In re Blumer
| Decision Date | 18 November 1988 |
| Docket Number | B.A.P. No. EW-87-2081-PRV,Bankruptcy No. 82-01599-214. |
| Parties | In re Eldon D. BLUMER and Katherine M. Blumer, Debtors. CREDIT ALLIANCE CORPORATION, Appellant, v. IDAHO ASPHALT SUPPLY, INC., Appellee. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit |
William J. Connor, Horton, Wilkins & Faurholt, Kennewick, Wash., for appellant.
Frank L. Kurtz, Yakima, Wash., for appellee.
Before PERRIS, RUSSELL and VOLINN, Bankruptcy Judges.
This appeal arises from an order allowing the claim of Idaho Asphalt Supply, Inc. as an administrative expense pursuant to 11 U.S.C. §§ 364(a) and 503(b)(1),1 the denial of reconsideration of the above order and an order denying a request for judicial notice of a deposition. We affirm.
On September 1, 1982, the debtors, Eldon D. Blumer and Katherine M. Blumer ("debtors") filed a Chapter 11 petition. Eldon Blumer was an individually licensed and bonded construction contractor engaged in the road building business. He was also the president of and a shareholder in Prairie Rock, Inc. ("Prairie Rock"), a closely held construction company that had also filed a Chapter 11 petition.
During the pendency of his Chapter 11 case, Eldon Blumer, as an individual, entered into a contract with Benton County to seal coat certain roads. In May of 1983, Mr. Blumer applied for credit for the Benton County project from the appellee, Idaho Asphalt Supply, Inc. ("Idaho Asphalt"). The application for credit identified Mr. Blumer as the contractor and the credit applicant. Idaho Asphalt supplied asphalt for the Benton County project and billed Mr. Blumer personally. Although some invoices were paid, invoices totaling $89,543.57 were not paid and this amount was past due on July 7, 1983. Mr. Blumer and Idaho Asphalt agreed that interest would be paid on the past due amounts at the rate of 18% per annum.
Prairie Rock's accounting records included as a liability the obligations to Idaho Asphalt. These same records further indicate that Prairie Rock paid the obligations to Idaho Asphalt by disbursements from its corporate accounts. However, at least some of the checks which purported to pay for the asphalt were drawn on accounts in the name of Mr. Blumer. When Idaho Asphalt asserted its claim in the bankruptcies, it did so by filing duplicate proofs of claim against the estates of the debtors and Prairie Rock for approximately $90,000, the full amount of the unpaid invoices on the Benton County project.
Subsequent to the transactions between Mr. Blumer and Idaho Asphalt, the bankruptcy court converted the debtors' case to Chapter 7 at their request.
Not long after conversion, the deposition of Robin Blumer, Eldon Blumer's son, was taken because Robin Blumer indicated he would be leaving the state. The majority of the questions in the deposition concerned a contested matter involving the validity of a post-petition deed of trust on the debtors' residence held by Dunning-Ray Insurance Agency, Inc. ("Dunning-Ray"). Neither Idaho Asphalt, nor its counsel, received notice of or was present at the Robin Blumer deposition. The bankruptcy court admitted the Robin Blumer deposition into evidence at a June 13, 1985 hearing involving primarily the validity of the Dunning-Ray deed of trust and the disposition of proceeds from the sale of the debtors' residence. Neither Idaho Asphalt nor its counsel were present at the June 13, 1985 hearing. There is no evidence that Idaho Asphalt received notice of the hearing.
In February of 1985, Idaho Asphalt filed in the debtors' case a Motion for an Order Classifying its Claim as an administrative expense. Appellant Credit Alliance Corporation ("Credit Alliance"), an unsecured creditor of the debtors, objected to this motion. On July 16, 1987, the court below held an evidentiary hearing on Idaho Asphalt's motion. At the hearing, counsel for Credit Alliance and counsel for Dunning-Ray, another creditor objecting to Idaho Asphalt's motion, presented argument based upon evidence revealed in the deposition of Robin Blumer. Neither counsel, however, expressly referred to the Robin Blumer deposition as the source of this evidence, nor did either counsel move for admission or request that the court take judicial notice of the Blumer deposition or request that the court consider it. At the conclusion of the hearing, the bankruptcy court ruled in favor of Idaho Asphalt.
