Executive Leasing Corp. v. Banco Popular De Puerto Rico

March 1, 1995 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 94-1877

EXECUTIVE LEASING CORPORATION, ET AL.,

Appellants,

v.

BANCO POPULAR DE PUERTO RICO, ET AL.,

Appellees.

ERRATA SHEET

The opinion of this court issued on February 27, 1995, is

amended as follows:

On the cover sheet of the opinion strike the line stating:

"[Hon. Hector M. Laffitte, U.S. District Judge]" and insert in

its place the following:

"[Hon. Justo Arenas, U.S. Magistrate Judge.]"

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

No. 94-1877

EXECUTIVE LEASING CORPORATION, ET AL.,

Appellants,

v.

BANCO POPULAR DE PUERTO RICO, ET AL.,

Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Justo Arenas, U.S. Magistrate Judge]

Before

Selya, Circuit Judge,

Bownes, Senior Circuit Judge,

and Stahl, Circuit Judge.

Harold D. Vicente, with whom Vicente & Cuebas were on brief for

appellant.

Nestor Duran-Gonzalez, with whom Jaime E. Toro-Monserrate and

McConnell Valdez were on brief for appellee.

February 27, 1995

BOWNES, Senior Circuit Judge. The plaintiffs,
BOWNES, Senior Circuit Judge.

Executive Leasing Corporation, Manuel Gonzalez Gierbolini and

Luz Iraida Gonzalez (both personally and on behalf of their

conjugal partnership), allege that defendants Banco de Ponce

(now Banco Popular de Puerto Rico, as successor-in-interest)

and BanPonce Corporation (collectively, "Banco") violated

various provisions of the Bank Holding Company Act (BHCA), 12

U.S.C. 1971 et seq., and Puerto Rico law in their loan

transactions with the plaintiffs. The district court entered

summary judgment for the defendants on the BHCA claim and

dismissed the pendent claims without prejudice. Executive

Leasing Corp. v. Banco Popular de Puerto Rico, 1994 WL 448985

(D.P.R. June 20, 1994). The plaintiffs appeal, and we

affirm.

As a threshold matter, we think that the plaintiffs

seriously misconceive their burden on appeal. The plaintiffs

make little effort to develop either their factual

1. See, e.g., Plaintiffs' Brief at 29 ("The analysis of the

allegations or their claims of error; instead, they offer
extrinsic evidence controversy . . . which was proffered by
Executive to the District Court deals adequately with the
conclusory statements, undigested record citations, repeated
matter and it is incorporated by reference."); id. at 35

("Executive explained the civil law methodology [for dealing
assurances that the district court was "thoroughly briefed"
with extrinsic evidence in cases alleging illegality or
fraud] to the District Court and Executive's explanation is
on various matters, and reminders that in reviewing a grant
incorporated by reference."); id. at 41 ("Executive provided

the District Court with Executive's own understanding of . .
of summary judgment, we are "free to consider the entire
. the elements of a BHCA claim . . . . Executive
respectfully directs the attention of this Court to the
record." The plaintiff's brief is less a brief than an
relevant materials, and incorporates them by reference.")
(there follows a citation to forty pages of the plaintiffs'
attempt to incorporate their voluminous district court
brief in opposition to summary judgment). The brief is
littered with many more examples of implicit incorporation in
pleadings by reference.1 We have held that attorneys cannot
lieu of factual and legal argument. See, e.g., id. at 31,

39, 40-41 (two examples), 43-46 (four examples).

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circumvent the page limit of Fed. R. App. P. 28(g) by

incorporating by reference a brief filed in another forum.

Katz v. King, 627 F.2d 568, 575 (1st Cir. 1980). "If counsel

desires our consideration of a particular argument, the

argument must appear within the four corners of the brief

filed in this court." Id. See also Hunter v. Allis-Chalmers

Corp., 797 F.2d 1417, 1430 (7th Cir. 1986) (issues cannot be

preserved by reference to documents filed in the district

court; issues must be argued to be preserved); Prudential

Ins. Co. of Am. v. Sipula, 776 F.2d 157, 161 n.1 (7th Cir.

