USCA1 Opinion

August 26, 1993

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________

No. 93-1142
RESOLUTION TRUST CORPORATION,
Plaintiff, Appellee,
v.
JERALD R. FELDMAN, ET AL.,
Defendants, Appellants.
____________________
ERRATA SHEET
The opinion of the
amended as follows:

Court issued

on

August 20,

1993, is

On page 3, line 8, delete "in exchange" so that line reads

as follows: "exchanged its secured position for an unsecured".
_________

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 93-1142
RESOLUTION TRUST CORPORATION,
Plaintiff, Appellee,
v.
JERALD R. FELDMAN, ET AL.,
Defendants, Appellants.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
___________________
____________________

Before
Breyer, Chief Judge,
___________
Bownes, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________
____________________

J. Daniel Lindley with whom Peter Antell and Antell & Associa
_________________
_____________
_________________
were on brief for appellants.
James H. Wexler with whom Bennett H. Klein and Kotin, Crabtre
________________
_________________
______________
Strong were on brief for appellee.
______
____________________
August 20, 1993
____________________

BOUDIN, Circuit Judge.

_____________
brought by the Resolution

In this appeal we revisit a suit

Trust Company ("RTC"), as receiver

for a failed bank, to collect

on a promissory note given the

bank by
first

Quinaquisset Realty Trust ("Quinaquisset").

round we

affirmed the

district court's

In the

dismissal of

Quinaquisset's claims against a third party. Resolution Trust

________________
Corp.
_____

v. Driscoll,
________

985 F.2d

44

(1st Cir.

1993).

We now

affirm the district court's entry of summary judgment for the

RTC in its action

against Quinaquisset and its rejection

of

Quinaquisset's counterclaims against the RTC as receiver.

In
conveyed

October
to

1987,

Fox

Quinaquisset

Run Realty

certain condominium

property called Willowbend that

Quinaquisset

was

contributed land

given

these

to the

Trust

("Fox

Run")

rights

in a

Fox Run was then developing.

rights

development.

because

In

it

had

a contemporaneous

transaction, Fox Run then repurchased the condominium rights,

giving Quinaquisset

a $1.1

million promissory note

payment with the balance paid in cash.

Quinaquisset

borrowed $950,000

Bank ("Sentry"), giving it

note

which

is

the subject

individuals

signed

Quinaquisset

gave

Then, in April

from Sentry

1989,

Federal Savings

in exchange a $950,000 promissory

of

guaranty

Sentry

as part

the

this
of
$1.1

case.
this

A
new

million

Quinaquisset note as collateral for the new note.

-2-2-

number

of

note,

and

Fox

Run-

Fox Run was also indebted to

December 1986
Willowbend.
promissory

$13 million

In

return for

note

secured

loan

Willowbend

on

mortgage, but
1987

when

by

to

it

received

mortgage

on

repurchased by

then

why

condominium
Fox

back a

Willowbend.

subordinated as to 152 acres

Quinaquisset

the

finance

Sentry took

held

Quinaquisset released its mortgage

subsequently
explained

which

from Sentry

this loan,

Sentry's mortgage was initially

of

Sentry, having obtained in

Run.

Quinaquisset exchanged

first

in October

permit

No
its

one

rights
has

ever

secured position

exchanged its secured position for an unsecured claim of $1.1

_________
million against

Fox Run,

but the consequences

were evident

when Fox Run encountered financial difficulties.

In

August

payments to

1989,

Fox

Quinaquisset.

Run fell
The

into

next month,

payments on its $13 million debt to Sentry.

been using the
million note
the

payments received
to cover

$950,000 note.

Quinaquisset
note to

In

on

Fox Run

its

halted

Quinaquisset had

from Fox Run

on the

Quinaquisset's payments to

$1.1

Sentry on

When Fox Run ceased to pay Quinaquisset,

in turn fell

Sentry.

default

into default on

April 1990 Fox

its own $950,000

Run and Sentry

entered

into a settlement agreement under which Sentry received title

to

Willowbend in return for its promise not to proceed under

the

$13

million

note

against

two

individuals

guaranteed Fox Run's payments to Sentry.

who

had

Sentry retained its

-3-3-

mortgage on Willowbend, and

the property

was acquired

in a subsequent foreclosure sale

by the Evergreen

Holding Company

("Evergreen"), a wholly owned subsidiary of Sentry.

