FDIC v. World

Opinion

USCA1 Opinion

October 22, 1992
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

No. 92-1389

                        FEDERAL DEPOSIT INSURANCE CORPORATION,
                                 Plaintiff, Appellee,

                                          v.

                            WORLD UNIVERSITY INC., ET AL.,
                                Defendants, Appellees.
                                      __________

                          SANTA BARBARA CENTER CORPORATION,
                                Defendant, Appellant.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

                  [Hon. Juan M. Perez-Gimenez, U.S. District Judge]
                                               ___________________

                                 ____________________

                                        Before

                                 Selya, Cyr and Stahl,

                                    Circuit Judges.
                                    ______________

____________________

            Norberto  Medina-Zurinaga  with  whom  Carlos  J.  Quilichini  and
            _________________________              ______________________
        Quilichini, Oliver, Medina & Gorbea were on brief for appellant.
        ___________________________________
            Jeannette   E.   Roach,   Counsel,   Federal   Deposit   Insurance
            ______________________
        Corporation,  with  whom Ann  S.  Duross,  Assistant General  Counsel,
                                 _______________
        Colleen B. Bombardier, Senior  Counsel, Robert D. McGillicuddy, Deputy
        _____________________                   ______________________
        Senior Counsel, Larry H.  Richmond, Counsel, Federal Deposit Insurance
                        __________________
        Corporation, Frank Gotay-Barquet and Feldstein, Gelpi & Gotay were  on
                     ___________________     ________________________
        brief for appellee.
                                 ____________________

____________________

STAHL,  Circuit Judge.  In this appeal, defendant-
                       STAHL,  Circuit Judge.
                               _____________

             appellant  Santa  Barbara   Corporation  ("Santa   Barbara")

             challenges the district court's entry of summary judgment in

             favor  of  plaintiff-appellee   Federal  Deposit   Insurance

             Corporation ("the FDIC").  Finding  no error in the district

             court's ruling, we affirm.

BACKGROUND
                                      BACKGROUND
                                      __________

                       On September  10, 1975,  Santa Barbara obtained  a

             $90,000  loan from Banco Central, a Puerto Rico bank.  Santa

             Barbara used  the  proceeds of  the  loan to  purchase  real

             property in  the municipality of Bayamon,  Puerto Rico ("the

             Bayamon property").  In exchange for the loan, Santa Barbara

             issued a  note in the  principal amount of  $90,000, payable

             with interest on  demand to  bearer.  The  note was  secured

             with a mortgage on the Bayamon property.  

                       Subsequently, on September 15, 1977, Santa Barbara

             sold  the  Bayamon  property  to  International  Educational

             Development Services, Inc.  ("International").  The deed  of

             sale reflects  that International agreed to  pay the $90,000

             note and accrued interest "when due."  Because International

             so  agreed, it  withheld  the value  of  the note  from  the

             purchase price paid to Santa Barbara. 

2

The  record of  this  case does  not indicate  the

             whereabouts  of the Santa  Barbara note until  June of 1983,

             when it  appears in International's possession  in a lawsuit

             pending  in the Puerto Rico Superior Court.  See Union Trust
                                                          ___ ___________

             Co.  v. World Univ., Inc., No. 83-2933 (P.R. Super. Ct. July
             ___     _________________

             6,  1983).  In that  case, Union Trust  Company ("Union"), a

             federally   insured  bank   in   Puerto  Rico,   sued  World

             University, Inc. ("World"), a  Puerto Rico corporation, on a

             debt.    The Puerto  Rico  Superior  Court entered  judgment

             against  World.   The judgment  reveals that  International,

             although not a party  to the Puerto Rico Superior  Court law

             suit,  pledged  Santa  Barbara's  bearer demand  note  as  a

             guarantee of payment of World's debt to Union.  The judgment

             also indicates  that Union  became a  holder of  the $90,000

             note. 

                       In December of 1983,  Union was ordered closed and

             the FDIC was appointed its receiver.   Among Union's assets,

             FDIC-receiver found  the facially valid Santa  Barbara note.

