977 F.2d 18 (1st Cir. 1992), 92-1344, F.D.I.C. v. Singh

Docket Nº:92-1344.
Citation:977 F.2d 18
Party Name:FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, Appellee, v. Pritam SINGH, et al., Defendants, Appellants.
Case Date:October 07, 1992
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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977 F.2d 18 (1st Cir. 1992)



Pritam SINGH, et al., Defendants, Appellants.

No. 92-1344.

United States Court of Appeals, First Circuit

October 7, 1992

Heard July 29, 1992.

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Elizabeth G. Stouder, with whom John S. Whitman, Richardson & Troubh, Allen J. Hrycay, and Reef, Jordan, Hrycay & Sears, Portland, Me., were on brief, for defendants, appellants.

Thomas A. Cox, with whom Mary Ann E. Rousseau and Friedman & Babcock, Portland, Me., were on brief, for plaintiff, appellee.

Before SELYA and STAHL, Circuit Judges, and SKINNER, [*] District Judge.

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SELYA, Circuit Judge.

In this case, the district court granted summary judgment on a guaranty in favor of the Federal Deposit Insurance Corporation (FDIC). 1 The guarantors appeal. We affirm the judgment below because, as a matter of law, the guaranty was free of ambiguity and the plaintiff was entitled to summary enforcement. See, e.g., Garside v. Osco Drug, Inc., 895 F.2d 46, 48-49 (1st Cir.1990) (appellate court may affirm a grant of summary judgment on any independently sufficient ground reflected in the record).


On December 23, 1985, Bandon Associates, a general partnership, executed and delivered a promissory note (the 1985 Note) in the principal amount of $1,050,000 to Patriot Bank, N.A. As collateral, Bandon gave the bank a mortgage on property it held in Maine. Both the 1985 Note and the mortgage deed were signed on Bandon's behalf by the four appellants as Bandon's sole general partners. The quartet also executed and delivered, on the same date, an unconditional guaranty of Bandon's obligations (the Guaranty). By the terms of that document, the signers "jointly and severally ... unconditionally guarantee[d]" all liabilities of Bandon Associates to Patriot Bank "now existing or hereafter arising, regardless of how they arise or by what agreement or instruments they may be evidenced...." The Guaranty did not refer specifically to the 1985 Note.

On April 6, 1987, Bandon entered into a written agreement (the Agreement) with Patriot Bank to revise the terms of the 1985 loan. The arrangement involved substituting a new note (the 1987 Note) for the old note. The 1987 Note was in the same face amount, but provided for a fixed interest rate, an amortization schedule, and a prepayment penalty. It was signed by the four appellants on Bandon's behalf and "individually." It also contained an assurance that the Bank would "look solely to its [c]ollateral for satisfaction of the [o]bligations of Borrower or under any documents or undertaking given as security herefor and not to the personal assets of any partner, General or Limited." At the same time, Bandon and Patriot jointly executed an emendatory instrument (the Amendment) which tied the security instruments into the 1987 Note, reaffirmed them, and stated that: "The Mortgage, the Assignment, the Guaranty, and the Financing Statement ... shall remain in full force and effect and all the terms thereof are hereby ratified and confirmed, by the parties hereto." Although Bandon and its principals were represented by counsel, the bank's lawyers were the chief architects of the documents.

Soon thereafter, Patriot Bank merged with Bank of New England (BNE). On January 6, 1991, the Comptroller of the Currency determined that BNE was insolvent and appointed the FDIC as receiver. The New Bank of New England (NBNE) was created, chartered, and duly designated as a bridge bank. The lender's rights material to the Patriot/Bandon transactions were assigned, in relatively rapid succession, from Patriot to BNE and, eventually, to NBNE.

Meanwhile, Bandon was unable to meet its payment obligations under the 1987 Note. On February 13, 1991, NBNE commenced a civil action to foreclose the mortgage in the United States District Court for the District of Maine. It simultaneously brought an action against the appellants, as individuals, alleging that each of them was liable under the Guaranty for Bandon's default. While the cases were pending, the FDIC dissolved NBNE and, as receiver, became the substitute plaintiff in both actions. 2

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In time, the district court granted the FDIC's dispositive motion in the guaranty action, invoking the D'Oench, Duhme doctrine, see D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 460, 62 S.Ct. 676, 680, 86 L.Ed. 956 (1942), and the statute that largely codifies the doctrine. 3 This doctrine defines the limited conditions under which agreements may validly diminish or defeat the FDIC's interest in an asset it acquires.


