743 F.2d 1069 (5th Cir. 1984), 84-1083, Browning v. Navarro

Docket Nº:84-1083.
Citation:743 F.2d 1069
Party Name:Jane H. BROWNING, Individually and as co-independent executrix of the Estate of William W. Browning, Jr., Deceased, et al., Plaintiffs-Appellants, v. Don NAVARRO, Individually and as Trustee For Pat S. Holloway, et al., Defendants-Appellees.
Case Date:October 01, 1984
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1069

743 F.2d 1069 (5th Cir. 1984)

Jane H. BROWNING, Individually and as co-independent

executrix of the Estate of William W. Browning,

Jr., Deceased, et al., Plaintiffs-Appellants,

v.

Don NAVARRO, Individually and as Trustee For Pat S.

Holloway, et al., Defendants-Appellees.

No. 84-1083.

United States Court of Appeals, Fifth Circuit

October 1, 1984

Rehearing and Rehearing En Banc Denied Nov. 7, 1984.

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[Copyrighted Material Omitted]

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Law Offices of R. Jack Ayres, Jr., P.C., R. Jack Ayres, Jr., Thomas V. Murto, III, Kenneth F. Nye, Winstead, McGuire, Sechrest & Minick, P.C., Jay J. Madrid, Dallas, Tex., for plaintiffs-appellants.

G. Leroy Street, Gerald P. Urbach, Dallas, Tex., for Robbie Holloway.

Pat S. Holloway, Giddings, Tex., pro se.

Timothy J. Vineyard, Michael R. Cooper, Dallas, Tex., for Navarro, et al.

Appeal from the United States District Court for the Northern District of Texas.

Before TIMBERS [*], POLITZ and RANDALL, Circuit Judges.

RANDALL, Circuit Judge:

The plaintiffs filed suit in the district court to enforce a state court judgment imposing a constructive trust on the defendants' assets and awarding $72,000,000 in damages for breach of fiduciary duty and fraud. Holding that the state court case was not tried in accordance with a bankruptcy court remand order and that the state court proceedings leading to the judgment were conducted in violation of the automatic stay, the district court granted the defendants' motion for summary judgment and declared the state court proceedings void. Because we hold that the parties complied with the bankruptcy court's remand order, that the stay was lifted, and that the resulting state court judgment was not void, we reverse the district court's judgment and remand the case.

I. Factual and Procedural Background.

Although the district court has set out in its opinion 1 the rather complex factual and procedural posture of this case, we recount here the pertinent events leading to this appeal.

On September 12, 1979, the plaintiffs ("Brownings") filed suit against Humble Exploration Co., Inc. ("Humble"), Pat Holloway ("Holloway"), and others in the 193rd Judicial District Court of Dallas County, Texas, seeking, as the alleged equitable owners of substantially all of the assets of Humble and Holloway, the imposition of a constructive trust on Humble's and Holloway's assets, actual and exemplary damages, and the appointment of an interim receiver to manage the disputed assets. (This case is hereinafter referred to as the "1979 case.") On November 19, 1979, Humble and Holloway filed Chapter 11 voluntary bankruptcy petitions and removed the 1979 case to the United States Bankruptcy Court for the Northern District of Texas ("Bankruptcy Court") pursuant to 28 U.S.C. Sec. 1478(a).

On November 21, 1979, the Brownings sued Sterling Pipeline Company ("Sterling") in the 191st Judicial District Court of Dallas County, alleging that Sterling was a wholly owned subsidiary of Humble or controlled by Holloway and therefore subject to the constructive trust sought in the 1979 case. The Sterling case was subsequently consolidated with the 1979 case and removed to the Bankruptcy Court.

The parties entered a "Stipulation and Agreement on Manner in Which Controversy Shall Be Heard, Determined and Liquidated," which was approved by the Bankruptcy Court and annexed to the court's January 18, 1980 "Order Remanding Causes of Action and Modifying Automatic

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Stay." The remand order purported to remand the 1979 case and the Sterling case to the 193rd Judicial District Court pursuant to the terms of the stipulation and agreement and to modify the automatic stay to permit trial of the cases upon remand again subject to the terms of the stipulation and agreement. The stipulation and agreement provided, inter alia, that, upon remand of the cases to the 193rd Judicial District Court, the parties would file joint motions to consolidate the cases into the 1979 case and to request that the presiding judge of the administrative judicial district be asked to assign a visiting or retired state judge to hear the consolidated cases. Paragraph 3 of the stipulation and agreement provides:

The order of the Bankruptcy Court remanding said consolidated cause to the state court for trial shall recite that such remand is conditional upon and shall only take effect upon the final assignment of said consolidated cause [to a visiting or retired state judge]. In the event that the BROWNING INTERESTS and Debtors [Humble and Holloway] are unable to obtain the assignment of said consolidated cause as prescribed ..., the remand of said consolidated cause shall not take effect and the Bankruptcy Court shall retain jurisdiction over said cause which shall proceed to trial in the Bankruptcy Court before a jury.

