Executive Leasing v. Banco Popular

• Court: Court of Appeals for the First Circuit
• Decided: February 27, 1995
• Docket: 94-1877
• Status: Published

Opinion

USCA1 Opinion

March 1, 1995     UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                     ____________

          No. 94-1877

                        EXECUTIVE LEASING CORPORATION, ET AL.,

                                     Appellants,

                                          v.

                        BANCO POPULAR DE PUERTO RICO, ET AL.,

                                      Appellees.

                                     ____________

ERRATA SHEET

The  opinion of this court  issued on February  27, 1995, is

          amended as follows:

On the cover sheet  of the opinion strike the  line stating:

          "[Hon. Hector  M. Laffitte, U.S.  District Judge]" and  insert in
                                      ____________________

          its place the following:

"[Hon. Justo Arenas, U.S. Magistrate Judge.]"
                                    _____________________



UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________

No. 94-1877

EXECUTIVE LEASING CORPORATION, ET AL.,

Appellants,

v.

BANCO POPULAR DE PUERTO RICO, ET AL.,

Appellees.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Justo Arenas, U.S. Magistrate Judge]
                                          _____________________



____________________

Before

Selya, Circuit Judge,
                                        _____________

                            Bownes, Senior Circuit Judge,
                                    ____________________

                              and Stahl, Circuit Judge.
                                         _____________

____________________

Harold D. Vicente,  with whom Vicente &  Cuebas were on  brief for
            _________________             _________________

        appellant.

            Nestor  Duran-Gonzalez,  with  whom Jaime  E.  Toro-Monserrate and
            ______________________              __________________________

        McConnell Valdez were on brief for appellee.
        ________________

____________________

February 27, 1995

                                 ____________________



BOWNES,  Senior Circuit  Judge.    The  plaintiffs,
                      BOWNES,  Senior Circuit  Judge.
                               _____________________

            Executive Leasing Corporation, Manuel Gonzalez Gierbolini and

            Luz Iraida Gonzalez  (both personally and on  behalf of their

            conjugal  partnership), allege that defendants Banco de Ponce

            (now Banco  Popular de Puerto Rico, as successor-in-interest)

            and  BanPonce  Corporation  (collectively, "Banco")  violated

            various provisions of the Bank Holding Company Act (BHCA), 12

            U.S.C.    1971  et seq.,  and Puerto Rico  law in their  loan
                            __ ____

            transactions with the plaintiffs.  The district court entered

            summary judgment for  the defendants  on the  BHCA claim  and

            dismissed  the pendent  claims without prejudice.   Executive
                                                                _________

            Leasing Corp. v. Banco Popular de Puerto Rico, 1994 WL 448985
            _____________    ____________________________

            (D.P.R.  June 20,  1994).    The  plaintiffs appeal,  and  we

            affirm.

                      As a threshold matter, we think that the plaintiffs

            seriously misconceive their burden on appeal.  The plaintiffs

            make   little  effort   to   develop  either   their  factual
                                
            ____________________

            1.  See, e.g., Plaintiffs' Brief at 29 ("The  analysis of the
                ___  ____
            allegations  or their  claims of  error; instead,  they offer
            extrinsic evidence  controversy . . . which  was proffered by
            Executive  to the  District Court  deals adequately  with the
            conclusory statements, undigested record  citations, repeated
            matter  and it  is incorporated  by reference.");  id. at  35
                                                               ___
            ("Executive explained the civil law  methodology [for dealing
            assurances that  the district court was  "thoroughly briefed"
            with  extrinsic evidence  in  cases  alleging  illegality  or
            fraud] to  the District Court and  Executive's explanation is
            on various matters,  and reminders that in  reviewing a grant
            incorporated by reference."); id.  at 41 ("Executive provided
                                          ___
            the District Court with Executive's  own understanding of . .
            of summary  judgment, we  are  "free to  consider the  entire
            .  the  elements  of  a  BHCA  claim  .  .  .  .    Executive
            respectfully  directs  the attention  of  this  Court to  the
            record."    The plaintiff's  brief is  less  a brief  than an
            relevant  materials, and  incorporates  them by  reference.")
            (there follows a  citation to forty pages  of the plaintiffs'
            attempt  to  incorporate   their  voluminous  district  court
            brief  in  opposition to  summary  judgment).   The  brief is
            littered with many more examples of implicit incorporation in
            pleadings by reference.1   We have held that attorneys cannot
            lieu  of factual and legal  argument.  See,  e.g., id. at 31,
                                                   ___   ____  ___
            39, 40-41 (two examples), 43-46 (four examples).

