Court Opinion

ID: 2963522
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:11:26.432785+00
Date Added: 2024-06-11T11:21:32.271267
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 94-1853

                             COMMAND TRANSPORTATION INC.,
                                Plaintiff - Appellee,

                                          v.

                             B.J.'S WHOLESALE CLUB INC.,
                             AMES DEPARTMENT STORES INC.,
                        MORSE SHOE INC., LIONEL LEISURE INC.,
                             AND HOME INSURANCE COMPANY,
                               Defendants - Appellees.

                                 ____________________

                          LIBERTY MUTUAL INSURANCE COMPANY,
                                Defendant - Appellant.
                                 ____________________

                                     ERRATA SHEET

               The  opinion of  this  court  issued on  August  9, 1995  is
          amended as follows:

               The coversheet should read "Hon. W. Arthur Garrity, Jr.".
                                                                   ___

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 94-1853

                             COMMAND TRANSPORTATION INC.,
                                Plaintiff - Appellee,

                                          v.

                             B.J.'S WHOLESALE CLUB INC.,
                             AMES DEPARTMENT STORES INC.,
                        MORSE SHOE INC., LIONEL LEISURE INC.,
                             AND HOME INSURANCE COMPANY,
                               Defendants - Appellees.

                                 ____________________

                          LIBERTY MUTUAL INSURANCE COMPANY,
                                Defendant - Appellant.
                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                  [Hon. W. Arthur Garrity, Jr., U.S. District Judge]
                                                ___________________

                                 ____________________

                                        Before

                                Boudin, Circuit Judge,
                                        _____________
                 John R. Gibson* and Campbell, Senior Circuit Judges.
                                               _____________________
                                _____________________

               David J.  Daly, with whom  John E. Lecomte, Timothy  J. Daly
               ______________             _______________  ________________
          and  Lecomte,  Emanuelson,  Tick  &  Doyle,  were  on  brief  for
               _____________________________________
          appellant Liberty Mutual Insurance Company.
               Kurt Terwilliger, with whom Richard D. Bickelman and Deutsch
               ________________            ____________________     _______
          Williams  Brooks DeRensis Holland  & Drachman  were on  brief for
          _____________________________________________
          appellee Command Transportation, Inc.

                                 ____________________

                                    August 9, 1995
                                 ____________________
                              
          ____________________

          *  Of the Eighth Circuit, sitting by designation.

                                         -1-

                    JOHN R. GIBSON,  Senior Circuit Judge.   Liberty Mutual
                    JOHN R. GIBSON,  Senior Circuit Judge.
                                     ____________________

          Insurance  Company appeals  from  the  district court's  judgment

          denying its counterclaims against Command Transportation, Inc. to

          recover  freight damage claims Liberty paid to Command's shippers

          and to collect insurance  premiums from Command.  Liberty  argues

          that the district court erred:  (1) in failing to reduce  freight

          damage  claims Liberty paid  Command's shipping customers  by the

          amounts the  shippers owed Command  for freight services;  (2) in

          denying  its motions  to substitute or  add the  Resolution Trust

          Corporation  as  a  defendant or  third-party  defendant;  (3) in

          denying  relief on  Liberty's breach  of  contract claim  against

          Command  for  unpaid insurance  premiums;  and (4)  in  ruling on

          issues of disputed material fact.  We affirm the district court's

          judgment.

                    It  is unnecessary  that we  detail  the complex  facts

          underlying the  relatively simple  issues in this  appeal.   This

          litigation began  when Command,  an interstate  trucking company,

          became  insolvent and attempted  to collect freight  charges from

          its  shippers,  including  B.J.'s  Wholesale  Club, Inc.;  Lionel

          Leisure,  Inc.; Morse  Shoe, Inc.;  and  Ames Department  Stores.

          These  shippers filed  counterclaims against Command  for freight

          damage and losses.

                    In  1980, Command  had purchased  a  Motor Truck  Cargo

          Policy from Liberty.  As required by the Interstate Commerce Act,

          the policy contained an endorsement for cargo liability, commonly

          referred  to  as  a  "BMC-32 endorsement."    49  U.S.C.    10927

          (a)(3)(1988).   Under the BMC-32 endorsement Liberty was required

          to pay directly  any freight damage claims  of Command's shippers

          for  which Command  may have  been liable.   Further,  the BMC-32

          endorsement provided, in part:

                      The insured agrees to reimburse [Liberty]
                      for  any  payment  made  by [Liberty]  on
                      account of any loss or damage involving a
                      breach of the terms of the policy and for
                      any payment that [Liberty] would not have
                      been   obligated   to  make   under   the
                      provisions of the  policy, except for the
                      agreement contained in  this endorsement.

