Court Opinion

ID: 2964729
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:30:14.078561+00
Date Added: 2024-06-11T11:43:00.090945
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

        No. 96-2009

                              IN RE HELEN D. GENS, d/b/a
                              HELEN GENS AND ASSOCIATES,

                                      Appellant,

                                          v.

                             RESOLUTION TRUST CORPORATION
                       (FEDERAL DEPOSIT INSURANCE CORPORATION),

                                      Appellee.

                                                     
                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Reginald C. Lindsay, U.S. District Judge]
                                              ___________________

                                                     
                                 ____________________

                                        Before

                                Selya, Circuit Judge,
                                       _____________

                              Cyr, Senior Circuit Judge,
                                   ____________________

                              and Stahl, Circuit Judge.
                                         _____________

                                                     
                                 ____________________

             Richard H. Gens for appellant.
             _______________
             Barbara  R.  Sarshik, Counsel,  FDIC,  with whom  Ann  S. DuRoss,
             ____________________                              ______________
        Assistant  General Counsel,  FDIC, Thomas  L. Hindes,  Senior Counsel,
                                           _________________
        FDIC, Joseph  G.  Butler, and  Barron  & Stadfeld  were  on brief  for
              __________________       __________________
        appellee.

                                                     
                                 ____________________

                                     May 5, 1997
                                                     
                                 ____________________

                    CYR,  Senior  Circuit  Judge.   Chapter  11  debtor-in-
                    CYR,  Senior  Circuit  Judge.
                          ______________________

          possession Helen  D. Gens ("Gens") challenges  a bankruptcy court

          order  which  allowed the  Federal Deposit  Insurance Corporation

          ("FDIC") to amend its  proof of claim following the  bar date for

          filing claims.  We affirm.

                                          I
                                          I

                                      BACKGROUND
                                      BACKGROUND
                                      __________

                    In  July 1988,  Gens executed  a promissory  note ("the

          Gens  Note")  payable to  U.S.  Funding  Inc. of  America  ("U.S.

          Funding")  in the principal amount of $70,000, by signing it both

          in her  "individual" capacity and in  her representative capacity

          as trustee for  the Old Jail Trust ("Trust").   The Gens Note was

          secured  by  a third  mortgage  on real  property  in Barnstable,

          Massachusetts, owned  by the  Trust ("the Barnstable  Property").

          Although  the  Barnstable  Property  was  subject  to  two  prior

          mortgages, U.S.  Funding and Gens allegedly  arranged for $36,000

          of  the $70,000  in  loan proceeds  to  be  used to  satisfy  the

          preexisting second mortgage.   U.S. Funding promptly assigned the

          Gens Note to Key Financial Services ("Key"), which assigned it to

          Home Owners Savings Bank ("Home Owners"). 

                    In October 1989, Home Owners commenced suit against Key

          in  federal  district  court,  alleging  that  the  purchase-sale

          agreement, whereby Home Owners acquired  the Gens Note from  Key,

          had been induced  by fraud  or that Key  had breached its  title-
                                      __

          insurance provisions.  Home  Owners demanded either rescission or

          damages for breach of contract. 

                                          2

                     The  Trust  defaulted on  the  Gens Note  in  or about

          January 1990 and the first mortgagee foreclosed on the Barnstable

          Property.   The  foreclosure  sale  resulted in  no  surplus  for

          application  to any  junior  lien, including  the third  mortgage

          securing  the  Gens Note.   In  September  1990, Home  Owners was

          declared insolvent and  the Resolution Trust  Corporation ("RTC")

          was  appointed  receiver.     RTC  designated  Knutson   Mortgage

          Corporation  ("Knutson") as its servicing agent on the Gens Note,

          and gave Knutson a limited power of attorney.   

                    Meanwhile,  in  the ongoing  federal action  brought by

          Home  Owners  against Key,  the  district  court entered  partial

          summary  judgment for RTC and  Home Owners, finding  that Key had

          breached the  purchase-sale agreement.    The attendant  district

          court order  directing  Key to  repurchase  the Gens  Note  never

          became final, however, apparently because RTC and Key were unable

          to agree upon a repurchase price. 

                    Gens  commenced  a voluntary  chapter 11  proceeding in

          September  1993,  but  failed to  schedule  the  Gens  Note as  a

          liability.    Knutson, as  RTC's agent,  filed  a proof  of claim

          ("POC")  in relation to the Gens Note in December 1993 ("original

          POC"), well before the May 16,  1994 bar date for filing  claims.

          The  original  POC  incorrectly  listed  Knutson  itself  as  the

          creditor, failed to disclose that Knutson was  the authorized RTC

          servicing  agent,  mischaracterized  the  claim as  secured,  and

          mistakenly identified  February 24, 1989 (rather  than July 1988)

          as the date Gens incurred the Gens Note obligation. 

                                          3

                    Almost seven  months after the bar  date, Knutson filed

          an  amended POC in relation  to the Gens  Note, correctly listing

          RTC  as  the creditor,  but still  (i)  failing to  disclose that

          Knutson was RTC's agent,  and (ii) incorrectly characterizing the

          claim  as "secured."    Knutson eventually  submitted  additional

          amended POCs correcting these deficiencies.

                    Gens  objected   to  the  original  and  amended  POCs,

          asserting inter alia judicial estoppel and discharge of the note,
                    _____ ____

          see  Mass.  Gen.  Laws  Ann.  ch.  106,     3-606.   While  these
          ___

          objections were pending, FDIC,  successor to RTC, was substituted

          as the creditor  on all POCs filed  by Knutson.  Ultimately,  the

          objections  to the original and amended POCs were rejected by the

          bankruptcy court and the district court affirmed.

