Matter of Manges

United States Court of Appeals,

Fifth Circuit.

No. 93-7328.

In the Matter of Clinton MANGES, Debtor.

Clinton MANGES, Duval County Ranch C and Man-Gas Transmission,
Appellants-Cross Appellees,

v.

SEATTLE-FIRST NATIONAL BANK and SeaFirst American Corporation,
Appellees-Cross Appellants.

In the Matter of DUVAL COUNTY RANCH C, Debtor.

Clinton MANGES, Duval County Ranch C and Man-Gas Transmission,
Appellants-Cross Appellees,

v.

SEATTLE-FIRST NATIONAL BANK and SeaFirst American Corporation,
Appellees-Cross Appellants (Two Cases).

In the Matter of MAN-GAS TRANSMISSION, Debtor.

Aug. 29, 1994.

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

Before KING and SMITH, Circuit Judges, and KENT*, District Judge:

KING, Circuit Judge:

Appellants, the debtors in a consolidated bankruptcy

proceeding, appeal from the district court's order affirming the

bankruptcy court's confirmation of the principal creditor's

proposed plan of reorganization. By way of cross-appeal, the

creditors request that we dismiss the appeal as moot. On the basis

of the facts before us, we agree with the creditors and, upon

*
District Judge of the Southern District of Texas, sitting
by designation.

1
finding the issues presented to be moot, dismiss the appeal.

I. Background

Appellant Duval County Ranch Company (the "Ranch Company")

owned the surface estate of a 99,000-acre ranch in Duval County,

Texas. Appellant Man-Gas Transmission Company ("Man-Gas") owned

the mineral rights under the ranch property. Both of these

companies were wholly owned by the individual debtor and appellant,

Clinton Manges ("Manges").1 The ranch was undisputedly and by far

the largest asset of the Manges debtors. Seattle First National

Bank ("Seattle") made a loan to the Ranch Company in 1980, which

was secured by a mortgage on the ranch surface estate and

personally guaranteed by Manges.

A. The Agreed Judgment and Foreclosure

The loan went into default, and Seattle filed suit against the

Ranch Company and Manges in the United States District Court for

the Western District of Texas, San Antonio Division, to recover the

sums owed. Eventually, in August of 1988, the parties entered into

an agreed judgment pursuant to which the Ranch Company and Manges

would make periodic payments on the loan.

After the Ranch Company and Manges subsequently failed to make

one of the scheduled payments under the agreed judgment, the Ranch

Company filed a voluntary Chapter 11 bankruptcy petition to prevent

foreclosure under the agreed judgment. Soon after, Manges and Man-

Gas also entered Chapter 11 proceedings.

1
Collectively, we refer to these appellants as the "Manges
debtors."

2
 Seattle requested relief from stay, but agreed to abandon that

request temporarily if certain conditions were met. The court

signed an "Agreed Order On Motion For Relief From Stay" on

September 5, 1990. Pursuant to that order, the Manges debtors were

to obtain insurance coverage for improvements to the ranch within

ten days of the order's entry. When the Ranch Company failed to

obtain the requisite binder for coverage within the agreed

time-period, Seattle gave notice of default. After the Ranch

Company received the notice and failed to cure the default, the

automatic stay was lifted, and the San Antonio court entered an

order of sale of the ranch property on October 30, 1990. Although

this order was stayed temporarily, the ranch was eventually sold at

auction by federal marshals on January 16, 1991 (the "January 16

foreclosure"), and was purchased by SeaFirst American Corporation

("SeaFirst"), a wholly-owned subsidiary of Seattle. The San

Antonio court confirmed the sale on January 17, 1991, and the

Manges debtors appealed both the order of sale and confirmation of

sale to this court.2

B. The Plan of Reorganization

The Manges debtors proposed several plans of reorganization,

but the bankruptcy court refused to confirm any of the debtors'

proposed plans. Instead, by order entered June 10, 1991, the

bankruptcy court confirmed the plan proposed by Seattle and

SeaFirst (the "Plan") after balloting and a four-day confirmation

2
We dismissed that appeal as moot after the bankruptcy court
confirmed the creditor plan of reorganization as discussed below.