In May

1990, Sentry, seeking to recover

the $950,000
court

against

note from

the balance of

Quinaquisset, brought suit

Quinaquisset's

guarantors of

the note.

failed.

The

RTC stepped

Sentry's

pending

state

In

trustee

and

the

in state
individual

September 1990, Sentry

in as

its receiver,

court suit

against

itself

and removed

Quinaquisset's

trustee and the guarantors to federal district court.

In

the district

claims of its

court, Quinaquisset

own against

against Evergreen,

the RTC as

asserted numerous

successor to

and against Fox Run's trustees.

Sentry,
It also

asserted

that

rendered

the

Quinaquisset's

the

alleged

Quinaquisset-Sentry

note

these
null

for

entities
and

void.

were dismissed on a

On May 12, 1992,

separate judgment

Fed. R. Civ. P.

of

claims against Evergreen

motion for summary judgment.

court entered

misconduct

the district

Evergreen pursuant

54(b), and we affirmed on

to

appeal. Driscoll,
________

985 F.2d at 45.

Prior

to

its

entry

of judgment

for

Evergreen,

the

district court had on July 19, 1991, granted summary judgment

for

the RTC on its

found

all

but one

barred by the

claims against Quinaquisset.

of

Quinaquisset's

The court

counterclaims to

be

D'Oench, Duhme doctrine, codified as 12 U.S.C.

______________

-4-4-

1823(e),

which

understandings not

limits

claims

based

reflected in bank records.

Duhme Co. v. FDIC, 315 U.S. 447 (1942).

__________
____
against

on

agreements

or

See D'Oench,
___ ________

The remaining claim

the RTC was dismissed on other grounds and no appeal

has been

taken as to it.

court entered
Civ.

separate judgment for

P. 54(b).

the RTC

under Fed.

R.

The judgment included an award of attorneys'

fees and costs to RTC.

In

On November 13, 1992, the district

This appeal followed.

this court, Quinaquisset

challenges the

Rule 54(b)

certification, but instead of offering a coherent explanation

of why

judgment

for

the

RTC

should

Quinaquisset attacks the attorneys'

court

evidently

entered a

have

fee award.

separate

judgment

because all claims between Quinaquisset

resolved; the remaining
Fox

Run

trustees,

in

claims by
federal

been

delayed,

The district
for the

RTC

and the RTC had been

Quinaquisset against
court

solely

jurisdiction, were remanded to the state court.

on

the

pendant

We conclude

that the judgment is properly before us.1

Turning to

the merits,

Quinaquisset contends that

the

district court's reliance on D'Oench, Duhme to dispose of its

______________
claims

against the RTC as Sentry's receiver is mistaken.

says that

its claims against

the RTC

are not based

It

on any

____________________
1The certificate may have been unnecessary. Because the
district court added a paragraph to the judgment remanding
the claims against the Fox Run trustees to state court,
apparently the judgment disposed of all remaining claims in
the federal court suit.
-5-5-

agreement, hidden or
but rather

otherwise, between

on Sentry's

itself and

foreclosure and sale

Sentry,

of Willowbend.

Quinaquisset argues that Sentry's

settlement with Fox Run in

April

foreclosure

1990,

and its

subsequent

principal asset, Willowbend, destroyed

million Fox Run-Quinaquisset note
collateral

for

impairment

of

Quinaquisset's
collateral

in

on Fox

Run's

the value of the $1.1

deposited with the bank as

own

debt,

and

turn

served

to

that

this

discharge

Quinaquisset's debt to Sentry.