(Emphasis added.)

The cases were remanded and consolidated and the presiding judge assigned the case to a retired state judge who ordered that a prior settlement agreement between the parties to the 1979 case entered in state court be enforced. 2 In 1981, the state court of appeals reversed and remanded the case for a jury trial and the Texas Supreme Court found no reversible error. 3 Upon remand, the 1979 case was assigned to a different retired state judge who entered an instructed verdict after a separate trial on the settlement agreement declaring the prior settlement agreement to be unenforceable. He then ordered that the case proceed to trial on the merits. 4

On May 26, 1982, 5 a group of investors sued Holloway and Humble in the 162nd Judicial District Court of Dallas County, Judge Dee Brown Walker (an active state district judge) presiding, claiming that the defendants wrongfully shut-in some oil and gas wells jointly owned by the investors and Humble. The plaintiffs sought the appointment of a receiver over Humble's assets. (This case is hereinafter referred to as the "1982 case.") The Brownings were named as defendants in the 1982 case because of their claim to ownership of Humble's and Holloway's assets. The 1982 case was removed to the Bankruptcy Court and remanded on the same day. Believing that the Brownings, during a May 27 hearing on the 1982 case, had requested a receiver over the assets of Humble, Humble filed a complaint in Bankruptcy Court seeking enforcement of the Bankruptcy Court's January 18, 1980 order forbidding the appointment of a receiver over Humble's assets as a form of relief in the 1979 case. On May 28, 1982, the 162nd District Court appointed a receiver over Humble's and Holloway's assets that were the subject of dispute in the 1982 case.

On June 4, 1982, the Bankruptcy Court abstained from hearing the 1982 case pursuant to 28 U.S.C. Sec. 1471(d). 6 Thereafter "ensued a somewhat dizzying sequence of state court orders" recounted by the district

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court, 37 B.R. at 205-06, which resulted in the transfer and consolidation of the 1979 case with the 1982 case before Judge Walker in the 162nd Judicial District. On June 24, the May 28 receivership order having been vacated by the state court of appeals, 7 Judge Walker granted the Brownings' request for a separate and expedited trial of the 1979 case. On August 26, 1982, after a month-long trial, judgment was entered in the 1979 case for the Brownings imposing the constructive trust on Humble's and Holloway's assets and awarding the Brownings actual and exemplary damages totalling $72,000,000. 8 Holloway and Humble appealed.

On October 5, 1982, the Bankruptcy Court enjoined the state court receiver from turning over the assets which were the subject of the state court judgment until that judgment became final. Humble's and Holloway's subsequent conversion of their Chapter 11 proceedings to Chapter 7 proceedings resulted in the appointment of a trustee, appellee Don Navarro ("Trustee"), over Humble's and Holloway's assets. When the Trustee refused to comply with the Brownings' demand to turn over assets in satisfaction of the state court judgment, the Brownings instituted the instant action on March 2, 1983, in the United States District Court for the Northern District of Texas, seeking an order to have Humble and Holloway post a supersedeas bond or, alternatively, turn over the assets. The Trustee filed a counterclaim, seeking an enforcement of the Bankruptcy Court's prior injunction against turning over the assets, further injunctive relief, and a declaratory judgment that the state court judgment was void. On December 5, 1983, the district court granted the Trustee's motion for summary judgment and declared void all proceedings before Judge Walker in the 1979 case. 9 After the district court denied its motion for a reconsideration and stay of its judgment, the Brownings filed this appeal. On January 17, 1984, the district court enjoined the Brownings from enforcing the state court judgment.

On July 11, 1984, after we heard oral argument in this case, a special panel of the Fifth District Court of Appeals of Texas dismissed Humble's and Holloway's appeal of the state court judgment, holding that "if a party seeks review in the federal court of a state court judgment on the ground of an alleged violation of a condition of remand from bankruptcy court without pointing out the alleged error in the state court, he is barred from further relief under state law." 10 The court of appeals reasoned that dismissal of the appeal was appropriate because a state appeal in addition to a federal appeal was a hardship that the parties need not be forced to bear and because it could not "justify proceeding with this appeal when the judgment under review ha[d] been declared void by the federal court." 11

II. The District Court Opinion.

In a carefully reasoned opinion...

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