          The policy terminated on  October 1, 1988, and was  replaced by a

          similar policy  issued by Home  Insurance Company.   Command sued

          Liberty and Home for breaching the insurance contract  by failing

          to  pay  shippers directly  for  their lost  or  damaged freight.

          Although  Liberty admittedly received the freight claims (and, in

          fact,  paid  some),  Liberty  argued  that  it  was  entitled  to

          Command's accounts receivable from the shippers.  Liberty alleged

          that a surety relationship existed between Command and Liberty by

          virtue of Liberty's payment of  freight damage claims directly to

          the  shippers under  the BMC-32  endorsement.   As  surety of  an

          insolvent  principal, Liberty  contended that  it  could set  off

          Command's freight  charge claims against  Liberty's obligation to

          pay the shippers' freight damage claims.

                    In  1986, Command  entered  into  a  revolving  finance

          agreement with Comfed Savings Bank.  The agreement granted Comfed

          a security  interest in  certain of  Command's assets,  including

          Command's accounts receivable.

                                         -3-

                    By April 1989, Command was insolvent.  Command sold its

          assets to Munson Transportation and paid the proceeds  to Comfed.

          In December  1990, the RTC  was named as conservator  for Comfed,

          and, in September 1991, the  RTC was appointed receiver.  Liberty

          claimed that the RTC was the real party in interest which must be

          substituted for Command or added as a third-party defendant.

                    During  the  litigation,   the  district  court  denied

          Liberty's motions to substitute the RTC for Command or to add the

          RTC  as a  third-party defendant.   The court  rejected Liberty's

          arguments that  the RTC,  through Comfed, was  the real  party in

          interest.

                    Ultimately, the parties  resolved all their  respective

          claims, except  for Liberty's counterclaims  against Command  for

          setoff and for breach of contract.

                    The  district court  ordered that  Command  and Liberty

          file an agreed stipulation of facts.  The parties could not agree

          to a joint stipulation of facts, so each party submitted its  own

          proposed  stipulation of facts.   The proposed  stipulations were

          almost identical except  each party included some  facts that the

          other party either disagreed with or did not address.

                    After  a hearing on March  28, 1994, the district court

          denied Liberty's counterclaims.   Command Transportation Inc.  v.
                                            _______________________________

          B.J's Wholesale Club, Inc., Civ.  No. 90-10188-G, slip op. at 16-
          __________________________

          17 (D. Mass. June 23, 1994).   The court determined that the BMC-

          32 endorsement  obligated Liberty  to pay  shippers directly  for

          freight  damage and  loss.   The court  ruled that  although this

                                         -4-

          obligation  may  supersede  other  provisions  of  the  insurance

          policy, "the endorsement must be read in conjunction with, not in

          lieu of, the policy."  Id. at 9.  The court based this ruling  on
                                 ___

          the endorsement,  which stated:   "[A]ll  terms, conditions,  and

          limitations in the policy  to which this endorsement is  attached

          are to remain in  full force and  effect."  After discussing  two

          cases  considering earlier versions of the BMC-32 endorsement, In
                                                                         __

          re  Yale Express Sys.,  Inc., 362  F.2d 111  (2d Cir.  1966), and
          ____________________________

          Empire Fire  & Marine Ins.  Co. v. J.  Transport, Inc., 880  F.2d
          ______________________________________________________

          1291  (11th  Cir.  1989),  the  court  distinguished  obligations

          arising   from  the  policy  and  obligations  arising  from  the

          endorsement.  The court concluded that Liberty could be a surety,

          entitled  to a  setoff  only  for payments  it  made to  shippers

          "solely" under  the endorsement, and that Liberty failed to prove

          that it made  payments solely under the endorsement.  Slip op. at

          13.   The court  determined that Liberty  failed to  classify its

          payments to shippers as an  obligation from the endorsement or as

          an  obligation from  the  policy.   The  court  pointed out  that

          Liberty omitted the cargo policy as an exhibit to the Stipulation

          of Facts, and attached only a one-page form:  "Motor Truck Policy

          - Gross Receipts,"  which did not explain Liberty's obligation to

          pay claims  under the policy.  Id.   The court ruled that Liberty
                                         ___

          was not entitled to set  off freight damage claims with Command's

          accounts receivable.   The court acknowledged that  Liberty could

          have  a valid  setoff  claim  "to the  extent  that its  payments

          represent deductibles  it would  not have  been obligated  to pay

                                         -5-

          under the policy."   Id. at 14.   Once again, however,  the court
                               ___

          concluded  that Liberty failed to prove  entitlement to a setoff.