3
hearing. In connection with the confirmation order, the bankruptcy

court issued findings of fact and conclusions of law, including the

following: (i) that the Plan complied with all requirements of 11

U.S.C. §§ 1123 and 1129, as well as other applicable law; (ii)

that the Plan "was proposed in good faith and not by any means

forbidden by law"; (iii) that "[t]he principal purpose of the [ ]

Plan is not the avoidance of taxes ..."; and (iv) that the debtors

had "no equity in any of the property of the estates subject to the

liens."3

Under the Plan, a liquidating trust would be created to hold

legal title to the debtors' assets for sale and distribution of

proceeds to the various creditors (the "Trust"). The Plan

appointed a vice-president of Seattle to serve as liquidating

trustee, overseeing the payment of approximately $80 million in

creditors' claims with approximately $35 million in trust assets.

The Manges debtors were required to execute the trust agreement

creating the Trust as well as a "blanket conveyance" transferring

all of their assets to the Trust. In the event the Manges debtors

failed to do so, third parties were authorized to execute the

appropriate documents. The Plan also provided that, upon its

confirmation, the January 16 foreclosure would be rescinded and all

liens existing prior to the foreclosure would be reinstated.

Another important aspect of the Plan was that SeaFirst would create

a $1.3 million creditor fund to pay administrative expenses,

3
With respect to this finding, the bankruptcy court further
decreed that "[t]he value of the secured claims shall be
determined by the sales price for the collateral."

4
priority wage claims, and general unsecured claims. Additionally,

SeaFirst voluntarily subordinated its estimated $36 million

unsecured claim to those of the remaining unsecured creditors, and

Seattle and SeaFirst waived their approximately $1.7 million

administrative expense claims.

With respect to tax consequences, the Plan specifically

provided that the Trust would be a non-taxable grantor trust—i.e.,

that the Trust would not be liable for any taxes resulting from the

sale of property. The Plan included an express provision that the

trustee was under no duty to file federal tax returns or to pay

income taxes of any kind. Nor was the trustee obligated to make

available trust assets or sale proceeds to satisfy the tax claims.

The IRS, one of the Manges' creditors, at first lodged objections,

but, during the confirmation hearings, withdrew any objections it

had to the Plan. Interestingly, the bankruptcy court, in its June

10 findings and conclusions, specifically found that "[t]here

should not be any significant post-confirmation income tax

liability to Manges due to the availability of tax attributes, the

value of the collateral, the availability of subchapter S

termination,4 and the lack of personal liability to Manges for [the

Ranch Company's] taxes."5

4
Although Man-Gas was created as a subchapter S corporation,
and consequently tax liabilities could be funnelled through to
its owner, Manges, the bankruptcy court deferred entry of its
written confirmation order so that Manges could convert Man-Gas
to a subchapter C corporation, thus immunizing him from personal
liability.
5
The bankruptcy court further observed that "[e]ven in the
event that the debtors are faced with post-confirmation tax

5
C. The Appellate Efforts

The Manges debtors took an appeal from the confirmation order

to the district court and unsuccessfully applied for a stay of the

Plan pending appeal from both the bankruptcy court and the district

court. They also sought a writ of mandamus from this court to

compel the district court to issue the stay, but that request was

similarly denied. Seattle and SeaFirst urged the district court to

dismiss the appeal as moot, but the district court refused,

concluding that the Plan had not been substantially consummated.

Specifically, the court below found that the most substantial asset

of the debtors—the ranch property—had not been sold, though it

recognized that a substantial amount of the Trust property had

otherwise been alienated. Reaching the merits, the district court

affirmed the confirmation order by order entered May 4, 1993 (the

"May 4 order").

The Manges debtors then commenced the instant appeal. Two

days after filing their notice of appeal, on May 14, 1993, the

Manges debtors sought and were denied an emergency stay from the

district court of its May 4 order pending appeal to this court.