                                         -2-
                                          2



circumvent  the  page  limit of  Fed.  R.  App.  P. 28(g)  by

            incorporating by  reference a  brief filed in  another forum.

            Katz v. King, 627 F.2d 568, 575 (1st Cir. 1980).  "If counsel
            ____    ____

            desires our  consideration  of  a  particular  argument,  the

            argument must  appear within  the four  corners of  the brief

            filed in this court."  Id.  See also Hunter v. Allis-Chalmers
                                   ___  ___ ____ ______    ______________

            Corp.,  797 F.2d 1417, 1430 (7th Cir. 1986) (issues cannot be
            _____

            preserved  by reference  to documents  filed in  the district

            court;  issues must  be argued  to be  preserved); Prudential
                                                               __________

            Ins. Co.  of Am. v. Sipula,  776 F.2d 157, 161  n.1 (7th Cir.
            ________________    ______

            1985) (practice of incorporation results in a composite brief

            of  more than  fifty pages;  "any risk  of oversight  [by the

            court] or of the failure to present properly the arguments on

            appeal rests with [appellant]").  

                      These  appellate rules  are wholly  consistent with

            our de novo  review of summary judgments.2  While we view the
                __ ____

            summary  judgment record in  the light most  favorable to the

            nonmoving party,  and indulge  all  reasonable inferences  in

            that party's favor, see, e.g., Vasapolli  v. Rostoff, 39 F.3d
                                ___  ____  _________     _______

            27, 32  (1st  Cir. 1994),  appellants  are not  excused  from

            arguing the issues  being appealed.   We will  not rely  upon

____________________

            2.  Summary judgment is appropriate when the  record reflects
            "no  genuine issue  as to  any material  fact and  . .  . the
            moving party is  entitled to  judgment as a  matter of  law."
            Fed. R. Civ. P. 56(c).

                                         -3-
                                          3



arguments  and allegations  that  are developed  only in  the

            district court pleadings.

                      In  light   of  these  principles,   most  of   the

            plaintiffs' appellate  arguments must  be  deemed waived  for

            lack  of  developed  argumentation.   See  United  States  v.
                                                  ___  ______________

            Zannino,  895 F.2d 1, 17  (1st Cir.), cert.  denied, 494 U.S.
            _______                               _____  ______

            1082  (1990).   We  address  only those  arguments  that have

            arguably been preserved.3

I.  FACTS
                                      I.  FACTS
                                          _____

                      In   May,   1983,  Executive   Leasing  Corporation

            ("Executive") entered  a loan  agreement with Banco,  whereby

            Executive  obtained  a  line  of  credit  for  its  principal

            business,   long-term  vehicle   leasing.     As  collateral,

            Executive assigned to Banco the accounts receivable generated

            by  its lease contracts.  Part of  the loan was to be used to

            discharge Executive's debt to another bank.

____________________

            3.  Alerted by  Banco's brief  to their possible  waiver, the
            plaintiffs use their reply brief to "set forth a succinct and
            veridic version of the facts . . . with limited references to
            the documents which are  part of the record."   Arguments not
            made in  the appellant's  opening brief, however,  are deemed
            waived.  See, e.g., Sandstrom v. Chemlawn Corp., 904 F.2d 83,
                     ___  ____  _________    ______________
            86  (1st Cir. 1990).  Moreover, the plaintiffs have not cured
            the defects of their opening brief.  Although Banco's alleged
            loan agreement violations, use of "disinformation," and other
            anti-competitive practices  may  be highly  relevant  to  the
            plaintiffs'  claims under  Puerto Rico  law, the  reply brief
            also fails to  raise a  genuine issue of  material fact  with
            respect to the BHCA claims.

