Darr v. Muratora

                  UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT

                                           

No. 93-1154

          STEPHEN DARR, TRUSTEE OF COLUMBUS MORTGAGE AND
             LOAN CORPORATION OF RHODE ISLAND, INC.,

                       Plaintiff, Appellee,

                                v.

                 JOSEPH R. MURATORE, SR., ET AL.,

                     Defendants, Appellants.

                                           

           APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF RHODE ISLAND

          [Hon. Ronald R. Lagueux, U.S. District Judge]
                                                      

                                           

                              Before

                  Cyr and Stahl, Circuit Judges,
                                               
                   and Fuste,* District Judge.
                                             

                                           

  Paul J. Bogosian, Jr.  with whom Hodosh, Spinella & Angelone  were
                                                              
on brief for appellants.
  Joseph Avanzato  with whom  John F.  Bomster and  Adler Pollock  &
                                                                    
Sheehan Incorporated were on brief for appellee.
                  

                                           

                         November 1, 1993
                                           

                  

*Of the District of Puerto Rico, sitting by designation.

          FUSTE,  District Judge.   The  Trustee  for a  bankrupt
          FUSTE,  District Judge.
                                

mortgage lending institution brought an action against the former

chairman  and chief executive  officer of the  company, his wife,

who was also an officer and director  of the bankrupt lender, and

three   separate   real  estate   and   development  corporations

controlled by the couple.  The Trustee's action sought to recover

over two million  dollars allegedly owed to  the bankrupt lending

institution  by defendants.  The Trustee contends that defendants

first, improperly created the debt, second, fashioned a favorable

calculation  of the amount  due, and third,  incorrectly declared

the loans repaid  through a questionable real  estate conveyance.

The  Trustee claims that defendants violated their fiduciary duty

to  the  institution  and  to  the  lender's  numerous  debenture

holders.  

          Defendants   argue   that   no   fiduciary   duty   was

transgressed,  and counter that  the Trustee committed  waste and

failed  to mitigate  damages to the  bankrupt estate  by allowing

foreclosure  on the properties  which allegedly were  conveyed in

order to satisfy  the debt.  They also take issue with the method

of debt calculation utilized by the district court.  In addition,

defendants  contend that  they  are  entitled  to  a  significant

reduction of any  outstanding debt because of the  equity in, and

rental income  from, the conveyed  real estate, and to  a further

reduction of the debt because of the Trustee's alleged failure to

prevent  the foreclosures of the properties.  Finally, defendants

                               -2-
                                2

argue  that they  should receive  a setoff  of  any debt  owed to

plaintiff as  a result  of various  unrelated expenses  allegedly

advanced by defendants to the plaintiff.

          In  the   instant  appeal,  defendants   challenge  two

decisions  of the  district court:   A  grant of  partial summary

judgment  with  respect  to  the  total remaining  debt  owed  by

defendants,  and the court's certification of final judgment.  We

now affirm the district court's partial summary judgment and hold
    affirm

that  final judgment  certification was  justified.   Defendants'

claims  of payment through  property transfer, waste,  failure to

mitigate, setoff, and miscalculation of debt are unavailing  as a

matter of law.

                                I.

                            Background
                                      

          From August 1961 to  December 1991, Defendant-Appellant

Joseph R. Muratore,  Sr. ("Mr. Muratore") owned and  controlled a

mortgage  lending   institution,   Columbus   Mortgage   &   Loan

Corporation of Rhode  Island, Inc., as  well as its  wholly-owned

real   estate   development  corporation   subsidiary,   Columbus

Development Corporation.  The nature of the business  of Columbus

Mortgage was to serve as  a mortgage lending firm specializing in

residential  real  estate  loans  secured  by  first  and  second

mortgages  on real  estate.   At  some  point, however,  Columbus

Mortgage entered into the  business of making unsecured  loans in

its  real estate dealings,  financing them in  large part through

                               -3-
                                3

the sale of  debentures.1  Columbus Mortgage  eventually took its

business  a  step  further  and  sold  a  second   generation  of

debentures  to   refinance  the  first  generation   of  maturing

obligations.   As  of December  31, 1989,  Columbus Mortgage  had

$4,400,139 in  outstanding debentures.  It is undisputed that Mr.

Muratore owed a fiduciary duty  to the debenture holders, as well

as to  Columbus Mortgage.   In February  1991, Columbus  Mortgage

declared  bankruptcy, acknowledging  its inability  to  repay its

debts in full, including its debentures.

          Mr. Muratore and his  wife, Defendant-Appellant Rose E.

