Bank National Association (the Defendant) by filing their Complaint to Determine Extent and Priority of Liens (the Original Complaint).¹ [Adv. Docket No. 1].

2. In the Original Complaint, the Trusts sought a declaratory judgment, pursuant to 28 U.S.C. §§ 2201 and 2202, that "the Trusts hold a first, prior and superior lien and security interest in the Debtors' property listed on Exhibit '1' to secure the repayment of the Bigler Modified Note." [Adv. Docket No. 1, p. 7, ¶ 26(a)]. In the alternative, the Trusts sought a declaration that "any stipulations made by the Debtors in either the Interim DIP Order or the Final DIP Order with respect to the extent and priority of liens and security interests in and to the Debtors' property are not binding on the Trusts." [Adv. Docket No. 1, p. 7, ¶ 26(b)].

3. On March 16, 2010, the Defendant filed its Motion to Dismiss Complaint for Failure to State a Claim upon Which Relief can be Granted (the Defendant's Motion to Dismiss). [Adv. Docket No. 7]. The Defendant argued that the Trusts' lien priority claim fails as a matter of law and, thus, the Original Complaint should be summarily dismissed pursuantto Federal Rule of Civil Procedure 12(b)(6), made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure 7012(b). [Adv. Docket No. 7, p. 1-2].

4. Thereafter, the Trusts, together with Sim-Tex (collectively, the Plaintiffs), filed their First Amended Complaint to Determine Extent and Priority of Liens on May 10, 2010 (the First Amended Complaint). [Adv. Docket No. 9].

5. While the First Amended Complaint sought the same declaratory relief set forth in the Original Complaint [Adv. Docket No. 9, p. 8-9, ¶¶ 29-32], it did address certain issues raised by the Defendant's Motion to Dismiss and included additional facts that the Plaintiffs assert came into existence or were discovered after the filing of the Original Complaint. Specifically, the First Amended Complaint: (a) added Sim-Tex as a party; (b) advised of the execution of a correction assignment to address the standing issue raised by the Defendant's Motion to Dismiss; and (c) made factual allegations that the Plaintiffs assert create a purchase money security interest in some of the collateral pledged to secure the indebtedness owed to the Trusts. [Adv. Docket No. 9, p. 1-7].

6. On May 12, 2010, the Court held a hearing on, among other things, the Defendant's Motion to Dismiss. At the close of the hearing, the Court took the matter under advisement.

7. On May 17, 2010, the Plaintiffs filed a Motion to Amend Original Complaint to Determine Extent and Priority of Liens (the Original Motion to Amend). [Adv. Docket No. 14]. In the Original Motion to Amend, the Plaintiffs admitted the following:

At the [May 12] hearing it became apparent that when filing the amended complaint the Trusts and Sim-Tex mistakenly relied on a provision of the Bankruptcy Rules that has been superseded by an amendment that became effective December 1, 2009.

[Adv. Docket No. 14, p. 2, ¶ 6]. The Plaintiffs requested that the Court grant them leaveto file an amended complaint and thereby retroactively consider the First Amended Complaint as properly filed in accordance with Bankruptcy Rule 7015(a)(2). [Adv. Docket No. 14, p. 3, ¶ 7]. The Court entered an order granting the relief requested in the Original Motion to Amend on June 24, 2010. [Adv. Docket No. 22].

8. The Defendant filed its Original Answer to the First Amended Complaint and Counterclaim on May 28, 2010 (the Counterclaim). [Adv. Docket No. 19]. In the Counterclaim, the Defendant requests that the Court award its costs and reasonable and necessary attorneys' fees pursuant to Section 37.009 of the Texas Civil Practice and Remedies Code and/or 28 U.S.C. §§ 2201-2202. [Adv. Docket No. 19, p. 5, ¶ 34].

9. On December 10, 2010, the Plaintiffs filed a second Motion to Amend Complaint to Determine Extent and Priority of Liens (the Second Motion to Amend). [Adv. Docket No. 31]. The Plaintiffs requested leave to amend the First Amended Complaint so that this Court may determine whether the liens and security interest being asserted as senior and first priority by the Defendant should be subject to equitable subordination pursuant to 11 U.S.C. § 510(c) and/or the state law doctrine of equitable estoppel. [Adv. Docket No. 31, p. 2 & 14].