          The court referred to an affidavit submitted by Liberty, to which

          Command  did not stipulate,  listing Liberty's total  payments to

          each  shipper.   Id.   Because  the affidavit  showed only  total
                           ___

          payments,  the court  could  neither  determine  if  Liberty  had

          already reduced the  amount by the deductible, nor  calculate the

          date,  amount,  or number  of  losses.   Accordingly,  the  court

          concluded that  there was  no basis for  ruling that  Liberty was

          entitled to a setoff for the deductible amount.  Id. at 14-15.
                                                           ___

                    Liberty also  claimed subrogation  rights arising  from

          indemnity agreements  between  it and  Command,  whereby  Command

          agreed to  indemnify Liberty  for any monies  paid by  Liberty in

          connection  with  "bonds,  undertakings  and/or  obligations   of

          suretyship or guarantee"  issued on behalf  of Command.   Because

          Liberty's recovery  under this  provision depended  on proving  a

          surety relationship, the court did not address Liberty's claim of

          subrogation.   Id. at  15.   The court  explained that a  further
                         ___

          obstacle to  Liberty's claims  existed because  a non-party,  the

          RTC,  held a secured  interest in Command's  accounts receivable.

          Id. at 16.
          ___

                    Finally,  the court held  that Liberty failed  to prove

          its breach of contract claim.   Id.  The court reasoned that  the
                                          ___

          sole  item  of  evidence,  a  September 20,  1989,  Statement  of

          Account, did not  prove that Command owed Liberty  premiums under

          the policy that lapsed in 1988.  Without the terms of the policy,

                                         -6-

          including proof of coverage dates, the court refused to speculate

          whether Command had failed to pay premiums due.  Id. at 17.
                                                           ___

                    Liberty filed a motion to amend judgment.  At a hearing

          on a different  motion, Liberty's counsel stated that  he did not

          expect the  court to  enter judgment on  the basis  of stipulated

          facts  but thought there  would be a  trial.  The  district court

          judge  found this statement inconsistent with his recollection of

          the  March 28, 1994  proceedings when Liberty's  counsel remained

          silent after Command's  counsel stated he  expected the court  to

          enter judgment on the basis of  the stipulated record.  The court

          construed Liberty's silence as assent.  The district court denied

          Liberty's motion, and Liberty appeals.

                                          I.
                                          I.

                    In its reply  brief, Liberty contends that  the parties

          did not authorize the district court  to decide disputed material

          facts.   Liberty  asserts that  although  the parties  wanted the

          district court to decide the  case based on stipulated facts, the

          parties  did not  agree to  stipulated facts.   Arguing  that the

          standard  governing the  granting of  a  summary judgment  motion

          applies, Liberty contends that the district court erred by ruling

          on material issues of genuine fact without a trial.

                    Liberty  agreed,  however,  for the  district  court to

          decide the case  on the record before it.  The first paragraph in

          Liberty's memorandum submitted  to the district court  in support

          of judgment in its favor states:

                      The  following  memorandum  is  submitted
                      pursuant   to   the   agreement   between

                                         -7-

                      [Command]   and   [Liberty]    that   all
                      remaining issues in this  case be decided
                      by the Court based  upon a Stipulation of
                      Facts.     No  final  agreement   on  the
                      Stipulation of Facts  was reached by  the
                      deadline  imposed by  the  Court, so  the
                      references in this  memorandum are to the
                      "Stipulation of  Facts" filed  by Liberty
                      on  March 23, 1994.   Liberty also relies
                      on its previous briefs filed with respect
                      to this matter.