                                         -4-
                                          4



As  a  condition  for  the  loan,  Banco  allegedly

            prohibited Executive from financing its leasing business with

            any  other bank.   This  claimed exclusive  dealing condition

            does  not appear  in  the  loan  agreement.    In  fact,  the

            agreement has an integration clause that provides:

                      [This  agreement] constitutes  the entire
                      agreement among the  parties . . . .   No
                      covenant  or  condition not  expressed in
                      this   agreement   shall  affect   or  be
                      effective   to   interpret,   change   or
                      restrict  this  agreement.    No  change,
                      termination or attempted waiver  shall be
                      binding unless in writing.

                      The exclusive dealing  condition was allegedly part

            of Banco's scheme to  drive Executive out of business  and to

            take  over its vehicle  leasing operation for  the benefit of

            Banco's  corporate affiliate,  Velco,  which happened  to  be

            Executive's main  competitor.   To that end,  Banco allegedly

            structured Executive's  line of credit to  create an inherent

            liquidity  shortage;  made  premature  and  improper  charges

            against Executive's account; and improperly refused to extend

            new credit to Executive when it was not in default.

                      Executive  eventually  fell   behind  in  its  loan

            payments.    In  December,   1987,  Banco  called  the  loan.

            Plaintiffs claim that it did so without  granting Executive a

            meaningful  opportunity to  obtain alternative  financing, or

            placing Executive on default  status as required by  the loan

            agreement.   In March, 1988, the parties entered an agreement

            to  terminate  the  loan  agreement.    Executive  agreed  to

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                                          5



transfer  its main assets and  all of its  lease contracts --

            even  those in  which Banco  had no  previous interest  -- to

            Banco, allegedly for the benefit of Velco.

                      The  plaintiffs claim  that under the  Bank Holding

            Company Act,  both the  initial loan  agreement and  the 1988

            termination agreement  were extensions of  credit conditioned

            upon a prohibited tying arrangement.

                                   II.  DISCUSSION
                                   II.  DISCUSSION
                                        __________

                      A.  The loan agreement
                      A.  The loan agreement

                      The plaintiffs  argue that Banco  violated the BHCA

            by  extending credit to  Executive on condition  that it "not

            obtain  some  other  credit,  property,  or  service  from  a

            competitor of  such bank . .  . ."  12  U.S.C.   1972(1)(E).4

            Because no such restriction  appears in the agreement itself,

            and the  loan agreement, by its  clear language, "constitutes

            the entire  agreement among the parties,"  the district court

            rejected the plaintiffs' extrinsic evidence of the  exclusive

            dealing condition, including their own sworn affidavits.  See
                                                                      ___

            Executive Leasing, 1994  WL 448985, at  *7 (citing P.R.  Laws
            _________________

            Ann.  tit. 32, App. IV, R. 69(B) (1983) (Parol Evidence Rule)

            (evidence  extrinsic  to  an  oral or  written  agreement  is

                                
            ____________________

            4.  Under 12 U.S.C.   1972(1)(E), a bank may not, among other
            things, extend  credit on  the condition or  requirement that
            "the customer  shall not obtain some  other credit, property,
            or service from a competitor of such bank . .  . other than a
            condition  or requirement  that  such  bank shall  reasonably
            impose in a credit transaction to assure the soundness of the
            credit."

                                         -6-
                                          6



inadmissible where "all the terms and conditions constituting

            the true  and  final  intention  of  the  parties  have  been

            included"); P.R.  Laws Ann. tit.  31,   3471  (1991) (Article

            1233  of the  Civil Code) ("If  the terms  of a  contract are

            clear  and leave  no  doubt  as  to  the  intentions  of  the

            contracting parties,  the literal  sense of  its stipulations

            shall be observed. .  . ."); Vulcan  Tools of Puerto Rico  v.
                                         ____________________________

            Makita  USA, Inc., 23 F.3d 564, 567 (1st Cir. 1994) (applying
            _________________

            Puerto Rico law; "[w]hen  an agreement leaves no doubt  as to

            the intent of the parties, a court should not look beyond the

            literal terms of the contract.")).