Muratore  ("Mrs.   Muratore"),  controlled  other   Rhode  Island

corporations, officially  unrelated to  Columbus Mortgage,  that,

inter alia, were  in the business of selling  and developing real

estate:   Defendants-Appellants Muratore Agency,  Inc. ("Muratore

Agency"), Muratore Realty Corp. ("Muratore Realty"), and Shawomet

Holding Associates ("Shawomet") (collectively  referred to as the

"Separate Muratore Companies").   We refer, collectively,  to all

Muratore  persons  and  Muratore  corporations as  the  "Muratore

Defendants".

          There  is  no  doubt  that  Columbus  Mortgage provided

several unsecured  loans  to  the  Separate  Muratore  Companies,

drawing funds from  the pool of money accumulated  by the selling

of debentures to citizens of  Rhode Island.  These loans  were by

                    

     1"Debentures  are unsecured debt, as opposed to bonds, which
are secured by the assets of the issuing company."  In  re Worlds
                                                                 
of Wonder  Sec. Litigation,  814 F.Supp.  850, 854 n.2  (N.D.Cal.
                          
1993).   See also  SEC v.  Howatt, 525  F.2d 226,  229 (1st  Cir.
                                 
1975).

                               -4-
                                4

no means insignificant.  In  fact, loans to the Separate Muratore

Companies,  most  or   all  of  which  were   unsecured,  totaled

$2,044,313  as of  June  30,  1989, more  than  half of  Columbus

Mortgage's total assets of $3,973,791 at that time.  In addition,

the  record strongly suggests that Columbus Mortgage's funds were

used to  pay miscellaneous personal  debts of Mr. Muratore.   The

record  contains  no proof  of  repayment  from  Mr. Muratore  to

Columbus  Mortgage.    The  bottom  line  is  that  the  Muratore

Defendants claim that their  total indebtedness was approximately

$900,000 in  December 1990, and  $1,200,000 in 1992.   Plaintiff-

Appellee  Stephen Darr, Chapter 11 Bankruptcy Trustee of Columbus

Mortgage ("Trustee"), argues that the defendant's  obligation was

over $2,000,000.

          The Muratore  Companies paid  off some  portion of  the

debt in  cash.  However,  the payments were applied  to principal

rather than  to accumulated  interest.   The Muratore  Defendants

claim   that  their  remaining  debt  to  Columbus  Mortgage  was

discharged in full on or about December 15, 1990, when two pieces

of real  estate of disputed  equity value were conveyed  from the

Muratore  Defendants to  Columbus Mortgage.2    In an  affidavit,

Mr. Muratore, an experienced appraiser in his own right, affirmed

under oath  that at the  time of the conveyance  he believed that

the fair market value of  the properties was $2,000,000, and that

approximately  $800,000  were  still   owed  on  the  properties'

                    

     2The two properties  conveyed by the Muratore  Defendants to
Columbus Mortgage are  located at 1845 Post  Road, Warwick, Rhode
Island, and 275-277 Atwells Avenue, Providence, Rhode Island.

                               -5-
                                5

mortgages.  Thus, according to  Mr. Muratore, the equity value of

the properties was  approximately $1,200,000.  In  the affidavit,

Mr. Muratore also referred to  an independent aggregate appraisal

of the properties,  before encumbrances,  of $1,660,000,  meaning

that as of  December 15, 1990  the equity  in the properties  was

approximately $860,000.   Scanning the  record, we  only find  an

independent  appraisal of  the  Post  Road  Property,  valued  at

$856,000 as  of December  19, 1992.   The Trustee  challenges the

Muratore Defendants'  valuation of the property,  contending that

given the unpaid portion of  the mortgages on the two properties,

their aggregate equity value was less than $100,000.  

          The  Muratore   Defendants  claim   that  the   Trustee

committed waste by failing to refinance the properties' mortgages

and allowing  foreclosure, causing  the estate  to lose  whatever

equity  remained.  Columbus Mortgage, through the Trustee, argues

that  it permitted foreclosure  on the properties  pursuant to 11

U.S.C.    362 because  they lacked equity  value.3   The Muratore

Defendants contend that  they deserve a  reduction of the  amount

owed to  Columbus Mortgage equal to the sum  of the equity in the

properties, the accrued rental income derived from the properties

before  foreclosure,  and  funds owed  to  the  Separate Muratore

Companies  by   Columbus  Mortgage  stemming   from  transactions

unrelated to the debt at issue in this case.  

