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USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-2288
FEDERAL DEPOSIT INSURANCE CORPORATION,
Plaintiff, Appellee,
v.
TORREFACCION CAFE CIALITOS, INC., ET AL.,
Defendants, Appellants.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Carmen Consuelo Cerezo, U.S. District Judge] ___________________
____________________
Before
Boudin, Circuit Judge, _____________
Campbell, Senior Circuit Judge, ____________________
and Schwarzer*, Senior District Judge. _____________________
____________________
Gilberto Mayo-Pagan with whom Mayo & Mayo was on brief for ____________________ _____________
appellants.
Daniel Glenn Lonergan , Counsel, with whom Ann DuRoss, _________________________ ___________
Assistant General Counsel, Colleen B. Bombardier, Senior Counsel, _______________________
Federal Deposit Insurance Corportion, and Jose R. Garcia Perez, ______________________________________ ________________________
Gonzalez, Bennazar, Garcia-Arregui & Fullana, were on brief for _______________________________________________
appellees.
____________________
August 15, 1995
____________________
____________________
*Of the Northern District of California, sitting by designation.
CAMPBELL, Senior Circuit Judge. The Federal _______________________
Deposit Insurance Corporation ("FDIC") seeks to recover funds
under several promissory notes once held by Girod Trust
Company ("GTC"), a failed Puerto Rico bank. The defendants
are the debtor, co-debtor, sureties, and guarantors of those
notes. The district court denied defendants' motion for
partial summary judgment and granted the FDIC's motion for
summary judgment. Defendants now appeal, arguing that the
district court erred in holding that the FDIC's claims were
not barred by the statute of limitations. We affirm in part
and reverse in part.
I.
The facts are undisputed. The defendants in this
case are: (1) Torrefaccion Cafe Cialitos ("TCC"), a Puerto
Rico company that processes and distributes coffee; (2) Pedro
Maldonado-Rivera (referred to by the district court as
"Maldonado I"), the president of TCC; (3) Daisy Ramirez de
Arellano ("Ramirez"), Maldonado I's wife and an officer of
TCC; (4) the legal conjugal partnership formed by Maldonado I
and Ramirez; and (5) Pedro Maldonado-Ramirez ("Maldonado
II"), TCC's vice president. TCC is the debtor for the loan
transactions that are at the center of this case. The
remaining defendants are the co-debtors, sureties, and
guarantors of those loans.
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In this suit, the FDIC seeks to collect the
principal and interest due from the following three loan
transactions:
1. 1977 Loan Transaction --- On May 27, 1977, ______________________
Maldonado I (personally and as president of TCC) and Ramirez
(personally) executed a loan agreement in favor of Banco
Financiero de Ahorro de Ponce, under which Banco Financiero
agreed to lend TCC $230,000. To evidence the loan, Maldonado
I (personally and as president of TCC) executed two
promissory notes: Note I, for $70,000, due on May 30, 1992,
and Note II, for $160,000, due on May 30, 1984. To further
secure payment of the loan, and any other TCC debt, TCC
executed a pledge agreement delivering three bearer mortgage
notes and a chattel mortgage. Maldonado I and Ramirez also
signed personal guaranties for the loan. The Farmers Home
Administration guaranteed 90% of the loan. GTC subsequently
entered into an agreement to purchase the remaining 10% of
the loan, should TCC default for a term longer than three
consecutive months. TCC defaulted on the loan, and GTC
purchased the loan on January 10, 1979.
2. 1979 Loan Transaction --- On March 5, 1979, ______________________
TCC executed a loan agreement in favor of GTC, under which
GTC loaned TCC $110,000. To evidence the loan, Maldonado I
(as president of TCC) executed two promissory notes: Note
III, for $35,000 and Note IV, for $75,000. Final payment on
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Note III was due March 5, 1986; final payment for Note IV was
due March 5, 1981. To secure payment of the loan, Maldonado
I (as president of TCC) executed a pledge agreement
delivering one bearer mortgage note. Later, to further
secure the loan, Maldonado (personally and as president of
TCC) and Ramirez (personally) executed a second pledge
agreement delivering another bearer mortgage note. Maldonado
I and Ramirez also signed personal guaranties for the loan.
3. 1981 Line of Credit --- On April 3, 1981, _____________________
Maldonados I and II (personally, and as TCC's president and
vice president) executed an open-end credit agreement with
GTC, under which GTC extended to TCC a line of credit of up
to $250,000, to be disbursed as cash advances or credits to
its checking account. Maldonados I and II executed a
continuing guaranty without collateral, jointly and severally
guaranteeing to the bank the punctual payment of TCC's debts.