                                          II
                                          II

                                      DISCUSSION
                                      DISCUSSION
                                      __________

          A.   Judicial Estoppel
          A.   Judicial Estoppel
               _________________

                    The  companion  doctrines  of  judicial   estoppel  and

          election of remedies1 essentially preclude a party from asserting

          a legal or factual position "inconsistent" with its position in a

          prior proceeding.   See Patriot  Cinemas, Inc. v.  General Cinema
                              ___ ______________________     ______________

          Corp., 834 F.2d 208, 212 (1st  Cir. 1987).  The estoppel  defense
          _____

          advanced  by  Gens  is   predicated  entirely  on  the  contract-

          rescission claim Home Owners asserted in the federal court action
                              
          ____________________

               1The "election  of remedies"  defense likewise derives  from
          the  equitable  doctrine  of estoppel.    See  Butcher v.  Cessna
                                                    ___  _______     ______
          Aircraft  Co., 850 F.2d 247,  248 (5th Cir.  1988), cert. denied,
          _____________                                       _____ ______
          489 U.S. 1067 (1989); In re Leonardi's Int'l, Inc., 123 B.R. 668,
                                ____________________________
          669 (Bankr. S.D. Fla. 1991).

                                          4

          against  Key,  alleging inter  alia  that Key  had  made material
                                  _____  ____

          misrepresentations  in  negotiating the  purchase-sale agreement.

          Implicit  in Home Owners' demand for  rescission of the purchase-

          sale agreement  was its  averment that  Key's fraud rendered  the

          purchase-sale agreement  voidable ab initio,  and therefore  that
                                            __ ______

          Home Owners never became a "holder" of the Gens  Note. See, e.g.,
                                                                 ___  ____

          In re Southern  Indus. Banking  Corp., 46 B.R.  306, 313  (Bankr.
          _____________________________________

          E.D. Tenn. 1985) ("A party to  a transaction induced by fraud may

          elect  between two  remedies     he  may  treat the  contract  as

          voidable and sue for the equitable remedy of rescission or he may

          sue for damages at law under the tort theory of 'deceit.'").

                    In  January 1992,  the  district court  awarded summary

          judgment  to RTC  on  its contract  claim.   Gens  now  contends,

          therefore, that FDIC is estopped from asserting a claim under the

          Gens  Note in her bankruptcy proceeding, since its POC is legally

          and factually  inconsistent with the litigation  position adopted

          by  Home Owners in the  district court action,  namely, that Home

          Owners  never  became  a holder  of  the  Gens  Note because  the

          purchase-saleagreementwasrescindablefromitsinception.Wedisagree.2
                              
          ____________________

               2Although  Gens  argues that  the bankruptcy  court decision
          must  be reviewed  de novo,  we have  yet to determine  the exact
                             __ ____
          standard for  reviewing applications of the  doctrine of judicial
          estoppel.  See Desjardins  v. Van Buren Community Hosp.,  37 F.3d
                     ___ __________     _________________________
          21,  23  (1st  Cir.  1994) (expressly  reserving  question);  cf.
                                                                        ___
          McNemar v. Disney Store,  Inc., 91 F.3d  610, 613 (3d Cir.  1996)
          _______    ___________________
          (adopting "abuse  of discretion" standard), cert.  denied, 117 S.
                                                      _____  ______
          Ct. 958 (1997); Data  Gen. Corp. v. Johnson,  78 F.3d 1556,  1565
                          ________________    _______
          (Fed. Cir. 1996)  (same); Yanez  v. United States,  989 F.2d  323
                                    _____     _____________
          (9th  Cir. 1993) (same).   "In reality, judicial  estoppel is not
          extrinsically a matter of fact or law;  the issues that arise may
          turn out  to be ones of  raw fact, abstract law,  or something in
          between, e.g., the   application of a general standard to a known

                                          5

                    Judicial estoppel  is not  implicated unless  the first

          forum  accepted the legal or  factual assertion alleged  to be at
                 ________

          odds with the position advanced in the current forum:

                    [W]here a party assumes a certain position in
                    a   legal   proceeding,   and   succeeds   in
                                                    ________
                    maintaining   that   position,  he   may  not
                    thereafter, simply because his interests have
                    changed,   assume    a   contrary   position,
                    especially if  it be to the  prejudice of the
                    party  who has  acquiesced  in  the  position
                    formerly  taken  by  him.  .  .   .  Judicial
                    estoppel  should be employed  when a litigant
                    is "playing fast and loose with the  courts,"
                    and  when "intentional  self-contradiction is
                    being used  as a  means  of obtaining  unfair
                                                _________
                    advantage  in  a forum  provided  for suitors
                    seeking justice."

          Patriot  Cinemas, 834  F.2d  at 212  (emphasis added)  (citations
          ________________

          omitted).3    Similarly,  the   primary  purpose  served  by  the
                              
          ____________________

          set  of facts."  Desjardins, 37 F.3d  at 23.  It is not necessary
                           __________
          to  determine the  precise standard of  review at  this juncture,
          however, since the bankruptcy court ruling would be affirmed even
          on plenary review.  See id.
                              ___ ___

