Securities Investor Protection Corp. v. Stellatos

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
SEP 4 1997
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

In re: BLINDER, ROBINSON &
COMPANY, INC.,

Debtor,
_______________________________ No. 95-1473

SECURITIES INVESTOR
PROTECTION CORPORATION,
GLEN E. KELLER, JR.,

Appellants,
v.

CHRISTOS STELLATOS, OLINKA
PODANY, PAUL P. TAN,

Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 93-K-213)

Submitted on the briefs:

Stephen P. Harbeck and Kevin H. Bell, Washington, D.C., for Appellant
Securities Investor Protection Corporation, and Andrew M. Low and Mark L.
Taylor, Davis, Graham & Stubbs LLP, Denver, Colorado, for Appellant Glen E.
Keller, Jr.

George Poulos, Astoria, New York, for Appellee Christos Stellatos, and Paul P.
Tan, pro se.
Before PORFILIO and LOGAN, Circuit Judges, and BURRAGE, District Judge. *

PER CURIAM.

After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore

ordered submitted without oral argument.

Background

On July 31, 1990, Blinder, Robinson & Company, Inc. (debtor) filed a

voluntary petition for relief under Chapter 11 of the Bankruptcy Code.

Immediately thereafter, the Securities Investor Protection Corporation (SIPC)

applied to the United States District Court for the District of Colorado for

protection under the Securities Investor Protection Act (SIPA), 15 U.S.C.

§§ 78aaa-78lll. Pursuant to § 78eee(b)(3) of SIPA, the district court appointed

Glen Keller (trustee) trustee for the liquidation of debtor and, pursuant to

§ 78eee(b)(4) of SIPA, removed the liquidation proceeding to the bankruptcy

court.

*
Honorable Michael Burrage, Chief Judge, United States District
Court for the Eastern District of Oklahoma, sitting by designation.

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 On August 8, 1990, the bankruptcy court entered an Order Approving And

Adopting Trustee’s Application. The order directed the trustee to effect

publication of notice of the proceedings in twenty-six newspapers throughout the

country on or before August 14, 1990, and to effect a mailing of notice to each

person who appears from the debtor’s records to have been a customer of the

debtor with an open account within the past twelve months to the address of the

person as it appears from the debtor’s records, also by August 14, 1990. The

order also approved the form and content of the notice and various other

documents to be mailed in the claim package. In accordance with § 78fff-2(a), 2

the notice informed that claims must be filed within six months from the date of

the notice and that no claims filed after that time would be allowed. The bar date

by which claims had to be filed was February 14, 1991.

2
That statute provides in relevant part that

[n]o claim of a customer or other creditor of the debtor which is
received by the trustee after the expiration of the six-month period
beginning on the date of publication of notice [of the commencement
of proceedings under SIPA] shall be allowed, except that the court
may, upon application within such period and for cause shown, grant
a reasonable, fixed extension of time for the filing of a claim by the
United States, by a State or political subdivision thereof, or by an
infant or incompetent person without a guardian.

15 U.S.C. § 78fff-2(a)(3).

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 Christos Stellatos, Paul Tan, and Olinka Podany, were customers of the

debtor with open accounts within twelve months of commencement of the

proceedings. For various reasons, they all filed claims with the trustee after the

bar date of February 14, 1991, and the trustee rejected each of their claims as

untimely. The bankruptcy court held a hearing with respect to each of the three

claimants, and it overruled the trustee’s rejection of the claims and ordered that

those three claims be treated in the same manner as timely-filed customer claims

in the SIPA liquidation. The trustee and the SIPC 3 appealed to the district court.

The district court affirmed the bankruptcy court decision, but on an entirely

different basis. The trustee and the SIPC now appeal the district court’s

affirmance of the bankruptcy court’s decision to this court. We exercise

jurisdiction under 28 U.S.C. § 158(d), 4 and, for the reasons set forth herein, we

must reverse.

