Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-86-01710/USCOURTS-ca10-86-01710-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

IN RE PAUL WELDON HERD, ) 

) 

Debtor. ) 

) 

ROWE INTERNATIONAL, INC., ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) No. 86-1710 

) 

PAUL WELDON HERD, ) 

) 

Defendant-Appellant. ) 

. FILED 

United States Co~rt ~f Appeals Tenth Circuit 

FEB 2 51988 

ROBERT L. HOECKER 

Clerk 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF UTAH 

(D.C. No. 85-0656G) 

William Thomas Thurman & Joel T. Marker, Salt Lake City, Utah, for 

Defendant-Appellant. 

Herschel J. Saperstein & Steven T. Waterman, Watkiss & Campbell, 

Salt Lake City, Utah, and L. Rich Humphreys & Gainer M. 

Waldbillig, Christensen, Jensen & Powell, P.C., Salt Lake City, 

Utah, for Plaintiff-Appellee. 

Before MOORE, TACHA and BALDOCK, Circuit Judges. 

BALDOCK, Circuit Judge. 

Appellate Case: 86-1710 Document: 010110018317 Date Filed: 02/25/1988 Page: 1 
This appeal concerns the effect of an erroneous bar date on a 

notice to creditors in a bankruptcy proceeding. 1 Paul Weldon 

Herd, debtor-appellant, filed a petition for reorganization under 

chapter 11 of the Bankruptcy Code on September 9, 1983. The 

debtor was a general partner in a partnership indebted to Rowe 

International, Inc., creditor-appellee. Debtor scheduled the 

creditor's claim as disputed. The notice to creditors sent by the 

clerk of the bankruptcy court stated: 

THE LAST DAY FOR FILING A PROOF OF CLAIM IS MARCH 9, 

1983 OR THE DATE OF COURT APPROVAL OF A DISCLOSURE 

STATEMENT PURSUANT TO 11 U.S.C. SEC. 1125, WHICHEVER 

OCCURS FIRST IN TIME. 

D. Ct. Rec. at 16 (Emphasis in original.). The notice to 

creditors was dated September 21, 1983, so the first potential bar 

date (March 9, 1983} set by the bankruptcy court had expired six 

months before the debtor filed his petition. The creditor filed 

its proof of claim on August 6, 1984, because it incorrectly 

believed that the claim was undisputed. Had the claim been 

scheduled as undisputed, it would have been unnecessary for the 

creditor to file a claim. See 11 u.s.c. § llll(a}; Bankr. R. 

3003(c)(2). The debtor's amended disclosure statement was 

approved by the bankruptcy court on August 31, 1984; a second 

amended disclosure statement was approved on April 26, 1985. 

1 After exam1n1ng the briefs and appellate record, this panel has 

determined unanimously that oral argument would not materially 

assist determination of this appeal. See Fed. R. App. P. 34(a); 

10th Cir. R. 34.l.8(a). The cause therefore is submitted without 

oral argument. 

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Appellate Case: 86-1710 Document: 010110018317 Date Filed: 02/25/1988 Page: 2 
The bankruptcy court determined that the notice to creditors 

was erroneous because it should have contained the date "March 9, 

1984," rather than the date ''March 9, 1983." The bankruptcy court 

adopted March 9, 1984, however, as the bar date and concluded that 

the erroneous notice was not misleading and contained sufficient 

information to put creditors on notice that further inquiry 

concerning the bar date would be necessary. Under this reasoning, 

the creditor's claim, filed subsequent to March 9, 1984, was 

denied as untimely. According to the bankruptcy court, further 

inquiry would have led creditors to determine that the 1983 date 

in the notice was erroneous and was intended to be a 1984 date. 

The bankruptcy court, relying on Bankr. R. 9006(b), also 

determined that the creditor had not made any showing of excusable 

neglect which would allow filing the claim after the intended bar 

date of March 9, 1984. 2 In making this finding, the bankruptcy 

2 In deciding whether to grant an extension of time in which to 

file the proof of claim, the bankruptcy court used an "excusable 

neglect" standard. According to one commentator, the extension 

may be granted "for cause,'' and the excusable neglect standard of 

Bankr. R. 9006 does not apply. L. King, 8 Collier on Bankruptcy 

~ff 3003.03[1] & 3003.05(4) (15th ed. 1987). The "for cause" 

standard of Bankr. R. 3003(c)(3) allows the bankruptcy court to 

grant an extension for grounds other than excusable neglect, 

although that often, but not always, will be a factor in deciding 

whether cause exists. In Re Terex Corp., 45 B.R. 290, 292 (Bankr. 

N.D. Ohio 1985) (Rule 3003(c)(3) gives the bankruptcy court 

greater discretion to grant extension.). But see In re South 

Atlantic Financial Corp., 767 F~2d 814, 817(llth Cir. 1985), 

cert. denied, 475 U.S. 1015 (1986) (Rule 3003(c)(3) must be read 

in conjunction with Rule 9006(b) and when a party moves for an 

extension of time to file after the bar date, it must prove 

excusable neglect.); In re Arrow Air, Inc., 75 B.R. 375, 377-78 

(Bankr. S.D. Fla. 1987)(discussing policy reasons in favor of an 

excusable neglect requirement). For example, the bankruptcy court 

may grant an extension of time "for cause" when the notice of the 

bar date is mailed to an incorrect address and the creditor 

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Appellate Case: 86-1710 Document: 010110018317 Date Filed: 02/25/1988 Page: 3 
court implicitly rejected the creditor's contention that the 

debtor misled the creditor by listing the creditor's claim as 

disputed. 