                    

     311  U.S.C.   362  provides  for an  automatic  stay on  the
property   of  an  estate   which  is  undergoing   voluntary  or
involuntary bankruptcy.  However,  under   362(d)(2)(A), a  party
in interest may  obtain relief from the stay if the debtor has no
equity in the property.

                               -6-
                                6

          Two months after  the conveyance of the  properties, on

February  15,  1991,  Columbus Mortgage,  under  the  guidance of

Mr. Muratore, filed  a voluntary  Chapter 11  bankruptcy petition

with the United States Bankruptcy Court for the District of Rhode

Island.  11 U.S.C.   1121.   At first, Columbus Mortgage operated

as  a debtor  in possession;  however,  the creditors'  committee

brought an adversary  proceeding in the bankruptcy court  for the

purpose of collecting money damages from the Muratore Defendants.

In early April  1992, the adversary  proceeding was withdrawn  to

the  United  States District  Court  for  the District  of  Rhode

Island.   Soon thereafter,  Stephen Darr  was appointed  Columbus

Mortgage's  Bankruptcy Trustee.  The Trustee, substituted for the

creditors'  committee, continued  a  six-count action  to recover

damages allegedly sustained  by the estate and  supposedly caused

by the Muratore Defendants.4  

          On October 14,  1992, the Trustee filed a  Fed. R. Civ.

P. 56 motion for partial summary  judgment and for entry of final

judgment on Count  III of the first amended  complaint alleging a

debt due and owing.  Fed. R. Civ. P. 54(b).  On January 12, 1993,

the district court granted the Trustee's motion and entered final

judgment  on Count  III against  the Muratore  Defendants  in the

amount of $2,146,034.24.  The  district court concluded that  the

Muratore Defendants  were in  fact one  entity,  one corpus,  and

                    

     4The  Trustee's  six-count  action  includes  the  following
allegations:   Count  I,  Breach of  Fiduciary  Duty;  Count  II,
Conversion; Count  III, Debt Due  and Owing; Count IV,  Breach of
Contract, and Count V, a second Breach of Contract.  

                               -7-
                                7

ordered final  judgment on Count  III because there was  "no just

reason for  delay."  The  district judge's primary  rationale for

Rule 54(b) certification was that the Muratore Defendants' assets

available to settle  the claim were barely sufficient  to pay the

debt and that  relief should be granted to  the debenture holders

as soon as possible.   The court noted that entry  of judgment on

Count III  would probably cause  the other counts to  become moot

because of the limited resources of the Muratore Defendants.  

                               II.

                         Summary Judgment
                                         

          In order to  review the district court's  certification

of  summary judgment  on Count  III of  the  adversary proceeding

against Mr. Muratore, we must decide whether the district court's

ruling fulfilled the  requirements for summary judgment  and Rule

54(b) certification.5

A.  Standard for Review
                       

          Our review  of summary  judgment decisions  is plenary.

Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990).  Summary
                    

judgment  is appropriate "if  the pleadings, depositions, answers

                    

     5We do not  disturb the district court's  determination that
the various actorswho constitute theMuratore Defendants arealter-
egos of one  another.  That finding by the district court has not
been seriously  challenged  on appeal  and rests  on sound  legal
principles.  See Oman Int'l Fin. Ltd. v. Hoiyong Gems Corp.,  616
                                                           
F. Supp. 351, 363-66  (D.R.I. 1985) (discussing law of  corporate
collectivity)  (affirmatively cited  in  United Elec.,  Radio and
                                                                 
Mach. Workers of  America v. 163 Pleasant Street  Corp., 960 F.2d
                                                       
1080, 1096  (1st Cir.  1992)); cf. Vucci  v. Myers  Bros. Parking
                                                                 
Sys., 494 A.2d  530, 535-36 (R.I.  1985).  Thus, we  will discuss
    
the Columbus Mortgage  debt as an obligation of  the aggregate of
defendants  without   segregating  loans  among   the  particular
Muratore entities.

                               -8-
                                8

to interrogatories,  and admissions  on file,  together with  the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of  law."  Fed. R.  Civ. P. 56(c).  In  applying this

standard to the  instant case, we  view the  record in the  light

most favorable to the nonmovants, the  Muratore Defendants.  Bank
                                                                 

One Texas, N.A.  v. A.J.  Warehouse, Inc., 968  F.2d 94, 97  (1st
                                         

Cir. 1992).  A nonmovant, however, bears the burden of placing at

least a  single material fact  into dispute after a  moving party

offers evidence of the absence of a genuine issue.  See Jaroma v.
                                                                 

Massey, 873  F.2d 17, 20  (1st Cir. 1989) (per  curiam); White v.
                                                                 

Hearst Corp., 669  F.2d 14, 17 (1st  Cir. 1982).  "[T]here  is no
            

issue for trial unless there is sufficient  evidence favoring the

nonmoving party  for a jury to return  a verdict for that party."