                    The  record of the March 28 proceedings also shows that

          Liberty expected the court to decide the case based on the record

          before  it.   At the  hearing,  the district  court judge  asked:

          "What are  we doing here  this afternoon?"  The  judge questioned

          whether  the proceedings were pretrial, cross motions for summary

          judgment, or trial of the case.  Command's counsel responded that

          the court directed  the parties to submit a  stipulation of facts

          and brief the issue of liability on Liberty's counterclaims.  The

          court  then  explained that  it  was  unsure  where to  turn  for

          evidence of  the payments, receipts  and dates, and asked  if the

          submitted  filings identified the amounts that Liberty, or anyone

          else,  paid  the  shippers.    Command's  counsel  answered  that

          Liberty's  affidavit showed  the amounts  Liberty  paid and  that

          Command  did   not  intend  to   submit  further   documentation.

          Liberty's  counsel agreed that  he addressed every  issue Command

          raised in  its briefs.   After discussing  the merits  of various

          issues,  the  court  asked  Liberty's  counsel  what  he  sought.

          Liberty answered:  "any monies which went to Command or may go to

          Command in the  future which were subject to  the shipper's right

          to setoff."

                                         -8-

                    Furthermore,  the  district   court's  June  23,  1994,

          decision made twenty-three findings of fact, incorporating all of

          the stipulations of  facts submitted by Liberty in  its March 24,

          1994  filing,  except  for  Liberty's proposed  stipulation  that

          Command had not paid certain premiums due.  Liberty's argument in

          this appeal does  not identify a disputed issue  of material fact

          it  claims to  be wrongly  decided by  the district  court.1   We

          therefore reject Liberty's argument that the district court erred

          by deciding this  case and, indeed, are left  with the impression

          that Liberty has been less than candid in urging this position.

                                         II.
                                         II.

                    Liberty  argues that the  BMC-32 endorsement  created a

          surety relationship  between Liberty  and Command,  and that  the

          district court's finding  of no suretyship is  clearly erroneous.

          Liberty contends that,  as Command's  surety, it  is entitled  to

          assert the shippers' right to set off unpaid freight charges.

                    The  case  law  unequivocally  supports  the   district

          court's view that  the mere existence  of the BMC-32  endorsement

          does not give rise to  a surety relationship entitling Liberty to

          set  off  its  obligation  to  pay  freight  damage  claims.    A

          suretyship  is created  only after  the insurer  makes  a payment

                              
          ____________________

          1    Having  failed to  identify  any  material  factual dispute,
          Liberty's  arguments that the  district court should  have viewed
          the proceedings as cross-motions for summary  judgment and held a
          trial on  the merits  are contradictory.   See Boston  Five Cents
                                                     ___ __________________
          Sav.  Bank v. Dep't  of Housing &  Urban Dev., 768  F.2d 5, 11-12
          _____________________________________________
          (1st Cir. 1985) (discussing difference between decisions based on
          cross-motions  for  summary   judgment  and  those  based   on  a
          stipulated record).

                                         -9-

          required solely under the endorsement,  in other words, a payment

          the  insurer "would  not have  been obligated  to make  under the

          provisions of the policy."

                    The Second Circuit considered an earlier version of the

          BMC-32 endorsement in  In re Yale  Express, 362  F.2d 111.   That
                                 ___________________

          endorsement  required the carrier  to reimburse the  insurer "for

          any payment that  the [insurer] would not have  been obligated to

          make under the provisions of the policy, except for the agreement

          contained  in the endorsement."   Id. at 113.   After the carrier
                                            ___

          went bankrupt, the shippers asserted  claims for lost and damaged

          freight.   Id.    The carrier  and  insurer asserted  conflicting
                     ___

          positions.   The  carrier  demanded that  the  shippers  pay  all

          freight charges  to it.  Id.  The  insurer asserted that it could
                                   ___

          set off freight damage  claims with the carrier's claims  against

          the shippers for  unpaid freight.  Id.   The Second  Circuit held
                                             ___

          that the insurer was a surety only for the claims it  paid solely

          under the endorsement, not to  those claims it paid also required

          by the policy.  Id. at 114.   The court explained that suretyship
                          ___

          exists when "'one person has undertaken an obligation and another

          person  is also under an obligation or other duty to the obligee,

          who is  entitled to but one  performance, and as between  the two

          who  are bound, one rather than  the other should perform.'"  Id.
                                                                        ___

