Longardner & Associates, Inc., In re
| Decision Date | 24 August 1988 |
| Docket Number | No. 87-1599,87-1599 |
| Citation | 855 F.2d 455 |
| Parties | , 18 Bankr.Ct.Dec. 574, Bankr. L. Rep. P 72,460 In re LONGARDNER & ASSOCIATES, INC., Debtor. Appeal of LANDAHL, BROWN & WEED ASSOCIATES, INC. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Edward D. Bunn, Bailey's Crossroads, Va., for appellant.
Leonard Opperman, Bose McKinney & Evans, Indianapolis, Ind., for appellee.
Before CUDAHY, COFFEY and RIPPLE, Circuit Judges.
Landahl, Brown & Weed Associates, Inc. (the "creditor") appeals a district court order affirming two orders of the bankruptcy court. The orders involve the confirmation of the plan of reorganization submitted by Longardner & Associates, Inc. (the "debtor"), and the denial of the creditor's motion to have the plan set aside. 1 The creditor seeks to have the case remanded to the bankruptcy court with instructions to vacate the confirmation order and to entertain its objections to the plan. We deny the creditor's request and affirm.
In October 1982, the debtor filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. 11 U.S.C. Secs. 1101-1146. It subsequently filed a plan of reorganization and a disclosure statement and later filed an amended plan and an amended disclosure statement. The creditor responded by filing objections to the amended disclosure statement, and the debtor then amended both the plan and the disclosure statement a second time.
On November 1, 1984, the bankruptcy court tentatively approved the second amended disclosure statement and scheduled a hearing on confirmation of the second amended plan for November 26. The creditor objected to the plan, claiming that it was inconsistent with previously filed financial records, that it omitted certain accounts receivable and other assets and that it proposed only $5,000 for settlement of the creditor's $266,000 claim. When the parties appeared before the bankruptcy court on November 26, the court informed them that the hearing would be rescheduled and that they would be notified by mail of the new hearing date.
On December 12, the court rescheduled the hearing for March 7, 1985, at 10:00 a.m., and mailed notice of the new hearing to the parties. The notice provided that the hearing "will take place ... for consideration of confirmation of the Plan of Reorganization; objections as may be made to confirmation; ... and such other matters as may properly come before the Court." Appendix to Appellant's Brief at 54. The creditor asserts that it did not receive this notice.
On December 13, the bankruptcy court entered its certification of mailing the notice to the parties. It entered an additional notice scheduling a hearing on the debtor's objection to the creditor's claim also for March 7, 1985, at 10:00 a.m. The creditor did receive this notice, which allegedly caused it to believe that the March 7 hearing dealt solely with the debtor's objection to the creditor's claim, rather than with both the debtor's objection and the court's confirmation of the proposed plan.
During the next several weeks, the creditor's counsel, Edward Bunn, and the debtor's counsel, Leonard Opperman, discussed the debtor's objection to the creditor's claim. In late February 1985, the parties agreed that the debtor would drop its objection to the claim in exchange for the creditor's assertion of an unsecured, rather than a secured, claim. The parties set forth this agreement in a stipulation filed with the court on February 27. This stipulation apparently caused the creditor mistakenly to believe that the March 7 hearing was unnecessary since the debtor's objection had been dropped. Bunn sent Opperman a letter stating, "We trust you will advise the Court to remove the case from the calendar for March 7, 1985." Appendix to Appellant's Brief at 53. Opperman received the letter, but contends that he assumed that the creditor was referring to the hearing on the debtor's objection to the creditor's claim, which the parties had resolved, but not to the hearing on the confirmation of the plan, which was also scheduled for the same date and time.
The bankruptcy court held the confirmation hearing on March 7 and approved the debtor's plan of reorganization. Bunn failed to appear on behalf of the creditor. Neither the court nor the debtor sent the creditor notice of the entry of the reorganization plan. The bankruptcy court records confirm that copies of the order were distributed only to the parties present at the confirmation hearing. 2
On March 12, the court sent notice of an order approving the stipulation the parties had filed on February 27. The creditor received this notice.
The creditor claims to have learned of the confirmation order on May 15, when it received a $5,000 check from the debtor as payment in full for its $266,000 claim. The creditor returned the check and, on May 21, filed with the bankruptcy court a motion to set aside the confirmation of the plan. The creditor alleged that it had never received notice either of the confirmation hearing or of the order of entry and that this lack of notice severely prejudiced the creditor. The creditor also complained that its objections to the plan had "not been satisfied." Appendix to Appellant's Brief at 68.