Anderson v.  Liberty Lobby,  Inc., 477 U.S.  242, 249 (1986).   A
                                 

nonmoving party  has a duty  to oppose a cogent  summary judgment

motion.  Id.
            

B.  Discussion
              

          Defendants  assert that there  exist genuine  issues of

material fact regarding the debt owed to Columbus  Mortgage which

preclude a grant of summary judgment.   In order to address these

allegations, we must  examine whether the real  estate conveyance

was a valid debt payment, whether the defendants were entitled to

any reductions  of the debt, and  whether it was correct  for the

defendants to  apply payments  to the principal  rather than  the

interest component of the debt.  

                               -9-
                                9

    1.  Were Real Estate Conveyances Debt Payments?
                                                   

          The  record  clearly  demonstrates  that  the  Muratore

Defendants  owe Columbus  Mortgage a  significant  sum of  money.

Defendants  admit  to  a  certain  amount  of  debt  to  Columbus

Mortgage,  but   argue  that  prior  to  filing  for  Chapter  11

bankruptcy,  two  valuable  properties  were  conveyed  from  the

Separate Muratore  Companies  to  Columbus  Mortgage  in  partial

satisfaction of the admitted debt.  

          Regardless  of the  fiduciary  propriety  of the  real-

estate- for-debt  transaction,6 Mr. Muratore admitted  before the

district court that the obligation created by his  arrangement of

Columbus Mortgage loans  to the Separate Muratore Companies was a

money debt.  There was no agreement that the debt could be repaid

through a  transfer of properties chosen by  the debtor.  Nor was

there evidence  of custom from  which such an agreement  could be

implied.  Since  loans are to be  normally repaid with money  and

not with houses or any other less liquid type of asset, even when

viewing the record  in the light most hospitable  to the Muratore

Defendants  we find untenable  the argument that  the real-estate

                    

     6This court  finds questionable  that the  Separate Muratore
Companies  attempted  to  repay  a  seven-digit  debt  through  a
property  transfer at  the direction  of Mr.  Muratore when,  two
months later,  the creditor, Columbus Mortgage, voluntarily filed
a  Chapter  11  bankruptcy  petition  also by  the  hand  of  Mr.
Muratore.   The facts  undisputedly show  that  Mr. Muratore  was
effectively   in  control  of   both  the  creditor   and  debtor
institutions involved in these transactions.   It is evident that
a  large cash debt  was supposedly satisfied at  a time and under
circumstances  which greatly  benefitted the  Muratore Defendants
and harmed the soon-to-be declared bankrupt company controlled by
Mr. Muratore, working to the detriment of the unsecured creditors
of that company.  

                               -10-
                                10

transfer satisfied  the debt.   We agree with the  district court

that  the debt  and  the real  estate  transaction have  separate

identities.  No genuine factual dispute revolves around the issue

of loan  satisfaction  by the  real estate  conveyance.   Without

prejudice to the bankruptcy court's final assessment of any claim

by the Muratore Defendants arising from the real estate transfer,

the money debt remains and the district court properly decided to

enforce the payment  of the same.  We now turn to a determination

of the extent of the debt.      

     2.  Waste, Failure to Mitigate, and Setoff
                                               

          The district  court held as  a matter of law  that what

the  Muratore Defendants  have defined  as waste  and  failure to

mitigate  are unavailing theories  as they pertain  to the motion

for summary judgment on Count III.  We agree.  Both the waste and

failure to mitigate theories operate on  the presumption that the

real-estate  conveyance   was  a  payment  toward   the  Muratore

Defendants' debt.  The district  court found that the real-estate

conveyance  cannot rightly  be deemed the  equivalent of  a money

payment  on the  Muratore Defendants'  debt  and, therefore,  any

credit or  complaint relating  to the  transferred properties  is

entirely separate  from the  debt owed by  defendant, and  may be

brought up  before the bankruptcy  court.  The $18,000  in rental

income that  the bankrupt estate  supposedly received due  to its

possession of the properties is no different.  

