Huddleston v. Nelson Bunker Hunt Trust Estate
| Decision Date | 29 June 1989 |
| Docket Number | Civ. A. No. CA3-88-3134-D,Bankruptcy No. 387-36380-HCA-11. |
| Citation | 102 BR 71 |
| Parties | Albert D. HUDDLESTON, Appellant, v. NELSON BUNKER HUNT TRUST ESTATE, et al., Appellees. |
| Court | U.S. District Court — Northern District of Texas |
Alan Sibarium of Alan D. Sibarium & Associates, Dallas, Tex. for appellant, Albert D. Huddleston.
Ivan Irwin, Jr. and Thomas Hoekstra of Shank, Irwin, Conant, Lipshy & Casterline, Dallas, Tex., for appellee, Nelson Bunker Hunt Trust Estate.
R. Paul Wickes, Robert W. Jones and Debra D. McCullough of Thompson & Knight, Dallas, Tex., for intervenor, NCNB-Texas Nat. Bank.
L.E. Creel, III, John B. Atwood, III, and Robert D. White of Creel Atwood & Phillips, P.C., Dallas, Tex., for appellee, William Herbert Hunt Trust Estate.
William T. Burke and Jack Gillis of Burke & Wright, Dallas, Tex., for appellee, Lamar Hunt Trust Estate.
Hugh M. Ray and Alan W. Harris of Andrews & Kurth, Dallas, Tex., and Melvyn L. Cantor, M.O. Sigal, Jr., John J. Kerr, Jr., Mark J. Thompson, Deborah M. Reyher and Richard B. Paige of Simpson Thacher & Bartlett, New York City, for appellee, Mfrs. Hanover Trust Co.
In this appeal from an order confirming a plan of reorganization for a chapter 11 debtor-in-possession, two appellees move to supplement the record in order to support their motions to dismiss the appeal as moot. The court grants the motions to supplement, but raises sua sponte the question whether the underlying mootness issue should first be considered by the bankruptcy court.
The Nelson Bunker Hunt Trust Estate ("Nelson Estate") is a chapter 11 debtor-in-possession. On September 16, 1988, the bankruptcy court entered an order confirming the First Joint Consensual Plan of Reorganization for the Nelson Estate, the William Herbert Hunt Trust Estate ("Herbert Estate"), and the Lamar Hunt Trust Estate ("Lamar Estate"). One aspect of the Plan, described as the "centerpiece" by one appellee, is the settlement of multimillion dollar complex litigation commenced by the three trust estates, Placid Oil Company ("Placid"), Penrod Drilling Company ("Penrod"), and certain beneficiaries of the trust estates, against 23 banks that had made loans to Placid and Penrod. Appellant, Albert D. Huddleston ("Huddleston"), suing as next friend for his four children, challenges the confirmation order on various grounds.
Appellees1 have moved to dismiss the appeal.2 NCNB-Texas National Bank ("NCNB") argues that the appeal has been rendered moot because Placid, its subsidiaries, the Placid banks, and others have taken substantial, irreversible actions in reliance upon the plan confirmation order, because Huddleston failed to seek a stay of the order, and because the finality of the confirmation order in the chapter 11 bankruptcy of Placid renders moot appellant's challenge to the Nelson Estate confirmation order. Appellee, Manufacturers Hanover Trust Company ("MHT"), similarly contends that the appeal is moot for the reason that irreversible action has been taken in the absence of a stay, rendering the appellate court powerless to grant appellant its requested relief. MHT argues that the banks that were lenders to Penrod under a credit agreement with Penrod and the three trust estates have formed a land partnership to which the trust estates have conveyed substantial realty and several irreversible transactions have been consummated with third parties based upon the validity of the confirmation order. MHT avers that distributions have been made under the Plan to the Penrod lender-banks and numerous other parties. MHT also posits that the appeal should be dismissed on grounds of lack of equity because Huddleston did not move for a stay of the confirmation order and due to the substantial change in circumstances that has transpired following confirmation. The trust estates support the arguments proffered by the other appellees.
In support of the mootness arguments, two appellees, MHT and the Nelson Estate, move the court for leave to supplement the appellate record. MHT seeks to add five affidavits that it contends describe events that occurred after the confirmation order was entered and that demonstrate the extent to which the Plan of Reorganization has been implemented. The Nelson Estate asks to incorporate one additional affidavit in the appellate record for the same purpose.3
The court first considers whether it should grant the motions to supplement the record.
