Professional Documents
Culture Documents
No. 96-2009
Appellant,
v.
Appellee.
____________________
____________________
Before
____________________
General Counsel,
FDIC,
with whom
Ann S. DuRo
____________
Senior Couns
appellee.
____________________
May 5, 1997
____________________
were
on brief
CYR,
CYR,
possession Helen
order
which
allowed the
filing claims.
Chapter
Federal Deposit
11
debtor-in-
a bankruptcy court
Insurance Corporation
We affirm.
I
I
BACKGROUND
BACKGROUND
__________
Gens
In
July 1988,
Gens executed
a promissory
Note")
payable to
U.S.
Inc. of
Funding")
in her
Funding
note ("the
America
("U.S.
as trustee for
secured
by
a third
Massachusetts, owned
Although
the
mortgage
by the
Barnstable
on real
property
Property
was
subject
mortgages, U.S.
of
in
the $70,000
in Barnstable,
loan proceeds
to
be
Property").
to
two
prior
used to
satisfy
the
in
federal
district
court,
alleging
that
the
purchase-sale
by fraud
insurance provisions.
Home
or that Key
__
Key,
title-
The
Trust
defaulted on
the
Gens Note
in
or about
Property.
The
application
securing
the
foreclosure
to any
junior
Gens Note.
sale
resulted in
lien, including
In
September
no
the third
1990, Home
surplus
for
mortgage
Owners was
Corporation ("RTC")
was
appointed
Corporation
receiver.
RTC
designated
Knutson
Mortgage
Meanwhile,
Home
Owners
summary
in
the ongoing
against Key,
the
breached the
court order
federal action
district
court entered
purchase-sale agreement.
directing
Key to
brought by
The attendant
repurchase
partial
the Gens
district
Note
never
became final, however, apparently because RTC and Key were unable
Gens
September
liability.
commenced
1993,
but
a voluntary
failed to
Knutson, as
chapter 11
schedule
RTC's agent,
the
filed
proceeding in
Gens
a proof
Note as
of claim
("POC")
The
original
POC
incorrectly
listed
Knutson
servicing
agent,
mischaracterized
mistakenly identified
the
itself
as
the
claim as
secured,
and
claims.
Almost seven
an
RTC
as
the creditor,
claim
as "secured."
to the Gens
but still
(i)
failing to
disclose that
Knutson eventually
submitted
additional
Gens
objected
to
the
original
and
amended
POCs,
see
___
Mass.
Gen.
Laws
Ann.
as the creditor
objections
ch.
106,
3-606.
While
these
by Knutson.
Ultimately,
the
II
II
DISCUSSION
DISCUSSION
__________
A.
A.
Judicial Estoppel
Judicial Estoppel
_________________
The
companion
doctrines
of
judicial
estoppel
and
prior proceeding.
advanced
by
Gens
is
Cir. 1987).
predicated
General Cinema
______________
The estoppel
entirely
on
the
defense
contract-
1The "election
the
equitable
of remedies"
doctrine
of estoppel.
See
___
Butcher v.
_______
from
Cessna
______
489 U.S. 1067 (1989); In re Leonardi's Int'l, Inc., 123 B.R. 668,
____________________________
669 (Bankr. S.D. Fla. 1991).
against
Key,
alleging inter
_____
misrepresentations
Implicit
in
alia
____
that Key
negotiating the
had
made material
purchase-sale agreement.
sale agreement
was its
purchase-sale agreement
averment that
voidable ab initio,
__ ______
and therefore
elect
between two
the
that
306, 313
(Bankr.
remedies
he
may
treat the
contract
as
In
judgment
January 1992,
to RTC
on
the
its contract
district court
claim.
Gens
awarded summary
now
contends,
Gens
and factually
by
Owners
never
became
a holder
of
the
position adopted
Gens
Note because
the
purchase-saleagreementwasrescindablefromitsinception.Wedisagree.2
____________________
2Although
must
be reviewed
standard for
estoppel.
21,
Gens
23
argues that
de novo,
__ ____
we have
Cir.
1994) (expressly
(9th
(same); Yanez
_____
to be ones of
question);
cf.
___
1996)
denied, 117 S.