               3See  United States  v.  Levasseur, 846  F.2d 786,  793 (1st
                ___  _____________      _________
          Cir.)  (estoppel  applies  where  party  previously  "obtained  a
          litigation benefit"), cert. denied, 488 U.S. 894 (1988); see also
                                _____ ______                       ___ ____
          Continental Ill. Corp. v.   Commissioner, 998 F.2d 513,  518 (7th
          ______________________      ____________
          Cir. 1993), cert.   denied, 510 U.S. 1041 (1994) (party must have
                      _____   ______
          "sold"  its position  to  prior  tribunal);  Wang Lab.,  Inc.  v.
                                                       ________________
          Applied  Computer Sciences,  Inc., 958  F.2d 355, 358  (Fed. Cir.
          _________________________________
          1992); In  re A. Barletta & Sons, Inc., 185 B.R. 976, 980 (Bankr.
                 _______________________________
          M.D.  Pa. 1995); In re  Pierce Packing Co.,  169 B.R. 421, 429-30
                           _________________________
          (Bankr. D. Mont. 1994); In re UNR Indus., Inc., 143 B.R. 506, 526
                                  ______________________
          (Bankr. N.D. Ill. 1992),  vacated on other grounds, 173  B.R. 149
                                    _______ __ _____ _______
          (N.D. Ill. 1994);  Phillips v.  FDIC (In re  Phillips), 124  B.R.
                             ________     ____  _______________
          712, 719 (Bankr. W.D. Tex. 1991); In re Merritt  Logan, Inc., 109
                                            __________________________
          B.R. 140, 147-48 (Bankr. E.D. Pa. 1990); cf. also Crown Life Ins.
                                                   ___ ____ _______________
          Co. v. American Nat'l Bank and Trust Co. of Chicago, 35 F.3d 296,
          ___    ____________________________________________
          299 (7th Cir. 1994)  ("An election of remedy  occurs only when  a
          party  accepts the  benefit  of pursuing  the initial  remedy.");
          Leonardi's Int'l,  Inc.,  123 B.R.  at 669  ("An election  . .  .
          _______________________
          between legally  inconsistent remedies can  be made  at any  time
          prior to the entry  of [final] judgment."); Collumb v.  Wyatt (In
                                                      _______     _____  __
          re  Wyatt),  6 B.R.  947,  951-52 (Bankr.  E.D.N.Y.  1980) ("'The
          _________

                                          6

          "election  of remedies"  doctrine  is "to  prevent double  [viz.,
                                                                      ____

          sequential] recoveries  for the same  wrong."  Tavormina  v. Fir,
                                                         _________     ____

          Inc. (In re Alchar Hardware Co.), 764 F.2d  1530, 1534 (11th Cir.
          ____  _________________________

          1985).  

                    Contrary to Gens' contention, RTC permissibly displaced

          its contract-rescission  claim  by  moving  for  partial  summary

          judgment  on  its alternative  claim  that Key  had  breached the

          purchase-sale agreement.  See  Fed. R. Civ. P. 8(e)(2)  ("A party
                                    ___

          may also state  as many separate claims [in its  complaint] . . .

          as the party has[,] regardless of consistency . . .  .").4  Under

          an   express  provision  in   the  purchase-sale  agreement,  the

          exclusive  remedy for its breach  was the repurchase  of the Gens

          Note  by  Key  upon demand  by  Home  Owners.    Thus,  unlike  a

          rescindment, which  necessarily presumes  a disaffirmance of  the

          purchase-sale agreement by Home Owners ab ovo, the RTC breach-of-
                                                 __ ___

          contract claim  implicitly acknowledged a valid  contract whereby

          Home  Owners became  the  holder  of  the  Gens  Note  until  Key

          repurchased the  Note.  Accordingly, the  current FDIC litigation
                              
          ____________________

          purpose of [the]  doctrine [of  election of remedies]  is not  to
          prevent  recourse to any remedy,   but to  prevent double redress
          for a single wrong.'") (citation omitted).

               4See, e.g.,  Desjardins,  37 F.3d  at  23 ("There  are  many
                ___  ____   __________
          situations, especially at the outset of litigation, where a party
          is free to assert a position from which it later withdraws     or
          even to assert, in the alternative, two inconsistent positions of
          its potential claims and  defenses."); Fort Vancouver Plywood Co.
                                                 __________________________
          v.  United States, 860 F.2d 409, 415  (Fed. Cir. 1988) ("With the
              _____________
          enactment  of   the  Federal   Rules  of  Civil   Procedure,  the
          traditional  election doctrine was  relaxed."); Grogan v. Garner,
                                                          ______    ______
          806  F.2d 829, 838 (8th Cir. 1986) ("[T]he doctrine [of election]
          is remedial, and  neither it  nor the federal  rules of  pleading
          require an election of substantive theories.").  

                                          7

          position  is   not  inconsistent   with  that  advanced   by  its

          predecessor, RTC,  since Home Owners  and RTC failed  to persuade

          the district court that the purchase-sale agreement was voidable,

          hence invalid from its inception.5  

          B.   Validity of Knutson Authorization
          B.   Validity of Knutson Authorization
               _________________________________

                    Next, Gens contends that  the original and amended POCs

          submitted by RTC are  invalid because Knutson was  not authorized

          to act as agent for RTC.  See Fed. R. Bankr. P. 3001(b) ("A proof
                                    ___

          of  claim shall  be executed  by the  creditor or  the creditor's

          authorized  agent  .  .  .  .");  see  also  Fed.  R.  Bankr.  P.
                                            ___  ____

          9010(a)(2).   Gens asserts that it would have demonstrated, at an

          evidentiary  hearing,  that  RTC  regulations, see  12  C.F.R.   
                                                         ___

          1606.4;   see  also   12  U.S.C.      1441a(n)(6),  presumptively
                    ___  ____

          disqualified  Knutson from serving as an RTC agent because, as an

          affiliate of Home Owners, presumably it was complicit in whatever

          financial  misfeasance  or malfeasance  led  to  the Home  Owners

          insolvency.  As  the bankruptcy court aptly noted,  however, Gens

          lacked standing to challenge Knutson's agency status.

                    The  RTC  regulation  pursuant  to  which  Knutson  was

                              
          ____________________

               5Furthermore,  RTC had  a  legal obligation  to  file a  POC
          against the Gens estate in order to preserve the position of Home
          Owners,  which  then  held   an  unsecured  claim  against  Gens.
          Finally, should Key repurchase the  Gens Note, FDIC would realize
          no  double recovery, since Key  would become the  claim holder of
          record.  See Fed. R. Bankr. P. 3001(e)(2).
                   ___
               The "election  of remedies"  argument fails for  yet another
          reason.   Since the  Trust and Gens  did not default  on the Gens
          Note  until  January 1990,  Home Owners  had no  available remedy
          against Gens in  1989 when  it filed its  complaint against  Key.
          The 1990 default by  the Trust and Gens thus  constituted a legal
          wrong distinct and severable from the breach of contract by Key. 