This legal theory represents a substantial winnowing
Quinaquisset's

claims made

Quinaquisset alleged
not

only at

in the

on

the foreclosure stage

part

There,

that Sentry engaged in wrongful conduct

with respect to Quinaquisset's

mortgage

district court.

of

but also

earlier, e.g.,
____

October 1987 discharge of its

Willowbend and

condominium permit rights to Fox Run.

its

reconveyance

privately promised to

of

Quinaquisset also made

claims, likely foreclosed by D'Oench, Duhme, suggesting

______________
Sentry had

of

assure that Fox

that

Run would

repay Quinaquisset the $1.1 million.

In fairness
difficult

among

to the
the

district court, it

welter

of

claims

to

has often
be

sure

been
what

Quinaquisset
does

was actually

the RTC

reading

help

arguing at

matters when

of D'Oench, Duhme so
______________

sovereign immunity

various points.

it

presses, as

broad that one

claims made

Nor

usual,

is reminded of

by independent nations.

In

-6-6-

any

event, whether to avoid D'Oench, Duhme or for some other

______________

reason,

Quinaquisset has now reduced its legal position to a

single claim (against the RTC) and defense (against the RTC's
own suit) based
million

note

on the impairment
given

Quinaquisset note.
Quinaquisset

to

to

Sentry
This

avoid

of the value of

the $1.1

as

for

collateral

streamlined position

application of

doctrine--although the RTC

the

legitimate

happened,
held the

theory

in relation
mortgage on

of

claims that the doctrine

liability.

to the

The

secure the

applies

the lack of

gist

foreclosure, was

Willowbend to

may help

D'Oench, Duhme
_______________

anyway--but the strategy raises its own problem:

any

the

of

what

that Sentry
$13 million

loan

to Fox

foreclosed
debt.2
still
to

the

This

Run stopped

mortgage and
left

These

against Sentry

paying, and

applied

the

note to

the

Sentry

proceeded with Sentry's prior suit

circumstances provide scant

or

Sentry then

proceeds to

Quinaquisset's $950,000

unpaid and the RTC

collect.

claim

Run, Fox

the

RTC,

or

basis for a

defense

against

collection of the unpaid note.

Quinaquisset relies
Massachusetts Commercial

centrally on

section 3-606

Code, Mass. Gen.

of the

L. ch. 106,

3-

____________________
2As noted, Sentry also received a conveyance of title
from Fox Run, and Sentry in exchange released two individuals
who had guaranteed payment of the Fox Run-Sentry note. This
conveyance was subject to the mortgage, but presumably
assured that Fox Run would not challenge the foreclosure.
-7-7-

606.

That section,

titled "Impairment

of Resource

Collateral," states in pertinent part:

(1) The holder [of an instrument] discharges any
party to the instrument to the extent that without
such party's consent the holder

or of

(a) without express reservation of rights

releases or agrees not to sue any person against
whom the party has to the knowledge of the holder a
right of recourse or agrees to suspend the right to
enforce against such person the instrument or
collateral or otherwise discharges such person,
except that failure or delay in effecting any
required
presentment,
protest, or
notice of
dishonor with respect to any such person does not
discharge
any party as
to whom presentment,
protest, or notice of dishonor is effective or
unnecessary; or
(b) unjustifiably impairs any collateral for
the instrument given by or on behalf of the party
or any person against whom he has a right of
recourse.
Although invoked by Quinaquisset, subsection (1)(a) does
not by any

stretch of

the imagination apply

in this

With respect to the Quinaquisset-Sentry note--the

case.

subject of

this suit--Sentry never purported to release anyone from, nor

promised

not to

sue

releases

issued

by

Quinaquisset-Sentry

anyone under,
Sentry
note:

this

had

nothing

they

were

note.

The

only

to

with

the

of

the

do

releases

individual guarantors of Fox Run's debt to Sentry, a debt for

which Quinaquisset

was not responsible since it

was never a

party to nor a guarantor of the Fox Run-Sentry note.