Under the line of credit, sixteen promissory notes were
executed in 1981 and 1982, with payment due throughout 1982.
On July 31, 1984, TCC petitioned for bankruptcy
under chapter 11. In the petition, GTC was listed among
TCC's creditors. On August 16, 1984, GTC was declared
insolvent, and the FDIC was appointed its receiver, acquiring
the assets giving rise to the claims in this case. On April
11, 1986, the TCC bankruptcy case was dismissed. On May 10,
1991, the FDIC brought this action to collect on the
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promissory notes it had acquired from GTC. TCC moved for
summary judgment, arguing that the limitations period for
collection on the promissory notes had expired. The FDIC
opposed the motion and filed its own motion for summary
judgment, which the district court granted.
II.
Under Puerto Rico law, actions to collect on
commercial promissory notes are subject to a limitations
period of three years from the note's date of maturity. P.R.
Laws Ann. tit. 10, 1908. The running of this limitations
period, however, is interrupted "by suit or any judicial
proceeding brought against the debtor," P.R. Laws Ann. tit.
10, 1903, including bankruptcy proceedings. See FDIC v. ___ ____
Barrera, 595 F. Supp. 894, 901 (D. P.R. 1984). Puerto Rico _______
law further provides that interruption of the limitations
period "in joint obligations equally benefits or injures all
the creditors or debtors," P.R. Laws Ann. tit. 31, 5304,
and an interruption "against the principal debtor by suit for
debt shall also lie against his surety." P.R. Laws Ann. tit.
31, 5305.
Federal law establishes an additional six-year
limitations period for suits brought by the FDIC to collect
on assets it acquires as receiver of a failed bank. 12
U.S.C. 1821 (d)(14)(A) (1988 & Supp. 1995) ("FIRREA").
Thus, if the state limitations period has not yet run when
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the FDIC steps in, the federal limitations period will apply.
The period begins to run upon appointment of the FDIC as
receiver or accrual of the action, whichever is later. 12
U.S.C. 1821 (d)(14)(B). The federal limitations period
does not, however, operate to extend claims that have already
lapsed under the state limitations period before the FDIC has
acquired them. See, e.g., Barrera, 595 F. Supp. at 898. ___ ____ _______
Applying these various statutory provisions to this
case, the district court held that the FDIC's claims, based
on the three loan transactions, were all timely filed. The
court found that the three-year limitations period of 1908
applied to the three loans, commencing on the maturity date
of each loan: May 30, 1992 for the 1977 loan; March 5, 1986
for the 1979 loan; throughout 1982 for the 1981 line of
credit. In calculating the maturity dates of the loans, the
court looked to the date when the final payment was due on
each loan transaction as a whole, not to the individual
maturity dates of the underlying promissory notes. For
example, although Note IV of the 1979 loan had a maturity
date of March 5, 1981, the district court considered the note
part of a single loan transaction, with an overall maturity
date of March 5, 1986.1
____________________
1. With respect to Note IV, the district court
alternatively found that, even if the later maturity date did
not control and the claim based on Note IV was therefore
untimely (since the bankruptcy proceeding began more than
three years later), it was revived through TCC's listing of
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The court then found that TCC's bankruptcy petition
was a "judicial proceeding" under 1903, and that the
limitations periods for the claims against TCC on all three
loans were tolled as of July 1984. The court further found,
pursuant to 5304 and 5305, that the tolling also applied
for suits against TCC's co-debtors, guarantors, and sureties.
Finally, the court found that, once the FDIC was appointed
receiver in August 1984, the FIRREA's six-year limitations
period came into effect, since the claims had not yet lapsed.
Under 12 U.S.C. 1821, the court held, FIRREA's limitations
period began to run in April 1986 at the earliest, when TCC
emerged from bankruptcy and the FDIC's claims accrued. As
the suit was filed within six years, in May of 1991, it was
timely. III.
On appeal, defendants argue that the district court
erred in holding: (1) that the bankruptcy proceeding tolled
the running of the limitations period for claims against the
co-debtors, sureties, and guarantors arising from Note II and
the notes underlying the 1981 line of credit; and (2) that
the claims against all defendants based on Note IV of the
1979 loan transaction were timely filed. Defendants state
that they do not appeal from the district court's decision
regarding the claims based on Note I and Note III. As this
____________________
the claim in the bankruptcy filing. P.R. Laws Ann. tit. 10,
1903.