                                          8

          designated is designed (i) to "ensure that contractors [hired  by

          RTC] meet  minimum standards  of competence,  integrity, fitness,

          and experience and are  held to the highest standards  of ethical

          conduct in  performing services  for RTC,"  (ii) to prevent  "the

          direct or indirect use  of information gained through performance

          of a  contract . .  . for personal  gain not contemplated  by the

          contract,"   and  (iii)   to  preclude   "the  use   of  personal

          relationships or  improper influence  to gain  unfair competitive

          advantage  in obtaining  contracts  with the  RTC."  12 C.F.R.   

          1606.1.    The RTC  regulation  thus  identifies two  conceivable

          classes of  intended  beneficiaries:   (1) competing  contractors
                                                     _________  ___________

          which  are  unfairly  denied  RTC  contract  bids;  and  (2)  the
                                                                        ___

          taxpaying  public,  which may  be  harmed by  RTC  revenue losses
          _________  ______

          resulting from "insider" conflicts of interest.

                    Gens   plainly   cannot   qualify   under   the   first

          classification, as she is not a competing contractor.  See, e.g.,
                                                                 ___  ____

          New Hampshire Right to Life Political Action Comm. v. Gardner, 99
          __________________________________________________    _______

          F.3d 8, 15 (1st Cir. 1996) ("[U]nder the principle of jus tertii,
                                                                ___ ______

          the plaintiff  ordinarily 'must assert [her] own legal rights and

          interests, and cannot  rest [her]  claim to relief  on the  legal

          rights  or  interests  of third  parties.'")  (citation omitted).

          Moreover, no  standing is  conferred upon Gens,  individually, by

          the generalized taxpayer benefit  theme which actuates the second

          classification.  See  Libertad v.  Welch, 53 F.3d  428, 436  (1st
                           ___  ________     _____

          Cir.  1995) (noting  that  claimant normally  may not  adjudicate

          "abstract questions  of wide public significance  which amount to

                                          9

          generalized   grievances  more  appropriately  addressed  by  the

          legislature").  Nothing in the statute, the RTC regulation or the

          attendant case law remotely suggests that Congress or  the agency

          itself  intended  to confer  standing  on chapter  11  debtors to

          enforce  the RTC regulation.6  See, e.g., Dubois v. United States
                                         ___  ____  ______    _____________

          Dep't  of Agric.,  102  F.3d  1273,  1281  (1st  Cir.  1996)  (to
          ________________

          demonstrate "standing," complainant  must establish, inter  alia,
                                                               _____  ____

          that  her  claim does  not fall  "outside  the zone  of interests

          protected by the specific law invoked") (quoting Allen v. Wright,
                                                           _____    ______

          468 U.S. 737, 751 (1984)); Benjamin v. Aroostook Med. Ctr., Inc.,
                                     ________    _________________________

          57 F.3d 101, 104 (1st Cir. 1995).7  

          C.   Amendments to Original POC
          C.   Amendments to Original POC
               __________________________

                    Gens next  contends that the bankruptcy  court erred in

          permitting RTC to amend its  original POC (i.e., December  1993),
                                                     ____

          which  incorrectly  stated that  Knutson  was  the claim  holder,

          without  disclosing  that it  was acting  as  RTC's agent.   Gens

          represents  that she  reasonably believed  Knutson held  no valid

                              
          ____________________

               6Furthermore,  even  assuming  she  had  standing,  Gens has
          alleged no  facts suggesting  that Knutson contributed  either to
          Home Owners'  insolvency or to any  "substantial loss" occasioned
          RTC.

               7Gens argues  that the  POCs filed by  Knutson were  invalid
          because they were  not signed  by RTC's  attorney.   See Fed.  R.
                                                               ___
          Bankr. P.  9010(a); 9011(a).   But see Fed. R.  Bankr. P. 3001(b)
                                         ___ ___
          (POC may be signed by creditor or its authorized agent); compare,
                                                                   _______
          e.g., Official  Bankruptcy Form  1 (providing space  for attorney
          ____
          signature) with  Official Bankruptcy Form 10  (POC form providing
                     ____
          no attorney-signature  line).   We need  not resolve  the present
          claim, however, since Gens  concededly failed to raise it  in the
          bankruptcy  court.   See  Juniper  Dev. Group  v.  Kahn   (In  re
                               ___  ___________________      ____    ______
          Hemingway Transp.,  Inc.), 993  F.2d 915, 935  (1st Cir.),  cert.
          ________________________                                    _____
          denied, 510 U.S. 914 (1993).
          ______

                                          10

          claim in its own right.  Further, she argues, since RTC failed to

          file a POC  in its own name  prior to the bar date,  there was no

          timely POC to be amended.

                    A bankruptcy  court ruling  allowing an amendment  to a

          POC is reviewed for abuse of discretion, under three criteria:

                    First, the proposed  amendment must not  be a
                    _____
                    veiled attempt  to  assert a  distinctly  new
                    right  to payment  as  to  which  the  debtor
                    estate was not fairly alerted by the original
                    proof of  claim.  Second, the  amendment must
                                      ______
                    not  result  in  unfair  prejudice  to  other
                    holders  of  unsecured  claims   against  the
                    estate.  Third, the need to amend must not be
                             _____
                    the product of bad faith  or dilatory tactics
                    on the part of the claimant.   

