In re Transtexas Gas Corp., 01-40609.

Citation303 F.3d 571
Decision Date22 August 2002
Docket NumberNo. 01-40609.,01-40609.
PartiesIn The Matter Of: TRANSTEXAS GAS CORPORATION; Transamerican Energy; Transamerican Refining Corporation, Debtors. Texas Comptroller of Public Accounts; The Texas Workforce Commission, Appellants, v. Transtexas Gas Corporation, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Mark E. Browning (argued), Austin, TX, for Appellants.

Stacy R. Obenhaus, Deirdre B. Ruckman, Gardere Wynne Sewell, Dallas, TX, Shelby A. Jordan (argued), Nathaniel Peter Holzer, Jordan, Hyden, Womble & Culbreth, Corpus Christi, TX, for Appellee.

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

Before KING, Chief Judge, and REAVLEY and WIENER, Circuit Judges.

KING, Chief Judge:

Appellants the Texas Comptroller of Public Accounts and the Texas Workforce Commission appeal the district court's judgment affirming a postjudgment order entered by the bankruptcy court setting out the interest rate applicable to payments due the Appellants under Section 3.02(b) of Appellee Transtexas Gas Corporation's Chapter 11 reorganization plan. Because we find that the bankruptcy court lacked jurisdiction to enter this order, we VACATE the judgment of the district court and REMAND with instructions that the district court VACATE the bankruptcy court's postjudgment order.

I. Factual and Procedural Background

We summarize only the factual and procedural information relevant to our disposition of this case. On February 7, 2000, the United States Bankruptcy Court for the Southern District of Texas entered an order ("the confirmation order") confirming Appellee Transtexas Gas Corporation's ("Transtexas") Second Amended Modified and Restated Plan of Reorganization ("the reorganization plan") under Chapter 11 of the United States Bankruptcy Code. See 11 U.S.C. §§ 1101-1174 (2000). The confirmation order provided, inter alia, that a ten percent interest rate would apply to any payments due to Appellants the Texas Comptroller of Public Accounts and the Texas Workforce Commission (collectively, "the state taxing authorities") under Section 3.02(b) of the reorganization plan. The state taxing authorities, who had previously objected to the reorganization plan during the approval process, filed a notice of appeal in the bankruptcy court on February 8, 2000, indicating their intent to appeal the confirmation order to the United States District Court for the Southern District of Texas. Pursuant to Federal Rule of Bankruptcy Procedure 8006, the state taxing authorities also filed a statement of the issues to be presented on appeal. See FED. R. BANKR.P. 8006 ("Within ten days after filing the notice of appeal... the appellant shall file with the clerk and serve on appellee a designation of the items to be included in the record on appeal and a statement of the issues to be presented."). This statement indicated that the issue on appeal was: "Whether the bankruptcy court erred in setting a 10% interest rate for the appellants' unsecured priority tax claims."

On February 16, 2000, the bankruptcy court entered, sua sponte, a "Supplemental Order Regarding Confirmation of Debtor's Second Amended, Modified, and Restated Plan of Reorganization" (the "first supplemental order"). This postjudgment order did not invoke the authority of any particular provision of the Federal Rules of Bankruptcy Procedure or the Federal Rules of Civil Procedure. The order corrected one error in the reorganization plan (replacing the word "two-thirds" in paragraph eleven of the order with the word "one-third") and reiterated the interest rate applicable to the state taxing authorities' claims, stating: "If and to the extent that the Priority Tax Claims of the Texas Comptroller are [a]llowed, the interest rate applicable to the payments to the Texas Comptroller provided for in Section 3.02(b) of the Plan shall be ten percent (10%) per annum, or such other rate that is determined upon final appeal." The text of the order clarified that it was "a Final Order ... subject to immediate appeal."

Also on February 16, 2000, Transtexas filed an "Emergency Motion for Entry of Order Determining Interest Rate Applicable to Priority Tax Claims Asserted by Texas Comptroller of Public Accounts and Texas Workforce Commission" seeking "entry of a separate order from the Order Confirming the Plan which orders that, to the extent that the Priority Tax Claims of the Texas Comptroller are [a]llowed, the interest rate applicable to the payments to the Texas Comptroller provided for in Section 3.02(b) of the Plan shall be ten percent (10%) per annum." This motion did not invoke a particular provision of the Federal Rules of Bankruptcy Procedure or the Federal Rules of Civil Procedure.

