Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-01111/USCOURTS-ca10-90-01111-0/pdf.json

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

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IN RE: 

DALTON 

v. 

PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

UNIOIL, ) 

) 

Debtor. ) No. 

) 

) 

DEVELOPMENT PROJECT # 1, ) 

) 

Appellant, ) 

) 

) 

) 

~~-. 1 I I~ D 

United. Stat~s ~ourt of Appoalo Tenth Circuit 

tiCV 4 1991 

ROBERT L. HOECKER 

Clerk 

90-1111 

UNSECURED CREDITORS COMMITTEE, ) 

and 

UNIOIL, 

) 

Creditor-Appellee, ) 

) 

) 

) 

a Nevada Corporation, ) 

) 

Debtor-Appellee. ) 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 87-C-1945) 

Thomas J. Kimmell (John M. Cogswell with him on the brief), of 

Cogswell and Eggleston, P.c., Denver, Colorado, for Appellant. 

Edwin G. Perlmutter (M. Frances Cetrulo with him on the brief), of 

Berenbaum & Weinshienk, P.C., Denver, Colorado, for CreditorAppellee. 

Jack M. Merritts (Thomas C. Deline with him on the brief), of 

Montgomery, Little, Young, Campbell & McGrew, Englewood, Colorado, 

for Debtor-Appellee. 

Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 1 
Before TACHA and EBEL, Circuit Judges, and VAN BEBBER, District 

Judge.* 

VAN BEBBER, District Judge. 

This is an appeal from the order of the United States District 

Court for the District of Colorado affirming the bankruptcy court's 

decision to set aside certain assignments of interests in oil and 

gas properties. We affirm in part, reverse in part, and remand the 

case for further proceedings. 

I. FACTS 

Unioil is an oil and gas exploration and operating company 

which filed its voluntary petition for reorganization under Chapter 

11 of the United States Bankruptcy Code, 11 u.s.c. §§ 101, et seq., 

on August 17, 1984. Prior to and after the filing of its petition 

in the bankruptcy court, Unioil held legal and equitable interests 

in various oil and gas properties located in Larimer, Weld, and 

Yuma Counties, Colorado. (R. Vol. I, doc. 27 at 1-2.) 

In March, 1985, the Unsecured Creditors Committee ("Creditors 

Committee") discovered that Unioil's vice-president, Melvin Lloyd 

Richards ("Richards"), was engaging in unauthorized post-petition 

transfers and payments. In response, the Creditors Committee and 

Unioil's largest creditor, Dowell-Schlumberger, Inc., filed joint 

motions with the bankruptcy court, seeking the appointment of a 

trustee and preliminary and permanent injunctions against Unioil 

* The Honorable G. T. Van Bebber, United States District 

Judge for the District of Kansas, sitting by designation. 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 2 
and Richards prohibiting further transfers of Unioil's property. 

(R. Vol. IV at 24-25.) 

A compromise was reached and a stipulation of Settlement was 

entered into among Unioil, Dowell-Schlumberger, Inc., the Creditors 

Committee, and an eventual lender to Unioil, Joseph Associates, 

Inc., on March 27, 1985. (R. Vol. I, doc. 9, Ex. A.) The 

stipulation provided that Larry L. Snodgrass would be appointed to 

monitor Unioil's operations and to countersign any checks above 

$750. (Id.) The stipulation further provided that: 

5. Unioil shall make no transfers of real or 

personal property without the prior order of the United 

States Bankruptcy Court for the District of Colorado or 

the prior written agreement of Unioil, Dowell 

Schlumberger Incorporated and the Credi tors Committee 

which is approved by order of court. 

The stipulation was subsequently approved and made an order of the 

bankruptcy court. (R. Vol. I, doc. 27 at 3.) 

In June and July, 1985, Richards executed assignments of 

Unioil I s interests in the Colorado oil and gas properties to 

various limited partnerships ("Partnerships") with which Unioil, 

Richards and other officers of Unioil were affiliated. 1 (R. Vol. 

IV at 29-30.) The assignments were made without the knowledge or 

approval of the Creditors Committee and Dowell-Schlumberger, Inc., 

and were never approved or authorized by the bankruptcy court. 