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is an appeal from a summary judgment, we review the district
court's decision de novo. See Pagano v. Frank, 983 F.2d 343, _______ ___ ______ _____
347 (1st Cir. 1993). Thus, we will affirm a grant of summary
judgment if there are no genuine issues of material fact and
the moving party is entitled to judgment as a matter of law.
Fed R. Civ. P. 56(c).
A. Tolling of Limitations Period _____________________________
Defendants argue first that, although the
bankruptcy proceeding may have tolled the limitations period
for suits against the debtor TCC, it did not toll the statute
of limitations for suits against co-debtors, guarantors, and
sureties as well. This is so, defendants argue, because the
automatic stay provision of the federal bankruptcy code,
found in 11 U.S.C. 362, preempts 5304 and 5305 of Puerto
Rico's commercial code. Defendants argue that, under 11
U.S.C. 362, a bankruptcy proceeding automatically stays,
and therefore tolls the statute of limitations for, actions
against debtors but not against co-debtors, guarantors, or
sureties. See Austin v. Unarco Indus., Inc., 705 F.2d 1, 4-5 ___ ______ ___________________
(1st Cir.), cert. dismissed, 463 U.S. 1247 (1983). To the _______________
extent they toll the limitations period for suits against co-
debtors, guarantors, and sureties, defendants argue, 5304
and 5305 conflict with the bankruptcy code and are thus
preempted.
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If 5304 and 5305 are preempted, defendants
argue, then the claims against co-debtors, guarantors, and
sureties based on Note II2 and the promissory notes
underlying the 1981 letter of credit are untimely. For
example, the promissory notes underlying the 1981 line of
credit all had maturity dates in 1982. The FDIC acquired the
notes in August of 1984, before the three-year limitations
period had lapsed. However, if the limitations period for
suits against the co-debtors, guarantors, and sureties was
not tolled by the bankruptcy proceedings, then the six-year
FIRREA limitations period began running in August of 1984,
when the FDIC acquired the assets, not April of 1986, when
TCC emerged from bankruptcy. As the claims against the co-
debtors, guarantors, and sureties were filed more than six
years later in 1991, the claims would be untimely.
We find defendants' preemption argument to be
without merit. The provisions of the federal bankruptcy code
preempt only those state laws that are in conflict with
federal law. See Stellwagen v. Clum, 245 U.S. 605, 613 ___ __________ ____
(1918). True, 362 automatically stays only suits filed
against debtors and not suits against that debtor's co-
debtors, guarantors, or sureties. Austin, 705 F.2d at 4-5. ______
____________________
2. Although defendants do not explicitly refer to Note II
in their argument, the argument based on the 1981 promissory
notes is equally applicable to Note II. We consider the
argument as applied to Note II, since the result is, in any
event, the same.
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But this does not indicate an inconsistency with 5304 and
5305. Nothing in the decisions construing 362 to stay only
suits against debtors implies that 362 precludes states _________
from themselves staying suits against co-debtors, guarantors,
and sureties. These decisions hold only that 362 does not ________
itself stay, nor require the staying of, such actions. See ___________ ___
Austin, 705 F.2d at 5 (recognizing that circumstances may, in ______
some cases, warrant a stay against co-debtors as well).
Furthermore, these cases deal with stays, not limitations _____
periods; thus, even if a creditor may proceed against co-
debtors, guarantors, or sureties during the pendency of a
bankruptcy proceeding, nothing bars a state from extending
the limitations period for such suits under state law.3 ___________________
Puerto Rico is still free to extend the limitations period,
under its own laws, for actions against co-debtors, sureties,
and guarantors, as it has done under 5304 and 5305.
There is no conflict between such an extension and
the purpose behind 362. By staying actions against the
debtor during bankruptcy, 362 gives the debtor a degree of
breathing room, relieving it of financial pressure and
allowing it to attempt repayment of its debts or to adopt a
____________________
3. For the same reason, defendants' reliance upon Camara ______
Insular v. Anadon, 83 P.R.R. 360, 365-66 (1961) and Santiago _______ ______ ________
v. Ares, 25 P.R.R. 446, 448 (1917) is misplaced, as both of ____
those cases deal only with the impact of bankruptcy
proceedings on the liability of co-debtors, guarantors, and _________
sureties, not upon the limitations period for bringing such
claims.
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reorganization plan. See S. Rep. No. 989, 95th Cong., 2d ___
Sess. 54-55 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, _____________
5840-41. In tolling the limitations period for suits against
co-debtors, guarantors, and sureties during the pendency of a
bankruptcy proceeding against the debtor, 5304 and 5305 do
not impinge upon this breathing room or otherwise detract
from the protection offered the debtor by 362.
