Christopher v. Diamond Benefits

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 95-10960
Summary Calendar
____________________
In The Matter of: CHARLES SIMPSON CHRISTOPHER,
Debtor.
CHARLES SIMPSON CHRISTOPHER,
Appellant,
versus
DIAMOND BENEFITS LIFE INSURANCE CO.,
Appellee.
_______________________________________________________________
Appeal from the United States District Court for the
Northern District of Texas
(5:93-CV-156-C)
_______________________________________________________________
May 8, 1996
Before JOLLY, JONES, and STEWART, Circuit Judges.
PER CURIAM:*
At issue in this appeal is the bankruptcy court's ruling that
the debtor, Charles S. Christopher, failed to give constitutionally
adequate notice of his Chapter 11 bankruptcy filing in the Northern
District of Texas to a known creditor, Diamond Benefits Life
*
Pursuant to Local Rule 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this opinion should not be published and is not precedent except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 Local Rule 47.5.4.
Insurance Company ("Diamond Benefits"). The district court
affirmed. So do we.
Our court is by now quite familiar with the factual background
of Christopher's bankruptcy and the ensuing adversary proceedings,
which we need not repeat in detail. See Matter of Christopher, 35
F.3d 232 (5th Cir. 1994); Matter of Christopher, 35 F.3d 567 (5th
Cir. 1994); Matter of Christopher, 28 F.3d 512 (1994). For the
purposes of this opinion, we merely note that Christopher does not
dispute that he was intimately aware of Diamond Benefits's creditor
status. In fact, Christopher was an investor in the group that
acquired Diamond Benefits, and Christopher served as a director and
chairman of Diamond Benefits. Christopher concedes in his reply
brief that "[a]nalytically ... we are in the posture in which
Debtor Christopher admits claimant Diamond Benefits is unscheduled
and received no notice."1
1
Christopher further conceded during his cross-examination at
trial:
COUNSEL: ... [Y]ou're aware that Diamond Benefits
was placed in receivership by the State of Arizona
in December of 1989?
CHRISTOPHER: Yes, sir.
COUNSEL: And you do not claim, sir, do you, that
at any time subsequent to the time a receiver was
appointed for Diamond Benefits that you gave any
kind of notice verbal, written or otherwise to the
receiver of the fact that you were in bankruptcy?
CHRISTOPHER: No, I don't.
-2-
Notwithstanding this admission, Christopher first argues on
appeal that Diamond Benefits received actual notice of
Christopher's bankruptcy because a front page newspaper article in
the Arizona Republic, which appeared over a Thanksgiving holiday
weekend, mentioned the fact that Christopher had filed bankruptcy
in Texas. According to Christopher, this article should have been
read by the Special Deputy Receiver of Diamond Benefits (the
"Receiver"), who subscribed to the newspaper and was mentioned by
name in the article. The Receiver, however, testified in a
deposition that he did not recall the particular newspaper article.
The Receiver reaffirmed his deposition testimony at trial.
The law is clear in our circuit: due process requires notice
that is (1) reasonably calculated to reach all interested parties;
(2) reasonably conveys all of the required information; and (3)
permits a reasonable amount of time for response. E.g., In re
Eagle Bus Mfg. Inc., 62 F.3d 730 (5th Cir. 1995). We hold that
Christopher's reliance on the Receiver's chance reading of a
holiday weekend feature story, which just happened to appear--
through no calculated effort on the part of Christopher--in an
Arizona newspaper, falls short of satisfying the Constitution's due
process requirements and the law of this circuit.
Christopher also alleges on appeal that he gave actual notice
of his bankruptcy to no less than seven co-directors, officers or
attorneys of Diamond Benefits before the insurance company went
into receivership. Christopher asserts that the knowledge of these
-3-
former associates should now be imputed to the Receiver. However,
Christopher glosses over the fact that, by order of the Superior
Court of Arizona, Diamond Benefits was placed into receivership,
and Christopher's former co-directors and associates were ousted.
We affirm the bankruptcy court's ruling that the alleged notice to
members of the company's former management, under whose direction
Diamond Benefits was driven to insolvency, cannot be imputed to a
newly appointed Receiver charged with investigating the prior
mismanagement. Based on the evidence presented in this record, the
bankruptcy court's factual finding that Christopher's former
business associates acted with interests adverse to those of the
Receiver is not clearly erroneous;2 hence, as a matter of law, the
knowledge of the company's former management is not attributable to
the Receiver. See, e.g., FDIC v. O'Melveny & Meyers, 969 F.2d 744,
750 (9th Cir. 1991) (knowledge acquired by the agent who is acting
adversely to its principal will not be attributed to the
2
Christopher claims that he gave notice of his bankruptcy
filing to an associate, William Spartin, who joined Diamond
Benefits as Christopher's administrative assistant and later became
a member of the company's board of directors. Christopher argues
that Spartin can be distinguished from the other members of Diamond
Benefits's ousted management because Spartin was a "non-
conspirator" and a "loyal agent" of the company. However, the
record reveals that the Receiver sued Spartin as a co-defendant
with Christopher and other former directors and officers of Diamond
Benefits in the United States District Court for the District of
Arizona on grounds of wrongful conversion, breach of statutory and
fiduciary duties, and RICO violations. Notwithstanding the fact
that Spartin was eventually dismissed from the Arizona litigation,
the bankruptcy court did not clearly err in finding that
Christopher's former associates at Diamond Benefits, including
Spartin, had interests adverse to those of the Receiver.
-4-
principal); FDIC v. Lott, 460 F.2d 82, 88 (5th Cir. 1972)
(knowledge possessed by bank officer acting in his own interest is
deemed adverse and is not imputable to the bank); Odom v. Ins. Co.
of the State of Pa., 441 S.W.2d 584, 591 (Tex.App.--Austin 1969),
aff'd, 455 S.W.2d 195 (Tex. 1970).
Accordingly, the district court's judgment is
A F F I R M E D.
-5-