                      Under Puerto Rico law, an agreement is "clear" when

            it can "'be  understood in one  sense alone, without  leaving

            any   room  for   doubt,  controversies   or  difference   of

            interpretation . . . .'"  Catullo v. Metzner, 834  F.2d 1075,
                                      _______    _______

            1079 (1st Cir.  1987) (quoting Heirs  of Ramirez v.  Superior
                                           _________________     ________

            Court,  81 P.R.R. 347,  351 (1959)).   The plaintiffs concede
            _____

            that  the loan agreement is clear.  They argue, however, that

            the written agreement was  not in fact the  entire agreement,

            and  that we must consider extrinsic evidence of the parties'

            intent  with  respect  to  integration.    This  argument  is

            supported by a  selective reading of  Article 1233 of  Puerto

            Rico's Civil Code, P.R. Laws Ann. tit. 31,   3471:

                        If the  terms of a  contract are  clear
                      and leave  no doubt as to  the intentions
                      of the contracting  parties, the  literal

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                                          7



sense  of  its   stipulations  shall   be
                      observed.

                        If  the words should appear contrary to
                      the evident intention of  the contracting
                      parties, the intention shall prevail.

            Relying  exclusively  on  the  second  sentence  quoted,  the

            plaintiffs argue that the words of the integration clause are

            in fact "contrary to the evident intention of the contracting

            parties."  Yet to consider the extrinsic evidence at all, the

            court  must first  find the relevant  terms of  the agreement

            unclear.  That requirement not  being met, the district court

            correctly  went no  further.   See  Vulcan,  23 F.3d  at  564
                                           ___  ______

            (because the contractual  term "non-exclusive"  is clear  and

            unambiguous,  there  is  "no  need  to  dwell  on"  extrinsic

            evidence  of  the supplier's  alleged  promise  to limit  the

            number  of  its distributors);  Ballester  Hermanos, Inc.  v.
                                            _________________________

            Campbell  Soup Co., 797 F.  Supp. 103, 108  n.4 (D.P.R. 1992)
            __________________

            (under  Puerto Rico's  Civil  Code and  parol evidence  rule,

            parties  may resort  to extrinsic  evidence of  circumstances

            surrounding the document "to  assist in the interpretation of

            an apparent conflict in  the written text") (emphasis added);
                                 __  ___ _______ ____

            Nike  Int'l Ltd. v. Athletic  Sales, Inc., 689  F. Supp. 1235
            ________________    _____________________

            (D.P.R. 1988) (under Article 1233  of the Civil Code,  intent

            of the parties "is to be gleaned first from the literal terms

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                                          8



of   the  contract   and   then,  if   necessary,  from   the
                                              ______________

            circumstances surrounding its execution") (emphasis added).5

                      The plaintiffs attempt  to distinguish our decision

            in  Vulcan  Tools,  23  F.3d  at  567-68,  where  we excluded
                _____________

            extrinsic  evidence that  was  offered to  vary  a clear  and

            unambiguous term  of the contract,  on the ground  that fraud

            and  illegality were not alleged.  This argument is made only

____________________

            5.  The plaintiffs  cite several civil law  treatises for the
            proposition that  the correct methodology for determining the
            intention of  contracting parties  is "to consider,  not only
            the  written contract  itself, but  all other  evidence which
            would  otherwise be  admissible."   The admissibility  of the
            "other evidence"  under Puerto Rico law,  however, depends in
            the first instance  on the clarity  of the written  contract.
            See Vulcan Tools, 23 F.3d  at 567-68; Mercado-Garcia v. Ponce
            ___ ____________                      ______________    _____
            Fed.  Bank, 979  F.2d 890,  894 (1st  Cir. 1992)  (where both
            __________
            parties  offered extrinsic  evidence contradicting  the clear
            terms of  a promissory note,  court is nonetheless  "bound to
            look no further than the note itself").