1985) (practice of incorporation results in a composite brief

of more than fifty pages; "any risk of oversight [by the

court] or of the failure to present properly the arguments on

appeal rests with [appellant]").

These appellate rules are wholly consistent with

our de novo review of summary judgments.2 While we view the

summary judgment record in the light most favorable to the

nonmoving party, and indulge all reasonable inferences in

that party's favor, see, e.g., Vasapolli v. Rostoff, 39 F.3d

27, 32 (1st Cir. 1994), appellants are not excused from

arguing the issues being appealed. We will not rely upon

2. Summary judgment is appropriate when the record reflects
"no genuine issue as to any material fact and . . . the
moving party is entitled to judgment as a matter of law."
Fed. R. Civ. P. 56(c).

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arguments and allegations that are developed only in the

district court pleadings.

In light of these principles, most of the

plaintiffs' appellate arguments must be deemed waived for

lack of developed argumentation. See United States v.

Zannino, 895 F.2d 1, 17 (1st Cir.), cert. denied, 494 U.S.

1082 (1990). We address only those arguments that have

arguably been preserved.3

I. FACTS
I. FACTS

In May, 1983, Executive Leasing Corporation

("Executive") entered a loan agreement with Banco, whereby

Executive obtained a line of credit for its principal

business, long-term vehicle leasing. As collateral,

Executive assigned to Banco the accounts receivable generated

by its lease contracts. Part of the loan was to be used to

discharge Executive's debt to another bank.

3. Alerted by Banco's brief to their possible waiver, the
plaintiffs use their reply brief to "set forth a succinct and
veridic version of the facts . . . with limited references to
the documents which are part of the record." Arguments not
made in the appellant's opening brief, however, are deemed
waived. See, e.g., Sandstrom v. Chemlawn Corp., 904 F.2d 83,

86 (1st Cir. 1990). Moreover, the plaintiffs have not cured
the defects of their opening brief. Although Banco's alleged
loan agreement violations, use of "disinformation," and other
anti-competitive practices may be highly relevant to the
plaintiffs' claims under Puerto Rico law, the reply brief
also fails to raise a genuine issue of material fact with
respect to the BHCA claims.

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As a condition for the loan, Banco allegedly

prohibited Executive from financing its leasing business with

any other bank. This claimed exclusive dealing condition

does not appear in the loan agreement. In fact, the

agreement has an integration clause that provides:

[This agreement] constitutes the entire
agreement among the parties . . . . No
covenant or condition not expressed in
this agreement shall affect or be
effective to interpret, change or
restrict this agreement. No change,
termination or attempted waiver shall be
binding unless in writing.

The exclusive dealing condition was allegedly part

of Banco's scheme to drive Executive out of business and to

take over its vehicle leasing operation for the benefit of

Banco's corporate affiliate, Velco, which happened to be

Executive's main competitor. To that end, Banco allegedly

structured Executive's line of credit to create an inherent

liquidity shortage; made premature and improper charges

against Executive's account; and improperly refused to extend

new credit to Executive when it was not in default.

Executive eventually fell behind in its loan

payments. In December, 1987, Banco called the loan.

Plaintiffs claim that it did so without granting Executive a

meaningful opportunity to obtain alternative financing, or

placing Executive on default status as required by the loan

agreement. In March, 1988, the parties entered an agreement

to terminate the loan agreement. Executive agreed to

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transfer its main assets and all of its lease contracts --

even those in which Banco had no previous interest -- to

Banco, allegedly for the benefit of Velco.

The plaintiffs claim that under the Bank Holding

Company Act, both the initial loan agreement and the 1988

termination agreement were extensions of credit conditioned

upon a prohibited tying arrangement.