This court denied a similar motion for stay on May 25, 1993. On

September 7, 1993, the Manges debtors filed an amended motion to

stay the Plan pending appeal, but that motion was also denied a

week later.

D. The Administration of the Trust

liability, the [ ] Plan is not unfair or inequitable since the
debtors have had the benefit of the prepetition use of money and
property without the burden of paying taxes."

6
 As a consequence of the failure to obtain a stay, numerous

events have taken place pursuant to the Plan. The Trust has been

created, and, soon after the Plan was confirmed, SeaFirst funded

the creditor fund, much of which was subsequently disbursed to

administrative claimants and priority wage claimants. According to

affidavits filed in the district court while the first tier of this

appeal was before that court, the Trust paid over $1.5 million in

creditors' claims and over $2.5 million in repairs and operating

expenses relating to the ranch property. Those affidavits also

reflect that the Trust litigated several unsecured claims and was

poised to distribute fifty percent of the remaining monies to the

allowed, general unsecured creditors by the time of the district

court appeal. The Trust additionally sold working interests,

executed oil and gas leases, entered into gas purchase contracts,

and leased almost all of the surface area of the ranch for grazing

and hunting purposes. It began reducing significant ad valorem tax

liabilities which had not been paid for years.

Most significant, however, is the fact that the ranch property

and all remaining mineral interests have been sold to non-creditor

third parties as of December 16, 1993 (the "December 16 sale"),

during the pendency of this appeal. Although we are not informed

of what additional, administrative measures have been taken during

the course of this appeal, we can only presume that the trustees

have continued to implement the unstayed Plan.

II. Analysis

The Manges debtors claim that the Plan as confirmed deprives

7
them of their ability to have a "fresh start" because they will be

saddled with significant post-confirmation tax liabilities and will

have no estate assets with which those liabilities can be

satisfied. Seattle and SeaFirst counter that the controversy is

moot because the Plan has been so substantially consummated that

this court can no longer provide effective relief.

Generally, the mootness inquiry centers upon the concern that

only live cases or controversies be decided by our courts. See

Powell v. McCormack, 395 U.S. 486, 496 n. 7, 89 S.Ct. 1944, 1951 n.

7, 23 L.Ed.2d 491 (1969) (recognizing that the Court's inability to

consider the merits of a moot case "is a branch of the [U.S. CONST.

art. III] constitutional command that the judicial power extends

only to cases or controversies") (citing Sibron v. New York, 392

U.S. 40, 57, 88 S.Ct. 1912, 20 L.Ed.2d 917 (1968)). A controversy

becomes moot in the traditional sense when, as a result of

intervening circumstances, there are no longer adverse parties with

sufficient interests to maintain the litigation. Chevron U.S.A.,

Inc. v. Traillour Oil Co., 987 F.2d 1138, 1153 (5th Cir.1993).

Many courts, including our own, however, have employed the concept

of "mootness" to address equitable concerns unique to bankruptcy

proceedings.6 In this context, "mootness" is not an article III

6
See, e.g., In re UNR Indus., Inc., 20 F.3d 766, 769 (7th
Cir.1994) (recognizing the virtually universal principle that "a
plan of reorganization, once implemented, should be disturbed
only for compelling reasons" and collecting cases); Rochman v.
Northeast Util. Serv. Group (In re Public Serv. Co.), 963 F.2d
469, 471-72 (1st Cir.) (noting that the mootness doctrine
facilitates the "important public policy favoring orderly
reorganizations and settlement of debtor estates by "affording
finality to the judgments of the bankruptcy court' ") (quotation