             FDIC-receiver  then  sold  the  note  to  the  FDIC  in  its

             corporate  capacity.  FDIC-corporate  commenced suit against

             Santa  Barbara for payment of the note and moved for summary

             judgment.   Santa Barbara responded with  a cross-motion for

3

summary judgment, asserting that  the note had been  paid by

             International. 

                       The district court granted  the FDIC's motion.  In

             so doing, the court  ruled, inter alia, that the FDIC  was a
                                         _____ ____

             holder in due course of a facially valid bearer note and, as

             such, was entitled to judgment on it as a matter of law.  We

             agree.1  

DISCUSSION
                                      DISCUSSION
                                      __________

             I.  Standard of Review
             ______________________

                       Summary   judgment   is  appropriate   where  "the

             pleadings,  depositions,  answers  to  interrogatories,  and

             admissions on  file, together  with the affidavits,  if any,

             show that there is  no genuine issue as to any material fact

             and  that the moving  party is entitled  to a  judgment as a

             matter of  law."  Fed.  R. Civ. P.  56(c); see also  Celotex
                                                        ___ ____  _______

____________________

             1To  further support  its  ruling, the  district court  also
             relied on the protections  afforded the FDIC by 12  U.S.C.  
             1823(e) (1989).   Because we find that the FDIC, as a holder
             in due course, is entitled to recover on the note, we do not
             address the  applicability of  12 U.S.C.    1823(e)  to this
             dispute.

                                          4

Corp. v. Catrett, 477  U.S. 317, 323 (1986); Aponte-Santiago
             _____    _______                             _______________

             v.  Lopez-Rivera, 957 F.2d 40,  40-41 (1st Cir.  1992).  The
                 ____________

             burden is upon  the moving party to  "put the ball  in play,

             averring `an  absence of  evidence to support  the nonmoving

             party's case.'"  Garside v. Osco Drug, Inc., 895 F.2d 46, 48
                              _______    _______________

             (1st  Cir. 1990) (quoting Celotex,  477 U.S. at  325).  "The
                                       _______

             burden  then  shifts  to  the  nonmovant  to  establish  the

             existence of at least one fact issue which is both `genuine'

             and `material.'"   Id. (citations omitted).   In determining
                                ___

             whether factual issues  exist, we  read the  record "in  the

             light  most  amiable  to  the  nonmovants  and  indulge  all

             reasonable inferences favorable to them."  Id.  
                                                        __

                       Our  review  of  a  summary  judgment   ruling  is

             plenary.  Hoffman  v. Reali, No. 91-1703, slip op. at 9 (1st
                       _______     _____

             Cir. August 27, 1992).  Moreover, we  are not limited to the

             district  court's reasoning.   Instead,  we may  "affirm the

             entry of  summary judgment  on any  independently sufficient

             ground made  manifest by the  record."  Quintero  v. Aponte-
                                                     ________     _______

             Roque,  No. 92-1227, slip op. at 3-4 (1st Cir. September 10,
             _____

             1992) (quoting United States v. One Parcel of Real Property,
                            _____________    ___________________________

             960 F.2d 200, 204 (1st Cir. 1992)).

II.  Law to be Applied
             ______________________

5

As an initial matter, we note  that there has been

             some  confusion between the parties to this appeal as to the

             applicable  law.   Before  the district  court, the  parties

             litigated primarily  on the basis of  Puerto Rico commercial

             law, but  made passing  references to federal  statutory and

             common law.  As  a result, the district court's  holding was

             anchored predominantly in Puerto Rico law. 

                       The FDIC now urges the application of federal law.

             We have previously stated that federal law applies where, as

             here,  the FDIC sues in its corporate capacity to collect on

             obligations acquired from the receiver of an insolvent bank.

             See,  e.g., Federal  Deposit Ins.  Corp. v.  Municipality of
             ___   ____  ____________________________     _______________

             Ponce, 904 F.2d  740, 745 (1st  Cir. 1990); Federal  Deposit
             _____                                       ________________

             Ins. Corp. v.  P.L.M. Int'l,  Inc., 834 F.2d  248, 252  (1st
             __________     ___________________

             Cir. 1987).   Yet, we have also  noted an exception to  this

             rule  where  the federal  question  is  not  raised  by  the

             parties.    Municipality  of  Ponce,  904  F.2d   at  745.  
                         _______________________

             Moreover, we  ordinarily will  not entertain  arguments made

             for  the first time on  appeal.  See  Buenrostro v. Collazo,
                                              ___  __________    _______

             No.  91-2337, slip  op.  at 9  (1st  Cir. August  26,  1992)

             (citing  Clauson  v. Smith,  823  F.2d  660, 666  (1st  Cir.
                      _______     _____

             1987)).  