______
78 F.3d 1556,
v. United States,
_____________
37 F.3d
turn out
doctrine of judicial
reserving
the exact
court decision
yet to determine
See Desjardins
___ __________
(1st
the bankruptcy
989 F.2d
1565
323
estoppel is not
or something in
Judicial estoppel
forum
is not
implicated unless
legal
proceeding,
maintaining
that
and
succeeds
________
position,
he
may
in
not
assume
especially if
contrary
it be to the
position,
prejudice of the
the first
to be at
party
who has
acquiesced
by
him.
in
formerly
taken
estoppel
should be employed
the
position
Judicial
when a litigant
when "intentional
being used
as a
advantage
in
self-contradiction is
means
a forum
courts,"
of obtaining
_________
provided
unfair
for suitors
seeking justice."
omitted).3
F.2d
Similarly,
at 212
the
(emphasis added)
primary
purpose
(citations
served
by
the
____________________
set
of facts."
to
determine the
Desjardins, 37 F.3d
__________
at 23.
precise standard of
It is not necessary
review at
this juncture,
3See
___
Cir.)
See id.
___ ___
United States
_____________
(estoppel
applies
v.
Levasseur, 846
_________
where
party
F.2d 786,
previously
793 (1st
"obtained
litigation benefit"), cert. denied, 488 U.S. 894 (1988); see also
_____ ______
___ ____
Continental Ill. Corp. v.
______________________
518 (7th
its position
to
prior
tribunal);
v.
(Fed. Cir.
1992); In re A. Barletta & Sons, Inc., 185 B.R. 976, 980 (Bankr.
_______________________________
M.D.
(Bankr. D. Mont. 1994); In re UNR Indus., Inc., 143 B.R. 506, 526
______________________
(Bankr. N.D. Ill. 1992),
(N.D. Ill. 1994);
Phillips v.
________
B.R. 149
B.R.
712, 719 (Bankr. W.D. Tex. 1991); In re Merritt Logan, Inc., 109
__________________________
B.R. 140, 147-48 (Bankr. E.D. Pa. 1990); cf. also Crown Life Ins.
___ ____ _______________
Co. v. American Nat'l Bank and Trust Co. of Chicago, 35 F.3d 296,
___
____________________________________________
299 (7th Cir. 1994)
party
accepts the
123 B.R.
at 669
of pursuing
6 B.R.
the initial
remedy.");
("An election
be made
at any
951-52 (Bankr.
E.D.N.Y.
. .
time
Wyatt (In
_____ __
1980) ("'The
"election
of remedies"
sequential] recoveries
doctrine
is "to
prevent double
wrong."
Tavormina
_________
[viz.,
____
v. Fir,
____
1985).
its contract-rescission
judgment
on
claim
its alternative
by
claim
moving
for
that Key
partial
had
summary
breached the
purchase-sale agreement.
See
___
complaint] . . .
an
express
exclusive
Note
by
provision
in
the
Key
upon demand
rescindment, which
by
purchase-sale
.").4
Owners.
necessarily presumes
Under
agreement,
Home
("A party
Thus,
the
of the Gens
unlike
a disaffirmance of
the
contract claim
Home
Owners became
repurchased the
the
Note.
holder
of
the
Accordingly, the
Gens
contract whereby
Note
until
Key
____________________
purpose of [the]
prevent
doctrine [of
election of remedies]
but to
is not
to
4See, e.g.,
___ ____
Desjardins,
__________
37 F.3d
at
23 ("There
are
many
or
enactment
traditional
806
of
the
Federal
Rules
Civil
Procedure,
the
F.2d 829, 838 (8th Cir. 1986) ("[T]he doctrine [of election]
is remedial, and
neither it
rules of
pleading
position
is
not
predecessor, RTC,
inconsistent
with
that
advanced
by
its
to persuade
B.
B.
of
claim shall
authorized
9010(a)(2).
agent
not authorized
be executed
by the
.");
see
___
creditor or
also
____
Fed.
the creditor's
R.
Bankr.
P.
evidentiary
1606.4;
hearing,
see
___
also
____
disqualified
that
12
RTC
regulations, see
___
U.S.C.
1441a(n)(6),
12
C.F.R.
presumptively
financial
misfeasance
insolvency.
As
or malfeasance
led
to
the Home
Owners
however, Gens
The
RTC
regulation
pursuant
to
which
RTC had
legal obligation
Knutson
was
file a
POC
____________________
5Furthermore,
to
which
then
held
an
unsecured
record.
claim
against
Gens.
claim holder of
The "election
of remedies"
yet another
reason.
Note
Since the
until
January 1990,
against Gens in
1989 when
Home Owners
had no
it filed its
on the Gens
available remedy
complaint against
Key.
constituted a legal
RTC] meet
minimum standards
conduct in
of competence,
integrity, fitness,
performing services
for RTC,"
by
of ethical
(ii) to prevent
"the
of a
contract . .
contract,"
and
. for personal
(iii)
relationships or
to
preclude
improper influence
advantage
in obtaining
1606.1.