II. DISCUSSION
II. DISCUSSION

A. The loan agreement
A. The loan agreement

The plaintiffs argue that Banco violated the BHCA

by extending credit to Executive on condition that it "not

obtain some other credit, property, or service from a

competitor of such bank . . . ." 12 U.S.C. 1972(1)(E).4

Because no such restriction appears in the agreement itself,

and the loan agreement, by its clear language, "constitutes

the entire agreement among the parties," the district court

rejected the plaintiffs' extrinsic evidence of the exclusive

dealing condition, including their own sworn affidavits. See

Executive Leasing, 1994 WL 448985, at *7 (citing P.R. Laws

Ann. tit. 32, App. IV, R. 69(B) (1983) (Parol Evidence Rule)

(evidence extrinsic to an oral or written agreement is

4. Under 12 U.S.C. 1972(1)(E), a bank may not, among other
things, extend credit on the condition or requirement that
"the customer shall not obtain some other credit, property,
or service from a competitor of such bank . . . other than a
condition or requirement that such bank shall reasonably
impose in a credit transaction to assure the soundness of the
credit."

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inadmissible where "all the terms and conditions constituting

the true and final intention of the parties have been

included"); P.R. Laws Ann. tit. 31, 3471 (1991) (Article

1233 of the Civil Code) ("If the terms of a contract are

clear and leave no doubt as to the intentions of the

contracting parties, the literal sense of its stipulations

shall be observed. . . ."); Vulcan Tools of Puerto Rico v.

Makita USA, Inc., 23 F.3d 564, 567 (1st Cir. 1994) (applying

Puerto Rico law; "[w]hen an agreement leaves no doubt as to

the intent of the parties, a court should not look beyond the

literal terms of the contract.")).

Under Puerto Rico law, an agreement is "clear" when

it can "'be understood in one sense alone, without leaving

any room for doubt, controversies or difference of

interpretation . . . .'" Catullo v. Metzner, 834 F.2d 1075,

1079 (1st Cir. 1987) (quoting Heirs of Ramirez v. Superior

Court, 81 P.R.R. 347, 351 (1959)). The plaintiffs concede

that the loan agreement is clear. They argue, however, that

the written agreement was not in fact the entire agreement,

and that we must consider extrinsic evidence of the parties'

intent with respect to integration. This argument is

supported by a selective reading of Article 1233 of Puerto

Rico's Civil Code, P.R. Laws Ann. tit. 31, 3471:

If the terms of a contract are clear
and leave no doubt as to the intentions
of the contracting parties, the literal

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sense of its stipulations shall be
observed.

If the words should appear contrary to
the evident intention of the contracting
parties, the intention shall prevail.

Relying exclusively on the second sentence quoted, the

plaintiffs argue that the words of the integration clause are

in fact "contrary to the evident intention of the contracting

parties." Yet to consider the extrinsic evidence at all, the

court must first find the relevant terms of the agreement

unclear. That requirement not being met, the district court

correctly went no further. See Vulcan, 23 F.3d at 564

(because the contractual term "non-exclusive" is clear and

unambiguous, there is "no need to dwell on" extrinsic

evidence of the supplier's alleged promise to limit the

number of its distributors); Ballester Hermanos, Inc. v.

Campbell Soup Co., 797 F. Supp. 103, 108 n.4 (D.P.R. 1992)

(under Puerto Rico's Civil Code and parol evidence rule,

parties may resort to extrinsic evidence of circumstances

surrounding the document "to assist in the interpretation of

an apparent conflict in the written text") (emphasis added);