            The question  of setoff  is different  than those  of

waste  and failure  to mitigate,  in that  defendants' theory  of

                               -11-
                                11

setoff   involves  debts  not  dependant  on  the  real  property

conveyance.  The  Muratore Defendants allege a right  to a setoff

of   $418,046.25  under  11  U.S.C.   553,7  citing  evidence  of

indebtedness  carried on the  ledger cards of  Columbus for wages

paid by the Muratore Defendants to employees of Columbus, and for

rental obligations due from Columbus. 

          Section  553 does not  create new substantive  law, but

incorporates in bankruptcy the common law right of setoff, with a

few additional restrictions.  U.S.  ex rel. I.R.S. v. Norton, 717
                                                            

F.2d 767, 772 (3d Cir. 1983).  The right of setoff allows parties

that  owe mutual debts to each  other to assert the amounts owed,

subtract one from  the other, and  pay only the  balance.  In  re
                                                                 

Bevill, Bresler & Schulman Asset Mgmt. Corp., 896 F.2d 54, 57 (3d
                                            

Cir. 1990).   However, allowing setoff undermines a basic premise

of bankruptcy law,  equality among creditors, by  "permit[ting] a

creditor  to obtain full satisfaction of a claim by extinguishing

an equal amount of the creditor's obligation to the debtor . .  .

in effect,  the creditor receives a 'preference'."   Id. (quoting
                                                        

In re Braniff Airways, Inc.,  42 B.R. 443, 448 (Bankr. N.D.  Tex.
                           

1984)). As a result, setoff in the context of a bankruptcy is not

automatic.  Under section 553, debts cannot be setoff unless they

are mutual.   Mutuality requires  that the debts "be  in the same

                    

     7In pertinent part, 11 U.S.C.   553 provides:  "[T]his title
does not affect any right of  a creditor to offset a mutual  debt
owing  by such  creditor  to  the debtor  that  arose before  the
commencement of the case under this title against a claim of such
creditor against the debtor that arose before the commencement of
the case."  11 U.S.C.   553(a) (1993).

                               -12-
                                12

right  and  between  the  same  parties,  standing  in  the  same

capacity."  4 Collier  on  Bankruptcy    553.04 (15th  ed. 1992).
                                     

Where the liability  of the party seeking the  setoff arises from

breach of a fiduciary duty, mutuality of debts does not exist and

therefore no  setoff is available.   Id.   See also In  re Drexel
                                                                 

Burnham  Lambert  Group,  Inc.,  113  B.R.  830,  847-48  (Bankr.
                              

S.D.N.Y. 1990); In re  Esgro, Inc., 645 F.2d  794, 797 (9th  Cir.
                                  

1981)  (discussing precursor to section 553); Allegaert v. Perot,
                                                                

466 F.Supp. 516, 518 (S.D.N.Y. 1978).  

          If the district court correctly found that Mr. Muratore

breached  his fiduciary duty to Columbus  Mortgage by causing the

unsecured loans to  the Muratore Defendants to be  made, then the

debts of the two parties are not mutual and no setoff  is allowed

as a  matter of  law.   The  district court  determined that  the

Muratore Defendants violated their fiduciary responsibilities and

assisted in the bankruptcy of Columbus Mortgage by taking actions

to  their benefit  and  against the  interests  of the  debenture

holders.     The  Muratore   Defendants  argue   that  the   loan

transactions carried  on between  Columbus Mortgage,  on the  one

side,  and the Separate Muratore Companies  and the Muratores, on

the   other,   were  honest,   arm's-length   business  dealings.

Defendants  cite their accounting  documentation as proof  of the

legitimacy of  the loans and terms at issue.  After reviewing the

record,   we  cannot   find  error   in   the  district   court's

determination  that the  Muratore  Defendants seriously  breached

their  fiduciary  obligations.   This  breach  of  fiduciary duty

                               -13-
                                13

created a  lack of  mutuality between  the unsecured  loans which

were made to the Muratore Defendants by Columbus Mortgage and any

money advanced to  Columbus Mortgage by the  Muratore Defendants.

As a result, there is no genuine issue of material fact regarding

the propriety of  any setoff  of the  debt owed  by the  Muratore

Defendants.  

     3.  Applying Cash Payments to Interest
                                           

          Defendants  next   argue  that  summary   judgment  was

improper because of  a dispute about the effect  of partial money

payments on  their debt obligations.   Defendants claim  that the

amount  owed is  lower than  the  trial court  found because  the

partial payments were to be used to reduce the principal (without

capitalizing   unpaid   interest)   rather  than   first   paying

accumulated   interest.8    The  district  court  concluded  that

repayment should have been  on an interest-first basis  and found

that the Separate Muratore Companies owed substantially more than

previously suggested  by the  Columbus Mortgage  account ledgers.