          (quoting  Restatement  of  Security    82  (1941)).    The  court

          reasoned  that,  although  the  insurer  and  carrier  were  both

          obligated  to the shipper, the carrier's promise to reimburse the

          insurer for any payments made solely by virtue of the endorsement

                                         -10-

          made  the carrier,  not the  insurer, the  principal who  "should

          perform."  Id.   The court distinguished claims  that the insurer
                     ___

          paid  under  the  endorsement exceeding  the  deductible:   "[the

          insurer's] position under the endorsement differs wholly from its

          status with respect to  claims exceeding [the deductible]; as  to

          the latter it is an  indemnitor," not a surety.  Id. at  114 n.1.
                                                           ___

          Because the deductible is an  amount which the insurer would "not

          otherwise be  obligated to pay"  except for the  endorsement, the

          insurer had surety status only for the deductible amount.  Id.
                                                                     ___

                    The Eleventh Circuit rejected the very argument Liberty

          makes here  in Empire Fire  & Marine, 880  F.2d 1291.   The court
                         _____________________

          remanded that case,  in part, for a determination  of whether the

          insurance  policy  covered the  loss  at  issue.   Id.  at  1298.
                                                             ___

          Likewise,  in  American  Inter-Fidelity  Exch.  v.  American  Re-
                         __________________________________________________

          Insurance Co., 17 F.3d 1018  (7th Cir. 1994), the Seventh Circuit
          _____________

          interpreted   language   virtually   identical  to   the   BMC-32

          endorsement, concluding that an insurer  is a surety only for the

          deductible under the  endorsement, the amount  it would not  have

          been  obligated to pay  under the policy.   Id. at  1022.  Accord
                                                      ___            ______

          Ford  Motor Co. v. Transport  Indem. Co., 41  B.R. 433, 439 (E.D.
          ________________________________________

          Mich.  1984), rev'd  on other  grounds,  795 F.2d  538 (6th  Cir.
                        ________________________

          1986).   Cf. Eastern Freight  Ways, Inc. v. Seaboard  Surety Co.,
                   ___ ___________________________________________________

          577  F.2d 175,  180  n.9  (2d  Cir.  1978)  (surety  relationship

          established because of issuance of bonds for cargo claims).

                    Because Liberty may be a  surety only to the extent its

          payments  to shippers represent  payments required "solely" under

                                         -11-

          the  endorsement,  we  have  no  difficulty  rejecting  Liberty's

          argument  that  the  district  court  erred  in  requiring it  to

          distinguish between policy and  endorsement obligations.  Liberty

          contends that  Command did  not allege  that Liberty's  liability

          arose from anything other  than the endorsement.  Liberty  points

          out  that, when it  was called on  to directly pay  the shippers,

          Command  had already  cancelled and  replaced  the cargo  policy.

          Thus, Liberty contends that the district court erred in requiring

          proof that  Liberty had no  obligation to pay the  shippers under

          the policy.  

                    Liberty's argument is circular.   The endorsement, just

          as in Yale Express and  Empire Fire & Marine, specifically limits
                ____________      ____________________

          Liberty's right to reimbursement from Command to payments Liberty

          would  not have  been  obligated  to pay  under  the policy,  and

          Liberty  bore  the  burden  of  proving  entitlement  to  setoff.

          Reliance Steel Prod. Co. v. National Fire Ins. Co., 880 F.2d 575,
          __________________________________________________

          577-78 (1st Cir. 1989).  Liberty neglected to specify whether its

          payments to shippers were  also obliged under the policy.  See In
                                                                     ___ __

          re Yale Express,  362 F.2d at 114  n.1 (insurer not a  surety for
          _______________

          amounts  in excess  of  deductible under  endorsement);  American
                                                                   ________

          Inter-Fidelity Exch., 17  F.3d at 1022 (insurer is  a surety only
          ____________________

          for deductible under endorsement).

                    We similarly reject Liberty's argument that  suretyship

          and insurance cannot co-exist  and that, therefore, its  right to

          setoff is  not subject to  the insurance provisions of  the cargo

          policy.     This  argument   is  inconsistent   with  the   cases

                                         -12-

          interpreting the BMC-32 endorsement  and irreconcilable with  the

          language   of  the   endorsement  providing   that  "all   terms,

          conditions, and limitations  in the policy  . . . remain in  full

          force and effect."   See Empire Fire  & Marine, 880 F.2d  at 1298
                               ___ _____________________

          (regulations  which  require  the endorsement  "do  not  alter or

          affect the  obligations between  the insured  and the  insurer");

          American Inter-Fidelity Exch., 17 F.3d at 1022 (same).
          _____________________________

                                         -13-

                                         III.
                                         III.

                    Liberty  next argues  that the  district court  clearly

          erred  in finding  that the  evidence was  insufficient  to prove

          Liberty's counterclaim  for premiums  owed by  Command under  the

          policy.  

