In re Government Securities Corp.
| Decision Date | 12 December 1989 |
| Docket Number | Civ. No. 88-1275. |
| Citation | 107 BR 1012 |
| Parties | In re GOVERNMENT SECURITIES CORPORATION, Debtor. John R. CAMP, Jr., Trustee, and the Securities Investor Protection Corporation, Appellants, v. Enrique A. MOREY, Sr., Appellee. |
| Court | U.S. District Court — Southern District of Florida |
Blackwell, Walker, et al., Miami, Fla., for debtor.
Theodore H. Focht, Michael E. Don, Josephine Wang, Securities Investor Protection Corp., Wash., D.C., for appellants.
Saturnio E. Lucio, II., Silvia M. Garrigo, Miami, Fla., for appellee.
ORDER REVERSING BANKRUPTCY COURT
THIS CAUSE comes before the Court upon the consolidated appeals of John R. Camp. Jr., Trustee, and Securities Investor Protection Corporation (hereinafter "SIPC"),1 from a decision of the Bankruptcy Court for the Southern District of Florida, allowing the Claimant/Appellee, Enrique A. Morey, Sr., to file a claim against the Debtor, Government Securities Corporation (hereinafter "GSC"), after the statutory bar date in a liquidation proceeding under the Securities Investor Protection Act, 15 U.S.C. § 78aaa et seq. (hereinafter "SIPA").2
This Court has jurisdiction of these consolidated appeals pursuant to 28 U.S.C. § 158(a).
On an appeal from a SIPA proceeding, a district court is to conduct a de novo review of the bankruptcy court's conclusions of law. In re Stalvey & Assocs., 750 F.2d 464, 468 (5th Cir.1985). However, the bankruptcy court's "findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of witnesses." Bankr.R. 8013.
On an application by SIPC, this Court (per Hastings, J.) entered an order on May 12, 1987, placing GSC, a broker-dealer in United States Government securities, into liquidation under SIPA,3 and appointing John R. Camp, Jr., Esquire, as trustee to administer and oversee the liquidation of GSC. Pursuant to SIPA Section 78eee(b)(4), this Court (per Hastings, J.) ordered the case removed to the Bankruptcy Court for the Southern District of Florida (Cristol, J.).
On December 29, 1987, Enrique A. Morey, Sr., submitted a claim to the Trustee. The Trustee denied the claim as untimely filed. By Memorandum Decision dated May 20, 1988, the Bankruptcy Court reversed the Trustee's determination. On or about May 27, 1988, the Trustee and SIPC separately appealed the Bankruptcy Court's Decision. On June 13, 1988, upon the Trustee's Motion to Consolidate Appeals from the Court's May 20, 1988 Memorandum Decision, the Bankruptcy Court ordered the appeals filed by the Trustee and SIPC consolidated nunc pro tunc to June 6, 1988.
Enrique A. Morey, Sr., is a Peruvian citizen who resides in Lima, Peru. He was introduced to Government National Mortgage Association certificates ("Ginnie Maes")4 by GSC's advertisements in Peru. On February 2, 1987, Morey purchased a Ginnie Mae certificate for $24,228.54 through GSC ("the February trade"). On March 27, 1987, Morey made two additional purchases of Ginnie Maes for a total of $44,757.53 (the "March trades"). The purchases were reflected in sales confirmation statements provided to Morey by GSC.
The confirmation statements listed Morey's address in Peru: Jose Carlos Mariategue, 134 Lima 17, Peru. In addition, the statement for the February trade also included directly under his name and address, and next to the word "Special", the following: "c/o Total Bank, Acct # XXXXXXXX-X 2700 Coral Way, Miami, FL XXXXX-XXXX." The confirmation statements of the March trades likewise listed Morey's address in Peru, but in the same manner specified the following: "All Corres: P.O. Box 149016, Coral Gables, FL XXXXX-XXXX."
It is not clear from the record how Morey paid for the February trade. Although the record contains a copy of a receipt issued by GSC to Morey for his payment of the February trade, it does not show the method of payment. The March trades were paid for through a check issued on Morey's account at Total Bank.