The  Muratore Defendants  argue that the  district court  did not

have  sufficient evidence  to decide  that  the repayment  method

should have been on an interest-first basis.  

          It  is undisputed that  the record contains  no express

agreement  detailing the method  for repaying the  loans.  Sample

promissory  notes  used  by Columbus  Mortgage  suggest  that the

standard practice for  Columbus Mortgage was payment  of interest

                    

     8By  allowing the payment  of principal first,  the Muratore
Defendants were able  to save over $600,000 in  interest on their
loans.

                               -14-
                                14

first,  with the  remainder  of any  given  payment going  toward

decreasing  the principal.    Defendants did  not place  into the

record  any promissory notes allowing payment of principal first,

then  interest.   Defendants  rely  primarily  on unsubstantiated

statements and assertions that question the evidence submitted by

the Trustee, and  fail to present hard evidence  to cast doubt on

the  Trustees'  or  the  district  court's  calculations  of  the

outstanding obligation.  Defendants assert that such calculations

were  done incorrectly and  were based on  incorrect assumptions,

but   provide  no   evidenced  alternatives   to  support   these

assertions.  In short, Defendants offer no "significant probative

evidence"  that  creates a  genuine  dispute about  the  terms of

repayment.   Anderson v. Liberty  Lobby, Inc., 477 U.S.  242, 249
                                             

(1986).  

          We  note  further that  the dispute  over the  terms of

repayment ultimately presents  not a factual question for  a jury

but a legal  question for the court.   While Rhode Island  law is

unclear on the subject, the  normal rule throughout the nation is

that, absent  an express  agreement to the  contrary, there  is a

presumption that  loan payments are  made to  interest first  and

then principal.9   See  In re Department of  Energy Stripper Well
                                                                 

Exemption  Litigation, 944 F.2d  914, 916  (Temp. Emer.  Ct. App.
                     

                    

     9Some courts have referred to this principle as the "'United
States Rule' on partial payments."  Shutts v.  Phillips Petroleum
                                                                 
Co., 567  P.2d 1292,  1321 (Kan. 1977),  cert. denied.,  434 U.S.
                                                      
1068  (1978).    The  rule   has  ancient  roots;  it  was  first
acknowledged by the  Supreme Court over a century and a half ago.
See Story v. Livingston, 38 U.S. 359, 371 (1839).
                       

                               -15-
                                15

1991); Bonjorno  v. Kaiser  Aluminum &  Chemical Corp.,  865 F.2d
                                                      

566, 576 (3d Cir. 1989), aff'd in part and rev'd in part on other
                                                                 

grounds,  494  U.S. 827  (1990);  Devex Corp.  v.  General Motors
                                                                 

Corp., 749 F.2d  1020, 1025 n.6 (3d Cir. 1984), cert. denied, 474
                                                            

U.S. 819 (1985); Nat G.  Harrison Overseas Corp v. American Barge
                                                                 

Sun  Coaster, 475  F.2d 504,  507 (5th  Cir. 1973);  Whiteside v.
                                                                 

Washington  Loan and Trust Co., 95 F.2d  83, 87 (D.C. Cir. 1937);
                              

Torosian v. National Capital Bank,  411 F. Supp. 167, 173 (D.D.C.
                                 

1976); Shutts  v. Phillips  Petroleum  Co., 567  P.2d 1292,  1321
                                          

(Kan.  1977), cert.  denied,  434 U.S.  1068  (1978); Landess  v.
                                                                 

State,  335 P.2d  1077  (Okla. 1958);  see also  45 Am.  Jur. 2d,
                                               

Interest and Usury,   99,  pp. 88-89; 47 C.J.S., Interest,    66,

pp. 72-73.

          As  the  United  States  Rule  contemplates  that  loan

repayments  ordinarily  are  to be  credited  first  to interest,

absent a  contrary agreement,  we are not  inclined to  conjure a

different   rule  under  Rhode  Island  law.    Moreover,  sample

promissory notes, testimony, and the national custom of crediting

loan  repayments  first  to interest,  all  support  the district

court's  conclusion.  Since there was  no genuine factual dispute

about the property transfer, the alleged reductions or the manner

of  debt calculation, we  hold that the  district court correctly

calculated the outstanding debt at $2,146,034.24.  

                               III.

