USCA1 Opinion
March 29, 1994 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-2080
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER OF BANK OF NEW ENGLAND, N.A.,
Plaintiff, Appellee,
v.
PAUL J. CHISHOLM,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge]
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Before
Breyer, Chief Judge,
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Torruella and Boudin, Circuit Judges.
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Michael F. Gaffny on brief for Paul J. Chisholm.
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David C. Aisenberg, Williams & Grainger, Margaret A. Burnham,
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Kathleen C. Engel, and Burnham & Hines on brief for Federal Deposit
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Insurance Corporation.
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Per Curiam. Paul Chisholm appeals the district
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court's denial of his Rule 60(b) motion for relief from a
default judgment entered against him. We find that the
district court did not abuse its discretion in denying
Chisholm's motion. We therefore affirm its judgment.
I
On February 4, 1987, Chisholm signed a personal
guaranty of all present and future obligations of his
company, Sanborn Wood Products, to Guaranty Bank and Trust
Co. Guaranty later ceased operation, and Bank of New
England (BNE) assumed all of its rights and obligations. On
February 5, 1988, Sanborn took out a $500,000 loan from BNE,
which was repayable "On Demand." The note stated that the
loan was "secured by Loan and Security Agreements dated
March 5, 1987 and February 4, 1987 naming payee as secured
party under its former name, Guaranty Bank & Trust Company."
Chisholm signed the note on behalf of Sanborn.
On June 7, 1990, BNE demanded that Sanborn pay the
outstanding balance of the loan in full. Six days later,
BNE filed suit against Sanborn and Chisholm in Massachusetts
state court. While the action was pending, BNE failed, and
the FDIC became its receiver. FDIC was therefore
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substituted as plaintiff in the state court action, and it
removed the action to federal court.
The district court scheduled a trial date for
October 14, 1992, and rescheduled for July 6, 1993, at the
parties' request. Although the FDIC filed an "Assented To
Motion to Continue Trial," which requested another
continuance until September, the district court never ruled
on the motion. Accordingly, trial commenced on July 6,
1993. Chisholm did not appear, apparently in the mistaken
belief that the district court had rescheduled the trial for
September, and the court entered a default judgment against
him for the full amount claimed. In a margin order, the
district court denied Chisholm's later request for relief
from judgment. Chisholm now appeals that denial.
II
To obtain relief from a default judgment, Chisholm
must show "both a good reason for the default and the
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existence of a meritorious defense." United States v.
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Proceeds of Sale of 3,888 Pounds Atlantic Sea Scallops, 857
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F.2d 46, 48 (1st Cir. 1988) (emphasis added). Chisholm has
suggested two possible "meritorious defenses" that, he says,
warrant relief from the default judgment. First, he says
that the note was "orally modified" so that it was no longer
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payable "On Demand." Second, he says that his personal
guaranty applied only to obligations owed directly to
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Guaranty Bank and Trust, not to any successor in interest
such as BNE or the FDIC. We find that neither defense has
merit, and therefore that the default judgment need not be
set aside.
"Agreements" which tend to "diminish or defeat"
the FDIC's "interest" in "assets" acquired by it from failed
banking institutions are not enforceable against the FDIC,
unless those agreements are, among other things, "in
writing." 12 U.S.C. 1823(e)(1). This rule, along with
the common law doctrine of D'Oench, Duhme & Co. v. FDIC, 315
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U.S. 447 (1942), protects the FDIC against "secret
agreements" which might lead it to err in evaluating the
worth of assets it acquires from failed banking
institutions. See, e.g., Langley v. FDIC, 484 U.S. 86
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(1987); Timberland Design v. First Service Bank for Savings,
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932 F.2d 46 (1st Cir. 1991). Because the alleged "oral
agreement" modifying the note's payment terms obviously does
not meet the statute's requirements, it cannot be enforced
against the FDIC, so it does not provide a "meritorious
defense" to the FDIC's action.
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Chisholm's second argument focuses on the
guaranty's language. The guaranty says that it
"guarantee[s] to you [Guaranty Bank & Trust], your
successors and assigns, full and prompt payment at maturity
of all present and future obligations of the Borrower to
you, including all renewals and extensions thereof or
substitutions therefor." Chisholm argues that the guaranty
applies only to obligations which originally ran to Guaranty
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Bank & Trust itself, because the words "successors and
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assigns" appear in the "guarantees to you" clause but not
the "obligations of the Borrower to you" clause. That is,
he argues that because the loan at issue here came from BNE,
not from Guaranty Bank & Trust (which no longer existed at
the time), the guaranty does not apply.
We do not think this is a sensible reading of the
language. The obvious reading of the guaranty is that it
applies to all present and future obligations owed by
Sanborn to Guaranty or to Guaranty's successors and assigns.
The fact that the BNE note (signed by Chisholm) expressly
incorporated the guaranty, and described the guaranty as
running to "payee [BNE] . . . under its former name,
Guaranty Bank & Trust Company," supports this reading.
Chisholm has not pointed us to any authority for reading the
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guaranty in the hypertechnical manner he suggests, nor have
we found any. Moreover, Chisholm has suggested no good
reason why he would be willing to secure his company's
obligations to a particular bank, but would be unwilling to
secure obligations to that bank's successor in interest; at
the very least, if such a distinction were intended, we
should expect to find language that explicitly made that
distinction, rather than boilerplate language in a
preprinted guaranty form, the natural reading of which
suggests the opposite. We therefore find that Chisholm has
failed to present a "meritorious defense." That failure is
sufficient to preclude us from finding an abuse of
discretion in the district court's refusal to grant relief
from the default. 3,888 Pounds Atlantic Sea Scallops, 857
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F.2d at 48-49.
Affirmed.
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