Court Opinion

ID: 48824
Source: CourtListenerOpinion
Date Created: 2010-04-25 23:49:27+00
Date Added: 2024-06-11T17:18:29.771348
License: Public Domain

United States Court of Appeals
                                                                     Fifth Circuit
                                                                  F I L E D
                    UNITED STATES COURT OF APPEALS
                                                                    April 2, 2007
                        FOR THE FIFTH CIRCUIT
                                                              Charles R. Fulbruge III
                                                                      Clerk

                             No. 06-20751
                           Summary Calendar

     In The Matter Of: ZOUHAIR HILAL, also known as Danny Hilal

                                         Debtor

     - - - - - - - - - - - - - - - - - - - - - - - - - - - -

     ZOUHAIR HILAL, also known as Danny Hilal,

                                             Appellant,

                                  v.

     TRUSTEE RANDY W WILLIAMS,

                                             Appellee.

         Appeal from the United States District Court for the
             Southern District of Texas, Houston Division
                             4:05-CV-3776

Before DAVIS, BARKSDALE, and BENAVIDES, Circuit Judges.

PER CURIAM:*

     Plaintiff Zouhair Hilal appeals the district court’s dismissal

of his appeal from the bankruptcy court as moot.          We AFFIRM.

                             I. BACKGROUND

     *
       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this opinion should not be published and is not precedent except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.
     After Hilal failed to pay a state court judgment against him

in the approximate amount of $79,000, the state court ordered the

sale of his interest in two companies: First Capital Interests,

L.L.C. (“First Capital”) and Blue Moon Venture, L.L.C. (“Blue

Moon”).     The judgment creditor, Stephen Riner, bought Hilal’s

interest in those entities for approximately $18,000.               Hilal

challenged the sale in state court, the state trial court denied

his motion, and both an intermediate appellate court and the Texas

Supreme Court denied his application for writ of mandamus. Shortly

thereafter,   on   February   4,   2005,   Hilal   filed   a   chapter    11

bankruptcy petition.

     On June 1, 2005, the bankruptcy court appointed Randy Williams

(“the trustee”) as the chapter 11 trustee.           Seeking to recover

First Capital and Blue Moon for the bankruptcy estate, the trustee

determined that it would be in the best interest of the estate to

settle the dispute with Riner rather than litigate ownership of the

companies.     Accordingly,    the   trustee   and   Riner     proposed    a

settlement of the claims that included paying Riner $5 million.

Riner, in exchange, agreed to pay $750,000 in taxes to the IRS and

release to the trustee all liens, claims, and interests held in

First Capital and Blue Moon.       The trustee would assume ownership

and management of the companies, and begin liquidation of the

estate and payment to creditors. A formal motion to compromise was

filed with the bankruptcy court on August 1, 2005, and Hilal

objected.

                                     2
      The bankruptcy court approved the compromise orally on October

21,   2005,      and   entered   the    “Order    Approving   Compromise   and

Settlement,” otherwise known as the “9019 Order,” three days later,

but temporarily stayed that order until October 31, 2005, so Hilal

could file a formal, written motion for a stay.               The bankruptcy

court denied that written motion on October 31, and the temporary

stay expired shortly thereafter.            An order reflecting that ruling

was entered on November 1, 2005, along with a denial of Hilal’s

motion for a new trial.            Hilal took no further action until

November 3, when he filed a notice of appeal in the district court,

and November 4, when he filed an emergency motion for stay pending

appeal.

      In   the    intervening    time    between    the   expiration   of the

bankruptcy court’s temporary stay, and Hilal’s filings with the

district court, the trustee and Riner consummated the settlement.

The district court denied Hilal’s emergency motion on November 7,

2005, and dismissed Hilal’s appeal as moot on August 9, 2006. Hilal

appeals.   We review the district court’s determination of mootness

de novo.    In re GWI PCS 1, Inc., 230 F.3d 788, 799–800 (5th Cir.

2000).

                                 II. DISCUSSION

      “[A] case is moot when the issues presented are no longer

‘live’ or the parties lack a legally cognizable interest in the

outcome.” County of Los Angeles v. Davis, 99 S.Ct. 1379, 1383

(1979). In the bankruptcy context, “mootness” is a recognition that

                                        3
a case has gone past the point where equitable judicial relief is

available.      In re Manges, 29 F.3d 1034, 1038–39 (5th Cir. 1994).

A   reviewing    court    can    “decline   to   consider   the   merits   of   a

confirmation order when there has been substantial consummation of

the plan such that effective judicial relief is no longer available

— even though there may still be a viable dispute between the

parties on appeal.”             Id. at 1039.      In determining whether a

bankruptcy case should have been dismissed as moot, we consider (1)

whether a stay had been obtained, (2) whether the plan had been

“substantially consummated,” and (3) whether the relief requested

would have affected either the rights of the parties not before the

court or the success of the plan.           Id. at 1041.

      Hilal argues that the trustee improperly consummated the

compromise prematurely, before Hilal had a chance to obtain a stay.

By consummating expeditiously, however, the trustee and Riner were

complying with the bankruptcy court’s order which provided that they

do so within ten days of the order’s entry date, October 24.               Hilal

argues that the order was not yet final, but in so doing confuses

“final order” and “nonappealable order.” In bankruptcy proceedings,

appeals are initiated by filing a notice of appeal within ten days

of the entry date of the order.         FED. R. BANKER P. 8001, 8002.      While

the order remained appealable for ten days, it was nevertheless

final upon entry.        As the district court correctly found, there was

no legal or factual requirement that the trustee wait ten days

                                        4
before consummating the compromise. We therefore evaluate mootness,

like the district court, under the factors set forth in In re

Manges.   29 F.3d at 1039.1

     As the district court found, all relevant factors in an

equitable mootness evaluation support the dismissal of Hilal’s

appeal.   At the time of the consummation, there was no stay in

place, nor was there a pending motion for a stay.      The absence of

a stay “militates in favor of dismissal for mootness.”      In re GWI

PCS 1, 230 F.3d at 801.       Furthermore, the compromise had already

been substantially consummated at the time of Hilal’s appeal.       A

plan is substantially consummated where substantially all property

has been transferred under the plan, the debtor has assumed control

of substantially all the property, and distribution of property has

commenced.   11 U.S.C. § 1101(2); Manges, 29 F.3d at 1041.      Here,

that had happened:    Riner was paid $4,250,000, the IRS was paid

$750,000 on Riner’s behalf, and the trustee acquired control of

First Capital and Blue Moon for the bankruptcy estate.

     Finally, a reversal of the 9019 order would substantially

affect the rights of others who are not parties to this appeal.

Substantial amounts of money had already been paid to Riner and the

     1
      Hilal argues that Manges should not apply here because that
case dealt with a plan of reorganization, rather than with a
compromise and settlement. The same concerns — such as undoing
transfers that have already been made, and affecting the rights of
others not party to the appeal — apply equally to plans of
reorganization and compromises and settlements, however, and the
distinction is irrelevant to our analysis.

                                    5
IRS, and loans had been pledged to other third parties.   Moreover,

litigation between Riner and the trustee had been dismissed.    The

adverse effect on third parties therefore also supports dismissal

for mootness.   Having considered the relevant factors, we find that

the district court was correct in dismissing Hilal’s appeal as

equitably moot.

     For the foregoing reasons, we AFFIRM the district court.

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