In August, 1985, Unioil's Plan of Reorganization was confirmed 

and a closing was held on September 22, 1985. (R. Vol. I, doc. 3.) 

1 The Partnerships had been formed in 1981 and 1982 for the 

purpose of financing the drilling of oil and gas wells on the 

properties at issue. (R. Vol. IV at 53-55.) 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 3 
The unauthorized assignments were then discovered by the Creditors 

Committee during its attempt to foreclose on the Yuma County 

properties in April, 1987. Contending that the assignments were 

made outside the course of ordinary business and in violation of 

the bankruptcy court's order, the Creditors Committee filed a 

motion on April 2, 1987, asking the bankruptcy court to set aside 

the assignments made to four different limited partnerships. (R. 

Vol. I, doc. 4.) on July 23, 1987, Unioil joined in the motion of 

the Creditors Committee and also moved to set aside all of the 

assignments made to the Partnerships. (R. Vol. I, doc. 9.) 

On September 29, 1987, the bankruptcy court conducted a 

hearing on these motions. At the hearing, the Partnerships 

stipulated that the assignments had been made in violation of the 

bankruptcy court's order and the March 27, 1985, Stipulation of 

Settlement. (R. Vol. IV at 25.) On December 7, 1987, the 

bankruptcy court entered an order setting aside the assignments, 

dismissing any lis pendens by the limited partnerships against the 

properties, and discharging and forever barring the claims of the 

Partnerships in the bankruptcy. (R. Vol. I, doc. 26.) 

The bankruptcy court found that, as stipulated to at the 

hearing, the transfers of Unioil's interests to the Partnerships 

violated the March, 1985, stipulation and order of the bankruptcy 

court. The court also found that the assignments were outside the 

ordinary course of the debtor's business, and would have required 

notice and a hearing even without the March, 1985, stipulation and 

order. As for the Partnerships' entitlement to the assignments, 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 4 
the court found that the evidence presented at the hearing was 

inconclusive as to the amount of money invested by the Partnerships 

in the oil and gas wells. The court further found that the 

Partnerships and their limited partners had knowledge of Unioil's 

bankruptcy and that, despite such knowledge, no claims were filed 

by the Partnerships or the limited partners before the time for 

filing claims had expired on December 31, 1984, or before the time 

for filing amended claims had expired on February 28, 1985. (R. 

Vol. I, doc. 27, at 1-5.) 

Based on these findings, the bankruptcy court made the 

following conclusions of law: The oil and gas interests were 

property of Unioil's estate under 11 u.s.c. § 541. 2 The 

assignments were void because they had been made without the 

court's approval and were outside the ordinary course of the 

debtor's business. The execution of the assignments by Richards 

was ultra vires and therefore, did not bind Unioil. The 

Partnerships and the limited partners were creditors of Unioil 

under 11 u.s.c. § 101(9) (A). 3 Because the Partnerships had actual 

knowledge of Unioil's bankruptcy and had failed to file any claims, 

their claims were forever barred, and they were bound by Unioil's 

plan of reorganization. Finally, the Partnerships had slept on 

2 Under 11 u.s.c. § 541(a) (1), the property of the debtor's 

estate includes "all legal or equitable interests of the debtor in 

property as of the commencement of the [bankruptcy] case." 

3 A "creditor" is defined as an "entity that has a claim 

against the debtor that arose at the time of or before the order 

for relief concerning the debtor." 11 u.s.c.s. § 101(9) (A) (Law. 

co-op. 1985) (current version at 11 u.s.c.s. § 101(10) (A) (Law. 

Co-op. Supp. 1991)). 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 5 
their rights and therefore, were not entitled to any equitable 

relief. (Id. at 5-7.) 

On March 14, 1990, the district court entered an order 

affirming the decision of the bankruptcy court to set aside the 

assignments. The district court held that the bankruptcy court's 

decision to set aside the assignments was a valid exercise of the 

bankruptcy court's equitable power to enforce its own orders. The 

district court also found that the bankruptcy court's findings of 

fact were not clearly erroneous. Because the district court found 

that the bankruptcy court had the authority to enforce its own 

orders, the district court concluded that it was not necessary to 

reach the other issues raised by the Partnerships and affirmed the 

bankruptcy court's decision. (R. Vol. III, doc. 4.) 