3
SIPA provides that the “SIPC shall be deemed to be a party in
interest as to all matters arising in a liquidation proceeding, with the right to be
heard . . . .” 15 U.S.C. § 78eee(d).
4
We note that the notice of appeal in this case was timely filed. The
district court properly extended the time for filing a motion to reconsider pursuant
to Fed. R. Bankr. P. 8015 and 9006(b)(1), which tolled the time for filing a notice
of appeal.

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 Bankruptcy Court Order

In its Order Approving Certain Late-Filed Claims As Timely-Filed, entered

on January 14, 1993, the bankruptcy court found the following facts. The trustee

obtained a list of approximately 220,000 customers from the debtor’s computer

records, and he and his staff printed information from those computer records

regarding those customers onto pressure-sensitive mailing labels. The mailing

labels were then checked and shipped to a direct mail company in Pennsylvania.

Customer claim packets containing notice, claim forms, and general information

regarding the SIPA proceeding were printed, and those materials were also

shipped to the direct mail company. The direct mail company affixed the mailing

labels to the claim packets and stuffed them in window envelopes, checked for

visibility of the mailing labels, affixed postage, and placed the envelopes in the

United States mail for delivery no later than August 14, 1990. The bankruptcy

court found that the trustee’s mailing of the notice was reasonable under the

circumstances.

The bankruptcy court specifically found that the trustee mailed notice to

Olinka Podany, Paul Tan, and Christos Stellatos at the addresses that appeared for

them in the debtor’s records and that those mailings were not returned to the

trustee’s office. In addition, the court found that notice of the proceedings had

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been published in twenty-six newspapers of general circulation throughout the

country, including all editions of the Wall Street Journal.

Acknowledging that all three claimants denied actual receipt of notice, the

bankruptcy court found specific facts with respect to all three claimants. The

bankruptcy court’s findings regarding the individual circumstances surrounding

each of the three claimants’ submission of untimely claims are fully set forth in

the district court’s opinion, see SIPC v. Stellatos (In re Blinder Robinson & Co.,

Inc.), 169 B.R. 704, 707-08 (D. Colo. 1994), and we will not repeat them here.

The bankruptcy court ultimately found that, despite the trustee’s efforts in

mailing notice to Ms. Podany, Mr. Tan, and Mr. Stellatos, and his publication of

notice,

these particular Claimants received no actual or constructive notice
of the proceedings and that due process and concepts of fundamental
fairness require allowance of late customer claims when a claimant
has sufficiently and persuasively demonstrated that he had not
received actual notice of the SIPA liquidation proceedings and the
deadline for filing customer claims.

Bankr. Ct. Order at 8. The court emphasized that, despite having held hearings on

many scores of untimely claims disputes where the trustee’s determination was

upheld and the customer claim was denied, these three particular claims “stand in

sharp distinction from and involve unique circumstances distinguishing them from

the other late customer claims to date.” Id. at 9. The court found that, although

the trustee’s notice by mailing and publication was reasonable in light of the

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sheer volume of customers, these three claimants had rebutted the presumption of

actual receipt that mailing affords by direct and substantial evidence.

The bankruptcy court also found that none of the three claimants received

constructive notice; it accepted their respective testimony that they did not read

newspapers during the relevant time. The court concluded that, because Ms.

Podany, Mr. Tan, and Mr. Stellatos did not actually receive notice of the

liquidation proceeding, their claims should be treated as timely filed. The

bankruptcy court held that literal application of SIPA to these three claimants

would be unconstitutional. In other words, it held that SIPA is unconstitutional as

applied to these three claimants.

District Court Order

The district court affirmed the bankruptcy court order that Ms. Podany,

Mr. Tan, and Mr. Stellatos be treated as having timely-filed their claims, but it

did so on an entirely different basis than the bankruptcy court. The district court

did not address the legal analysis of the bankruptcy court regarding the due

process violations and resulting constitutionality of SIPA as applied to the three

claimants. Instead, it found clear error in the bankruptcy court’s finding that the

trustee mailed notice to Mr. Tan and Mr. Stellatos. Therefore, the district court

concluded that Mr. Tan and Mr. Stellatos were deprived of the requisite notice

under SIPA, and that published notice alone was insufficient to satisfy due

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process requirements. As to Ms. Podany, it found that she fell within one of the

statutory exceptions to the time-bar provision of SIPA.

