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Bankruptcy – Plan Confirmation – Revocation – Failure Of Notice

Where the partnership that purchased the deed and trust on debtor’s property did not receive copies of debtor’s amended plan and disclosure statement, or a notice of the hearing on confirmation, the plan confirmation is set aside.

Debtor’s bankruptcy counsel or a member of his staff did timely mail to the original noteholder, a bank, at its regular mailing address copies of the amended plan and disclosure statement and the notice of hearing on confirmation. However, none of these documents were received by the individuals at the bank who were responsible for debtor’s bankruptcy case. In fact, neither the bank’s responsible officers nor its counsel learned of the court’s confirmation of the amended plan until some weeks after Nov. 5, 1992.

I find that debtor’s admitted failure to give notice to the bank’s bankruptcy counsel of the filing of an amended plan and hearing on confirmation requires the court to vacate the confirmation order under Rule 60(b)(6).

Although the partnership argues that debtor failed to notice either the bank or the bank’s counsel, it has been unable to prove there was no notice to the bank. The burden of proof on an assertion of failure to give notice is on the party who did not receive the notice, a difficult burden indeed as has been recognized by numerous cases.

Even though the court has found that the bank has no present record of receiving notice, the evidence is unrefuted that the officer of debtor’s bankruptcy counsel mailed copies of the appropriate documents to the bank. However, more important is the fact, also undisputed, that debtor’s bankruptcy counsel intentionally failed to send copies of the documents to the bank’s bankruptcy counsel. The court found unpersuasive counsel’s stated reasons for the omission.

Since the evidence supports the debtor’s counsel statement that he noticed the bank directly, I decline to find counsel guilty of misconduct as required by Rule 60(b)(3). However, counsel’s failure to notice the bank’s bankruptcy counsel when combined with the unexplained failure of the bank’s responsible employees to receive any indication of the impending confirmation of the amended chapter 11 plan clearly present circumstances warranting the vacation of the order of confirmation pursuant to the general provision of Rule 60(b)(6).

In Re: Birdneck Apt. Associates II L.P. (Tice) No. 91-23164-T, Mar. 16, 1993; USBC at Norfolk, Va.; Frank J. Santoro for debtor; Richard J. Martin for the partnership; James T. Lloyd Jr., U.S. Trustee’s Office. VLW 093-4-022, 8 pp.

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