8
inquiry as to whether a live controversy is presented; rather, it

is a recognition by the appellate courts that there is a point

beyond which they cannot order fundamental changes in

reorganization actions. See In re AOV Indus., Inc., 792 F.2d 1140,

1147 (D.C.Cir.1986) (recognizing that "[e]ven when the moving party

is not entitled to dismissal on article III grounds, common sense

or equitable considerations may justify a decision not to decide a

case on the merits") (citations omitted). Consequently, a

reviewing court may decline to consider the merits of a

confirmation order when there has been substantial consummation of

the plan such that effective judicial relief is no longer

available—even though there may still be a viable dispute between

the parties on appeal. Halliburton Serv. v. Crystal Oil Co. (In re

Crystal Oil Co.), 854 F.2d 79, 82 (5th Cir.1988); Brite v. Sun

Country Dev., Inc. (In re Sun Country Dev., Inc.), 764 F.2d 406,

406-07 n. 1 (5th Cir.1985). The Eleventh Circuit cogently

described the competing interests which must be considered in this

regard:

The test for mootness reflects a court's concern for striking
the proper balance between the equitable considerations of
finality and good faith reliance on a judgment and the
competing interests that underlie the right of a party to seek
review of a bankruptcy order adversely affecting him.

First Union Real Estate Equity and Mort. Inv. v. Club Assoc. (In re

omitted), cert. denied, --- U.S. ----, 113 S.Ct. 304, 121 L.Ed.2d
226 (1992); Trone v. Roberts Farms, Inc. (In re Roberts Farms,
Inc.), 652 F.2d 793, 798 (9th Cir.1981) (holding that reversal of
the confirmation order "would knock the props out from under the
authorization for every transaction that has taken place, [and]
would do nothing other than create an unmanageable,
uncontrollable situation for the Bankruptcy Court").

9
Club Assoc.), 956 F.2d 1065, 1069 (11th Cir.1992) (citation

omitted). The concept of "mootness" from a prudential standpoint

protects the interests of non-adverse third parties who are not

before the reviewing court but who have acted in reliance upon the

plan as implemented. As the Seventh Circuit aptly framed the

issue, we must determine "whether it is prudent to upset the plan

of reorganization at this late date." In re UNR Indus., Inc., 20

F.3d 766, 769 (7th Cir.1994).

This court has historically examined three factors in making

this assessment—(i) whether a stay has been obtained, (ii) whether

the plan has been "substantially consummated," and (iii) whether

the relief requested would affect either the rights of parties not

before the court or the success of the plan. Ronit, Inc. v.

Stemson Corp. (In re Block Shim Dev. Co.), 939 F.2d 289, 291 (5th

Cir.1991) (citing Crystal Oil, 854 F.2d at 81-82); Cleveland,

Barrios, Kingsdorf & Casteix v. Thibaut, 166 B.R. 281, 286

(E.D.La.1994).7 We evaluate each in turn.

A. Halting the Runaway Train: the Motions to Stay

As the Manges debtors correctly observe, in many of the cases

in which bankruptcy appeals were dismissed as moot, the appellants

failed to seek a stay. E.g., Crystal Oil, 854 F.2d at 82 (noting

the objecting creditor "should have sought a stay so the reviewing

court could consider the plan's propriety before implementation led

7
The Eleventh Circuit, in a recent opinion on the subject,
listed an additional inquiry—whether the relief sought would
affect the reemergence of the debtor as a revitalized entity.
See First Union Real Estate Equity and Mort. Inv. v. Club Assoc.
(In re Club Assoc.), 956 F.2d 1065, 1069 n. 11 (11th Cir.1992).

10
third parties to make commitments in reliance on the plan");

Cleveland, Barrios, 166 B.R. at 286-87 (observing that the failure

to seek a stay warrants dismissal of appeal on mootness grounds if

the lack of stay has permitted a comprehensive change in

circumstances or substantial consummation of the plan); see also

Trone v. Roberts Farms, Inc. (In re Roberts Farms, Inc.), 652 F.2d

793, 798 (9th Cir.1981) (dismissing an appeal on equitable grounds

where appellant never applied to bankruptcy court for stay). By

contrast, the Manges debtors argue, they diligently—albeit

unsuccessfully—pursued a stay at every turn.8 Thus, they appear to

conclude, they have preserved their right to a merits review.