Huddleston opposes the motions for several reasons. He contends that, if the affidavit evidence is admitted, he will be deprived of the right and ability to test the veracity of the witnesses who executed the affidavits. He argues that if supplementation is now allowed — after he has filed his appellant's brief — he will be placed "at a grave disadvantage." Appellant reasons that the use of affidavits which are not subject to cross-examination will violate his right to due process of law.
Huddleston also assails the evidentiary admissibility of portions of the affidavits on the grounds that they contain legal conclusions, are based on hearsay, or otherwise are not predicated upon personal knowledge. He likewise challenges the legal import of various passages in the affidavits.
The court rejects Huddleston's arguments to the extent they are offered to support outright exclusion of the affidavits. Pursuant to Fed.R.Civ.P. 43(e),4 this court has the authority to hear a motion on affidavits when a motion is based on facts not appearing of record. The court may also direct that the matter be heard wholly or partly on depositions. Rule 43(e) is made applicable to bankruptcy cases by virtue of Fed.R.Bankr.P. 9017.5 Huddleston is not deprived of a right to test the veracity of a witness merely because the witness' testimony is offered by affidavit. He likewise is not deprived of a right of cross-examination. Rules 43(e) and 9017 permit a motion to be decided on affidavits and without cross-examination.6
To the extent Huddleston has a basis for challenging the credibility of an affiant or the admissibility of his testimony, or to the extent he desires to offer his own evidence in opposition to appellees' affidavit evidence, appellant may do so by presenting counteraffidavits or by filing objections to the admissibility of appellees' testimony. Moreover, this court interprets Rule 43(e) to require at least a narrowly focused adversary hearing when the evidence presents a controlling credibility question. Huddleston's right to due process of law is thus protected. Movants cannot obtain the relief they seek solely on the basis of affidavits if the court must decide a controlling credibility question without personally hearing, and viewing the demeanor of, the pertinent witnesses. Huddleston, as nonmovant, therefore has a full opportunity to challenge the movants' evidence.
Appellant is also entitled to challenge the legal sufficiency and effect of the evidence. In addition to submitting counteraffidavits, the court will permit appellant to file a memorandum that sets forth the reasons for his contention that the testimony does not support the substantive relief appellees seek. Appellant's fear that he is placed "at a grave disadvantage" because affidavits have been admitted in the record after he has filed his brief is ameliorated by the court's permitting him to file a supplemental brief, if necessary, with leave of court.
The court grants the motions for leave to supplement the record with the six affidavits in question. Appellant may file counteraffidavits, and a memorandum in opposition to appellees' affidavit evidence, no later than July 20, 1989.
The court next considers sua sponte whether the mootness issue to which the affidavit — and any counteraffidavit — evidence relates should first be considered by the bankruptcy court. Although there are reported cases that employ various approaches, the court has located no decision that formulates a standard for distinguishing between dismissal motions that should be passed on directly by the district court and those that ought initially be considered by the bankruptcy court. The court holds today that the line should be drawn on the basis whether disposition of the motion will require the resolution of controlling disputed facts.
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As an appellate court, this court has the discretion to order supplementation of the record on appeal. See In re GHR Energy Corp., 791 F.2d 1200, 1202 (5th Cir.1986) (per curiam); Dickerson v. State of Alabama, 667 F.2d 1364, 1367 (11th Cir.), cert. denied, 459 U.S. 878, 103 S.Ct. 173, 74 L.Ed.2d 142 (1982). The Nelson Estate cites three cases for the proposition that the court can consider post-confirmation order events in determining whether a bankruptcy appeal has become moot: In re Crystal Oil Co., 854 F.2d 79 (5th Cir.1988); In re AOV Industries, Inc., 792 F.2d 1140, 1148 (D.C.Cir.1986); and In re Information Dialogues, Inc., 662 F.2d 475 (8th Cir.1981) (per curiam). While these cases undoubtedly support the contention that an appellate court, particularly in a bankruptcy matter,7 can determine whether an appeal has become moot, the decisions do not resolve the manner in which an appellate court should proceed when the controlling mootness evidence is disputed.
In Crystal Oil the district court dismissed an appeal as moot and that order was in turn appealed to the circuit court. 854 F.2d at 81. The Fifth Circuit's opinion does not indicate whether the parties disputed in the circuit court the controlling facts on the mootness question. It appears, however, that the party opposing dismissal conceded one apposite result of a successful appeal and that other pertinent matters were uncontested. Id. Nothing in the opinion intimates that the circuit court — or, for that matter, the district court — found facts on the mootness issue.
In AOV Industries the D.C. Circuit remanded a bankruptcy appeal to the district court to...
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