10. On January 6, 2011, the Court held a hearing on the Second Motion to Amend. The Court entered its Order Denying the Second Motion to Amend on January 14, 2011. [Adv. Docket No. 44]. The Court found that: "(1) there has been undue delay on behalf of the Plaintiffs in filing this Motion; (2) there would be undue prejudice to the Defendant if this Court granted the Motion; and (3) the proposed amendments contain causes of action on which the Plaintiffs are not likely to prevail." [Adv. Docket No. 44, p. 2].

11. On January 20, 2011, the Plaintiffs filed their Answer to the Counterclaim, asserting that: (a) 28 U.S.C. §§ 2201-2202 does not explicitly provide for the award of attorneys' fees and costs; (b) utilization of Section 37.009 to award attorneys' fees and costs should not be permitted in this adversary proceeding; and (c) it would not be equitable and just for the Court to award attorneys' fees and costs to the Defendant. [Adv. Docket No. 46].

12. On January 27, 2011, following a hearing held in this Court on that same day, the Court signed an order granting the Defendant's Motion for Summary Judgment. [Adv. Docket No. 49]. The order expressly denied the Plaintiffs' request for a declaratory judgment and all further relief requested in the First Amended Complaint. [Adv. Docket No. 49, p. 1]. The order also provided that "the Court reserves jurisdiction over, and will hold a separate hearing on, Amegy Bank National Association's counterclaim for attorneys['] fees." [Adv. Docket No. 49, p. 2].

13. On February 3, 2011, counsel for the Plaintiffs and counsel for the Defendant jointly submitted a Stipulation Regarding Defendant's Attorneys' Fees. [Adv. Docket No. 51]. The parties stipulated that for purposes of this adversary proceeding:

a) the amount of attorney's fees and expenses reasonably and necessarily incurred by Defendant in defending the Adversary Proceeding was $160,000 (the "Reasonable Fee");

b) the amount of hours and the rates charged by Defendant's attorneys and staff for purposes of computing the Reasonable Fee were reasonable and necessary.

[Adv. Docket No. 51, p. 2, ¶ 5].

14. On February 28, 2011, the Plaintiffs and the Defendant both filed briefs related to the Counterclaim. [Adv. Docket Nos. 52 & 53].

15. The Court held a hearing on the Counterclaim on April 1, 2011. The Court heard oral argument from counsel for the Defendant and counsel for the Plaintiffs. No exhibits wereintroduced into evidence.

16. At the April 1, 2011 hearing, counsel for the Plaintiffs objected to counsel for the Defendant reading portions of Scianna's deposition transcript into the record on the basis that the transcript had not been admitted into evidence at the hearing. [Tape Recording, 4/1/2011 Hearing at 10:12:55 a.m.—10:13:55 a.m.]. Counsel for the Defendant responded that the deposition transcript was already in the record and could be considered as evidence before the Court. Specifically, it was attached as an exhibit to the Defendant's Motion for Summary Judgment, and the Plaintiffs did not object to its inclusion as summary judgment evidence. [Tape Recording, 4/1/2011 Hearing at 10:13:55 a.m.—10:14:22 a.m.]. The Court sustained the Plaintiffs' objection since the transcript had not been admitted into evidence at the hearing being held on the Counterclaim. [Tape Recording, 4/1/2011 Hearing at 10:14:23 a.m.—10:14:40 a.m.].

17. Counsel for the Defendant then called Scianna as a witness. Counsel for the Plaintiffs objected on the basis that counsel for the Defendant did not provide him with a witness or exhibit list prior to the hearing. [Tape Recording, 4/1/2011 Hearing at 10:16:09 a.m.— 10:16:49 a.m.]. The Court sustained the objection. [Tape Recording, 4/1/2011 Hearing at 10:16:49 a.m.—10:17:14 a.m.]. Counsel for the Plaintiffs then made an oral motion for judgment based on the fact that the Defendant had not admitted any evidence. [Tape Recording, 4/1/2011 Hearing at 10:17:15 a.m.—10:17:34 a.m.]. The Court declined to grant the oral motion for judgment and...