Pettersson v. McConnell

• Court: Court of Appeals for the Fifth Circuit
• Decided: May 6, 1999
• Docket: 99-10073
• Status: Unpublished

Opinion

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 R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.