                     Entry of Final Judgment
                                            

A.  Standard for Review
                       

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                                16

          A  district court  "may  direct the  entry  of a  final

judgment  as to one or  more but fewer than all  of the claims or

parties only upon an express  determination that there is no just

reason for delay and upon an  express direction for the entry  of

judgment."  Fed. R. Civ. P. 54(b).  Orders pursuant to Rule 54(b)

are reviewable by the Court of Appeals for abuse of discretion by

the trial  court.  Sears, Roebuck & Co.  v. Mackey, 351 U.S. 427,
                                                  

437 (1956); Ginett  v. Computer Task Group, Inc.,  962 F.2d 1085,
                                                

1092 (2d Cir. 1992).  This court, however, has limited the Mackey
                                                                 

holding  to cases  like the  instant one  in which  a Rule  54(b)

certificate has  been granted  by the district  court.   Makuc v.
                                                                 

American Honda Motor Co., 692 F.2d 172, 173 (1st Cir. 1982).  
                        

          In  Spiegel v. Trustees  of Tufts College,  843 F.2d 38
                                                   

(1st Cir.  1988), we held that the district court's certification

of a final  judgment pursuant to Rule 54(b)  must satisfy certain

criteria.  First,  the judgment must have the  "requisite aspects

of finality."  Id. at  43 (citing Morrison-Knudsen Co. v. Archer,
                                                                

655  F.2d 962, 965 (9th Cir. 1981)).   Second, the district court

must have  made its  decision to certify  a final  judgment while

viewing all claims  and parties in perspective.   See id. (citing
                                                         

Pahlavi v. Palandjian, 744 F.2d 902, 904 n.5 (1st Cir. 1984), and
                     

quoting Curtiss-Wright Corp. v. General Elec. Co., 446 U.S. 1, 10
                                                 

(1980)).  Third, we examine  the trial judge's "assessment of the

equities"  regarding any justifiable reasons for delay.  Spiegel,
                                                                

843 F.2d  at 43.   This process is necessarily  case-specific and

requires an assessment  of the entire litigation  and an analysis

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                                17

of factors which  suggest reasons to relax  the usual prohibition

against piecemeal  appellate review.10   "If  the district  court

has fulfilled  its responsibility  of enlightening  us as to  the

basis  for  certification  .  .  .  then   we  give  'substantial

deference'  to the  court's  exercise of  its  discretion."   Id.
                                                                

(quoting Pahlavi, 744 F.2d at 904 n.5).
                

B.  Discussion
              

    1.  Two-Pronged Threshold Test
                                  

          The first  prong of our inquiry is  whether judgment on

Count III, alone,  satisfies the requirement of  finality.  Count

III of  the Trustee's first  amended complaint simply  asserts an

amount  of money  owed to  the  bankrupt estate  by the  Muratore

Defendants.  There can be  little doubt that entering judgment on

Count  III  provides  the requisite  quantum  of  finality.   See
                                                                 

Spiegel, 843 F.2d at 43.  If a certain sum of money  is deemed to
       

be owed to a bankrupt estate, a decision that recognizes the debt

and orders payment is a coherent and final disposition.  The debt

is either owed or it is not.  

                    

     10Factors  analyzed by other courts in evaluating Rule 54(b)
motions  include (1) the relationship between the adjudicated and
non-adjudicated claims,  (2) the  possibility that  the need  for
review  might be  mooted by future  developments in  the district
court, (3) the possibility  that the same issue might  have to be
considered  again by  the reviewing  court, (4)  the presence  or
absence of a claim or counterclaim which might result in a setoff
against the judgment which is to be made final, (5) miscellaneous
considerations   such    as   delay,   economic    and   solvency
considerations, efficiency,  frivolity of  competing claims,  and
expense.   Allis-Chalmers Corp. v. Philadelphia Electric Co., 521
                                                            
F.2d 360, 364 (3d Cir. 1975).

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                                18

          Second, we  verify whether  the trial judge  considered

the interrelatedness  of claims and  the overall  context of  the

case before him.   See Spiegel,  843 F.2d at 43  (citing Pahlavi,
                                                                

744 F.2d at  904 n.5, and quoting Curtiss-Wright  Corp., 446 U.S.
                                                       

at  10).   Here,  the  district court  observed that  a  grant of

partial summary judgment would  cause the other counts  to become

moot,  since the  effect of  the  satisfaction of  the Count  III

judgment would  be to  deplete the  Muratore Defendants  of their

assets.    The  district  court  was  explicitly  referring  to a

contextual analysis.  The district judge found that the assets of

defendants  are not  sufficient  to  satisfy  any  further  money

claims.  Thus, we hold  that the second Rule 54(b)  criterion was

met when the district judge contemplated his action pertaining to

Count  III with a  view to the  other five  counts and not  in an

abstract or myopic fashion.