Discussion

1. Factual Findings as to Mailing of Notice.

“In reviewing a district court’s decision affirming the decision of a

bankruptcy court, this court applies the same standards of review which governed

the district court. The bankruptcy court’s findings of fact will be rejected only if

clearly erroneous.” Tulsa Energy, Inc. v. KPL Prod. Co. (In re Tulsa Energy,

Inc.), 111 F.3d 88, 89 (10th Cir. 1997) (quotation omitted).

If the [bankruptcy] court’s account of the evidence is plausible in
light of the record viewed in its entirety, the court of appeals may not
reverse it even though convinced that had it been sitting as the trier
of fact, it would have weighed the evidence differently. Where there
are two permissible views of the evidence, the factfinder’s choice
between them cannot be clearly erroneous.

Anderson v. City of Bessemer City, 470 U.S. 564, 573-74 (1985). Thus, the

factual findings need not be correct, see Bill’s Coal Co., Inc. v. Board of Pub.

Utils., 887 F.2d 242, 244 (10th Cir. 1989), but we must uphold them if they fall

within the range of permissible conclusions, see Cooter & Gell v. Hartmarx Corp.,

496 U.S. 384, 400 (1990).

After taking testimony in three separate hearings for these three claimants

and receiving much documentary evidence in those and other hearings, as well

asreceiving testimony from the trustee, the bankruptcy court stated:

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 This Court is convinced that Ms. Podany, Mr. Tan, and Mr.
Stellatos . . . were mailed a customer claim packet containing the Notice
and a customer claim form on or before August 14, 1990. In addition, it is
uncontroverted that Keller published notice in 26 newspapers of general
circulation throughout the United States, including all editions of the Wall
Street Journal.

Bankr. Ct. Order at 8. It also stated:

This Court is cognizant of Mr. Stellatos’ arguments regarding the
alleged inconsistencies in and inadequacy of Keller’s proof of
mailing. This Court is convinced, however, that the proof is
sufficient and that the customer claim packets, totaling 221,242,
were, at least, placed into the custody and control of the United
States Postal Service. The ultimate outcome of the articles’ intended
journey throughout the world is much more uncertain.

Id. at 7 n.6.

Our review of the record reveals that the bankruptcy court’s conclusion that

the trustee mailed notice to these three claimants on or before August 14, 1990, is

both logical and reasonable. See Branding Iron Motel, Inc. v. Sandlian Equity,

Inc. (In re Branding Iron Motel, Inc.), 798 F.2d 396, 400 (10th Cir. 1986).

Further, considering the entire evidence, we are not left with “the definite and

firm conviction that a mistake has been committed.” Exxon Corp. v. Gann, 21

F.3d 1002, 1005 (10th Cir. 1994) (quotation omitted). At the very least, it is

certainly within the range of possible conclusions in light of the entire record.

Therefore, we must reverse the district court’s holding of clear error in the

bankruptcy court’s finding that notice was mailed to these three claimants.

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 With regard to the district court’s specific concerns with what it perceived

as a lack of proof that the trustee mailed notice in August of 1990 to Mr. Tan and

Mr. Stellatos, we note the following. The trustee testified on December 3, 1991,

that the mailing list was obtained from the debtor’s computer records and that the

exact same information printed out for that list was printed a second time onto

pressure-sensitive mailing labels. App. at 1004.