II. STANDARDS OF REVIEW 

In reviewing the decision of the bankruptcy court, the 

district court is bound to accept the bankruptcy court's findings 

of fact unless they are clearly erroneous, but may examine its 

conclusions of law de novo. In re Branding Iron Motel. Inc., 798 

F.2d 396, 399-400 (10th Cir. 1986). A bankruptcy court's factual 

determinations will not be disturbed on appeal absent "the most 

cogent reasons appearing in the record." In re Reid, 757 F.2d 230, 

233-34 (10th Cir. 1985). 

We likewise review the bankruptcy court's factual findings 

under the clearly erroneous standard, while its conclusions of law 

are reviewable de novo. In re Mullet, 817 F.2d 677, 678-79 (10th 

Cir. 1987). 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 6 
III. DISCUSSION 

our jurisdiction over this appeal arises pursuant to 2 8 u. S. c. 

§ 158 (d). However, as an initial matter, we must determine whether 

the notice of appeal filed in this case is sufficient to confer 

appellate jurisdiction over all of the plaintiff partnerships or 

only over the appeal of plaintiff Dalton Development Project No. 1 

("Dalton Development") pursuant to Fed.R.App.P. 3(c). 

Federal Rule of Appellate Procedure 3(c) requires that "[t]he 

notice of appeal shall specify the party or parties taking the 

appeal." Failure to name a party in a notice of appeal constitutes 

a failure of that party to appeal and will result in dismissal of 

the appeal for lack of appellate jurisdiction. Torres v. Oakland 

Scavenger Co., 487 U.S. 312, 314, 317 (1988); Laidley v. McClain, 

914 F.2d 1386, 1388-90 (10th Cir. 1990). 

The notice of appeal filed in this case identifies the 

appellants as "Appellant Partnerships, Dalton Development Project 

No. 1 et al. and other partnerships." (R. Vol. III, doc. 6.) 

Dalton Development contends that this designation is sufficient to 

constitute an appeal by all of the partnerships affected. However, 

the Supreme Court has specifically held that use of the phrase "et 

al." utterly fails to provide notice of the identity of the 

appellants. Torres, 487 U.S. at 318. Accordingly, we conclude 

that the appeals of the partnerships which are not specifically 

named in the notice of appeal must be dismissed for lack of 

jurisdiction. We have jurisdiction only over the appeal of Dalton 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 7 
Development, as the sole partnership specifically named in the 

notice of appeal, and proceed to address the merits of that appeal. 

On appeal, Dalton Development argues that the district court 

committed reversible error in affirming the bankruptcy court's 

decision to set aside the assignments. It also argues that the 

district court erred in affirming the bankruptcy court's finding 

that Dalton Development's claims were discharged and contends that 

it was not given adequate notice of the bankruptcy proceedings. 

Finally, Dalton Development contends that the district court 

committed reversible error by failing to find that Unioil was 

barred from setting aside the assignments under the doctrines of 

unclean hands, estoppel by deed, promissory estoppel, and/or 

judicial cancellation of instruments, and by failing to find that 

Dalton Development was a bona fide purchaser and/or had equitable 

interests in the oil and gas properties at issue. As stated 

earlier in this opinion, we affirm in part, reverse in part, and 

remand the case for further proceedings. 

We affirm the district court's determination that the 

bankruptcy court's decision to set aside the assignments was a 

valid exercise of the bankruptcy court's equitable power to enforce 

its own orders. Courts have the power to enforce their lawful 

orders. ~hillitani v. United States, 384 U.S. 364, 370 (1966). 

Furthermore, the purpose of the Bankruptcy Code is the collection 

and equitable distribution of the debtor's estate to its creditors. 

In re May, 12 B.R. 618, 621 (N.D. Fla. 1980); In the Matter of 

Universal Research Laboratories. Inc., 13 B.R. 856, 859 (Bankr. 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 8 
N.D. Ill. 1981). The bankruptcy judge has the power to issue any 

order which is necessary or appropriate to protect the debtor's 

estate. In re Davis, 730 F.2d 176, 183-84 (5th Cir. 1984); In re 

B.T. Wilson Drywall Construction, Inc., 36 B.R. 439, 442 (E.D. Ark. 

