September 23, 1993 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 92-2467
RAYMOND E. CRONKITE and MAINE
AQUARIUM, INC.,
Plaintiffs, Appellants,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
Before
Selya, Cyr, and Boudin,
Circuit Judges.
Valeriano Diviacchi with whom Diviacchi Law Office was on brief
for appellants.
Claire L. McGuire, Counsel, Federal Deposit Insurance
Corporation, with whom Ann S. DuRoss, Assistant General Counsel,
Federal Deposit Insurance Corporation, Colleen B. Bombardier, Senior
Counsel, Federal Deposit Insurance Corporation, and Robert
McGillicuddy, Deputy Senior Counsel, Federal Deposit Insurance
Corporation, were on brief for appellee, Federal Deposit Insurance
Corporation.
John J. Wall, III with whom Thomas F. Monaghan and Monaghan,
Leahy, Hochadel & Libby were on brief for appellee, Archie Maxwell.
BOUDIN, Circuit Judge. Raymond Cronkite purchased 46
acres of land in 1982, giving the seller a note on which
Cronkite later defaulted. In April 1985, the then holder of
the note, Maine National Bank, entered into a settlement
agreement with Cronkite, who agreed to a revised payment
schedule for the 1982 note and gave the bank a blanket
mortgage on all his property in York County, Maine. The
agreement also included a paragraph obligating the bank at
Cronkite's request to "release parcels" from the blanket
mortgage, provided that Cronkite met four conditions:
--that he not be in default under the agreement;
--that he not be in default as to his existing payment
obligations to the bank;
--that he show the bank a net worth of over 150
percent of the remaining principal and accrued
interest on the note; and
--that he seek the release in order "to complete a
fair market value sale" and provide the bank with a
copy of the contract showing the sales price and a
with a good faith estimate of the distribution of
the sales proceeds.
In December 1985, Cronkite arranged to sell a parcel of
property that he owned ("lot 8") which was not subject to
Maine National Bank's blanket mortgage. Lot 8, however, was
subject to a mortgage held by the Saco and Biddeford Savings
Bank ("the Saco Bank"). To obtain release of that mortgage,
Cronkite proposed that Maine National Bank subordinate its
interest in lot 136, which was subject to the blanket
mortgage, to the interest of the Saco Bank. The Saco Bank
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was willing to release its mortgage on lot 8 if Maine
National Bank would allow lot 136 to be substituted as
collateral for Cronkite's debt to the Saco Bank.
Although what happened next is the subject of some
dispute, ultimately Maine National Bank declined to
subordinate its interest in lot 136, taking the position that
it had agreed to release parcels under certain conditions but
not to subordinate its interest. Thereafter the Federal
Deposit Insurance Corporation ("FDIC") became the receiver of
Maine National Bank. After exhausting the required
administrative remedies, Cronkite brought the present suit in
the district court against the FDIC for breach of the
settlement agreement based on Maine National Bank's failure
to subordinate its interest in lot 136.1
The magistrate judge granted summary judgment for the
FDIC, ruling that the settlement agreement on its face
required the bank to release property but not to subordinate
it. The district court adopted the magistrate judge's
recommended decision. This appeal followed. Cronkite's main
argument is that since "subordination" is a lesser sacrifice
of interest than a full "release," the latter term
1Cronkite joined as plaintiff a corporation that he
hoped to assist through the sale of lot 8 and named as
defendants two former officers of Maine National Bank. He
also made other claims in addition to breach of contract.
Since the presence of other parties does not affect the legal
issue, and the other claims have not been briefed on appeal,
we need not discuss the other parties or other claims.
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encompasses the former and the settlement agreement should be
read as if it said "release or subordinate." At the very
least, Cronkite says that he should have been allowed to
offer extrinsic evidence.
Considering the issue of interpretation de novo, In re
SPM Mfg. Corp, 984 F.2d 1305, 1311 (1st Cir. 1993), we agree
with the magistrate judge's reading. It is sound policy to
read commercial documents according to their terms.
Subordination may often have less severe consequences for the
holder of an interest than does release, but it is still a
different legal arrangement. And agreements relating to
loans and mortgages are instruments in which words are
normally used with some precision. If one begins by
departing from the plain meaning of a familiar term one may
end by enlarging the contract to embrace transactions never
contemplated. This case well illustrates these precepts of
construction.
The transaction that Cronkite seeks to bring within the
"release" paragraph of the settlement agreement is by no
means the same as the type to which the paragraph is
directed. In the former case, the bank would know not only
that Cronkite was current in his obligations to the bank and
had a net worth of 150 percent of his remaining obligations,
but also that he was selling the released property in "a fair
market value sale." In other words, his secured real
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property would be diminished but he would increase his
immediate net worth by the fair market value of the property,
giving the bank some additional protection.
In the subordination transaction proposed to Maine
National Bank, Cronkite was asking the bank to subordinate
its interest not so that the subordinated property could be
sold but so that some other piece of property could be sold.
There is nothing in this arrangement to assure that the sale
price of the property sold would be as high as the value of
the property with respect to which Maine National Bank was to
subordinate its interest. That bank could easily find that
it had given another creditor a superior position on a very
valuable piece of property so that Cronkite could make a sale
of a much less valuable one. It does not matter whether this
was or was not the case here. The point is, rather, that the
transaction is in no sense the one to which the bank had
committed itself.
Under certain circumstances, extrinsic evidence may be
admissible to cast light on the intention of the parties and
the meaning of their agreement. For the sake of
completeness, we note that Cronkite did not in opposing
summary disposition point to any extrinsic evidence that
would alter the result even if extrinsic evidence were
admissible. Accordingly, we have no occasion to consider
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when under Maine law extrinsic evidence is admissible in
interpreting written contracts.
Affirmed.
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