Shelton Property Rural Acreage, L.L.C. v. Placid Oil Co.

Case: 10-11107 Document: 00511567840 Page: 1 Date Filed: 08/10/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 10, 2011
No. 10-11107 Lyle W. Cayce
Summary Calendar Clerk
In the Matter of: PLACID OIL COMPANY,
Debtor
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SHELTON PROPERTY RURAL ACREAGE, L.L.C.,
Appellant,
v.
PLACID OIL CO.,
Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:10-CV-862
Before JOLLY, GARZA, and STEWART, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Shelton Property Rural Acreage, L.L.C. (“Shelton”)
brought suit against Defendant-Appellee Placid Oil Company (“Placid”), alleging
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 10-11107 Document: 00511567840 Page: 2 Date Filed: 08/10/2011
property damage caused by oil and gas exploration prior to Placid’s 1986
bankruptcy. The bankruptcy court granted Placid’s motion for summary
judgment, and the district court affirmed. For the following reasons, we
AFFIRM.
I.
Placid is an oil and gas company, and from 1942 until 1956, Placid
operated oil wells on property in Louisiana leased from Shelton’s predecessor in
title. On August 29, 1986, Placid filed for Chapter 11 bankruptcy. Pursuant to
Federal Rule of Bankruptcy Procedure 3002(c)(3), the bankruptcy court set
January 31, 1987 as the Bar Date for filing proofs of claim to Placid’s bankruptcy
estate. Known creditors were given notice by mail of the Bar Date. Unknown
creditors were given notice by publication in the Wall Street Journal on January
2, January 9, and January 16 of 1987. On September 30, 1988, Placid obtained
a discharge from the bankruptcy court of all claims existing on that date, except
those created or assumed by the reorganization plan. The bankruptcy court’s
order also included any future claims for damages that occurred prior to the
discharge.
In 2002, Shelton purchased the property Placid previously leased. Six
years later, Shelton brought suit in state court, alleging that Placid caused
environmental damage to the property during its 1942 to 1956 leasehold. Placid
reopened its Chapter 11 case and filed an adversary proceeding in bankruptcy
court to determine the dischargeability of Shelton’s claim. Placid then filed a
motion for summary judgment. Placid argued that Shelton’s predecessor in title,
the owners of the property at the time of the bankruptcy proceedings, did not file
a proof of claim for any alleged environmental damage to the property during
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Placid’s leasehold. Thus, Placid argued, Shelton’s claim had been discharged by
the bankruptcy court’s 1988 order. In response to Placid’s motion for summary
judgment, Shelton argued that its predecessor did not receive adequate notice
of Placid’s bankruptcy proceeding. Specifically, Shelton argued that its
predecessor was a “known creditor,” and as such, was entitled to “actual notice,”
i.e. notice by mail or in person.
On April 10, 2010, the bankruptcy court granted Placid’s motion. The
district court affirmed.1 Shelton appeals.
II.
A.
A grant of summary judgment is reviewed de novo. In re SeaQuest Diving,
LP, 579 F.3d 411, 417 (5th Cir. 2009) (citing In re Erlewine, 349 F.3d 205, 209
(5th Cir. 2003)). Summary judgment is proper when there is no genuine issue
as to any material fact and the movant is entitled to judgment as a matter of
law. FED. R. CIV. P. 56(c); FED. R. BANKR. P. 7056 (applying FED. R. CIV .P. 56 to
adversary bankruptcy proceedings). As for the district court’s determination of
whether a party is a known or unknown creditor, this court has determined it
“is entirely an issue of fact, and our standard of review is therefore one of clear
error.” In re Crystal Oil Co., 158 F.3d 291, 298 (5th Cir. 1998).
B.
To satisfy Fourteenth Amendment due process, notice must be “reasonably
calculated, under all the circumstances, to inform interested parties of the
1
For the balance of this opinion, references to the district court’s opinion refer also
the bankruptcy court’s determination.
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pendency” of the proceeding. Mullane v. Cent. Hanover Bank & Trust Co., 339
U.S. 306, 314 (1950). A claim against a declarant of Chapter 11 bankruptcy is
considered a property interest requiring notice to the potential claimant. In re
Kendavis Holding Co., 249 F.3d 383, 385–86 (5th Cir. 2001) “The type of notice
that is reasonable or adequate for purposes of satisfying the due process
requirement in this context depends on whether a particular creditor is known
or unknown to the debtor.” In re J.A. Jones, Inc., 492 F.3d 242, 249 (4th Cir.