          Juniper Dev. Group v.  Kahn (In re Hemingway Transp.,  Inc.), 954
          __________________     ____  ______________________________

          F.2d  1, 10 (1st Cir. 1992) (citations omitted) (emphasis added).

          Leave to  amend a  POC should  be "freely  given when  justice so

          requires."  See  Fed. R. Bankr.  P. 7015.8  The  bankruptcy court
                      ___

          did not abuse its discretion.

                    First, in order to "fairly alert" the debtor  estate, a

          POC  need  only  "provide[]  adequate notice  of  the  existence,

          nature, and amount of  the claim as well as the creditor's intent

          to hold the estate liable."   Unioil, Inc. v. H.E. Elledge (In re
                                        ____________    ____________  _____

          Unioil,  Inc.), 962 F.2d 988, 992 (10th Cir. 1992).  The original
          _____________

          POC, accompanied by a copy  of the Gens Note, see Fed.  R. Bankr.
                                                        ___

          P. 3001(c), met the  general notice requirement.  As  Knutson was
                              
          ____________________

               8Bankruptcy Rule  7015 makes Fed.  R. Civ. P.  15 (governing
          amendments  to complaints)  applicable in  adversary proceedings.
          Although  this case arose as  a contested matter,  rather than an
          adversary proceeding,  Fed. R. Bankr. P.  9014 permits Bankruptcy
          Rule  7015 to be applied in contested matters.  In re Stavriotis,
                                                          ________________
          977 F.2d 1202, 1204 (7th Cir. 1992).

                                          11

          duly  authorized  to file  the original  POC  for RTC,  see supra
                                                                  ___ _____

          Section  II.B,  the mere  failure  to  disclose Knutson's  agency

          status in no sense affected the validity of the claim itself.  As

          the  Tenth  Circuit  correctly  recognized in  Unioil,  a  simple
                                                         ______

          substitution  of the  real party  in interest  (viz., RTC)  for a
                                                          ____

          related  party  mistakenly  listed  in the  original  POC  (viz.,
                                                                      ____

          Knutson qua agent) represents a proper ground for amendment.  See
                  ___                                                   ___

          Unioil, 962  F.2d at  992 (permitting amendment  where a  trustee
          ______

          (rather than the trust) was incorrectly listed as creditor).9

                    Second,  Gens points  to no  unfair prejudice  from any

          deficiency  in the original POC.  See Hemingway Transp., 954 F.2d
                                            ___ _________________

          at 10;  see  also Unioil,  962  F.2d at  993  (noting that  party
                  ___  ____ ______

          opposing  amendment must  show actual  prejudice).   Instead, she

          suggests  simply  that  allowing  the  RTC  amendment  prejudices

          unsecured   creditors,   who   may   receive   less   under   any

          reorganization plan than would  have been received were  the FDIC

          claim not allowed.  But the standard Gens proposes would preclude

          virtually any amendment, since  it dispenses with the requirement

          that  the debtor  or  trustee  show  "unfair" prejudice.    Thus,

          something more  than mere creditor disappointment  is required to

          preclude amendment.  See In re  Stoecker, 5 F.3d 1022, 1028  (7th
                               ___ _______________

                              
          ____________________

               9Nor would the two remaining defects in the original POC bar
          amendment.   First, as trustee for  the Old Jail  Trust, Gens had
          every reason  to know that  the original characterization  of the
          POC,  as  "secured,"  was  mistaken, since  the  first  mortgagee
          already had  foreclosed on  the Barnstable Property  securing the
          Gens  Note.  Second, the mistaken date assigned to the underlying
          debt  instrument was  a minor  defect, given  that the  Gens Note
          itself was attached to the POC. 

                                          12

          Cir.  1993); In  re Outdoor Sports  Headquarters, Inc.,  161 B.R.
                       _________________________________________

          414, 422  (Bankr. S.D. Ohio 1993); In re Brown, 159 B.R. 710, 716
                                             ___________

          n.5  (Bankr.  D.N.J. 1993);  In re  Dietz,  136 B.R.  459, 468-69
                                       ____________

          (Bankr. E.D. Mich. 1992). 

                    Gens neither alleged nor demonstrated that any creditor

          acted in  detrimental reliance on any  representation or omission

          in  the original  POC.    See,  e.g.,  Brown,  159  B.R.  at  716
                                    ___   ____   _____

          (permitting POC  amendment from unsecured to  secured, given that

          "no  evidence  has  been  offered that  anyone  relied  to  their

          detriment  upon the claims as  originally filed").   Nor did Gens

          allege  either bad faith or dilatory motive.  Moreover, these RTC

          amendments  occurred long before the formulation  of a chapter 11

          plan.  See Holstein v. Brill, 987 F.2d 1268, 1270 (7th Cir. 1993)
                 ___ ________    _____

          (characterizing  confirmation   of   debtor  plan   as   "passing

          milestone"  that makes  it  more  likely  POC  amendment  may  be

          prejudicial).  

                    To be sure, Knutson demonstrated considerable laxity in

          executing its agency responsibilities, especially its seven-month

          delay in submitting  amended proofs  of claim.   Were there  some

          showing  in  these  circumstances  that RTC  gained  a  strategic

          advantage  or  that  other  parties  in  interest  were  unfairly

          prejudiced,  the case for disallowance  of the amended POCs would

          have been much stronger.   Absent any such showing,  however, the

          court did not abuse its discretion in permitting RTC to amend its

          original POC.  "It is well accepted that  the bankruptcy court is

          guided by the principles  of equity, and that the  court will act

                                          13

          to assure that ' . . . substance will not give way to form, [and]

          that  technical  considerations  will  not   prevent  substantial

          justice from being done.'"   Pepper v. Litton, 308 U.S. 295,  305
                                       ______    ______

          (1939) (citation omitted). 

