Pettersson v. McConnell ( 1999 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-10073
In The Matter Of: INTERNATIONAL AVIATION SERVICES I, LTD
Debtor
---------------------------
RAGNAR PETTERSSON,
Appellee,
v.
MICHAEL A MCCONNELL, Trustee,
Appellant.
Appeal from the United States District Court
for the Northern District of Texas
(4:98-CV-728-A)
May 5, 1999
Before HIGGINBOTHAM, JONES, and DENNIS, Circuit Judges.
PER CURIAM:*
Michael McConnell, bankruptcy trustee for International
Aviation Services, Ltd., brings a motion to vacate the district
court’s judgment in this case and to dismiss the appeal as moot.
In the underlying lawsuit, the trustee attempted to avoid Ragnar
Pettersson’s deed of trust lien on IASL’s hangar lease. On June
*
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this opinion should not be published and is not precedent except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.
19, 1998, the bankruptcy court held that the trustee could avoid
the deed of trust because (1) the deed of trust was invalid because
it contained an unfulfilled condition precedent; and (2) the deed
of trust constituted a preferential transfer. On appeal to the
district court on December 18, 1998, the court reformed the deed of
trust to remove the unsatisfied condition precedent on the grounds
of mutual mistake, and the court held that a portion of the deed of
trust was not a preferential transfer due to the new value
exception. The trustee filed an appeal to this court, and he
subsequently filed the motion now under consideration.
The basis for the trustee’s motion is that, subsequent to the
original filing of his claim to avoid Pettersson’s deed of trust,
Pettersson voluntarily agreed to subordinate his deed of trust lien
in the total amount of $2,300,000. Then, on September 1, 1998,
after the bankruptcy court’s ruling but prior to the district
court’s ruling, the trustee sold substantially all of IASL’s
assets, including the interest in the hangar lease that was the
collateral for Pettersson’s deed of trust. The hangar interest
sold for $2,278,967. Because Pettersson’s deed of trust was
subordinate to $2,300,000 in other debts, and because the hangar,
the collateral for the deed of trust, sold for less than
$2,300,000, Pettersson stands to recover nothing on the deed of
trust. Thus, argues the trustee, the case is now moot because
there is no preferential transfer to avoid.
A controversy is mooted when, “as a result of intervening
circumstances, there are no longer adverse parties with sufficient
2
legal interests to maintain the litigation.” Chevron, U.S.A. v.
Traillour Oil Co., 987 F.2d 1138, 1153 (5th Cir. 1993). A moot
case presents no Article III case or controversy, and a federal
court has no constitutional jurisdiction to resolve the issue it
presents. See Goldin v. Bartholow, 166 F.3d 710, 717 (5th Cir.
1999); see also Baccus v. Parrish, 45 F.3d 958, 961 (5th Cir.
1995)(noting that the Constitution requires the existence of a case
or controversy to support federal jurisdiction and that the
controversy posed by a complaint must be present “throughout the
litigation process”).
This case is moot. The intervening events that rendered this
dispute moot were Pettersson’s subordination of his deed of trust
and the sale of the collateral for less than the amount of the
debts to which the deed of trust was subordinated. These events
mooted this case because there is no longer a preferential transfer
to avoid; that is, the case is moot because there is no injury
traceable to Pettersson, so no effective judicial remedy exists or
is needed.
Because this case is moot, we have no power under Article III
to decide its merits, see Goldin, 166 F.3d at 718, but we retain
authority to order vacatur if appropriate, see U.S. Bancorp
Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 23 (1994).
Vacatur of the district and bankruptcy court rulings below is
warranted if the controversy presented for review became moot due
to circumstances unattributable to any of the parties. See id.
Though Pettersson voluntarily subordinated his deed of trust to
3
$2,300,000 in other debts, neither party was responsible for the
hangar interest’s sale for less than that amount. Furthermore, the
vacatur rule is an equitable one, justified as a means of avoiding
the unfairness of a party’s being denied the power to appeal an
unfavorable judgment by factors beyond its control. See Goldin,
166 F.3d at 719 (citing United States v. Munsingwear, 340 U.S. 36
(1950)). Equitable factors weigh in favor of vacating both the
bankruptcy and district courts’ rulings in this case. Both rulings
addressed the validity of the deed of trust in light of the
unsatisfied condition precedent, and the courts reached differing
results. Vacating both rulings will prevent the judgments,
“unreviewable because of mootness, from spawning any legal
consequences.” See Munsingwear, 340 U.S. at 41; see also Western
Farm Credit Bank v. Davenport, 40 F.3d 298, 299 (9th Cir.
1994)(relying on Munsingwear and dismissing the appeal and vacating
the rulings of both the district and bankruptcy courts on mootness
grounds).
Thus, we dismiss the appeal as moot, vacate the district and
bankruptcy court judgments, and remand to the district court with
instructions to dismiss the case.
4