On August 30, 1985, the bankruptcy court held a hearing on the creditor's motion. Bunn, representing the creditor, testified that no prejudice to the debtor would result from setting aside the reorganization plan. He urged that the creditor was entitled to notice of the confirmation of the plan and that failure to receive this notice affected the creditor's right to appeal the confirmation to the district court. In response to the bankruptcy court's repeated instruction that the creditor must prove fraud to set aside the confirmation of the plan, Bunn said that he didn't believe there was any fraud. 3
In October, the creditor filed a memorandum in support of its motion to set aside the plan, in which it reiterated many of the points made at the hearing. The creditor stated that it did not "suggest that the March 7, 1985 order was procured by fraud, but by some mistake notice was not sent to [the creditor]." Appendix to Appellant's Brief at 79. The creditor, however, encouraged the court to review allegations in its prior pleadings (which it attached as exhibits to the memorandum) to determine whether the debtor had engaged in fraud in its disclosure statements.
The bankruptcy court denied the creditor's motion to set aside. The court found that the creditor could obtain relief from a confirmed plan only under section 1144 of the Bankruptcy Code, which allows a court to revoke a confirmation order procured by fraud. 11 U.S.C. Sec. 1144. The court concluded that the creditor had not alleged fraud and, further, the court itself had not found that the debtor fraudulently procured the order confirming the reorganization plan. The bankruptcy court also found that notice of the confirmation hearing had been delivered to the creditor's counsel and thus it concluded that the creditor had established no legal grounds for setting aside the confirmation order.
The district court adopted the bankruptcy court's findings and conclusions and affirmed the denial of the creditor's motion. The district court also rejected the creditor's argument on appeal that the clerk's failure to send notice of entry of the order confirming the plan entitled the creditor to an extension of time to appeal the March 7 order.
As we review these decisions of the bankruptcy and district courts, we must accept findings of fact unless they are clearly erroneous. We, of course, however, review conclusions of law de novo. In re Agnew, 818 F.2d 1284, 1286 (7th Cir.1987); In re Kimzey, 761 F.2d 421, 423 (7th Cir.1985); Bankr.R. 8013.
We consider first whether the bankruptcy court's order confirming the reorganization plan should be set aside because the creditor did not receive notice of the confirmation hearing. On this issue, the bankruptcy court made the following findings of fact: (1) on December 12, 1984, it issued a notice rescheduling the confirmation hearing for March 7, 1985; (2) copies of this notice were mailed to all parties, including Bunn, as the creditor's counsel; and (3) the notice mailed to Bunn was addressed correctly and was not returned to the clerk's office. Based on these findings, which are not clearly erroneous, the bankruptcy court correctly concluded that notice of the hearing was "reasonably calculated to reach interested parties," Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 318, 70 S.Ct. 652, 659, 94 L.Ed. 865 (1950), and thus satisfied the requirements of due process. We conclude that the court's notice also met the requirements of the Bankruptcy Code. See Bankr.R. 2002(b) (); id. 9006(e) ().
Actual receipt of notice of the hearing by the creditor is not required. See In Re Park Nursing Center, Inc., 766 F.2d 261, 263 (6th Cir.1985). Nevertheless, in this case, in which notice was properly addressed, stamped and mailed, there is a presumption that Bunn received it on behalf of the creditor. See Hagner v. United States, 285 U.S. 427, 430, 52 S.Ct. 417, 418, 76 L.Ed. 861 (1932); In re Nimz Transp., Inc., 505 F.2d 177, 179 (7th Cir.1974); In re Moseley, 74 B.R. 791, 802 (Bankr.C.D.Cal.1987). Bunn's denial of receipt alone does not rebut the presumption, but merely creates a question of fact. See In re Farris, 43 B.R. 726, 727-28 (Bankr.N.D.Ill.1984); In re American Properties, Inc., 30 B.R. 239, 244 (Bankr.D.Kan.1983). But see In re Yoder Co., 758 F.2d 1114, 1118 (6th Cir.1985). The bankruptcy court resolved this question against the creditor.
The creditor nevertheless argues that the debtor presented no evidence to meet its...
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