          D.   Impairment of Collateral 
          D.   Impairment of Collateral
               ________________________

                    Lastly,  Gens challenges  the  bankruptcy court  ruling

          dismissing her "impairment of  collateral" defense without  first

          affording her an evidentiary  hearing.  She claimed that  a prior

          holder  of the  Gens  Note     presumably  U.S. Funding      used

          $36,000  of the loan proceeds  to pay off  the preexisting second

          mortgage on  the Barnstable  Property, but  failed to  obtain and

          record  the mortgage discharge.  Thus,  the mortgage securing the

          Gens Note  remained third  in priority,  rather than climbing  to

          second priority.

                    Pursuant  to Mass.  Gen.  Laws.  Ann.  ch.  106,     3-

          606(1)(b), "[t]he holder discharges any party to the [negotiable]

          instrument  to the extent  that without such  party's consent the

          holder  .  .  .  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."   An impairment  of

          collateral  may  result  if  the  conduct  of  the  holder  of  a

          collateralized negotiable instrument unjustifiably diminishes the

          physical value of the collateral, releases the  collateral to the

          principal  obligor before the loan is repaid, or fails to perfect

          its security interest in the collateral.  See Rose v. Homsey, 197
                                                    ___ ____    ______

          N.E.2d  603, 605-06 (Mass. 1964);  see also Hawaii  Broad. Co. v.
                                             ___ ____ __________________

                                          14

          Hawaii Radio, Inc.,  919 P.2d  1018, 1029 (Haw.  Ct. App.  1996);
          __________________

          White v. Household Fin. Corp., 302 N.E.2d 828, 835 (Ind. Ct. App.
          _____    ____________________

          1973).  Nevertheless, in most jurisdictions a party  asserting an

          "impairment  of collateral"  defense  must prove  she signed  the

          negotiable  instrument  (viz.,  promissory  note)  merely  as  an
                                   ____

          accommodation party  for the principal  debtor, rather than  as a

          borrower.   See  James  A. White  &  Robert S.  Summers,  Uniform
                      ___                                           _______

          Commercial Code    13-16 (3d ed. 1988).10  
          _______________

                    An   accommodation  maker   is  one   "who  signs   the

          [negotiable]  instrument  in  any  capacity for  the  purpose  of

          lending [her] name  to another party  to it,"   Mass. Gen.  Laws.

          Ann. ch. 106,   3-415(1).  Frequently, accommodation parties sign

          debt instruments to enable the principal obligor to obtain a loan

          which  would  not have  been  granted  absent the  accommodation.

          Although an accommodation party is liable to the lender under the

          debt instrument,  her liability is  that of  a surety only.   Id.
                                                                        ___

          cmt. 1.  Thus, the accommodation maker reasonably expects that if

          called  upon  for  payment  following  the   principal  obligor's

          default, she will  be subrogated to  the lender's rights  against

          the principal  obligor, including  the right of  recourse against
                              
          ____________________

               10The latent confusion  in this regard stems from  the broad
          language in U.C.C.    3-606, which  refers to  "any party to  the
                                                          ___ _____
          [negotiable] instrument."   See FDIC v. Blue  Rock Shopping Ctr.,
                                      ___ ____    _________________________
          Inc., 766 F.2d 744, 749 (3d Cir. 1985) (outlining caselaw split).
          ____
          We have found  no Massachusetts case  which determines whether  a
          nonaccommodation obligor on a promissory note may also invoke the
          U.C.C.    3-606  defense.   Since Gens  and the  bankruptcy court
          implicitly accepted the majority rule    that Gens must establish
          accommodation  status    and because we  affirm on an alternative
          ground,  we need  not  address the  unresolved  Massachusetts-law
          question. 

                                          15

          any collateral securing the underlying debt instrument.  See  id.
                                                                   ___  ___

          cmt. 5;  see also FDIC v. Blue Rock Shopping Ctr., Inc., 766 F.2d
                   ___ ____ ____    _____________________________

          744, 749 (3d Cir.  1985); accord Restatement of Security     104,
                                    ______

          141  (1941).   Therefore, to  the extent the  holder of  the debt

          instrument unjustifiably devalues or releases the collateral,  or

          fails  to perfect  its  rights in  the  collateral against  third

          parties,  the  right  of  recourse  may  be  diminished,  thereby

          entitling  the accommodation  maker to  a commensurate  discharge

          from liability under the debt instrument.  See Blue Rock Shopping
                                                     ___ __________________

          Ctr., 766 F.2d at 751.
          ____

                    The bankruptcy court considered Gens'  second signature

          conclusive  evidence that  she had  signed the  Gens Note  in her

          "individual" capacity, that is,  as a principal coborrower rather

          than  an accommodation maker.  It also concluded that the purport

          of  Gens'  second signature  on the  Gens  Note was  not rendered

          ambiguous, either by the anterior designation of the Trust as the

          sole "Borrower" or the failure to designate a "Co-borrower."

                    Citing considerable case authority, Gens maintains that

          all accommodation makers necessarily sign promissory notes either

          in   their   "individual"    or   "representative"    capacities.

          Consequently, she argues,  these designations cannot conclusively

          resolve  a signatory's  accommodation status.11   Since  the Gens

          Note must therefore be considered facially ambiguous, Gens argues
                              
          ____________________

               11See, e.g., FDIC v. Trans Pacific Indus., Inc., 14 F.3d 10,
                 ___  ____  ____    __________________________
          12 (5th Cir.  1994) (rejecting  FDIC's "attempts  to nullify  the
          import"  of the  "borrower"  identification  block in  promissory
          note,  which reflected corporation  as sole borrower  and did not
          designate corporate officer as coborrower). 