Turning to
Sentry

subsection (1)(b), Quinaquisset

divested Fox

Run of

Willowbend by

-8-8-

the

argues that
transfer of

title
This

from Fox
in

Run

turn,

followed by

says

principal asset

the mortgage

Quinaquisset,

was no

meant

although somewhat misleading.3

in some

sense, Sentry's

for the instrument,"

Run-Quinaquisset

note

that

longer available to

back up Fox Run's debt to Quinaquisset.

It might also

if collateral

Quinaquisset-Sentry note and that

held

Run's

quite true,
be said that,

the "collateral

is taken to

Sentry

Fox

Quinaquisset to

This is

actions "impaired"

which

foreclosure.

to

be the

Fox

secure

the

latter note is called "the

instrument."
But

subsection (1)(b)
and

Quinaquisset does

without a shred of authority,

unjustifiable for

Sentry to foreclose on

debt.

That

think

it

absurd

impairment be

"unjustifiabl[e]"

it held the mortgage

we

requires that the

to

as

that it was

property for which

when a default occurred on

is just what

argue,

security is there

for.

the secured
The

fact

that this security was an asset of a party, Fox Run, who also
had a debt to
worse off by

Quinaquisset meant that Quinaquisset was

the foreclosure.

That is

the normal fate

made
of

unsecured creditors when the bankrupt's only asset is already

pledged.

____________________

3It is
asset, even
a mortgage
larger than

misleading because Willowbend was not much of an

in Fox Run's hands, so long as it was subject to
to secure a defaulted debt apparently as large or
the value of Willowbend.
-9-9-

Quinaquisset might

have been

better off if

Sentry had

pursued Fox Run's guarantors instead of looking to Willowbend

to

satisfy Fox Run's debt, but the guarantees were to Sentry

and the mortgage ran

its

claims

to Sentry.

against the

Sentry's decision

Fox Run

trouble-free sale of the

guarantors

Quinaquisset's dilemma; if

Fox Run is illusory, it

in favor

of a

property was an entirely reasonable

choice which was Sentry's to make.

for

to forgo

Sentry is not responsible

Quinaquisset's claim against

has no one but itself (and

possibly

Fox Run) to blame.

Since
action or

Quinaquisset has failed

defense against

thus, against

to set forth

Sentry under section

the RTC as receiver), we

court on that ground.

a cause of
3-606 (and,

sustain the district

See Doe v. Anrig, 728 F.2d 30, 32 (1st

___ ___
_____

Cir. 1984) (court may affirm on a ground not relied on by the

district
other

court).

We need

arguments as to

Other versions of
in the district
grounds
been

not address

why section

the

RTC's numerous

3-606 should

Quinaquisset's claims against

court may

properly have

not apply.
Sentry made

been dismissed

on

of D'Oench, Duhme, but since these versions have not

______________

argued in this court,

we have no

occasion to consider

them.4
____________________
4Quinaquisset also complains that Sentry, and then the
RTC, declined to surrender the Fox Run-Quinaquisset note
after the foreclosure so that Quinaquisset could pursue its
rights under the note.
But (assuming the note still had
value after the foreclosure), the note remained security for
-10-10-

The

final

attorneys' fees
supporting

issue

is

the

to the RTC.

Quinaquisset's

district

court's

award

of

Under the terms of the guaranty

note

to Sentry,

the

individual

guarantors agreed not only to guarantee the Quinaquisset debt

but to pay all
"in

costs and attorneys' fees incurred

connection with

rights under, this

the

enforcement of

Guaranty."

. .

by Sentry
[Sentry's]

The district court

awarded

the

RTC $79,374 in legal

and it

held that the

fees for the

district court suit,

guarantors were jointly

and severally

liable for this amount.

Quinaquisset
attributable to

objects

to

the

of

the

award

of the litigation.

It

argues that the claims against Evergreen were not within

the

scope of the
in

the Evergreen phase

portion

guaranty and that the request for

any event

untimely because

separate judgment

in favor

scope issue first.

guaranty,

On

our review

anything

other

extends

to "all"

it was

is plenary;

than the

made well

of Evergreen.

the issue of

language

costs and

such fees is
after the

We consider

the

interpretation of

the

neither
of

attorneys'

side relies

the guaranty,
fees of

on

which

Sentry "in

connection with" the enforcement of Sentry's rights under the

guaranty.