However, in rejecting a similar argument, Judge Easterbrook aptly

pointed out that the failure to seek a stay is not "a censurable

event to be punished by refusal to adjudicate the merits"; rather,

[t]he significance of an application for a stay lies in the
opportunity it affords to hold things in stasis, to prevent
reliance upon the plan of reorganization while the appeal
proceeds. A stay not sought, and a stay sought and denied,
lead equally to the implementation of the plan of
reorganization. And it is the reliance interests engendered
by the plan, coupled with the difficulty of reversing critical
transactions, that counsels against attempts to unwind things
on appeal. Every incremental risk of revision on appeal puts
a cloud over the plan of reorganization and derivatively over
the assets of the reorganized firm.

8
The district court denied the debtors' request for a stay
because it was not persuaded that the Manges debtors had the
requisite likelihood of success on appeal. The bankruptcy court
more fully elaborated its grounds for denial of stay, reasoning
that, even if execution of the Plan were stayed, overwhelming
circumstances would compel it to lift the automatic stay to allow
foreclosure upon the estate's assets. Because foreclosure upon
the debtors' assets would leave little to be divided among the
remaining claimants, the bankruptcy court concluded that the most
fair and equitable result was to confirm the Plan and deny the
stay.

11
In re UNR Industries, 20 F.3d at 769-70; see also In re AOV

Indus., Inc., 792 F.2d 1140, 1147 (D.C.Cir.1986) (recognizing that

unsuccessful attempt to obtain stay had same result as failure to

seek stay). In short, the failure or inability to obtain a stay

pending appeal carries the risk that review might be precluded on

mootness grounds.

Although we recognize that, in many situations, the reviewing

court's decision whether to grant a stay is essentially dispositive

of the case—considering the average length of time for an

appeal9—we note that several provisions of the Bankruptcy Code

preordain such a consequence. See, e.g., 11 U.S.C. § 363(m)

(mandating that the reversal of an unstayed order authorizing the

sale or lease of estate property "does not affect the validity of

the sale or lease under such authorization to an entity that

purchased or leased such property in good faith ... unless such

authorization and such sale or lease were stayed pending appeal");

11 U.S.C. § 1127(b) (curtailing significantly bankruptcy court's

ability to modify plan of reorganization after its confirmation and

"substantial consummation"); see also Bankruptcy Rule 805 ("Unless

an order approving a sale of property ... is stayed pending appeal,

the sale to a good faith purchaser ... shall not be affected by the

reversal or modification of such order on appeal, whether or not

the purchaser knows of the pendency of the appeal."). As the Ninth

9
See In re UNR Industries, 20 F.3d at 768 (noting that
"[t]he long delay between the bankruptcy court's confirmation of
the plan and the district court's disposition of objections to
that action laid the foundation for the conclusion that the plan
is beyond challenge").

12
Circuit recognized in In re Roberts Farms, "the principle of

dismissal of an appeal for lack of equity ... places a heavy burden

on aggrieved party-appellants in bankruptcy cases. It is justified

to prevent frustration of orderly administration of estates under

various provisions of the Bankruptcy Act." 652 F.2d at 798. It is

undisputed that the Manges debtors did not obtain a stay, and we

must thus examine the transactions which have taken place as a

consequence to determine whether the confirmation challenge has

become equitably or prudentially moot.

B. Unscrambling the Eggs: Substantial Consummation

"Substantial consummation" is a statutory measure for

determining whether a reorganization plan may be amended or

modified by the bankruptcy court. 11 U.S.C. § 1127(b).10 This

court, in addressing the mootness issue, has borrowed the

"substantial consummation" yardstick because it informs our

judgment as to when finality concerns and the reliance interests of

10
The statutory definition of "substantial consummation" is
as follows:

"[S]ubstantial consummation" means—

(A) transfer of all or substantially all of the
property proposed by the plan to be transferred;

(B) assumption by the debtor or by the successor
to the debtor under the plan of the business or of the
management of all or substantially all of the property
dealt with by the plan; and

(C) commencement of distribution under the plan.