                                          16

          that  a  hearing should  have  been conducted  to  consider parol

          evidence that the parties  to the Gens Note (viz.,  U.S. Funding,
                                                       ____

          the  Trust, and Gens) all understood  that Gen's second signature

          was intended only  as an accommodation  endorsement.  See,  e.g.,
                                                                ___   ____

          Mass.  Gen. Laws. Ann.  ch. 106,    3-415(3)  (expressly allowing

          parol evidence  of accommodation status except  as to holders-in-

          due-course); United Beef Co. v. Childs, 27 N.E.2d 962, 964 (Mass.
                       _______________    ______

          1940)  (same); see also Butler v. Nationsbank, 58 F.3d 1022, 1027
                         ___ ____ ______    ___________

          (4th Cir. 1995) (outlining multi-factored, intent-based "purpose"

          and "proceeds" tests for determining accommodation status); First
                                                                      _____

          Dakota  Nat'l Bank  v. Maxon,  534 N.W.2d  37, 41-42  (S.D. 1995)
          __________________     _____

          (same).12
                              
          ____________________

               12FDIC counters  that 12  U.S.C.   1823(e)  (codification of
          D'Oench   Duhme  doctrine)   barred  parol   evidence   of  Gens'
          _______________
          accommodation status, or that FDIC's status as a federal or state
          holder in due course barred Gens from invoking the U.C.C.   3-606
          defense.   See  Mass. Gen.  Laws. Ann.  ch. 106,    3-415(3) ("As
                     ___
          against  a holder  in  due  course  and  without  notice  of  the
          accommodation oral  proof of the accommodation  is not admissible
          to  give  the  accommodation  party  the  benefit  of  discharges
          dependent on his  character as  such.").  Since  FDIC's right  to
          invoke  either doctrine in this case is open to serious question,
          we express no opinion on its contentions.  See, e.g., O'Melveny &
                                                     ___  ____  ___________
          Myers  v.  FDIC,  512  U.S.  79  (1994)  (generally  discouraging
          _____      ____
          adoption  of federal  common-law rules  especially protective  of
          FDIC);  Varel v. Banc One  Capital Partners, Inc.,  55 F.3d 1016,
                  _____    ________________________________
          1021 (5th Cir. 1995) (D'Oench inapplicable where issue is not the
                                _______
          enforceability of a secret, unwritten side agreement, but whether
          to allow parol evidence concerning the intendment of an ambiguous
          written contract provision);  Capitol Bank and  Trust Co. v.  604
                                        ___________________________     ___
          Columbus  Ave.  Realty Trust  (In  re  604 Columbus  Ave.  Realty
          ____________________________   __________________________________
          Trust), 968 F.2d 1332, 1350-51 (1st Cir. 1992) (holding that FDIC
          _____
          is not  entitled  to  federal  holder-in-due-course  status  when
          acting  in its  capacity as  receiver); Calaska Partners  Ltd. v.
                                                  ______________________
          Corson, 672 A.2d 1099, 1104 (Me.  1996) (FDIC as receiver of bulk
          ______
          purchaser not a holder in due course under state law); Mass. Gen.
          Laws.  Ann. ch.  106,     3-302(3) (denying  holder-in-due-course
          status   to  party  who  acquired   note  "as  part   of  a  bulk
          transaction").

                                          17

                    Even were we to assume arguendo that Gens was  entitled
                                           ________

          to an  evidentiary hearing  to determine  whether she  signed the

          Gens  Note as  an accommodation  maker, she  failed to  set forth

          allegations which would establish the second essential element in

          her  affirmative  defense     a  cognizable  "impairment" of  the

          collateral.   See RTC  v. Feldman,  3 F.3d 5,  9 (1st  Cir. 1993)
                        ___ ___     _______

          (appellate court may affirm  on any ground supported  by record),

          cert. denied, 510 U.S. 1163 (1994).  As her section 3-606 defense
          _____ ______

          is founded exclusively  on the claim that  her subrogation rights

          were frustrated, supra, Gens  was required to do more  than prove
                           _____

          that U.S. Funding or another holder failed to obtain and record a

          mortgage discharge.13

                    Section   3-606  plainly  requires  evidence  that  the

          holder's  dereliction   actually  resulted  in  a   loss  to  the

          accommodation  party.  See Mass. Gen. Laws. Ann. ch. 106,   3-606
                                 ___

          ("The holder discharges any party to the instrument to the extent
                                                              __ ___ ______

          . . . the holder . . . unjustifiably impairs [the] collateral . .

                              
          ____________________

               13Citing Providence,  Fall River & Newport  Steamboat Co. v.
                        ________________________________________________
          Massachusetts Bay S.S. Corp.,  38 F.2d 674 (D. Mass.  1930), Gens
          ____________________________
          contends  that the  holder's mere  failure to  record a  mortgage
          discharge warrants  her total release from  liability because the
          Barnstable Property obviously was  of sufficient value to satisfy
          the Gens Note  in July 1988, and the holder's  failure to perfect
          its security  interest unquestionably increased her  risk of loss
                                                               ____
          without her consent, even if no actual loss occurred.   Since the
                                          ______
          cited  case predates  the adoption  of the  Massachusetts Uniform
          Commercial  Code  in  1958,  it  is  both  legally  and factually
          inapposite.   See id. at 675 (noting  that the court was "dealing
                        ___ ___
          not with  the question how  far a  surety who has  guaranteed the
          performance of  a contract is released  by subsequent alterations
          in it by  the contracting parties, but with a  change made by the
          creditor in the state  of facts on which an  independent contract
          of guaranty rests"); cf. infra note 14.
                               ___ _____

                                          18

          .  .").14   Gens  alleged no  facts  which would  demonstrate any

          actual diminution of her subrogation rights. See FDIC v. Blanton,
                                                       ___ ____    _______

          918 F.2d  524, 530 (5th Cir.  1990) (burden of proof  is on party

          alleging discharge).