Nike Int'l Ltd. v. Athletic Sales, Inc., 689 F. Supp. 1235

(D.P.R. 1988) (under Article 1233 of the Civil Code, intent

of the parties "is to be gleaned first from the literal terms

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of the contract and then, if necessary, from the

circumstances surrounding its execution") (emphasis added).5

The plaintiffs attempt to distinguish our decision

in Vulcan Tools, 23 F.3d at 567-68, where we excluded

extrinsic evidence that was offered to vary a clear and

unambiguous term of the contract, on the ground that fraud

and illegality were not alleged. This argument is made only

5. The plaintiffs cite several civil law treatises for the
proposition that the correct methodology for determining the
intention of contracting parties is "to consider, not only
the written contract itself, but all other evidence which
would otherwise be admissible." The admissibility of the
"other evidence" under Puerto Rico law, however, depends in
the first instance on the clarity of the written contract.
See Vulcan Tools, 23 F.3d at 567-68; Mercado-Garcia v. Ponce

Fed. Bank, 979 F.2d 890, 894 (1st Cir. 1992) (where both

parties offered extrinsic evidence contradicting the clear
terms of a promissory note, court is nonetheless "bound to
look no further than the note itself").

We note, too, that the plaintiffs' extrinsic evidence of
the actual practice of the parties would not have blocked
summary judgment on their 1972(1)(E) claim. For example,
Banco tolerated Executive's repeated overdrafts and delays in
payment, even though the loan agreement required Executive to
pay on time. The practice of permitting late payments and
overdrafts strikes us as a reasonable accommodation to
Executive; it raises no genuine question regarding the
integration of the agreement. As for Banco's other alleged
deviations from the loan agreement, the integration clause
provides that "no change . . . shall be binding unless in

writing" (emphasis added). This is not a representation that
there would never be any variance, however small, from the
agreement. With respect to terms that the parties intended
to be binding and enforceable, nothing plaintiffs have
articulated on appeal leads us to doubt that the loan
agreement should "be deemed as complete" under Puerto Rico's
parol evidence rule. P.R. Laws Ann. tit. 32, App. IV, R.
69(B). In fact, on several occasions when Banco renewed
Executive's line of credit or adjusted the terms of the loan,
it did so in writing as required by the loan agreement.

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by the attempted incorporation of a surreply filed with the

district court; accordingly, it has been waived. In their

original complaint, the plaintiffs made no allegation

regarding exclusive dealing, let alone fraud. Fraud was not

alleged in the amended complaint, or even in the tendered,

but rejected, second amended complaint.

Even were we to reach the argument of illegality,

we would reject it on the merits. The plaintiffs' extrinsic

evidence was offered not to illuminate (for example) the

circumstances under which the agreement was made, see R.

69(B), but to contravene an express term of the agreement.

The plaintiffs have cited no authority to suggest that the

illegality exception to Puerto Rico's parol evidence rule

sweeps this far. The district court correctly excluded any

evidence of the exclusive dealing condition.

B. The termination agreement
B. The termination agreement

Under the BHCA, banks may not require, as a

condition for extending credit, that "the customer provide

some additional credit, property, or service to a bank

holding company of such bank, or to any other subsidiary of

such bank holding company." 12 U.S.C. 1972(1)(D). The

plaintiffs allege that Banco violated 1972(1)(D) by forcing

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Executive to surrender its vehicle leasing business to Banco

for the benefit of its leasing affiliate, Velco.6

The plaintiffs make only a cursory argument that

Executive was in fact required to provide "additional . . .

property" (as opposed to the collateral for the loan) within

the meaning of the BHCA. For a "detailed exposition of the

facts" and the plaintiffs' legal theories, we are directed to

their pleadings below. We rule that the plaintiffs' argument

under 1972(1)(D) has been waived.7

We turn now to two claims of procedural error,

which we assess in light of their effect (if any) upon the

summary judgment proceedings.

C. The second amended complaint
C. The second amended complaint

The plaintiffs argue that the district court abused

its discretion by denying them leave to file a second amended

complaint. On January 18, 1994, the district court heard

arguments on the need for a stay of discovery pending Banco's

motion for summary judgment on the BHCA claims. The

plaintiffs gave no hint that a second amended complaint was

in the offing. By order of the court, Banco was to move for

6. Banco incorrectly asserts that the plaintiffs never
invoked 1972(1)(D) before the district court. In fact,
references to that section appear in the plaintiffs'
opposition to summary judgment.