2007).
The Supreme Court has explained that known creditors include “both
those claimants actually known to the debtor, as well as those whose identities
are ‘reasonably ascertainable.’” Crystal Oil Co., 158 F.3d at 297 (quoting Tulsa
Prof’l Collection Servs., Inc. v. Pope, 485 U.S. 478, 490 (1988)). “A creditor is
‘reasonably ascertainable’ if it can be discovered through ‘reasonably diligent
efforts.’” Id. (quoting Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 798 n.
4 (1983)). “In order for a claim to be reasonably ascertainable, the debtor must
have in his possession, at the very least, some specific information that
reasonably suggests both the claim for which the debtor may be liable and the
entity to whom he would be liable.” Id.“Under the Supreme Court’s longstanding jurisprudence, the debtor must
provide actual notice–not notice by publication–to all ‘known creditors’ in order
to achieve a legally effective discharge of their claims.” Id. (quoting City of New
York v. New York, N.H. & H.R. Co., 344 U.S. 293, 296 (1953)). For example, the
Court has “recognized that mail service is an inexpensive and efficient
mechanism that is reasonably calculated to provide actual notice.” Tulsa, 485
U.S. at 490.
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While actual notice of the Bar Date must be provided to known creditors,
constructive notice is constitutionally sufficient for unknown creditors. J.A.
Jones, 492 F.3d at 249–50. It is well established that notice by publication will
generally suffice for constructive notice. See Chemetron Corp v. Jones, 72 F.3d
341, 346 (3d Cir. 1995). Furthermore, “[p]ublication in national newspapers is
regularly deemed sufficient notice to unknown creditors.” Id. at 349–50; see also
Mullane, 339 U.S. at 316–17 (1950) (Notice by publication is sufficient for
unknown creditors.).
Shelton argues that their predecessor was a known creditor entitled to
actual notice because Placid continued to lease the property until 1964. This is
significant for two reasons. First, Shelton claims that a water study published
in 1958 showed that the water wells on the property were contaminated due to
oil and gas activities. Second, a June 1, 1964 edition of Oil and Gas Journal
contained an article entitled “Louisiana Battling Brine Pollution” that claims
that the Little River, which borders the Shelton property, was being polluted due
to unlined oil and gas pits. Therefore, when Placid filed for bankruptcy, Shelton
claims, it should have been aware of Shelton’s potential property damage claims.
Shelton argues that this would make Shelton’s predecessor in title a known
creditor and thus entitled to actual notice. We disagree.
This court has held that when reviewing a decision for clear error, the
judgment “will be reversed only if, on the entire evidence, we are left with the
definite and firm conviction that a mistake has been made.” In re Allison, 960
F.2d 481, 483 (5th Cir. 1992). The district court’s determination was not clearly
erroneous because the summary judgment evidence sufficiently establishes that
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Shelton’s predecessor was an unknown creditor at the time Placid filed for
bankruptcy.
Specifically, the record indicates that, at the time Placid filed for
bankruptcy, there was no specific information that reasonably suggests that
Placid knew of any claims related to property it leased from Shelton’s
predecessor. Crystal Oil Co., 158 F.3d at 297. The district court correctly relied
on the following evidence to support its grant of summary judgment: (1) from
1956 to 1986 (when Placid filed bankruptcy), no environmental complaint was
made by Shelton’s predecessor in title; (2) affidavits provided by Shelton did not
show actual knowledge, asserting that Placid knew of Shelton’s potential claim;
(3) as Placid had tens of thousands of former leaseholds, it would have taken a
“tremendous effort” for Placid to give each actual notice of the bankruptcy, and
had no reason to do so; and (4) Shelton’s assertion that the environmental
damage was easily identifiable is not credible in light of the fact that it took
Shelton six years, from when they purchased the property in 2002 until they
filed suit in 2008, to notice the damage. In light of this evidence, we agree with
the district court that Shelton’s predecessor was an unknown creditor.
As an unknown creditor, Shelton was entitled only to notice by publication.
Mullane, 339 U.S. at 316–17 (1950). Placid notified unknown creditors by
publication in the Wall Street Journal on three separate occasions. According
to Fifth Circuit precedent, notice by publication in the Wall Street Journal is
sufficient for unknown creditors. Crystal Oil Co., 158 F.3d 291, 298 (5th Cir.
1998). Therefore, Shelton received adequate notice and summary judgment was
appropriate.
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III. Conclusion
For the aforementioned reasons, we AFFIRM the district court’s judgment.
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