Following the hearing, Idaho Asphalt submitted proposed findings and an order reflecting the court's ruling. Credit Alliance objected to the proposed findings and order. It submitted an opposing set of findings based upon evidence contained in the Robin Blumer deposition, and excerpts from the Robin Blumer deposition. At a September 9, 1987 telephone conference regarding the proposed findings, the bankruptcy court indicated that it would not consider the Robin Blumer deposition and that it would sign the proposed findings and order submitted by Idaho Asphalt. The court entered the order on September 29, 1987. Credit Alliance moved for reconsideration and for judicial notice of the deposition of Robin Blumer. By an order entered October 15, 1987, the bankruptcy court denied the motions for reconsideration and for judicial notice of the Robin Blumer deposition. On October 19, 1987, Credit Alliance filed a timely notice of appeal from the September 29 and October 15 orders.
1. Whether the bankruptcy court erred in refusing to consider the Robin Blumer deposition.
2. Whether the bankruptcy court erred in determining that Idaho Asphalt extended credit to debtor Eldon Blumer in the ordinary course of business and was entitled to administrative expense priority under section 364(a) and section 503(b)(1).
3. Whether Credit Alliance is entitled to an award of attorney fees on appeal.
A bankruptcy court's findings of fact will not be reversed unless clearly erroneous. Bankruptcy Rule 8013; In re Lewis, 79 B.R. 893, 895 (9th Cir. BAP 1987). Conclusions of law are subject to de novo review. Lewis, 79 B.R. at 895.
Credit Alliance contends that the bankruptcy court erred in refusing to consider the Robin Blumer deposition because, as a previously admitted deposition, it was part of the record in the bankruptcy case. The Ninth Circuit Court of Appeals addressed the question of what evidence a bankruptcy judge can consider from prior hearings in In re Acequia, Inc., 787 F.2d 1352 (9th Cir.1986) when it affirmed the bankruptcy judge's consideration of evidence presented at a prior hearing in ruling on confirmation of a Chapter 11 plan of reorganization. Acequia recognizes that a bankruptcy judge may, but need not, consider evidence from a prior hearing in the same case if the notice of what will be considered is sufficient to permit the parties to challenge the prior evidence. Based upon the procedural and factual distinctions between this case and Acequia, which are discussed more fully below, we hold that the bankruptcy judge did not err in refusing to consider the Robin Blumer deposition.
In Acequia, the complaining party received notice through the debtor's Disclosure Statement of the substance, if not the source, of the evidence that would be presented at the confirmation hearing. During the confirmation hearing in Acequia, the debtor's counsel referred to the earlier admitted evidence thereby bringing the issue of admissibility of the evidence before the court. Credit Alliance did not offer, refer to or ask the court to consider Robin Blumer's deposition during the hearing.2 Credit Alliance's counsel merely incorporated the facts allegedly proved by the deposition into its closing argument without indicating its source of proof. It was not until after the end of the hearing on Idaho Asphalt's motion that Credit Alliance first brought the deposition to the attention of the bankruptcy court and opposing counsel. Furthermore, unlike the complaining party in Acequia, there is no evidence that Idaho Asphalt received notice of or attended either the deposition or the hearing at which it was introduced.
Credit Alliance also contends that the trial court erred in refusing to take judicial notice of the Robin Blumer deposition. It is well established that a court may take judicial notice of its own records. See United States v. Wilson, 631 F.2d 118, 119 (9th Cir.1980); In re Missionary Baptist Foundation of America, Inc., 712 F.2d 206 (5th Cir.1983). But this does not mean that a court can take judicial notice of the truth of all documents found within a court's records. That a fact sought to be noticed is found in a court's records is not talismanic; the fact still must be of the type described in Fed.R.Evid. 201 ("Rule 201"). In re Armorflite Precision, Inc., 48 B.R. 994, 996 (D. Maine 1985); see generally Wright & Miller § 5106; Russell, Bankruptcy Evidence Manual, § 201.5 (West 1987); see also M/V American Queen v. San Diego Marine Construction, 708 F.2d 1483, 1491 (9th Cir.1983) ().
Rule 201 allows a court to take judicial notice of facts that are not subject to reasonable dispute in that they are either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Rule 201. The facts set forth in the Robin Blumer deposition are not "generally known within the territorial jurisdiction of the trial court" or "capable of accurate and ready determination by resort to sources whose accuracy cannot...
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