The RTC
contracts
regulation
"the
use
to gain
with the
RTC."
identifies two
conceivable
(1) competing
_________
contractors
___________
beneficiaries:
which
unfairly
denied
RTC
contract
bids;
which may
be
harmed by
RTC
public,
______
12 C.F.R.
thus
intended
taxpaying
_________
personal
unfair competitive
classes of
are
of
by the
and
(2)
the
___
revenue losses
Gens
plainly
cannot
qualify
under
the
first
See, e.g.,
___ ____
the plaintiff
rest [her]
rights
of third
or
Moreover, no
interests
standing is
parties.'")
Cir.
See
___
1995) (noting
"abstract questions
legal
individually, by
Libertad v.
________
that
on the
(citation omitted).
classification.
claim to relief
Welch, 53 F.3d
_____
claimant normally
may not
428, 436
(1st
adjudicate
which amount to
generalized
grievances
legislature").
more
appropriately
addressed
by
the
the agency
itself
debtors to
intended
enforce
to confer
standing
Dep't of Agric.,
________________
102
F.3d
her
claim does
11
1273,
that
on chapter
not fall
1281
(1st
Cir.
1996)
"outside
the zone
(to
alia,
____
of interests
468 U.S. 737, 751 (1984)); Benjamin v. Aroostook Med. Ctr., Inc.,
________
_________________________
C.
C.
Gens next
which
incorrectly
without
disclosing
represents
that she
stated that
that it
court erred in
Knutson
was acting
reasonably believed
1993),
was
the claim
as
RTC's agent.
Knutson held
holder,
Gens
no valid
____________________
6Furthermore,
alleged no
Home Owners'
RTC.
even
assuming
facts suggesting
she
had
standing,
insolvency or to any
Gens has
either to
7Gens argues
that the
POCs filed by
not signed
9010(a); 9011(a).
by RTC's
Knutson were
attorney.
invalid
See Fed.
___
R.
Bankr. P. 3001(b)
Bankruptcy Form
no attorney-signature
line).
1 (providing space
court.
See
___
We need
for attorney
not resolve
the present
10
v.
Kahn
____
(1st Cir.),
in the
(In re
______
cert.
_____
file a POC
there was no
A bankruptcy
court ruling
allowing an amendment
to a
to
to payment
to
be a
distinctly
which
the
new
debtor
claim.
result
in
Second, the
______
unfair
unsecured
amendment must
prejudice
against
other
holders
of
estate.
claims
to
the
or dilatory tactics
Inc.), 954
__________________
F.2d
____
______________________________
Leave to
requires."
amend a
POC should
be "freely
See
___
Fed. R. Bankr.
given when
P. 7015.8
The
justice so
bankruptcy court
POC
need
only
"provide[]
adequate notice
of
the
____________________
existence,
estate, a
The original
As
R. Bankr.
Knutson was
8Bankruptcy Rule
amendments
Although
to complaints)
R. Civ. P.
applicable in
adversary proceeding,
Rule
adversary proceedings.
a contested matter,
Fed. R. Bankr. P.
15 (governing
rather than an
In re Stavriotis,
________________
11
duly
authorized
Section
II.B,
to file
the mere
the original
failure
to
POC
for RTC,
see supra
___ _____
disclose Knutson's
agency
As
the
Tenth
Circuit
substitution
related
correctly
of the
party
recognized in
real party
mistakenly
Unioil,
______
in interest
listed
in the
simple
(viz., RTC)
____
original
POC
for a
(viz.,
____
Unioil, 962
______
F.2d at
where a
See
___
trustee
Second,
deficiency
at 10;
Gens points
see
___
also Unioil,
____ ______
opposing
amendment must
suggests
simply
that
962
to no
from any
F.2d at
show actual
allowing
unfair prejudice
the
993
(noting that
prejudice).
RTC
amendment
party
Instead, she
prejudices
unsecured
creditors,
who
may
the debtor
something more
less
under
any
the FDIC
that
receive
or
trustee
show
"unfair" prejudice.
preclude amendment.
Thus,
is required to
(7th
____________________
9Nor would the two remaining defects in the original POC bar
amendment.
every reason
POC,
as
to know that
"secured,"
was
the
first
of the
mortgagee
already had
foreclosed on
Gens
Note.
debt
instrument was
a minor
defect, given
12
securing the
that the
Gens Note
Cir.
414, 422
n.5
161 B.R.
(Bankr.
D.N.J. 1993);
In re Dietz,
____________
136 B.R.
459, 468-69
acted in
in
the original
POC.