As there is no conflict, 5304 and 5305 are not
preempted and serve to extend the limitations period during
bankruptcy proceedings for suits against co-debtors,
guarantors, and sureties. See Barrera, 595 F. Supp. at 901; ___ _______
FDIC v. Marco Discount House, 575 F. Supp. 730, 732 (D. P.R. ____ ____________________
1983). Accordingly, the district court correctly held that
the FDIC's claims against the co-debtors, guarantors, and
sureties did not accrue until April of 1986, when the
bankruptcy case was dismissed. As the claims were filed
within FIRREA's six-year limitations period, they are timely.
B. Note IV _______
Defendants argue that, even if the bankruptcy
proceeding did toll the statute of limitations for claims
against co-debtors, guarantors, and sureties, the claim based
on Note IV ($75,000) supporting the 1979 loan transaction was
nevertheless untimely. Defendants point out that the
maturity date on the Note was March 5, 1981. Under the
three-year limitations period, the claim expired on March 5,
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1984, several months before the bankruptcy proceeding was
instituted and before the FDIC acquired the note. Thus, they
argue, neither the tolling provisions under Puerto Rico law
nor the six-year limitations period under FIRREA apply, and
the claim is untimely.4
The FDIC argues that the district court correctly
found that Note IV was not a separate loan, but merely part
of a single, 1979 loan transaction. Thus, the maturity date
for the Note was actually the maturity date for the entire
loan, March 5, 1986, and not March 5, 1981. In reaching its
conclusion, the district court pointed in particular to the
fact that both Note III and Note IV were part of a single
loan agreement, that there was only one application to the
FHA for the loan and guarantee stating the total amount of
$110,000, and that there was only one guarantee for the total
amount of the loan. The FDIC argues that defendants do not
expressly contest this finding on appeal, and that it should
therefore be affirmed. Since the maturity date was 1986, the
limitations period had not run by the time the FDIC acquired
the loan.
____________________
4. Defendants also argue that the district court erred in
concluding that TCC's listing of the Note in its bankruptcy
schedules served to revive the claim under P.R. Laws Ann.
tit. 10, 1903. Evidently recognizing that the case law
appears to support defendants' argument, see FDIC v. Cardona, ___ ____ _______
723 F.2d 132, 137 (1st Cir. 1983), the FDIC does not contest
this argument on appeal, relying instead on the district
court's alternate ground for the result.
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While it is true that defendants have not expressly
contested the district court's conclusion on this ground, we
find that the defendants have implicitly contested the
district court's finding by consistently discussing Note IV
as a separate claim and by calculating the timeliness of that
claim from Note IV's date of maturity. We further hold that
defendants' argument has merit. We see no legal basis for
treating the two promissory notes as a single loan for
statute of limitations purposes. The three-year statute of
limitations applies, by its terms, to commercial promissory
notes. See P.R. Laws Ann. tit. 10, 1908, ("Actions arising ___
from drafts shall extinguish three years after maturity . . . ________
. A similar rule shall be applied to commercial bills of
exchange and promissory notes . . . ." (emphasis added)); see ________________ ___
also Barrera, 595 F. Supp. at 898; Marco Discount House, 575 ____ _______ ____________________
F. Supp. at 731. In this case, the 1979 loan transaction was
supported by two separate promissory notes with two separate
maturity dates: March 5, 1981 and March 5, 1986. Under a
straightforward application of the statute, the limitations
periods for suits based on the two Notes began running at
different times.
We see no legal basis for importing the maturity
date of Note III into Note IV despite the separate maturity
date on the face of Note IV. The fact that the two notes
happened to be part of the same "loan transaction" is
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immaterial for statute of limitations purposes, since the
operative legal documents were the notes themselves.
Accordingly, the limitations period for claims based on Note
IV expired three years after maturity, on March 5, 1984,
before it could be interrupted by the bankruptcy proceeding
and before the FDIC acquired the note. The FDIC's claim
based on that note is therefore untimely.
IV.
We affirm the district court's holding that the
FDIC's claims on Note I, Note II, Note III, and the notes
underlying the line of credit were all timely filed, but
reverse the district court's holding that the claim on Note
IV was timely filed. We remand to the district court for a
recalculation of the judgment amount in light of this
decision.
So ordered. Each party to bear its own costs. __________ ________________________________
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Document Info
Docket Number： 94-2288
Filed Date： 8/15/1995
Precedential Status： Precedential
Modified Date： 9/21/2015