The district court was also concerned that the two affidavits identifying

Mr. Tan and Mr. Stellatos’s names as being on the mailing list referred to the

certificate of mailing filed with the bankruptcy court dated March 6, 1991, and

made no reference to the August 14, 1990 mailing list. It is true that the

certificate of mailing dated March 6, 1991 is less clear than it could be regarding

its tie-in to the August 14, 1990 mailing list. Considering the entire record,

however, it is clear (or, at the very least, a permissible conclusion) that the

certificate of mailing dated March 6, 1991 was intended as evidence of the

August 14, 1990 mailing to the list of customers obtained from the debtor’s

computer records. The August 14, 1990 mailing list was too voluminous to file

with the bankruptcy court because it filled several boxes, so, by order of the

bankruptcy court, the mailing list was kept at the offices of the trustee’s legal

counsel. Sometime after the initial August 14, 1990 mailing, it became apparent

that something needed to be on file with the bankruptcy court regarding the

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mailing. Consequently, on March 6, 1991, the trustee executed a certificate of

mailing indicating that he caused the notice materials to be mailed on the dates

indicated in the Affidavit of Mailing 5 attached thereto to customers of the debtor.

He went on to state that the mailing list of customers would be kept at the

trustee’s law firm, and would be available for review upon proper notice. App. at

431.

Finally, it is evident from the record that supplemental mailings were

effected after the initial August 14, 1990 mailing. The district court found that

troublesome because it held that the record was not clear that Mr. Tan and

Mr. Stellatos were not included in those mailings, as opposed to the August 14,

1990 mailing. Our review of the record shows that the supplemental mailings had

date-specific certificates of mailing attached to them, and the record contains

copies of the customer lists for those mailings. Neither Mr. Tan nor Mr. Stellatos

appears on any of those supplemental mailing lists. The existence of

supplemental mailings does not render clearly erroneous the bankruptcy court’s

finding that Mr. Tan and Mr. Stellatos were mailed notice in the initial August 14,

1990 mailing.

5
The district court questioned the admissibility of the Affidavit of
Mailing by Joanne Walzl referred to in the certificate of mailing. We need not
reach the issue, however, because our reading of the record would support the
bankruptcy court’s factual findings even without considering the Walzl affidavit.

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 2. Due Process.

The bankruptcy court found that these three claimants’ due process rights

were violated because they did not actually receive the notice mailed by the

trustee. The district court did not address that legal issue, because it affirmed on

a different basis. Because this is a purely legal issue, we see no need to prolong

this case by remanding it to the district court for further consideration in light of

our holding that the bankruptcy court’s finding as to mailing was not clearly

erroneous. Thus, we will address the due process issue.

The Supreme Court held in Mullane v. Central Hanover Bank & Trust Co.,

339 U.S. 306 (1950), that “[a]n elementary and fundamental requirement of due

process in any proceeding which is to be accorded finality is notice reasonably

calculated, under all the circumstances, to apprise interested parties of the

pendency of the action and afford them an opportunity to present their

objections.” 339 U.S. at 314. “The reasonableness and hence the constitutional

validity of any chosen method may be defended on the ground that it is in itself

reasonably certain to inform those affected.” Id. at 315. The Court held that, in

that case, publication of notice was insufficient to afford due process to

individuals whose addresses were known. Because the names and addresses were

known to the trustee in that case, due process required notice “at least by ordinary

mail to the record addresses.” Id. at 318. Relying on Mullane, this court has held

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that, when the name and address of an interested party is known, due process

requires notice “‘by mail or other means as certain to ensure actual notice.’

Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 800, 103 S. Ct. 2706, 2712,

77 L.Ed.2d 180 (1983). But due process does not require that the interested party

actually receive the notice.” United States v. Clark, 84 F.3d 378, 380 (10th Cir.

1996); see also United States v. 51 Pieces of Real Property, 17 F.3d 1306, 1316

(10th Cir. 1994) (“Due process does not require, however, that the interested

party actually receive notice.”); Weigner v. City of New York, 852 F.2d 646, 649,

652 (2d Cir. 1988) (holding that due process does not require actual receipt of

notice mailed; “Particularly where mailing is supplemented by other forms of

notice such as posting or publication, the risk of non-receipt is constitutionally

acceptable.”).

We are satisfied that the trustee’s actions of mailing notice to the customers

and publishing notice in newspapers of general circulation were reasonable.