11 U.S.C. § 1101(2). The district court focused only upon
subpart (A) of the test in denying the motion to dismiss,
and the parties appear to dispute only that requirement.

13
third parties upon the plan as effectuated have become paramount to

a resolution of the dispute between the parties on appeal. E.g.,

Block Shim, 939 F.2d at 291; accord Club Associates, 956 F.2d at

1069.

The district court concluded that the Plan had not been

"substantially consummated," and, as a result, the relief sought

was not moot. The principal basis for this conclusion was the fact

that the ranch had yet to be sold at the time the district court

entered its order. Of course, that event has now occurred, and we

must determine as a threshold matter whether we may properly

incorporate the December 16 sale into our mootness analysis. If

so, we will then evaluate the effect the sale has upon that

determination, in addition to the other transactions which are

contended to evidence substantial consummation of the Plan.

1. Evidence of December 16 sale

The Manges debtors have long recognized the significance of

this transaction and the consequent effect it would have on the

mootness question. In fact, in requesting a stay during the

pendency of this appeal, they represented that:

The trustee is currently involved in negotiations to sell the
property, having received written offers to purchase the
property. An order preventing such sale is necessary to
prevent the sale from rendering moot the appellants' appeal.
A sale of this property would leave the bankruptcy estate with
few assets and would render this appeal moot (emphasis added).

As noted above, this court denied the stay.

Now that the ranch has been sold and the threat of mootness

looms larger, the Manges debtors challenge the December 16

sale—apparently for the first time—on the basis that there is no

14
evidence that the sale was made to a good-faith third-party

purchaser, a requirement that they contend has been incorporated

into the first prong of the substantial consummation determination.

They also speculate that "discovery could conceivably reveal ...

that [the sale] was not a good faith transfer for value, or was

conditioned on the outcome of this appeal" (emphasis added).

Reasoning from that assumption, the debtors argue that the recent

sale might be subject to rescission in the event their appeal was

successful. Therefore, the Manges debtors previously asked that we

remand the case to the district court for discovery on the mootness

issue; however, this court denied the request. Although we

recognize that the "substantial consummation" test is generally

fact-driven such that an evidentiary hearing on the issue would be

necessary, there is a very important distinction in the case

presented. Substantial consummation here is merely a sub-part of

the overall mootness balancing test, as discussed above. Mootness

is evaluated by the reviewing court, which may take notice of facts

not available to the trial court if they go to the heart of the

court's ability to review. See Board of License Comm'rs v.

Pastore, 469 U.S. 238, 240, 105 S.Ct. 685, 686, 83 L.Ed.2d 618

(1985) ("When a [post-appeal] development ... could have the effect

of depriving the Court of jurisdiction due to the absence of a

continuing case or controversy, that development should be called

to the attention of the Court without delay."); Clark v. K-Mart

Corp., 979 F.2d 965, 967 (3d Cir.1992) (Unless reviewing court can

receive facts relevant to mootness, "there [is] no way to find out

15
if an appeal has become moot."). Thus, this court may review

evidence as to subsequent events not before the courts below which

bears upon the issue of mootness. E.g., Crystal Oil, 854 F.2d at

81; Roberts Farms, 652 F.2d at 796.

Problems can arise, however, where the party opposing a motion

to dismiss on mootness grounds contests the newly submitted

evidence, as do the debtors here.11 However, we need not concern

ourselves with resolving any such evidentiary dispute in the

context of our mootness determination—or remanding it to the

bankruptcy court for resolution—because there is no real

controversy as to the "facts" regarding the sale of the ranch.