                    Liberty sought $656,330.04  in premiums allegedly  owed

          by Command under the cargo policy.  The district court noted that

          the "only policy before the Court is the Motor Truck Policy . . .

          issued on November 1, 1980 and numbered K01-712-001357-04."  Slip

          op. at  16-17.  The district  court found that the  only evidence

          offered by Liberty to support its breach of contract  claim was a

          September 20,  1989, Statement  of  Account.   Id.  at 16.    The
                                                         ___

          Statement of Account listed several policy numbers,  and the only

          policy number in the two-page statement which corresponded to the

          policy number on the face of the policy differed by one digit and

          listed  a "Retro  Adjustment" in  the  amount of  $186,159.   The

          district  court concluded  that the  evidence did  not show  that

          Command   continues  to  owe  premiums  under  the  policy  which

          terminated in 1988,  only that Liberty made  a "retro adjustment"

          to that policy.

                    During  the hearing,  the district court  asked counsel

          which  page  of  the  policy  defined  "premiums owed  under  the

          policy."   Liberty's  counsel remained  silent  when counsel  for

          Command stated that "it's  not [Command's] burden" but  "if there

          is an  answer to that question I would  guess it would be located

          in the policy."

                                         -14-

                    On  appeal,  Liberty  explains   only  that  a   "retro

          adjustment is  an increased premium  owed by an insured  based on

          the cost to the insurer as shown by actual experience,"  and that

          the "retro adjustment amounts listed on the  Statement of Account

          are  'Payable on  Receipt.'"   Liberty  explains  that the  total

          retroadjustments  reflected in the  Statement of Account  are all

          premiums  for policies  that are  part of  the cargo  policy and,

          therefore, Liberty  should be awarded  $444,262 on its  breach of

          contract claim.   The shortfall of Liberty's  contentions is that

          it has  presented no  evidence to explain  how it  calculated the

          "retro  adjustment" or why Command still  owes premiums under the

          1988 insurance policy.2   Therefore, the  district court did  not

          err in concluding that there was insufficient evidence to support

          Liberty's breach of insurance contract claim.

                                         IV.
                                         IV.

                    Finally,  Liberty   alleges  numerous  errors   in  the

          district court's refusal to substitute  the RTC as the real party

          in interest or to  add the RTC as  a party under Fed. R.  Civ. P.

          17(a), 19, and 20.  Liberty alleges that Comfed, and subsequently

          the  RTC, is the real  party in interest.   Liberty also contends

          that  the RTC,  acting through  the corporate  shell  of Command,

          attempts,  through this litigation,  to force Liberty  to pay the

          shippers' claims  so that the  RTC may collect the  full accounts
                              
          ____________________

          2  Liberty's citation to Truck Ins. Exch.  v. Webb Transfer Line,
                                   ________________________________________
          Inc., 432 S.W.2d 25, 26 (Ky. Ct. App. 1968), is unpersuasive.  In
          ____
          that case,  the parties  did not dispute  the computation  of the
          total  amount  of  premiums payable,  and  the  insurer presented
          testimony as to the premium computation.  Id.  
                                                    ___

                                         -15-

          receivable due from the shippers free from Liberty's right to set

          off.     Liberty  contends  that  the  RTC's  collection  without

          affording notice or  the opportunity to be heard deprived Liberty

          of  its  property  in  violation  of  the  Fifth  and  Fourteenth

          Amendments to the United States Constitution.

                    Because Liberty failed to prove entitlement to a setoff

          against  Command's bankruptcy  estate, Liberty's efforts  to make

          the RTC a party necessarily fail.  In any event, we are persuaded

          that  a  number of  other  reasons support  the  district court's

          refusal to substitute or add the RTC as a party or  a third-party

          defendant, including Liberty's failure to exhaust  administrative

          remedies, see,  e.g., Marquis v.  FDIC, 965 F.2d 1148,  1151 (1st
                    ___   ____  ________________

          Cir.  1992),  or  to  explain  the  superiority  of  its  alleged

          interest.  See In re Yale Express, 362 F.2d at 117.
                     ___ __________________

                    We affirm the district court's judgment.
                       ______

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