6

Here, however,  the issue  need  not be  addressed

             because,  in each  regime, the  analysis is  essentially the

             same.    Under  both  Puerto   Rico  law  and  the  hornbook

             principles that  necessarily would  inform federal  law, the

             FDIC,  as possessor of  a bearer note,  is a holder  of that

             note.    See  P.R.  Laws  Ann.  tit.  19,     381(8)  (1989)
                      ___

             ("`Holder'  means the payee or  indorsee of a  bill or note,

             who is in possession of it, or the bearer thereof."); U.C.C.

                1-201(20) (1989)  ("`Holder'  means a  person  who is  in

             possession  of . . . an instrument  . . . issued or indorsed

             to .  . . bearer or  in blank.").  A holder  of a negotiable

             instrument  is entitled  to enforce  payment in  his/her own

             name.   P.R. Laws  Ann.  tit. 19,    91  ("The  holder of  a

             negotiable instrument may sue thereon in his[/her] own name.

             .  . .");  U.C.C.    3-301  ("The  holder of  an  instrument

             whether or not [s/]he is the owner may . . . enforce payment

             in his[/her] own name.").   A holder in  due course has  all

             the rights of a holder.   See generally P.R. Laws Ann.  tit.
                                       ___ _________

             19,   92; U.C.C.   3-302(1).  S/he also takes the instrument

             free from  most claims on it  and defenses to it.   See P.R.
                                                                 ___

             Laws Ann. tit.  19,   97 ("A holder in  due course holds the

             instrument free  from any defect of title  of prior parties,

             and  free from  defenses  available to  prior parties  among

7

themselves. . .  ."); U.C.C.   3-305 ("To the  extent that a

             holder is a holder in due course [s/]he takes the instrument

             free from  (1) all claims to  it on the part  of any person;

             and (2) all  defenses of  any party to  the instrument  with

             whom  the holder  has not  dealt except  [certain delineated

             "real" defenses  not  applicable to  the  instant  case].").

             Finally, the  maker of a negotiable  instrument engages that

             s/he will pay the  instrument according to its tenor  at the

             time of his/her  engagement.  See P.R. Laws Ann.  tit. 19,  
                                           ___

             111; U.C.C.   3-413(1).

III.  Santa Barbara's Arguments
             _______________________________

                       In its  effort to  counter  such authority,  Santa

             Barbara  makes five arguments:   (1) the FDIC  had notice of

             infirmities in the note; (2)  the FDIC tacitly consented  to

             recognize International, and not Santa Barbara, as liable on

             the  note;  (3)  the note  was  negotiated  to  the FDIC  an

             unreasonable length of  time after it was made;  (4) because

             the note was not delivered to the FDIC by Santa Barbara, the

             FDIC cannot enforce  it against Santa  Barbara; and (5)  the

             note  was paid  by  International.   Though Santa  Barbara's

8

brief  is not entirely clear  on this point,  the first four

             arguments  appear directed towards  challenging the district

             court's  ruling that  the FDIC  is a  holder in  due course,

             while the fifth seems  to be asserted as a defense  to Santa

             Barbara's obligation as  the note's maker.   We address each

             argument in turn.