                We note, too, that  the plaintiffs' extrinsic evidence of
            the actual  practice of  the parties would  not have  blocked
            summary  judgment on their    1972(1)(E) claim.  For example,
            Banco tolerated Executive's repeated overdrafts and delays in
            payment, even though the loan agreement required Executive to
            pay  on time.  The  practice of permitting  late payments and
            overdrafts  strikes  us  as  a  reasonable  accommodation  to
            Executive;  it  raises  no  genuine  question  regarding  the
            integration of the agreement.   As for Banco's  other alleged
            deviations from  the loan  agreement, the integration  clause
            provides that  "no change .  . .  shall be binding  unless in
                                                       _______
            writing" (emphasis added).  This is not a representation that
            there would  never be any  variance, however small,  from the
            agreement.  With respect to  terms that the parties  intended
            to  be  binding  and  enforceable,  nothing  plaintiffs  have
            articulated  on appeal  leads  us  to  doubt  that  the  loan
            agreement should "be deemed  as complete" under Puerto Rico's
            parol  evidence rule.   P.R. Laws Ann.  tit. 32,  App. IV, R.
            69(B).   In  fact,  on several  occasions when  Banco renewed
            Executive's line of credit or adjusted the terms of the loan,
            it did so in writing as required by the loan agreement.

                                         -9-
                                          9



by the attempted incorporation  of a surreply filed  with the
                                                 ________

            district  court; accordingly, it  has been waived.   In their

            original  complaint,   the  plaintiffs  made   no  allegation

            regarding exclusive dealing, let alone fraud.  Fraud was  not

            alleged in  the amended complaint,  or even in  the tendered,

            but rejected, second amended complaint.

                      Even were  we to reach the  argument of illegality,

            we  would reject it on the merits.  The plaintiffs' extrinsic

            evidence  was offered  not  to illuminate  (for example)  the

            circumstances  under which  the  agreement was  made, see  R.
                                                                  ___

            69(B),  but to contravene  an express term  of the agreement.

            The plaintiffs  have cited no  authority to suggest  that the

            illegality  exception to  Puerto Rico's  parol evidence  rule

            sweeps this far.   The district court  correctly excluded any

            evidence of the exclusive dealing condition.

                      B.  The termination agreement
                      B.  The termination agreement

                      Under  the  BHCA,  banks  may  not  require,  as  a

            condition  for extending  credit, that "the  customer provide

            some  additional  credit,  property,  or service  to  a  bank

            holding company of such  bank, or to any other  subsidiary of

            such bank holding  company."   12 U.S.C.    1972(1)(D).   The

            plaintiffs allege that Banco violated   1972(1)(D) by forcing

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                                          10



Executive to surrender its  vehicle leasing business to Banco

            for the benefit of its leasing affiliate, Velco.6

                      The plaintiffs  make only a  cursory argument  that

            Executive was in fact  required to provide "additional .  . .

            property" (as opposed to the  collateral for the loan) within

            the meaning of the  BHCA.  For a "detailed exposition  of the

            facts" and the plaintiffs' legal theories, we are directed to

            their pleadings below.  We rule that the plaintiffs' argument

            under   1972(1)(D) has been waived.7

                      We  turn now  to  two claims  of procedural  error,

            which we  assess in light of  their effect (if any)  upon the

            summary judgment proceedings.

                      C.  The second amended complaint
                      C.  The second amended complaint

                      The plaintiffs argue that the district court abused

            its discretion by denying them leave to file a second amended

            complaint.   On January  18, 1994,  the district court  heard

            arguments on the need for a stay of discovery pending Banco's

            motion  for  summary  judgment  on  the  BHCA  claims.    The

            plaintiffs gave no hint  that a second amended  complaint was

            in the offing.  By  order of the court, Banco was to move for

____________________

            6.  Banco  incorrectly  asserts  that  the  plaintiffs  never
            invoked    1972(1)(D)  before the district  court.   In fact,
            references  to  that   section  appear  in  the   plaintiffs'
            opposition to summary judgment.

            7.  We  therefore need not decide whether  the workout of the
            loan  constituted  an  "exten[sion  of]  credit"  within  the
            meaning of the BHCA.

                                         -11-
                                          11



summary  judgment  by February  7,  1994, and  the  trial was

            scheduled  for  April 18,  1994.   On  February 1,  1994, the

            plaintiffs  unexpectedly moved  for  leave to  file a  second

            amended  complaint.   The  motion remained  pending when  the

            district court entered summary judgment for Banco.