1983) . 

It is undisputed that the assignments of the oil and gas 

interests made by Richards in the summer of 1985 violated the 

March, 1985, stipulation and order of the bankruptcy court 

prohibiting transfers of Unioil I s property without prior court 

approval. Moreover, the March, 1985, stipulation and order was 

entered for the purpose of preventing further unauthorized 

transfers by Unioil and Richards. (R. Vol. I, doc. 27 at 2-3.) 

Thus, the order was a lawful one which was necessary and 

appropriate for the protection of the debtor's estate. Since the 

assignments in question violated a lawful order of the bankruptcy 

court, we hold that the bankruptcy court had the inherent power to 

enforce its order by setting aside the assignments. 

In addition, the bankruptcy court found that the assignments 

violated 11 u.s.c. § 363(c) (1) which provides in part that: 

[U]nless the court orders otherwise, the trustee may 

enter into transactions, including the sale or lease of 

property of the estate, in the ordinary course of 

business, without notice or a hearing .•.• 

The bankruptcy court concluded that, even if the transfers did not 

violate the court's order, the extensive assignments made by 

Richards were outside the ordinary course of the debtor's business 

and would have required a notice and hearing on the transfers. 

(R. Vol. I, doc. 27 at 5-6.) We agree with the bankruptcy court's 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 9 
findings and hold that the transfers were made in violation of 

11 u.s.c. § 363 (c) (1). 

The bankruptcy court may issue appropriate orders in the 

enforcement of its jurisdiction and to carry out provisions of the 

Bankruptcy Code. 11 u.s.c. § 105; In re LJC Corp., 30 B.R. 292, 

296 (Bankr. D.C. 1983); In re Shafer, 63 B.R. 194, 197 (Bankr. D. 

Kan. 1986). Since the assignments violated section 363(c) (1), we 

conclude that it was appropriate for the bankruptcy court to issue 

an order rendering those transfers null and void. Therefore, we 

affirm the bankruptcy court's order setting aside the assignments 

made by Richards. 

However, we reverse the bankruptcy court's order insofar as it 

discharges the claims in bankruptcy of Dalton Development. The 

bankruptcy court found that the Partnerships, including Dalton 

Development, had actual knowledge of Unioil's bankruptcy and were, 

at a minimum, on inquiry notice to investigate Unioil's bankruptcy. 

Because the Partnerships had not filed any claims in the Unioil 

bankruptcy and because the time for filing claims had expired, the 

court concluded that the Partnerships' claims were overdue and 

therefore barred and that the Partnerships were bound by Unioil's 

reorganization plan. (R. Vol. I, doc. 27 at 6-7.) 

Dalton Development contends that because it was not given 

formal notice of the bar date or confirmation hearing, it cannot be 

bound by Unioil's confirmed reorganization plan. We agree. In 

Reliable Electric Co .• Inc. v. Olson Construction Co., 726 F.2d 

620, 623 (10th Cir. 1984), this court held that the discharging of 

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a creditor's claim in a Chapter 11 bankruptcy under 11 u.s.c. 

§ 1141 (d) 4 without reasonable notice and an opportunity to be 

heard violated the creditor's Fifth Amendment due process rights. 

Under Reliable, a Chapter 11 debtor bears the burden of providing 

formal notice of the confirmation hearing to a known creditor 

before that creditor's claim may be discharged in bankruptcy. 

Reliable, 726 F.2d at 622. The confirmation of a Chapter 11 plan 

of reorganization cannot discharge the claim of a creditor who has 

not received constitutionally adequate formal "notice of the 

proceeding or of the confirmation hearing." Id. at 623. 

Appellees cite In re Green, 876 F.2d 854 (10th Cir. 1989), for 

the proposition that actual knowledge of the bankruptcy proceedings 

constituted constitutionally adequate notice to Dalton Development 

of the deadlines for filing claims with the bankruptcy court. 

However, we find that appellees' argument is inapposite since the 

decision in In re Green in fact confirms this court's holding in 

Reliable that formal notice is required in Chapter 11 cases. 