Morey overpaid GSC with respect to the three trades. GSC issued a check on March 23, 1987, in the amount of the overpayment for the February trade, and consistent with the "Special" instructions on the confirmation statement for the February trade, made it payable not to Morey in Peru, but as follows:
Enrique Morey or Enrique A. Morey JTWROS
The reimbursement on the March trades was also made payable to Morey at "P.O. Box 149016, Coral Gables, FL XXXXX-XXXX," as specified in the "Special" instructions on the March trades confirmation statements.
Principal and interest payments on Ginnie Maes are paid each month. The Ginnie Mae Manual at 64. Before GSC was placed in liquidation, Morey received some principal and interest payments. On March 15, 1987, GSC issued a check for the principal and interest payment in the amount of $2,568.82 due on the February trade. The check was issued to Morey's account at Total Bank. On April 15, 1987, GSC issued a second check for the principal and interest payment due on the March trades. The check was made payable to Morey at the post office box in Coral Gables. However, although the checks were made payable to Morey in Florida, it appears from the record that at least one principal and interest statement was sent to him in Peru, in that, a "Principal and Interest Statement" on GSC letterhead directed to Morey at the Lima, Peru, address, detailing the March payment on the February trade, was attached to his claim.
As authorized by the Bankruptcy Court, the Trustee caused to be published on May 29, 1987, a "Notice to Customers and Creditors of Government Securities Corporation and to All Other Parties In Interest" hereinafter the "notice". The notice advised that GSC had been placed into liquidation under SIPA, and that Mr. Camp was appointed as trustee. The Bankruptcy Court approved the form of the notice. The notice was mailed to all customers and general creditors of GSC. Claim forms were to be mailed by the Trustee, but customers who did not receive them within seven days from the date of the notice could obtain them by writing to the Trustee at an address provided in the notice.
The notice specified the time limits for filing claims against the Debtor GSC. With respect to customer claims, it provided: All "customer" claims were to be received by the Trustee on or before July 8, 1987. Such claims were to be sent to the Trustee by certified mail, return receipt requested. There is no dispute that Morey purchased rights to certain United States Government securities from GSC in the ordinary course of GSC's business as a broker-dealer of such securities, and was therefore a customer of GSC for purposes of SIPA liquidation proceedings.
The notice also specified the time limits for general creditors (i.e., broker dealers) to file claims, and stressed that "no claim of any kind will be allowed unless filed within six months after the date of this Notice" (emphasis in original). The six-month outer filing period for all claimants, including customers, expired on November 29, 1987.
GSC was based in Coral Gables, Florida, with branch offices in North Miami Beach, Fort Lauderdale, Boca Raton, West Palm Beach, Tampa, St. Petersburg, and Sarasota, Florida. A majority of GSC's customers were also located in Florida. Accordingly, the Bankruptcy Court authorized the Trustee to publish the notice in several Florida newspapers, including the Miami Herald; Fort Lauderdale News; Palm Beach Post; St. Petersburg Times; Tampa Tribune; and Sarasota Herald Tribune; as well as in the national edition of the Wall Street Journal.
In preparing for the mailing of the notice, the Trustee's staff compiled from books and records of the Debtor GSC a list of names and addresses of GSC customers who had open accounts within the twelve months preceding the commencement of the SIPA liquidation proceedings. Mailing labels were generated for these customers. Morey's name, and his address, "Jose Carlos Mariategue, 134 Lima 17, Peru," appeared on the list, and a label was prepared for him.
The staff also compiled a second list of names and addresses of GSC customers having both foreign and domestic addresses, and generated a set of corresponding labels. Again, Morey's name at the same address in Peru appeared on the list and a second label was prepared for him. Even though some duplication of mailings would occur, copies of the notice and customer claim forms were mailed to the persons whose names appeared on the sets of labels. The Bankruptcy Court accepted the Trustee's contention that two copies of the notice with claim forms were duly mailed to Morey and not returned. Accordingly, Morey should have received the notice and claim forms in the mail at least once, if not twice.
As an asset of the GSC's estate, the list of names and addresses of its customers were sold by the Trustee to the brokerage firm, Kidder, Peabody & Co., Inc. (hereinafter "Kidder"). The sale was not a transfer of GSC customer accounts to Kidder. Rather, the customers' names and addresses were sold to Kidder for purposes of soliciting the customers' business.
Sometime in late August, 1987 (approximately three months before the claims filing period expired), Morey received a letter from Kidder advising him that it was the "substitute broker" for GSC. The letter was written in Spanish and stated in pertinent part:
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