A. Notice of Infirmities
                       ________________________

                       Santa Barbara  is correct in asserting that notice

             of defenses or infirmities  in a note defeats holder  in due

             course status.   See P.R. Laws Ann. tit. 19,   92 ("A holder
                              ___

             in due course is a holder who has taken the instrument under

             the  following conditions:  . . .  that at  the time  it was

             negotiated  to  him[/her]  [s/]he   had  no  notice  of  any

             infirmity  in the instrument or  defect in the  title of the

             person negotiating it."); U.C.C.   3-302(1)(c) ("A holder in

             due  course  is a  holder who  takes  the instrument  .  . .

             without  notice that it is overdue or has been dishonored or

             of any defense  against or claim  to it on  the part of  any

             person.").  Santa  Barbara contends that the FDIC  must have

             been aware  of two facts  that would have  put it  on notice

             that  the  note  was  defective:    (1)  that  International

             simultaneously  possessed  the  note and  owned  the Bayamon

9

property which secured  payment of  the note;  and (2)  that

             Union only intended  to acquire a mortgage over  the Bayamon

             property, not the note  itself, in accepting International's

             pledge  on  behalf  of  World  in  1983.    Santa  Barbara's

             contention fails to withstand factual and legal scrutiny.

                       First,  Santa  Barbara  does  not  point   to  any

             evidence in  support of  its allegation  that the FDIC  knew

             that  International owned the Bayamon property and possessed

             the  note simultaneously.   The  Puerto Rico  Superior Court

             judgment and the note do not  themselves reflect this fact.2
                                           __________

             Moreover,  Santa Barbara  cannot seriously  assert that  the

             FDIC was under an obligation  to investigate beyond the face

             of these documents  when it acquired  the note from  Union.3

             As  such, Santa  Barbara's allegation  of notice  is without

             factual evidentiary support.  

                       Second, a  plain reading  of the 1983  Puerto Rico

             Superior Court judgment undercuts Santa  Barbara's assertion
                                 
             ____________________

             2Nowhere is it  argued that the  FDIC had before it  a title
             search or a deed to the Bayamon property, the only documents
             in the record that could have indicated the property's owner
             in 1983, when the FDIC purchased Santa Barbara's note.

             3Any such  obligation would undermine  Congress's desire  to
             promote and facilitate purchase and assumption transactions,
             wherein FDIC-corporate purchases assets  from FDIC-receiver,
             because these transactions must be completed in great haste.
             See Federal Deposit  Ins. Corp. v. 604  Columbus Ave. Realty
             ___ ___________________________    _________________________
             Trust, 968 F.2d 1332, 1349-50 (1st Cir. 1992). 
             _____

                                          10

regarding  Union's intentions  at that  time.   The judgment

             makes  clear  that  the  mortgage  would  serve  only  as  a

             guarantee to the  note and that Union would be the owner and

             holder of the  note.4  In  light of these  facts and in  the

             absence  of  other evidence,  there  is  no merit  to  Santa

             Barbara's  argument that the FDIC had  notice that Union was

             intending  to  acquire  only  a mortgage  over  the  Bayamon

             property, and not the note itself. 

                       Finally, even were the  FDIC to have had knowledge

             of such facts when  it acquired the note, Santa  Barbara has

             not  made  any  argument  that  this  knowledge  would  have

             constituted  notice of  an "infirmity  in the  instrument or

             defect in the title of the person negotiating it," P.R. Laws

             Ann. tit. 19,    92(4),  or notice that  the instrument  had
                                 
             ____________________

             4Specifically, the judgment provides:

                       In guarantee of  the obligations  listed
                       herein, [World] is bound to  [Union] for
                       the following:

                            a) Second mortgage for $90,000
                            in principal as guarantee to a
                                         __ ____________
                            Bearer  note  with 12%  yearly
                            interest due on demand. .  . .
                            To   establish  by   means  of
                            corresponding    clarification
                            document, that  [Union] is the
                                            ______________
                            owner   and  holder   of  said
                            ______________________________
                            mortgage note.
                            _____________

             (emphasis supplied).

                                          11

been "dishonored" or  was subject to  a "defense against  or

             claim to  it. . . ." U.C.C.   3-302(1)(c).  Put another way,

             Santa Barbara  has failed to assert,  let alone demonstrate,

             that knowledge  of these  facts  would deprive  the FDIC  of

             holder  in due  course status.   We  have repeatedly  warned

             litigants that "issues adverted  to in a perfunctory manner,

             unaccompanied by some effort at developed argumentation, are

             deemed waived."  See, e.g., Elgabri v. Lekas, 964 F.2d 1255,
                              ___  ____  _______    _____

             1261 (1st  Cir. 1992) (quoting United States v. Zannino, 895
                                            _____________    _______

             F.2d  1, 17 (1st Cir.), cert. denied, 494 U.S. 1082 (1990)).
                                     _____ ______

             Accordingly,   Santa   Barbara's  "notice   of  infirmities"

             argument must fail.

