It is not possible to delete a shape if it is part of a larger shape. When you delete Level 1 text from shape Two, the Level 2 text, C, is promoted to Level 1. In the following illustration, shapes One, Two, and Three all have Level 2 text that is composed of bullets and alphabetic characters.
If you delete a line of Level 1 text when any Level 2 text exists, then the first line of Level 2 text is promoted to Level 1 (the top shape).