Executive Leasing v. Banco Popular ( 1995 )


Menu:
  • 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


    -5- 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



    -7- 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








    -8- 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









    -10- 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



    -12- 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.







    -13- 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. _________





    -14- 14