    2.  Equities  
                

          Moving  to the  heart  of  this  analysis,  we  examine

whether the trial judge abused his discretion in determining that

there was  "no just reason for delay," Fed.  R. Civ. P. 54(b), in

light  of  the  futility  of  the  defendants'  claims  regarding

reductions  in  the amount  of  the debt  and  the time-sensitive

position of the Trustee and debenture holders.11  

                    

     11An additional requirement  for a  proper certification  is
that the district judge must  have made an "express direction for
the entry of judgment."  Fed. R. Civ. P. 54(b).  This requirement
was obviously met by the judge's oral and written directions. 

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                                19

          In the usual case, if there is a possibility of a later

setoff  of a  money debt,  Rule 54(b)  certification of  the debt

would  be improper  because of  the  inefficient and  inequitable

result which  would occur  if one party  were allowed  to collect

money which may have to  be paid back to the other party when the

remaining litigation is  completed.   Pahlavi, 744  F.2d at  904.
                                             

However, that is  not the case here.   No setoff or  reduction of

the Muratore  Defendants' debt  could be allowed  as a  matter of

law.  The claimed reductions relating to the transferred property

could  not be  applied  to reduce  the money  debt.   The  amount

allegedly owed by Columbus Mortgage  for wages and rent cannot be

setoff because the fiduciary relationship between the two parties

renders  the debts  non-mutual.   Here  then, we  do  not face  a

situation   where  the  Muratore  Defendants  will  pay  Columbus

Mortgage only to have Columbus Mortgage return the money when the

remaining  claims are decided.   Rather, the  Muratore Defendants

will  have to  join  the other  unsecured  creditors and  proceed

through the Bankruptcy Court in  an attempt to recover any amount

allegedly owed by Columbus Mortgage.  The claimed setoffs present

no just reason for delay.

        The  district  court  determined  that certification  was

proper because the Trustee and debenture holders  would be harmed

with  the  postponement of  any  appeal.    The trial  court,  in

exercising its discretion  in the  Rule 54(b)  context, may  take

time  and value into consideration in finding delay unreasonable,

particularly  in  a  case  of failure  to  meet  basic  fiduciary

                               -20-
                                20

responsibilities.     Cf.  Curtiss-Wright   Corp.,  446  U.S.   1
                                                 

(consideration of  time-value  of  money).   While  there  is  an

economic preference for  all claims in a particular  case to move

to the appeal stage together, a demonstration  of clear injustice

or  hardship resulting  from  delaying  a  final  judgment  on  a

particular  question  may  justify  certification.    Since   the

district court  in the  instant case  considered the  appropriate

criteria in a  reasonable and coherent manner,  "we conclude that

[the court] did not abuse its discretion . . . ."  Curtiss-Wright
                                                                 

Corp., 446 U.S. at 12; see Spiegel, 843 F.2d 38; see  also Pierce
                                                                 

v.  Underwood, 487  U.S.  552, 562  (1988).   There was  "no just
             

reason for delay."  Fed. R. Civ. P. 54(b).

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                                21

                               IV.

                            Conclusion
                                      

          We  hold that there was  no genuine dispute of material

fact concerning the district court's calculation of the debt owed

by the Muratore Defendants  to Columbus Mortgage and its  Trustee

in the amount  of $2,146,034.24.   Fed.  R. Civ. P.  56(c).   The

attempt to satisfy the debt through a transfer of real estate was

unavailing because there is no evidence of an arrangement between

the parties whereby real estate conveyances were to be considered

payments on  the outstanding debt.   No reduction of the  debt by

funds  related to  the  properties can  be  granted, because  the

property  itself was  not a repayment  for the loans  made to the

Muratore Defendants.   Because  defendants created  the loans  in

violation of the fiduciary duty  owed to the plaintiff, no setoff

for  other  alleged  debts owed  by  plaintiff  to defendants  is

available.   Furthermore,  the cash  payments  on the  debt  were

incorrectly  applied to the  principal rather than  the interest,

and  therefore the  sum  calculated  by  the district  court  was

correct.  We have examined the record in the light most favorable

to  defendants, but we are  unwilling to go  further and take the

leaps of faith suggested by the Muratore Defendants.  Finally, we

hold  that entry of final judgment  on Count III pursuant to Rule

54(b) was well within the sound discretion of the district court.

Fed.  R.  Civ.  P. 54(b).   We,  therefore,  affirm the  district
                                             affirm
                                                   

court's summary judgment on Count III.  

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