                    First, she did not allege that any  creditor obtained a

                              
          ____________________

               14Although we have found  no Massachusetts case precisely in
          point, the clear majority trend among U.C.C. jurisdictions  is to
          require the  accommodation maker  to prove actual  loss from  the
          impairment.   See,  e.g., Alcock  v. Small  Bus. Admin.,  50 F.3d
                        ___   ____  ______     __________________
          1456, 1462 (9th  Cir. 1995)  ("A clear majority  of state  courts
          place the burden on  the guarantor to prove actual  prejudice and
                                                      ______  _________
          limit   the   discharge  to   the   extent   of  the   impairment
          demonstrated.") (emphasis added);   Myers v. First State Bank  of
                                              _____    ____________________
          Sherwood, 732  S.W.2d 459, 461  (Ark.) ("[T]he surety  must prove
          ________
          two elements in order to be entitled to a discharge     'that the
          holder of the note was responsible for the loss or impairment  of
          the collateral, and the extent to which the impairment results in
                                                                 _______ __
          loss.'") (emphasis added)  (quoting Van Balen  v. Peoples Bank  &
          ____                                _________     _______________
          Trust Co., 626 S.W.2d 205, 209-10 (Ark. Ct. App. 1981)), modified
          _________                                                ________
          on  other  grounds, 741  S.W.2d 624  (Ark.  1987); Bank  South v.
          __  _____  _______                                 ___________
          Jones, 364  S.E.2d 281, 285 (Ga. Ct.  App. 1987) ("[A] failure to
          _____
          perfect a lien  on pledged  corporate stock [does  not] effect  a
          discharge where it was shown  that the stock had no value  at the
          time the action [to  collect on the debt] was  commenced."); Hurt
                                                                       ____
          v. Citizens Trust  Co., 196 S.E.2d 349,  351 (Ga. Ct. App.  1973)
             ___________________
          (noting that appellant has  "not shown how the failure  to record
          the leases and  assignments resulted in  any damage")); Rempa  v.
                                                                  _____
          LaPorte  Prod. Credit Ass'n, 444  N.E.2d 308, 313  (Ind. Ct. App.
          ___________________________
          1983) (see  infra); T.O. Stanley Boot Co. v. Bank of El Paso, 847
                 ___  _____   _____________________    _______________
          S.W.2d  218, 223 (Tex. 1992) ("If the creditor breaches his duty,
          the surety  is  discharged on  the  note  to the  extent  of  his
          loss."); Century 21 Prods., Inc. v. Glacier Sales, 875 P.2d 1238,
                   _______________________    _____________
          1242  (Wash.  Ct.  App.  1994)  ("Should a  creditor  impair  the
          collateral, the surety  will be  discharged to the  extent he  is
          harmed by the impairment."), rev'd on other grounds, 918 P.2d 168
                                       _____ __ _____ _______
          (Wash.  1996);  see  generally  Carolyn  Edwards,  Impairment  of
                          ___  _________                     ______________
          Collateral Under Section 3-606 of the Uniform Commercial Code, 12
          _____________________________________________________________
          U. Dayton  L. Rev. 509, 522 n.81 (1987) ("A number of courts have
          concluded that an unjustifiable impairment of collateral includes
          a  failure to perfect a security interest if such failure results
          in a loss  to the surety as subrogee."); cf.  also Revised U.C.C.
                                                   ___  ____
          3-605(f)  (discharge for  impairment of  collateral only  "to the
          extent the impairment causes the party asserting discharge to pay
          more than  that party  would have been  obliged to pay  . .  . if
          impairment had not occurred.").

                                          19

          superior right of recourse against the Barnstable Property due to

          the  fact   that  the  preexisting  second   mortgage  was  never

          discharged  of  record.   In addition,  the  auction sale  of the

          Barnstable  Property conducted  pursuant  to  the  first-mortgage

          foreclosure resulted in no surplus for application  to any junior

          lien, including the second mortgage.  Accordingly, the record can

          support   no  finding   that  any   junior  lien   was  impaired.

          Consequently, Gens'  liability would not have  been affected even

          if she had  been able to establish that she  signed the Gens Note

          as an accommodation  maker.   See, e.g., Rempa  v. LaPorte  Prod.
                                        ___  ____  _____     ______________

          Credit  Ass'n, 444 N.E.2d 308,  313 (Ind. Ct.  App. 1983) ("Thus,
          _____________

          where  the party  asserting the  impairment establishes  that the

          creditor  did not  perfect its  lien but  fails to  establish the

          extent  to which  that failure  resulted in  loss, the  party has

          failed  to  establish  its   affirmative  defense  of  pro  tanto
                                                                 ___  _____

          release.").15

                                         III
                                         III

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                              
          ____________________

               15Moreover, Gens merely  alleged that no  mortgage discharge
          was recorded.  She did not allege that the $36,000,  see supra p.
                                 ___                           ___ _____
          2,  was  never  applied   to  the  preexisting  second  mortgage.
          Therefore, assuming the  underlying debt was in fact  fully paid,
          it would seem extremely unlikely that the mortgagee or any of its
          assignees could have asserted a  viable right to recourse against
          the  Barnstable Property.  See,  e.g., Beaton v.  Land Court, 326
                                     ___   ____  ______     __________
          N.E.2d  302, 307  (Mass.)  (noting  that  "a court  acting  under
          general  principles of  equity jurisprudence  has broad  power to
          reform,   rescind,  or  cancel   written  instruments,  including
          mortgages,"  and that  the  discharging party  could simply  have
          brought  suit  to compel  the mortgagee  to  cancel the  note and
          "issue  a  discharge  of  mortgage  in  a  form  appropriate  for
          recording"), appeal dismissed, 423 U.S. 806 (1975).
                       ______ _________

                                          20

                    Accordingly,  the district  court judgment  is affirmed

          and costs are awarded to the appellee.

                    SO ORDERED.
                    SO ORDERED.
                    __ _______

                                          21