B. Tacit Consent
                       ________________

                       Santa  Barbara  next  argues  that  Union  tacitly

             consented   to  International's   1977  assumption   of  the

             obligation  on the note,  and that such  consent, when taken

             together  with   the  cancellation   of  the   note  through

             International's alleged payment, discharged  its obligation.

             We disagree.

                       We have  previously recognized that,  under Puerto

             Rico  law, a  lender's  tacit  consent  to a  third  party's

             assumption of liability on a  note and acceptance of payment

12

combine  to cancel the note and preclude the FDIC from later

             recovering  thereon.   See  Federal  Deposit  Ins. Corp.  v.
                                    ___  ____________________________

             Bracero  & Rivera,  Inc.,  895 F.2d  824,  826-28 (1st  Cir.
             ________________________

             1990).   However,  the situation in  Bracero &  Rivera bears
                                                  _________________

             little resemblance to the facts in the case before us.  

                       Bracero  & Rivera also  involved a  facially valid
                       _________________

             note, payable to bearer on  demand, found in the files of  a

             failed  bank.    However,  prior to  failure,  the  bank had

             accepted  payment   from  a   third  party  on   the  debt.5

             Additionally, the bank issued  a credit voucher in  favor of

             the  defendant  which  contained  the   following  notation:

             "cancellation of [defendant's] loan 25-85-70-9."   Notice of

             this  cancellation  was  in  the FDIC's  possession  at  all

             relevant times.  See generally id. at 825-29.  
                              ___ _________ ___

                       The district  court in  Bracero  & Rivera  entered
                                               _________________

             judgment  in favor  of defendant.   In  so doing,  the court

             ruled  that,  under  Puerto  Rico law,  the  lender's  tacit

             consent to  the third party's assumption of liability on the
                                 
             ____________________

             5The  note in Bracero &  Rivera was originally  secured by a
                           _________________
             mortgage  on a housing development.   The maker  of the note
             sold  the  housing  development  to  the  third  party,  who
             retained enough money from the purchase price to pay off the
             maker's note.  Upon  making an additional loan to  the third
             party, the bank retained  from the loan enough money  to pay
             the note.  Thus,  the bank accepted payment on the note, and
             the third  party owed the bank a new  debt.  See id. at 825-
                                                          ___ ___
             26.

                                          13

note  and acceptance of payment discharged the note.  Id. at
                                                                   ___

             826.    We  affirmed,  noting  that  the  FDIC's  notice  of

             cancellation would  preclude it from recovering  as a holder

             in due course.  Id. at 829.
                             ___

                       In the  case at bar,  however, there is  no record

             evidence,  such as  the  cancellation voucher  in Bracero  &
                                                               __________

             Rivera, indicating that  Union, at the time that it acquired
             ______

             the note as security for its judgment against World, tacitly

             consented to  relieve Santa Barbara of its obligation on the

             note and look solely to International  for payment.  Despite

             Santa Barbara's argument  to the contrary, we simply  do not

             see how Union's acceptance of the note with knowledge of the

             1977 deed agreement between International and Santa Barbara,

             if Union  had such knowledge,6  implies the existence  of an

             intent  on   Union's  part   to  tacitly  consent   to  hold

             International  liable on  the  note.   Furthermore, even  if

             Union  did  so  intend,  the record  is  devoid  of evidence

             indicating that the FDIC  had notice of this intent.   Thus,

             the doctrine of tacit  consent, if applicable to  this case,

             would not deprive the FDIC of holder in due course status.

____________________

             6The record does  not indicate that Union  actually had this
             knowledge.