See,
e.g.,
representation or omission
Brown,
159
B.R.
at
716
___
(permitting POC
"no
evidence
detriment
allege
_____
has
been
offered that
anyone
relied
originally filed").
amendments
plan.
____
to
their
of a chapter 11
See Holstein v. Brill, 987 F.2d 1268, 1270 (7th Cir. 1993)
___ ________
_____
(characterizing
milestone"
confirmation
that makes
it
of
more
debtor
likely
plan
POC
as
amendment
"passing
may
be
prejudicial).
delay in submitting
showing
in
these
amended proofs
circumstances
of claim.
that RTC
Were there
gained
some
strategic
advantage
or
prejudiced,
that
other
parties
in
interest
were
unfairly
however, the
court did not abuse its discretion in permitting RTC to amend its
original POC.
13
to assure that ' . . . substance will not give way to form, [and]
that
technical
considerations
will
not
prevent
substantial
305
D.
D.
Impairment of Collateral
Impairment of Collateral
________________________
Lastly,
Gens challenges
holder
$36,000
of the
hearing.
Note
the Barnstable
bankruptcy court
mortgage on
record
Gens
the
first
a prior
presumably
U.S. Funding
to pay off
Property, but
ruling
Thus,
failed to
used
obtain and
Gens Note
remained third
in priority,
to
second priority.
Pursuant
to Mass.
Gen.
Laws.
Ann.
ch.
106,
3-
instrument
holder
to the extent
instrument
unjustifiably impairs
given by
against whom
collateral
he has
may
or on
result
behalf of
right of
if
the
any
collateral
the party
recourse."
conduct
of
for
or any
the
person
An impairment
the
holder
of
of
principal
N.E.2d
collateral to the
Broad. Co. v.
14
919 P.2d
Ct. App.
1996);
White v. Household Fin. Corp., 302 N.E.2d 828, 835 (Ind. Ct. App.
_____
____________________
1973).
"impairment
negotiable
of collateral"
instrument
defense
(viz.,
____
must prove
promissory
note)
asserting an
she signed
merely
as
the
an
accommodation party
borrower.
See
___
James
Commercial Code
_______________
An
[negotiable]
A. White
&
Robert S.
Summers,
as a
Uniform
_______
accommodation
instrument
in
maker
any
is
"who
capacity for
to another party
3-415(1).
one
to it,"
the
signs
the
purpose
Mass. Gen.
of
Laws.
which
would
not have
been
granted
absent the
accommodation.
debt instrument,
cmt. 1.
her liability is
that of
a surety only.
Id.
___
called
upon
for
payment
the principal
following
be subrogated to
obligor, including
the
principal
the right of
obligor's
against
recourse against
____________________
3-606, which
[negotiable] instrument."
refers to
the broad
"any party to
___ _____
the
Inc., 766 F.2d 744, 749 (3d Cir. 1985) (outlining caselaw split).
____
We have found
no Massachusetts case
3-606
defense.
Since Gens
and the
bankruptcy court
accommodation
affirm on an alternative
ground,
status
we need
not
and because we
address the
question.
15
unresolved
Massachusetts-law
cmt. 5;
id.
___
see also FDIC v. Blue Rock Shopping Ctr., Inc., 766 F.2d
___ ____ ____
_____________________________
141
See
___
(1941).
Therefore, to
holder of
104,
the debt
fails
to perfect
parties,
entitling
the
its
right
rights in
of
recourse
the accommodation
the
collateral against
may
maker to
be
diminished,
a commensurate
or
third
thereby
discharge
conclusive
evidence that
she had
than
of
an accommodation maker.
Gens'
second signature
signed the
second signature
Gens Note
in her
on the
Gens
Note was
not rendered
in
their
"individual"
resolve
a signatory's
or
"representative"
capacities.
accommodation status.11
Since
the Gens
1994) (rejecting
of the
"borrower"
FDIC's "attempts
identification
to nullify
block in
as sole borrower
the
promissory
16
that
hearing should
have
been conducted
to
consider parol
U.S. Funding,
____
the
Mass.
as an accommodation
parol evidence
ch. 106,
endorsement.
3-415(3)
See,
___
e.g.,
____
(expressly allowing
as to holders-in-
1940)
v. Maxon,
_____
534 N.W.2d
37, 41-42
(S.D. 1995)
(same).12
____________________
12FDIC counters
that 12
U.S.C.
1823(e)
(codification of
D'Oench
Duhme
_______________
doctrine)
barred
parol
evidence
of
Gens'
See
___
Mass. Gen.
against
a holder
in
accommodation oral
to
give
the
course
ch. 106,
and
party
character as
the
such.").