                      Rule 15(a) of the  Federal Rules of Civil Procedure

            provides  in part  that leave  to amend  pleadings  "shall be

            freely given when justice so requires."   Absent factors such

            as  undue  delay,  bad  faith or  dilatory  motive,  repeated

            failure to  cure deficiencies by  previous amendments,  undue

            prejudice to the opposing  party, or "futility of amendment,"

            the leave sought should be granted.  Foman v. Davis, 371 U.S.
                                                 _____    _____

            178, 182 (1962).

                      We are  confident that  the district court  did not

            abuse its  "considerable discretion" by  implicitly rejecting

            the  second amended  complaint.   Rodriguez v.  Banco Central
                                              _________     _____________

            Corp., 990 F.2d 7, 14  (1st Cir. 1993).  This was  the second
            _____

            time  that  the  plaintiffs  had  attempted  to  amend  their

            complaint  to  forestall  a   dispositive  motion  (in   this

            instance, Banco's summary judgment motion).  The first motion

            for  leave  to  file  an amended  complaint  came  after  the
                                                               _____

            original  complaint  was dismissed.   Moreover,  after nearly

            five  years  of  litigation  and a  prior  amendment  of  the

            complaint, and  with the trial  less than three  months away,

            the plaintiffs  made allegations  for the first  time against

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                                          12



Banco Popular, the  successor-in-interest to defendant  Banco

            de  Ponce,  based  on  conduct  that  took  place  after  the
                                                               _____

            termination  of  the  loan  agreement --  conduct  that  "has

            continued to this date."  "The further along a case is toward

            trial, the greater the threat of prejudice and delay when new

            claims  are belatedly  added."   Rodriguez,  990 F.2d  at 14.
                                             _________

            Although the district court  should have "state[d] explicitly

            its  reasons  for  den[ying]"  leave  to  amend, Kay  v.  New
                                                             ___      ___

            Hampshire  Democratic Party,  821  F.2d 31,  34-35 (1st  Cir.
            ___________________________

            1987),  this  reason  for  the  denial   is  plain  from  the

            procedural history of  the case:  the plaintiffs  were trying

            to prolong  discovery and  postpone a  ruling on  the summary

            judgment  motion in  the hope  that "something  concrete will

            eventually  materialize .  .  . ."   Dow  v.  United Bhd.  of
                                                 ___      _______________

            Carpenters & Joiners of Am., 1 F.3d 56, 58 (1st Cir. 1993).
            ___________________________

                      The  tendered complaint would  have been  futile in

            any event because it could not have  blocked summary judgment

            on the jurisdictional  BHCA claims.  See Kay,  821 F.2d at 34
                                                 ___ ___

            ("for  the sole  reason that  [the proposed]  amendment would

            have been futile, it was properly denied") (citing Foman, 371
                                                               _____

            U.S.  at 182).    On  appeal,  the  plaintiffs  point  to  no

            particular  amendment that  might with  appropriate discovery

            have raised a genuine issue of material fact.

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                                          13



For all  of these  reasons, we reject  the argument

            that the plaintiffs should have been allowed to file a second

            amended complaint.

                      D.  The stay of discovery
                      D.  The stay of discovery

                      The plaintiffs argue that the district court abused

            its  discretion  by  staying  discovery  during  the  summary

            judgment proceedings, and  by denying their  Fed. R. Civ.  P.

            56(f) motion for additional discovery.  This argument has not

            been  adequately  developed  on  appeal and  must  be  deemed

            waived.  See, e.g., Plaintiffs' Brief  at 26 ("Executive also
                     ___  ____

            showed,  with great  particularity, where discovery  stood at

            the time.  [That discussion is incorporated by reference[.] .

            .  .  ]") (citing  two district  court  pleadings).   We have

            searched the  plaintiffs' brief  in vain  for a  showing that

            their discovery  requests, whether those pending  at the time

            of  the stay  or  those made  pursuant  to Rule  56(f),  were

            necessary  or even  relevant to  their opposition  to summary

            judgment on the BHCA  claims.  Again, the plaintiffs  fail to

            address  the specific  manner  in which  they were  allegedly

            prejudiced by the claimed error.

                      Double  costs  are  assessed   against  plaintiffs'

            attorneys pursuant  to Fed. R.  App. P.  38. and 28  U.S.C.  

            1927.

                      Affirmed.
                      Affirmed.
                      _________

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                                          14