On appeal from the bankruptcy court, the district court 

reversed the bankruptcy court decision and held that the 

creditor's claim was timely filed. The district court reasoned 

that the March 9, 1983, date in the notice to creditors was 

invalid and that the only valid bar date in the notice was when 

the court approved a disclosure statement (August 31, 1984), which 

in this case was subsequent to the creditor's filing a proof of 

claim on August 6, 1984. 

In reviewing the factual findings of the bankruptcy court_, 

both the district court and the court of appeals are bound by 

those findings unless they are clearly erroneous. In re Branding 

Iron Motel, Inc., 798 F.2d 396, 399 (10th Cir. 1986). The legal 

conclusions of the bankruptcy court are subject to de novo review 

by the district court and the court of appeals. In re Mullet, 817 

F.2d 677, 678 (10th Cir. 1987). The district court did not 

determine that the factual findings of the bankruptcy court were 

clearly erroneous. Instead, the district court reversed the 

bankruptcy court on its legal conclusion that a notice with 

receives delayed notice. In re Robintech, Inc., 69 B.R. 663, 666 

(Bankr. N.D. Tex. 1987). Likewise, notice which is 

constitutionally deficient also would satisfy the "for cause'' 

standard contained in the rule. In Re Standard Metals Corp., 48 

B.R. 778, 787 (Bankr. D.Colo. 1985), aff'd on other grounds, 817 

F.2d 625 (10th Cir. 1987). 

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Appellate Case: 86-1710 Document: 010110018317 Date Filed: 02/25/1988 Page: 4 
alternative bar dates, one of which was erroneous, sufficed as 

notice that claims must.be filed by March 9, 1984. 

Bankr. R. 3003(c) 3 controls the filing of proofs of claims. 

Subdivision (3) allows the bankruptcy court to fix the time for 

filing and to extend the time for cause shown. Bankr. R. 

3003(c)(3). At a minimum, there must be notice of not less than 

twenty days prior to the time fixed for filing proofs of claims. 

Bankr. R. 2002(a)(8). In Reliable Elec. Co., Inc. v. Olson 

Constr. Co., 726 F.2d 620, 623 (10th Cir. 1984), we discussed the 

requirement that adequate formal notice must be given to known 

creditors to be constitutionally adequate. Even if a creditor is 

aware of bankruptcy proceedings, there must be reasonable notice 

before a claim will be barred for untimeliness. New York v. New 

York, New Haven & Hartford R.R. Co., 344 U.S. 293, 297 (1953). 

Inquiry notice of the bar date, in this situation, is not enough: 

3 The applicable bankruptcy rule provides: 

3003(c) Filing Proof of Claim. 

(1) Who May File. Any creditor or indenture 

trustee may file a proof of claim within the time 

prescribed by subdivision (c)(3) of this rule. 

(2) Who Must File. Any creditor or equity 

security holder whose claim is not scheduled or 

scheduled as disputed, contingent, or unliquidated 

shall file a proof of claim within the time 

prescribed by subdivision (c)(3) of this rule; any 

creditor who fails to do so shall not be treated as 

a creditor with respect to such claim for the 

purposes of voting and distribution. 

(3) Time for Filing. The court shall fix and for 

cause shown may extend the time within which proofs 

of claim or interest may be filed. 

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Appellate Case: 86-1710 Document: 010110018317 Date Filed: 02/25/1988 Page: 5 
The clerk of the bankruptcy court is specifically 

required to give not less than 20 days notice by mail of 

the time fixed for filing proofs of claim pursuant to 

bankruptcy rule 3003(c). Bankruptcy Rule 2002(a)(8). 

The responsibility does not lie with the creditors or 

claimants to search out what is required procedurally of 

them in this situation. The law provides them with a 

right to appropriate, effective notice. Bankruptcy Rule 

2002(a)(8); Reliable Electric Co., Inc. v. Olson 

Construction Co., 726 F.2d 620 (10th Cir. 1984); 5 

Collier on Bankruptcy para. 1141.01[4][b] (15th ed.). 

Actual knowledge of the filing of a bankruptcy does not 

negate the statutory notice requirements nor does it 

place a duty on creditors to inquire regarding the time 

limitations for filing claims. New York v. New York, 

New Haven & Hartford Railroad Co., 334 U.S. 293, 73 

s.ct. 299, 97 L.Ed. 333 (1953). 

In Re Spring Valley Farms, Inc., No. 87-G-0211-E (N.D. Ala. Jan. 

28, 1988) (LEXIS, Bkrtcy library, Courts file). A creditor is not 

charged with interpreting a notice, containing an obviously 

invalid alternative bar date, which is ambiguous at best and 

incomprehensible at worst. "The notice must be of such nature as 

to reasonably convey the required information . II Mullane v. 

Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). The 

notice also must "afford a reasonable time for those interested to 

make their appearance." Id. 

Judged against these standards, we agree with the district 

court that the notice was deficient. Written notice of the bar 

date for filing claims should be clear and definite, not abstract 

and ambiguous. The bankruptcy clerk's notice announced that the 

bar date was March 9, 1983, or the date of court approval of a 

disclosure statement, whichever occurred earlier. As noted, the 

debtor's amended disclosure statement was approved August 31, 

1984. So the bar date, according to the notice, was the earlier 

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Appellate Case: 86-1710 Document: 010110018317 Date Filed: 02/25/1988 Page: 6 
of March 9, 1983, or August 31, 1984. Thus, the bar date 

containeq in the notice had expired prior to the debtor filing his 

petition. The notice was defective and the creditor's filing a 

proof of claim by the last alternative effective date contained in 

the notice, August 31, 1984, was sufficient. 

AFFIRMED. 

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Appellate Case: 86-1710 Document: 010110018317 Date Filed: 02/25/1988 Page: 7