7. We therefore need not decide whether the workout of the
loan constituted an "exten[sion of] credit" within the
meaning of the BHCA.

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summary judgment by February 7, 1994, and the trial was

scheduled for April 18, 1994. On February 1, 1994, the

plaintiffs unexpectedly moved for leave to file a second

amended complaint. The motion remained pending when the

district court entered summary judgment for Banco.

Rule 15(a) of the Federal Rules of Civil Procedure

provides in part that leave to amend pleadings "shall be

freely given when justice so requires." Absent factors such

as undue delay, bad faith or dilatory motive, repeated

failure to cure deficiencies by previous amendments, undue

prejudice to the opposing party, or "futility of amendment,"

the leave sought should be granted. Foman v. Davis, 371 U.S.

178, 182 (1962).

We are confident that the district court did not

abuse its "considerable discretion" by implicitly rejecting

the second amended complaint. Rodriguez v. Banco Central

Corp., 990 F.2d 7, 14 (1st Cir. 1993). This was the second

time that the plaintiffs had attempted to amend their

complaint to forestall a dispositive motion (in this

instance, Banco's summary judgment motion). The first motion

for leave to file an amended complaint came after the

original complaint was dismissed. Moreover, after nearly

five years of litigation and a prior amendment of the

complaint, and with the trial less than three months away,

the plaintiffs made allegations for the first time against

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Banco Popular, the successor-in-interest to defendant Banco

de Ponce, based on conduct that took place after the

termination of the loan agreement -- conduct that "has

continued to this date." "The further along a case is toward

trial, the greater the threat of prejudice and delay when new

claims are belatedly added." Rodriguez, 990 F.2d at 14.

Although the district court should have "state[d] explicitly

its reasons for den[ying]" leave to amend, Kay v. New

Hampshire Democratic Party, 821 F.2d 31, 34-35 (1st Cir.

1987), this reason for the denial is plain from the

procedural history of the case: the plaintiffs were trying

to prolong discovery and postpone a ruling on the summary

judgment motion in the hope that "something concrete will

eventually materialize . . . ." Dow v. United Bhd. of

Carpenters & Joiners of Am., 1 F.3d 56, 58 (1st Cir. 1993).

The tendered complaint would have been futile in

any event because it could not have blocked summary judgment

on the jurisdictional BHCA claims. See Kay, 821 F.2d at 34

("for the sole reason that [the proposed] amendment would

have been futile, it was properly denied") (citing Foman, 371

U.S. at 182). On appeal, the plaintiffs point to no

particular amendment that might with appropriate discovery

have raised a genuine issue of material fact.

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For all of these reasons, we reject the argument

that the plaintiffs should have been allowed to file a second

amended complaint.

D. The stay of discovery
D. The stay of discovery

The plaintiffs argue that the district court abused

its discretion by staying discovery during the summary

judgment proceedings, and by denying their Fed. R. Civ. P.

56(f) motion for additional discovery. This argument has not

been adequately developed on appeal and must be deemed

waived. See, e.g., Plaintiffs' Brief at 26 ("Executive also

showed, with great particularity, where discovery stood at

the time. [That discussion is incorporated by reference[.] .

. . ]") (citing two district court pleadings). We have

searched the plaintiffs' brief in vain for a showing that

their discovery requests, whether those pending at the time

of the stay or those made pursuant to Rule 56(f), were

necessary or even relevant to their opposition to summary

judgment on the BHCA claims. Again, the plaintiffs fail to

address the specific manner in which they were allegedly

prejudiced by the claimed error.

Double costs are assessed against plaintiffs'

attorneys pursuant to Fed. R. App. P. 38. and 28 U.S.C.

1927.

Affirmed.
Affirmed.

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