Opinion ID: 468201
Heading Depth: 2
Heading Rank: 1

Heading: Consideration of the Prior Testimony

Text: 19 Clinton contends that the bankruptcy court was not permitted to consider the evidence presented at the Trustee Hearing in ruling on confirmation. Rather, Clinton maintains that a proponent of a plan must demonstrate at the confirmation hearing that the plan complies with the provisions of the Code and may not rely upon evidence presented at a prior hearing. He cites provisions in the Code which state that the court shall hold a hearing on confirmation of a plan, and that the court shall confirm a plan only if [t]he plan complies with the applicable provisions of this title. 11 U.S.C. Secs. 1128(a), 1129(a)(1) (1982). See also In re Featherworks Corp., 25 B.R. 634, 642 (Bankr.E.D.N.Y.1982) (proponent has burden of demonstrating that the plan complies with Code), aff'd, 36 B.R. 460 (E.D.N.Y.1984). 20 The parties have argued at length over whether a bankruptcy court may take judicial notice of evidence presented at prior hearings. However, this case does not present an issue of judicial notice. Judicial notice involves recognizing the truth of certain facts. 9 C. Wright & A. Miller, Federal Practice and Procedure, Sec. 2410, at 340 (1971 & Supp.1985). See also Fed.R.Evid. 201(b). The Debtor never requested that the bankruptcy court take judicial notice of the evidence presented at the Trustee Hearing. Further, the record reveals Judge Young did not believe he was taking judicial notice of that testimony. Judge Young simply indicated he would consider the prior testimony in ruling on confirmation, and give it whatever weight I think it is worth. 21 We need not rely upon the concept of judicial notice to approve the bankruptcy court's consideration of evidence presented at the earlier Trustee's Hearing. 6 The bankruptcy court must hold an evidentiary hearing in ruling on confirmation. See, e.g., Technical Color & Chemical Works, Inc. v. Two Guys From Massapequa, Inc., 327 F.2d 737, 742 (2d Cir.1964); In re Aminex Corp., 15 B.R. 356, 358 n. 4 (Bankr.S.D.N.Y.1981). See also Bankr.R. 3020(b)(2). 7 But this does not preclude the bankruptcy court from considering evidence presented by the parties at prior evidentiary hearings. See e.g., In re Graco, Inc., 364 F.2d 257, 260 (2d Cir.1966). In the typical reorganization case, the bankruptcy judge will preside over many hearings in which the court is asked to draw legal conclusions from facts developed at prior proceedings. Here, for example, Judge Young conducted (and Clinton and Haley attended) three hearings in which Clinton's alleged misconduct was at issue. Judge Young stated that he was familiar with the prior testimony and would consider it in ruling on the Plan. To require the bankruptcy court to ignore prior evidence would impose a harsh and unnecessary administrative burden. We find nothing in either the language or logic of the Code requiring the court or parties to grind the same corn a second time, Aloe Creme Labs., Inc. v. Francine Co., 425 F.2d 1295, 1296 (5th Cir.1970) (per curiam), and we will not read into the Code the requirement of redundancy. 22 We also reject Clinton's contention that the bankruptcy court's ruling prohibiting participation by Clinton's counsel at the Trustee Hearing precluded the bankruptcy court from considering, at the Confirmation Hearing, the prior testimony. Clinton never informed the bankruptcy court (at the Trustee hearing) that he might be entitled to participate as a party in interest. 11 U.S.C. Sec. 1109(b) (1982). 8 The record reveals that Clinton did not state why he had appeared at that hearing with personal counsel. 9 Further, despite Judge Young's ruling, Clinton's attorney remained at the hearing and raised several objections. 23 Moreover, even if the bankruptcy court improperly denied participation by Clinton or his individual counsel at the Trustee Hearing, we must remember this is an appeal from the Confirmation Hearing, not the Trustee Hearing. This court has recognized that prior defects in a bankruptcy case may be cured at the confirmation stage. In In re Westgate-California Corp., 634 F.2d 459 (9th Cir.1980), this court ruled that a prior failure to hold an evidentiary hearing was rendered harmless because the court considered the pertinent evidence at the confirmation hearing. Id. at 462. See also Fed.R.Civ.P. 61. Here, Clinton maintains that his inability to examine witnesses and present evidence at the Trustee Hearing so tainted those proceedings that the court could not consider the evidence presented at that hearing. However, Clinton was not denied participation at the Confirmation Hearing. Clinton had every opportunity, at the Confirmation Hearing, to reexamine the witnesses who testified at the Trustee Hearing. 10 Because Clinton had the opportunity at the Confirmation Hearing to challenge the prior testimony and chose not to do so, we conclude that the bankruptcy court's ruling on Clinton's participation at the Trustee Hearing did not cause prejudice. 11 Hence, Judge Young could properly consider the prior testimony in ruling on confirmation. 24 Finally, we hold that the Debtor provided Clinton with adequate notice that his alleged misconduct would be considered at the Confirmation Hearing. The Supreme Court has stated that to comport with the requirements of due process, notice must apprise the affected individual of, and permit adequate preparation for, an impending 'hearing.'  Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 14, 98 S.Ct. 1554, 1563, 56 L.Ed.2d 30, 42 (1978) (footnote omitted). See also Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed.2d 865 (1950). The Disclosure Statement outlined the allegations of misconduct, and the bankruptcy court found this document would enable creditors to make an informed judgment about the Plan. Clinton does not deny he received this document. Hence, Clinton knew the allegations of misconduct were relevant and would be considered in confirming the Plan. 12 Although the Debtor did not specifically inform Clinton that counsel would refer to the evidence presented at the Trustee Hearing, we do not believe this affected Clinton's ability to prepare for the Confirmation Hearing. Clinton gave no indication that he desired to examine the witnesses who testified at the Trustee Hearing. For example, when the Debtor referred to the prior testimony, Clinton did not request a continuance to enable him to call the prior witnesses to testify or to present other evidence. See In Re Clifton Steel Corp., 35 B.R. 732, 736 (N.D.N.Y.1983) (no violation of due process where party failed to ask for adjournment). See also Gorham v. Wainwright, 588 F.2d 178, 180 (5th Cir.1979) (criminal context). The Debtor satisfied the requirements of due process. See generally In re Gregory, 705 F.2d 1118, 1122-23 (9th Cir.1983).