Seattle and SeaFirst have filed authenticated copies of the deeds

of sale and sales agreements respecting the December 16 sale, and

the co-trustees have stated under oath that these documents

constitute the entire agreement between the Trust and the

third-party buyers. Conspicuously absent from the papers before us

is any affidavit or documentary evidence—other than sheer

speculation by the debtors in their motion to remand—that the sale

11
One district court, acting in its appellate function, was
faced with a potentially viable challenge to certain affidavit
evidence submitted in support of a motion to dismiss on the basis
of mootness. See Huddleston v. Nelson Bunker Hunt Trust Estate,
102 B.R. 71 (N.D.Tex.1989). The court determined that the
affidavit evidence was appropriately submitted and observed that:

There may be disputes regarding evidence on the
mootness question that are inapposite to the court's
decision. If these disputes do not stand in the path
of the district court's resolution of the mootness
issue, the court need not remand the matter to the
bankruptcy court.

Id. at 76 n. 9.

16
was somehow compromised in order to facilitate a finding of

mootness. This silence is even more suspect in light of the fact

that the debtors filed motions to stay in this court to suspend the

sale at issue, never once having lodged the charges they make

today.12

Seattle and SeaFirst urge us to take judicial notice of the

unimpeached certified copies of the deeds and assignments executed

by the Trust to the third-party purchasers contained in Seattle and

SeaFirst's Record Excerpts, an invitation we accept. E.g., Pratt

v. Kelly, 585 F.2d 692, 696 (4th Cir.1978); see also FED.R.EVID.

201; cf. Landy v. FDIC, 486 F.2d 139, 151 (3d Cir.1973) (taking

judicial notice of court documents), cert. denied, 416 U.S. 960, 94

S.Ct. 1979, 40 L.Ed.2d 312 (1974). We also take note of the

properly authenticated sales agreements which fail to evidence any

contingency upon the outcome of this appeal. From these documents,

it appears that the "centerpiece" of this litigation has been

irreversibly sold to third parties. Therefore, "it is very

doubtful that effective relief could be afforded even if [the

Manges debtors] prevailed on the merits." In re Information

Dialogues, Inc., 662 F.2d 475, 476 (8th Cir.1981) (per curiam).

This factor alone weighs heavily in favor of a finding of mootness.

2. Other evidence of "substantial consummation"

12
We cannot more accurately summarize the situation than did
SeaFirst:

For two years, the Manges Debtors played Cassandra,
prophesying the fall of their kingdom should the ranch
be sold; once the sale happened, they became King
Lear, refusing to accept the fate they foresaw.

17
 Even prior to the sale, the Trust spent millions of dollars

improving, upgrading, and preparing the property for sale,

countless hours in negotiation of the conveyance, and substantial

amounts in appraisals, surveys, and other closing costs. The Trust

additionally engaged in negotiations to renew gas production on the

ranch mineral estate, to lease both the surface estate and mineral

rights, and to dispose of litigation involving Trust assets.

Significant amounts were paid to state taxing authorities to reduce

the outstanding liability for property taxes on the ranch which had

not been paid for several years. Millions of dollars in claims

have been paid to date from the creditor fund established by

Seattle and SeaFirst.

In sum, (i) the Trust "has transferred all or substantially

all of the property proposed by the [P]lan to be transferred";

(ii) the liquidating trustees have assumed the business and

management of all the property dealt with by the Plan; and (iii)

the Trust has "commence[d] distribution under the [P]lan." 11

U.S.C. § 1101(2). Accordingly, the "substantial consummation"

factor counsels convincingly against reviewing the merits of the

debtors' challenge to the Plan.

C. The Effect upon Parties not before us

As several courts have made clear, "[s]ubstantial

consummation of a reorganization plan is a momentous event, but it

does not necessarily make it impossible or inequitable for an

appellate court to grant effective relief." Frito-Lay, Inc. v. LTV

Steel Co., Inc. (In re Chateaugay Corp.), 10 F.3d 944, 952 (2d

18
Cir.1993) (citing AOV Industries, 792 F.2d at 1148). Thus, we must

also evaluate the other factors relevant to the mootness issue.