On February 17, 2000, the bankruptcy court conducted a telephone hearing to consider Transtexas's motion. The next day, on February 18, 2000, the bankruptcy court issued an "Order Determining Interest Rate Applicable to Priority Tax Claims Asserted by Texas Comptroller of Public Accounts and Texas Workforce Commission" (the "second supplemental order"). This postjudgment order, which also did not invoke the authority of any particular provision of the Federal Rules of Bankruptcy Procedure or the Federal Rules of Civil Procedure, stated:

Upon record of the Confirmation Hearing, including the objection to confirmation of the Plan filed by the Texas Comptroller of Public Accounts and the Texas Workforce Commission (collectively, "Texas Comptroller") the Court has determined that payment of Priority Tax Claims asserted by the Texas Comptroller, to the extent such claims are [a]llowed, under the Plan is ten percent (10%) per annum. Accordingly, the Court hereby ORDERS ... [i]f and to the extent that the Priority Tax Claims of the Texas Comptroller are [a]llowed, the interest rate applicable to the payments to the Texas Comptroller provided for in Section 3.02(b) of the Plan shall be ten percent (10%) per annum.

Like the first supplemental order, the second supplemental order was designated as "a Final Order ... subject to immediate appeal."

On February 28, 2000, the state taxing authorities filed two separate notices of appeal from the first and second supplemental orders. In the statements of issues accompanying these notices, the state taxing authorities described the issues on appeal as follows:

1. Whether a bankruptcy court, at the request of a debtor and a lender, may deny creditors that have already filed a notice of appeal the right to appeal a confirmation order by entering a "supplemental order" that makes no substantive change in a ruling contained in the confirmation order.

2. To the extent not decided in the Comptroller's and TWC's still-pending appeal of the confirmation order, w[h]ether the bankruptcy court erred in setting a 10.0% annual interest rate for unsecured priority tax claims under 11 U.S.C. § 1129(a)(9)(C), when the reorganized Debtor will be paying 13.25% to 15.0% interest on fully-secured loans of similar duration obtained through the commercial loan market.

After these appeals were noticed, Transtexas filed a motion to dismiss the state taxing authorities' appeal of the confirmation order and the first supplemental order, arguing that these appeals were moot in light of the bankruptcy court's subsequent entry of the second supplemental order. Transtexas thus took the position that the second supplemental order (i.e., the February 18, 2000 order) was the appropriate order for the district court to consider on appeal. The state taxing authorities filed a response to this motion and filed a separate motion seeking to consolidate their appeals of the confirmation order, the first supplemental order, and the second supplemental order. The district court issued an order granting the state taxing authorities' motion to consolidate on March 22, 2000. The court did not rule on Transtexas's motion to dismiss in this order.

The parties subsequently briefed the merits of the interest rate dispute to the district court. On June 26, 2000, the district court entered an order ("the remand order") remanding the case to the bankruptcy court. The district court noted that it was unclear from the record whether the bankruptcy court arrived at the ten percent interest rate by considering the appropriate factors dictated by this court's decision in Mississippi State Tax Commission v. Lambert (In re Lambert), 194 F.3d 679 (5th Cir.1999), and instructed the bankruptcy court to make further findings of fact and conclusions of law regarding the market rate of interest applicable to the state taxing authorities' priority tax claims, including, but not limited to: (1) the rate of interest that the debtor would pay to borrow a similar amount on the commercial market; (2) the quality of the debtor's security; and (3) the subsequent risk of default by the debtor.

In this remand order, the district court also ruled on Transtexas's motion to dismiss the state taxing authorities' appeals of the confirmation order and the first supplemental order. The court granted this motion in part, stating:

From the record, it appears that the Bankruptcy Court entered the separate order so that its entire order confirming the plan would not be disturbed on appeal, but rather only the portion dealing with the interest rate. Appellants admit that the sole issue raised by their appeal is the setting of the interest rate by the Bankruptcy Court.... The Court therefore concludes that Appellants' first two appeals are moot. Accordingly, the Court GRANTS IN PART Appellants' Motion to Dismiss.

The district court did not further explain the rationale underlying its determination that the state taxing authorities' first two appeals were "moot." The state taxing authorities did not immediately attempt to appeal this remand order.

The bankruptcy court entered findings of fact and conclusions of law in accordance with the district court's remand...

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