These two methods of notice, in combination, were reasonably calculated to

apprise interested parties of the SIPA liquidation and afford them an opportunity

to be heard. 6 Thus, the trustee’s actions satisfied due process requirements.

3. SIPA requirements.

6
We note that the bankruptcy court found that the trustee’s actions in
mailing notice to the customers and publishing notice in newspapers of general
circulation were reasonable. Bankr. Ct. Order at 9-10.

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 The six-month time-bar contained in § 78fff-2(a)(3) of SIPA is mandatory

and absolute. See Camp v. Morey (In re Gov’t Secs. Corp.), 107 B.R. 1012, 1022

(S.D. Fla. 1989) (“time limits [under SIPA] for filing claims are mandatory and

may not be extended by the exercise of some equity power.”); Miller v. Austin, 72

B.R. 893, 894, 896-98 (S.D.N.Y. 1987); Redington v. Borghi (In re Weis Secs.),

411 F. Supp. 194, 195 (S.D.N.Y. 1975) (denying late-filed claim despite lack of

actual receipt of mailed notice), aff’d without opinion, 538 F.2d 317 (2d Cir.

1976); SEC v. J. Shapiro Co. (In re Secs. Investor Protection Corp.), 414 F.Supp.

679, 680, 683 (D. Minn. 1975) (holding time-bar mandatory and actual receipt of

notice immaterial); SEC v. Kenneth Bove & Co., Inc., 353 F.Supp 496, 497

(S.D.N.Y. 1973) (six-month time period is “absolute outer limit”); In re Adler,

Coleman Clearing Corp., 204 B.R. 99, 103 (Bankr. S.D.N.Y. 1997); In re OTC

Net, Inc., 34 B.R. 658, 660-61 (Bankr. D. Colo. 1983) (§ 78fff-2(a)(3) provides a

strict statute of limitations and is an absolute bar to untimely claims).

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 The only exception relevant here to the mandatory application of the

six-month time-bar is when an incompetent person without a guardian may apply,

within the six-month period, for an extension upon cause shown. See 15 U.S.C.

§ 78fff-2(a)(3). Ms. Podany’s hardships caused by the automobile accident in

which she was involved are unfortunate, but the fact remains that she was

required to apply for an extension within the six-month time period to file her

claim. See Camp v. Morey (In re Gov’t Secs. Corp.), 107 B.R. 1012, 1022 (S.D.

Fla. 1989); Camp v. Carson (In re Gov’t Secs. Corp.), 95 B.R. 829, 832, 833

(S.D. Fla. 1988). She made no such application, 7 and, therefore, her untimely

claim does not fall within the exception to the mandatory and absolute time-bar.

The district court’s holding that she fell within the exception because, had she

made such an application for extension, it would have been granted, is contrary to

the plain language of the statute.

Conclusion

The bankruptcy court’s finding that the trustee mailed notice to Mr. Tan,

Mr. Stellatos, and Ms. Podany on or before August 14, 1990 was not clearly

7
We note that the record contains evidence to indicate that Ms.
Podany was not “incompetent” throughout the entire six-month period. There was
a period of time, within the six-month period, that she returned to work, and her
testimony indicated that her failure to discover the notice before expiration of the
six-month period may have been partially due to her own lack of diligence. App.
at 1019, 1020-21.

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erroneous. The record contains sufficient evidence to support that conclusion.

Further, the district court’s holding that Ms. Podany’s late-filed claim fell within

the exception for incompetent persons without guardians was erroneous. The

six-month limitations period in SIPA is mandatory and absolute, and none of the

three late-filed claims in this case falls within the very limited statutory

exceptions.

Finally, the trustee’s actions of mailing notice to the three claimants,

combined with publishing the notice in newspapers of general circulation,

satisfied the constitutional requirements of due process. The bankruptcy court’s

conclusion to the contrary was error.

The judgment of the United States District Court for the District of

Colorado is REVERSED and the case is REMANDED to the district court with

instructions to remand to the bankruptcy court for further proceedings consistent

with this opinion.

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