With respect to the mootness factor relating to third parties, we

reiterate that the ranch property and attendant mineral rights—by

far the most substantial assets—have been sold to purchasers who

are not before this court. Furthermore, as noted above, millions

of dollars in administrative and priority claims have been paid to

claimants not parties to this appeal. Millions more have been

expended in preparing the property for the sale consummated in

December of 1993. The Trust has significantly reduced ad valorem

tax liabilities by entering into settlements with, and making

distributions to, the claimant taxing authorities not participating

in the appeal.

We must evaluate these transfers, many of which appear

irreversible, against the backdrop of the relief sought—nothing

less than a wholesale annihilation of the Plan.13 All of these

13
At oral argument, the Manges debtors' counsel argued for
the first time that we might simply strike the offensive portion
of the Plan without completely unravelling it. See Bill Roderick
Distrib., Inc. v. A.J. Mackay Co. (In re A.J. Mackay Co.), 50
B.R. 756, 759-60 (D.Utah 1985) (holding that a bankruptcy court
may modify a Chapter 11 plan after confirmation by deleting
provisions that it did not have the jurisdiction to confirm). We
disagree. The Bankruptcy Code provides that a plan may not be
modified or amended after substantial consummation has taken
place. 11 U.S.C. § 1127(b); cf. Trans World Airlines, Inc. v.
Texaco, Inc. (In re Texaco, Inc.), 92 B.R. 38, 46 (S.D.N.Y.1988)
(observing that " "the piecemeal dismantling of [a plan of
reorganization] ...' is, in practical terms, if nothing else, a
virtually impossible task") (quoting AOV Indus., Inc., 792 F.2d
1140, 1149 (D.C.Cir.1986)). In light of the facts that the Plan
has been substantially consummated and that the tax provision is
integral to the Plan as implemented, the requested modification
is simply not possible.

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third-party recipients and many others have relied upon the Plan,

and the irretrievable depletion of estate assets would

correspondingly decrease the amounts available to all claimants.

In short, we doubt seriously that we could place the estate or the

parties back into the status quo as it existed before the

confirmation order if we were to unravel the Plan at this time.

Therefore, we conclude that this factor weighs heavily against our

interference at this late date.

D. Other Factors

Other factors particular to this case also counsel against our

intervention. See In re AOV Industries, 792 F.2d at 1147-48

("Determinations of mootness ... require a case-by-case judgment

regarding the feasibility or futility of effective relief should a

litigant prevail."). For example, even assuming the sale of the

ranch and mineral rights could somehow be set aside, there is no

reason to believe that the property would return to the debtors in

the event we reversed the bankruptcy court's confirmation order on

appeal. Rather, the ranch would return to SeaFirst, which

voluntarily surrendered it to the Trust in order to obtain

confirmation of the Plan, and the potential tax liability to the

debtors occasioned by the sale on foreclosure would be resurrected.

Moreover, Seattle and SeaFirst have expended millions of their

own funds—both in cash infusions and forbearance of administrative

expenses—in reliance upon the Plan, much of which cannot be

recovered. See, e.g., Crystal Oil, 854 F.2d at 82 (considering

important the fact that a creditor which had made significant

20
sacrifices to obtain confirmation would lose benefits obtained in

exchange if appellant successfully overturned plan). Further, if

we were to reverse the Plan, the unsecured creditors would likely

receive nothing for their claims because the portion of the

creditor fund which remains will revert to Seattle and SeaFirst.

Additionally, we presume that SeaFirst will reurge its $2 million

administrative expense claims and rescind its voluntary

subordination of its substantial unsecured debt. The extensive

dismantling of this successfully executed Plan would be nothing

short of a disaster for the bankruptcy court and the parties before

it. These circumstances further persuade us that the instant

appeal is prudentially moot.

III. Conclusion

To summarize, the Plan has been virtually fully implemented,

and, at this point, unravelling it would be virtually impossible.

For the foregoing reasons, we hold that "it would be plainly

inequitable for this court to consider the merits of [the Manges

debtors' appeal]." Crystal Oil, 854 F.2d at 82. Accordingly, we

dismiss the appeal.

APPEAL DISMISSED.

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