                                          14

C. Unreasonable Time
                       ____________________

                       Relying on  P.R. Laws  Ann. tit. 19,    93,  Santa

             Barbara next argues  that neither  Union nor the  FDIC is  a

             holder in  due course because the  instrument was negotiated

             to Union and the  FDIC an unreasonable length of  time after

             its  issuance.7  Santa Barbara raised  this argument for the

             first time in  its motion requesting that the district court

             alter or amend its judgment.  See Fed. R. Civ. P. 59(e).  
                                           ___

                       Rule 59(e) motions  are "aimed at reconsideration,
                                                         __

             not initial consideration."  Harley-Davidson Motor Co., Inc.
                                          _______________________________

             v. Bank  of New England, 897  F.2d 611, 616  (1st Cir. 1990)
                ____________________

             (citing White v. New Hampshire Dept. of Employment Sec., 455
                     _____    ______________________________________

             U.S. 445, 451 (1982)) (emphasis in original).  Thus, parties

             should not  use them  to "raise  arguments which  could, and

             should,  have  been  made  before  judgment  issued."    Id.
                                                                      ___

             (quoting Federal Deposit Ins. Corp. v. Meyer, 781 F.2d 1260,
                      __________________________    _____

             1268 (7th Cir. 1986)).  Motions under Rule 59(e) must either

             clearly establish  a manifest error  of law or  must present

____________________

             7P.R. Laws Ann. tit. 19,   93 states:

                       Where an instrument payable on demand is
                       negotiated  an  unreasonable  length  of
                       time after  its issue, the holder is not
                       deemed a holder in due course.

                                          15

newly discovered evidence.   Meyer, 781 F.2d at 1268.   They
                                          _____

             may not be used to argue a new legal theory.  Id.  
                                                           ___

                       Here, there was no  reason why Santa Barbara could

             not have  made its  "unreasonable time" argument  before the

             district  court  entered judgment.   Moreover,  the argument

             neither  reveals a manifest error of  law nor presents newly

             discovered evidence.  As a  result, we find no error in  the

             district  court's refusal  to  amend or  alter its  judgment

             based on this argument.

D. Improper Delivery
                       ____________________

                       Santa Barbara's improper delivery argument suffers

             a similar fate.  To the extent that Santa Barbara  made this

             argument at all before the district court, it did so only in

             a  most  perfunctory  manner.    It  is  well  settled  that

             arguments  made in  a  perfunctory manner  below are  deemed

             waived  on appeal.   See,  e.g., Buenrostro,  slip op.  at 9
                                  ___   ____  __________

             (citing McCoy v. Massachusetts Inst. of Technology, 950 F.2d
                     _____    _________________________________

             13, 22 (1st Cir.  1991), cert. denied, ___ U.S.  ___, 112 S.
                                      _____ ______

             Ct. 1939 (1992)).  We see  no reason to depart from ordinary

             practice under the present circumstances, and accordingly we

             treat the argument as waived.

16

E.  Payment
                       ___________

                       Having rejected Santa Barbara's challenges  to the

             district  court's finding that the  FDIC is a  holder in due

             course, we  need not  address Santa Barbara's  allegation of

             payment in an  extended manner.   The defense  that a  third

             party has paid  a previous  holder in order  to discharge  a

             note  is a personal defense.  See  P.R. Laws Ann. tit. 19,  
                                           ___

             97 ("A  holder in due course holds the instrument . . . free

             from  any   defenses  available   to  prior  parties   among

             themselves, and  may enforce  payment of the  instrument for

             the full amount thereof  against all parties thereon."); see
                                                                      ___

             also James J. White and Robert  S. Summers,  Handbook of the
             ____                                         _______________

             Law  Under the Uniform Commercial  Code,   14-9,  at 573 (2d
             _______________________________________

             ed.  1980)  (defenses  not  listed in  U.C.C.  3-305(2)  are

             personal defenses).   Personal defenses may  not be asserted

             against holders in due course.  See  P.R. Laws Ann. tit. 19,
                                             ___

                97; U.C.C.     3-305.    As  a  result,  Santa  Barbara's

             assertion  of  payment cannot  defeat  the  FDIC's right  to

             recover on the note.8

CONCLUSION
                                      CONCLUSION
                                      __________
                                 
             ____________________

             8While evidence of payment would not change our analysis, we
             note that there  was no  direct evidence of  payment in  the
             record before us.

                                          17

Because  we find each of Santa Barbara's arguments

meritless, we affirm the judgment of the district court.

                       Affirmed.
                       ________

18