Since
of
the
is not admissible
of
discharges
FDIC's right
to
v.
adoption
FDIC);
notice
benefit
3-415(3) ("As
without
accommodation
dependent on his
invoke
due
Laws. Ann.
3-606
FDIC,
____
512
of federal
U.S.
79
(1994)
common-law rules
discouraging
especially protective
of
55 F.3d 1016,
1021 (5th Cir. 1995) (D'Oench inapplicable where issue is not the
_______
604
___
Trust), 968 F.2d 1332, 1350-51 (1st Cir. 1992) (holding that FDIC
_____
is not
entitled
acting
in its
to
federal
capacity as
holder-in-due-course
status
when
purchaser not a holder in due course under state law); Mass. Gen.
Laws.
status
Ann. ch.
to
106,
party
who
3-302(3) (denying
acquired
note
"as
holder-in-due-course
part
of
bulk
transaction").
17
to an
Gens
evidentiary hearing
Note as
to determine
an accommodation
whether she
maker, she
failed to
entitled
signed the
set forth
her
affirmative
collateral.
defense
See RTC
___ ___
cognizable
v. Feldman,
_______
3 F.3d 5,
9 (1st
is founded exclusively
"impairment" of
Cir. 1993)
by record),
the
than prove
mortgage discharge.13
Section
holder's
3-606
dereliction
accommodation
party.
plainly
actually
requires
resulted
evidence
in
that
the
to
the
loss
3-606
____________________
that the
holder's mere
discharge warrants
failure to
1930), Gens
record a
failure to perfect
risk of loss
____
case predates
Commercial
Code
inapposite.
not with
the adoption
1958,
it
of the
is
both
performance of
in it by
in
far a
Massachusetts Uniform
legally
and factually
of facts on which an
guaranteed the
by subsequent alterations
18
Since the
a contract is released
mortgage
independent contract
.").14
Gens
alleged no
facts
which would
demonstrate any
918 F.2d
is on party
alleging discharge).
creditor obtained a
____________________
is to
require the
accommodation maker
impairment.
See,
___
limit
the
e.g., Alcock
____ ______
Cir. 1995)
to prove actual
to
the
extent
of
the
50 F.3d
of state
discharge
Sherwood, 732
________
loss from
courts
prejudice and
_________
the
impairment
must prove
'that the
of
Trust Co., 626 S.W.2d 205, 209-10 (Ark. Ct. App. 1981)), modified
_________
________
on
__
other
_____
Jones, 364
_____
grounds, 741
_______
S.W.2d 624
perfect a lien
on pledged
(Ark.
not] effect
at the
commenced."); Hurt
____
assignments resulted in
1973)
to record
v.
1983) (see
___
S.W.2d
218, 223 (Tex. 1992) ("If the creditor breaches his duty,
the surety
is
discharged on
the
note
to the
extent
of
his
(Wash.
Ct.
App.
1994)
will be
("Should a
creditor
discharged to the
impair
the
extent he
is
1996);
see
___
generally
_________
Carolyn
Edwards,
Impairment of
______________
in a loss
3-605(f)
impairment of
collateral only
"to the
that party
19
obliged to pay
. .
. if
the
fact
that
the
preexisting
discharged
of
record.
Barnstable
Property conducted
second
In addition,
mortgage
the
pursuant
auction sale
to
the
support
no
finding
Consequently, Gens'
if she had
that
any
junior
lien
maker.
never
of the
first-mortgage
to any junior
as an accommodation
was
was
impaired.
v. LaPorte
Prod.
___
where
the party
creditor
extent
to which
failed
to
perfect its
that failure
establish
its
_____
asserting the
did not
____
______________
impairment establishes
lien but
fails to
resulted in
affirmative
establish the
loss, the
defense
that the
of
party has
pro
___
tanto
_____
release.").15
III
III
CONCLUSION
CONCLUSION
__________
____________________
was
never
alleged that no
mortgage discharge
to
the
preexisting
see supra p.
___ _____
second
mortgage.
fully paid,
the
e.g., Beaton v.
____ ______
Barnstable Property.
N.E.2d
302, 307
general
principles of
reform,
rescind,
mortgages,"
brought
"issue
(Mass.)
suit
a
cancel
the
to compel
discharge
(noting
that
of
written
instruments,
the mortgagee
in
acting
has broad
discharging party
mortgage
"a court
equity jurisprudence
or
and that
See,
___
to
a
power to
including
could simply
cancel the
form
under
have
note and
appropriate
for
20
Accordingly,
the district
court judgment
is affirmed
SO ORDERED.
SO ORDERED.
__ _______
21