Appellants theorize that the non-recourse provision in the 1987 Note conflicts with both the Guaranty and the reaffirmation of the Guaranty; and that, under applicable law, the conflict should be resolved in favor of the 1987 Note. In their view, the judgment below should be reversed or, alternatively, vacated and the case remanded for trial regarding the effect of the non-recourse provision. 4

The yardstick by which we must measure the cogency of appellants' contentions is not in doubt. "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.' " Rivera-Muriente v. Agosto-Alicea, 959 F.2d 349, 351 (1st Cir.1992) (quoting Fed.R.Civ.P. 56(c)). When, as here, the district court has cranked up the machinery of Rule 56, and disposed of a case on that basis, appellate review is plenary. See Allen v. Adage, Inc., 967 F.2d 695, 699 (1st Cir.1992); Garside, 895 F.2d at 48.

Although a dispute over the meaning of a contract is often a dispute about a material fact, summary judgment is not necessarily foreclosed in such a situation. See Allen, 967 F.2d at 698. In some circumstances, "[t]he words of a contract may be so clear themselves that reasonable people could not differ over their meaning." Boston Five Cents Sav. Bank v. Secretary of Dep't of HUD, 768 F.2d 5, 8 (1st Cir.1985). This is such an instance: here, long-standing principles of Massachusetts contract law compel us to conclude that the non-recourse provision in the 1987 Note neither trumps the plain language of the Guaranty nor creates an ambiguity in the contract documents.


We begin by reviewing applicable state law. We then apply that law, explain how federal law is supportive of the result that we reach, and address appellants' remaining counter-arguments.


The instruments at issue here state that they are to be governed by, and construed in accordance with, the law of Massachusetts. Under Massachusetts law, when several writings evidence a single contract or comprise constituent parts of a single transaction, they will be read together. See Chelsea Indus., Inc. v. Florence, 358 Mass. 50, 260 N.E.2d 732, 735 (1970); see also Ucello v. Cosentino, 354 Mass. 48, 235 N.E.2d 44, 47 (1968) (holding that the parties' intent "must be gathered from a fair construction of the contract as a whole and not by special emphasis upon any one

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part"); Chase Commercial Corp. v. Owen, 32 Mass.App.Ct. 248, 588 N.E.2d 705, 707 (1992) (construing a Guaranty and contemporaneous loan and security agreements as part of one transaction and reading them together despite the fact that the Guaranty did not incorporate the other documents by reference).

"The question of whether a contract term is ambiguous is one of law for the judge." Allen, 967 F.2d at 698; accord Boston Five Cents Sav. Bank, 768 F.2d at 8; Jefferson Ins. Co. v. Holyoke, 23 Mass.App.Ct. 472, 503 N.E.2d 474, 476 n. 4, rev. denied, 399 Mass. 1104, 506 N.E.2d 146 (1987). A contract is not ambiguous simply because litigants disagree about its proper interpretation. See Papago Tribal Util. Auth. v. FERC, 723 F.2d 950, 955 (D.C.Cir.1983), cert. denied, 467 U.S. 1241, 104 S.Ct. 3511, 82 L.Ed.2d 820 (1984). Rather, a contract, or a set of documents which in the ensemble comprise a contract, is considered ambiguous only when the language "is reasonably prone to different interpretations." Fowler v. Boise Cascade Corp., 948 F.2d 49, 54 (1st Cir.1991). Stated another way, contract language which "is susceptible to differing, but nonetheless plausible, constructions ... is ambiguous." Allen, 967 F.2d at 700; see also Fashion House, Inc. v. K Mart Corp., 892 F.2d 1076, 1083 (1st Cir.1989).


Notwithstanding appellants' unremitting effort to overshadow the Guaranty by a single-minded focus on the 1987 Note's non-recourse provision, we discern no ambiguity here. The non-recourse provision unequivocally refers to the "Obligations of Borrower," namely, Bandon, and to the "personal assets of any partner." (Emphasis supplied.) The status of guarantor is obviously not implicated either by the word "Borrower" or by the allusion to "any partner." Any mention of, or reference to, the appellants qua guarantors is conspicuously lacking.

On the other hand, the language of the Guaranty is plain as a pikestaff. The signatories "unconditionally guarantee[d]" all liabilities "now existing or hereafter arising." Nothing in the document package indicates that the parties later intended to nullify the Guaranty or to restrict its sweep. Indeed, the parties took pains in the 1987 Amendment to reaffirm the Guaranty, thus leaving it in full flower. We believe that, by executing the Guaranty in addition to the partnership obligation, and by thereafter reaffirming it in conjunction with the loan rewrite, the appellants incurred liability in two separate and distinct capacities. Cf., e.g., Fred T. Ley & Co. v. Sagalyn, 302 Mass. 488, 19 N.E.2d 687, 689 (1939) (upholding personal liability of trustees who also signed guaranty of trust obligations as individuals).


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