Filed: Apr. 02, 2007
Latest Update: Feb. 21, 2020
Summary: 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-C
Summary: 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..
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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this opinion should not be published and is not precedent except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.
6