In In re Green, it was held that a creditor who did not 

receive formal notice of the filing of a petition for bankruptcy 

relief under Chapter 7, but who had actual knowledge shortly after 

4 11 u.s.c. § 1141(d) provides in pertinent part: 

(d) ( 1) Except as otherwise provided in this subsection, in the plan, or in the order confirming the 

plan, the confirmation of a plan -- (A) discharges the debtor from any debt that arose 

before the date of such confirmation .•• whether or 

not --

(i) a proof of the claim based on such debt is filed 

or deemed filed under section 501 of this title. 

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Appellate Case: 90-1111 Document: 010110096845 Date Filed: 11/04/1991 Page: 11 
the filing, was bound by the bar date for filing complaints to 

determine dischargeability. In re Green, 876 F.2d at 855. Citing 

Reliable, the creditor-appellant in that case argued that it was 

deprived of due process since it did not receive formal notice. 

However, recognizing that "the statutory and substantive 

differences between creditor's rights under Chapters 11 and 7 

cannot be gainsaid," this court rejected appellant's argument and 

held that "[b]ecause of the basic difference in the notice 

provisions of the relative statutes, the rule that governs notice 

and dischargeability in Chapter 11 does not apply in Chapter 7. 11 

Id. at 856, 857. Conversely, in the present case, the rule that 

governs notice and dischargeability in Chapter 7 does not apply in 

Chapter 11. Thus, the holding in In re Green has no application to 

the notice requirements for a Chapter 11 bankruptcy proceeding. 

Furthermore, contrary to the bankruptcy court's conclusion 

that the Partnerships, including Dal ton Development, were on 

inquiry notice as to Unioil's bankruptcy, the Supreme Court has 

held that: 

As specifically applied to bankruptcy reorganization 

proceedings, •.• a creditor, who has general knowledge 

of a debtor's reorganization proceeding, has no duty to 

inquire about further court action. The creditor has a 

"right to assume" that he will receive all of the notices 

required by statute before his claim is forever barred. 

New York v. New York. New Haven & Hartford R.R. Co., 344 

U.S. 293, 297, 73 s.ct. 299, 301, 97 L.Ed. 333 (1953). 

Reliable, 726 F.2d at 622. Thus, despite the fact that the 

creditor in Reliable knew of the bankruptcy proceedings in general, 

we concluded that the creditor was not bound by the reorganization 

plan because it was not given "formal notice of any kind regarding 

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the reorganization proceedings, or the time and manner for filing 

a claim .•• prior to the confirmation hearing." Id. 

In the case before us, although Dalton Development had, 

through its limited partners, actual knowledge of the pendency of 

Unioil 's bankruptcy proceedings, it did not receive any formal 

notice of the deadline for filing proofs of claim, the time for 

filing objections to the reorganization plan, or the confirmation 

hearing. Despite Dalton Development's general knowledge of 

Unioil's bankruptcy, under Reliable, its claims could not properly 

be discharged in bankruptcy. 

Unioil attempts to distinguish Reliable by arguing that, 

unlike the debtor in Reliable, it did not know that Dalton 

Development was a potential creditor. While it is true that none 

of the Partnerships were ever listed as creditors, Uni oil was 

clearly aware of the existence of Dalton Development and of the 

fact that the partnership had invested money in Unioil for the 

drilling and development of the West Hardin well. (R. Vol. VII, 

First Amended Disclosure Statement, Ex. E.) Therefore, Unioil 

cannot claim in good conscience that it was unaware that Dalton 

Development was a potential creditor. Because Dalton Development 

did not receive formal notice of the bar date or the confirmation 

hearing, we reverse the bankruptcy court's decision barring Dalton 

Development's claims in bankruptcy and hold that the partnership is 

not bound by Unioil's confirmed plan of reorganization. 

Finally, as listed above, Dalton Development has raised 

several other arguments concerning its entitlement to either 

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equitable or legal title to the oil and gas interests in question. 

In light of our holding that the transfers in question were 

unlawful and that the bankruptcy court had the power to set aside 

the assignments, those issues are irrelevant and we do not address 

them. Accordingly, the decision of the district court is AFFIRMED 

in part and REVERSED in part. The case is REMANDED for further 

proceedings consistent with this opinion. 

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