____________________
Quinaquisset's debt to Sentry; Sentry says, as one might
expect, that the conditions for returning the note had not
been satisfied; and Quinaquisset offers no reply.
-11-11-

Although
collect

this

against

suit

the

began

with

Sentry's

Quinaquisset guarantors,

then asserted separate

efforts

Quinaquisset

third-party claims against Evergreen.

The only colorable claim against Evergreen was an attempt

undo

the

foreclosure

of Sentry's

Driscoll, 985 F.2d at 47.

________
of

a stretch of the

mortgage

to

on Willowbend.

We agree that it might be too much

"in connection with"

this phase of the litigation--if

Evergreen's

to

language to treat

there were nothing more

involvement--as any part

of the

to

enforcement of

Sentry's rights under the Quinaquisset-Sentry note.

But there was

more to Evergreen's involvement.

answer to Sentry's complaint

In the

Quinaquisset asserted that

the

conduct of Sentry's subsidiary or affiliate, i.e., Evergreen,

____
was

a defense to Sentry's suit against the guarantors on the

Quinaquisset-Sentry

note; and

against Evergreen,

Quinaquisset

various entities
void.

in the

third-party complaint

said that

the

including Evergreen made the

conduct

of

note null and

While this claim or defense as to Evergreen evaporated

under scrutiny, the allegations made it essential for the RTC

to defend Evergreen

as part of Sentry's own

collection suit

against the guarantors.

As for timeliness,
decision

of this

court,

Employment Security,
___________________

Quinaquisset's objection rests on

White v.
_____

629 F.2d 697

New Hampshire Dep't of

________________________
(1st Cir. 1980).

There,

this

court held that a

motion for attorneys'

fees under 42

-12-12-

U.S.C.

1988 came too late when made over

entry of

apparently

final judgment
ending

adopting

active

issue.

455 U.S.

a consent

litigation

Quinaquisset fails to mention

over a decade ago by

four months after

in

decree
the

untimeliness here even under

case.

that the decision was reversed

the Supreme Court on the very

445 (1982).

and

In any

point at

event, there

was no

our original decision in White,

_____

so the objection is doubly without merit.

Attorneys' fees were not sought until after the separate
judgment in favor
claim
of

of Evergreen but

to attorneys' fees.

Sentry, now

the

attorneys' fees for

Evergreen's actions,

RTC as

Evergreen itself had

no

Rather, the guaranty ran in favor

receiver.

all its work,

The RTC

did

including the defense

before a final judgment

seek
of

was entered in

its favor.
Lastly, we

affirm

the district

court's decision

that

each

guarantor

amount

is

individually

of attorneys'

fees.

responsible

Quinaquisset

for

the full

argues that

the

attorneys' fee should have been apportioned among guarantors,

just as

liability for

the underlying debt

was apportioned;

the guaranty made each guarantor liable for only $150,000 (or
$75,000 in a few
provided

cases) of the underlying $950,000

in a schedule attached to the guarantee.

answer is that liability for costs and attorneys'

on a

different

provision

of the

guaranty

that

debt, as
The short
fees rests
made

the

-13-13-

"Guarantors"

liable

for

such

costs

and

fees

without

limitation.
A promise cast in these terms normally makes each person
liable for
as joint,
(1951).
joint
and

the full sum, whether the

several, or

both.

liability is described

A. Corbin, Contracts
_________

Distinctions among those concepts

and several) relate to

928

(joint, several,

other matters, such as joinder

release, not to the amount of

liability.

The amount of

liability can be contractually limited by specifying that the

___
promisors
supra,
_____
was

are

liable

only

925, at 703-04, but

attached to

the

for

specific

amounts, Corbin,
______

in this case no such limitation

promise to

pay

collection costs

attorneys' fees.
The judgment of the district court is affirmed.
________

-14-14-

and