Federal Deposit Insurance v. Massingill

United States Court of Appeals,

Fifth Circuit.

No. 93-1258.

FEDERAL DEPOSIT INSURANCE CORPORATION, in its Corporate Capacity,
Plaintiff-Appellee,

v.

Billy D. MASSINGILL, Defendant-Appellant.

July 6, 1994.

Appeal from the United States District Court for the Northern
District of Texas.

Before HIGGINBOTHAM and WIENER, Circuit Judges, and KAUFMAN,*
District Judge.

FRANK A. KAUFMAN, District Judge:

This case arises from an action brought by the Federal Deposit

Insurance Corporation ("FDIC") against Billy D. Massingill for the

amounts owed upon two promissory notes ("Notes") issued by

Massingill and another individual to a now-defunct New Mexico bank.

United States District Judge Sam R. Cummings, in a partial summary

judgment order issued pursuant to Fed.R.Civ.P. 56(d) and upon the

conclusion of a bench trial, entered judgment for the FDIC in the

full amounts requested by that agency in connection with both

Notes. For the reasons set forth infra, we affirm the judgment of

the district court.

I.

Billy D. Massingill and Charles S. Christopher, both residents

of Texas, executed two promissory notes in favor of Moncor Bank,

*
District Judge of the District of Maryland, sitting by
designation.

1
N.A., ("Moncor" or "Bank"), located in Hobbs, New Mexico. Note 1,

in the amount of $360,000, was secured by 20,000 shares of stock in

Fiberflex Products, Inc. ("Fiberflex"), a Texas corporation.1

Massingill and Christopher signed that Note as co-makers on March

22, 1984, in order to acquire those shares of Fiberflex.

Massingill was a founding shareholder and director of Fiberflex,

but he sold his shares to Christopher later in 1984. Note 1 was

payable in four semi-annual installments of $40,000, plus interest,

on September 25, 1984; March 25, 1985; September 25, 1985; and

March 26, 1986; with the balance, along with remaining interest,

due on September 25, 1986. According to the face of Note 1, the

interest rate was to be "[a] variable rate equal to 1/27 per year

above Bank's Base Lending Rate. Base Lending Rate is the rate set

from time to time by Bank, below which loans will not usually be

made."

Christopher and Massingill, again as co-makers, executed

another promissory note, referred to herein as Note 2, in favor of

Moncor, in the amount of $125,500, in December 1984. The first

installment on Note 2 apparently was due in late March 1985. The

payment was not made, and Massingill seemingly refused either to

renew or repay the Note in default. As a result, pursuant to

insecurity clauses2 in the defaulted Note 2 and in Note 1, the

1
Note 1 actually was executed in favor of "First City
National Bank." First City changed its name to Moncor before the
second note was executed.
2
The insecurity clauses in each Note provide as follows:

DEFAULT: BORROWER SHALL BE IN DEFAULT under this Note

2
executive vice president of Moncor sent Christopher a letter dated

May 23, 1985, with a copy to Massingill, which stated in pertinent

part:

Since [the defaulted] note is now 66 days past due and it does
not appear that Billy Massingill is willing to sign a renewal
note, we are hereby placing you both on notice that both notes
[the defaulted note and Note 1] are immediately due and
payable.

If the entire balance plus accrued interest is not paid within
10 days from the date of this letter, we will proceed with
legal action to collect our interest in the Fiberflex, Inc.,
stock which was assigned to MONCOR Bank, and we will pursue
collection of any deficiency from both makers of said notes.

In that letter, Moncor also delineated the precise amounts due

and the daily sums by which the outstanding balance would accrue.

Although Note 1, in and of itself, technically was not in default,

Moncor demanded payment upon that Note as well, in accordance with

the insecurity provision in that Note.

The defaulted Note 2 eventually was renewed. That renewed

note will be referred to as Renewed Note 2. Renewed Note 2,

payable to Moncor Bank, was a promissory note in the amount of

$125,150, and was secured in part by 21,500 shares of Fiberflex

stock and in part by the assignment to Moncor of a life insurance

if any of the following events occur:

....

5. Bank reasonably and in good faith believes it
is insecure or believes that the prospect of receiving
payment on this Note or any other indebtedness is in
any way impaired, even though the Borrower is not
otherwise in default.

Upon default and at any time after default, Bank
may declare this Note and all other indebtedness
immediately due and payable without notice or demand.

3
policy belonging to Christopher. Renewed Note 2 provided for

payment in two installments. The first installment, of $60,000

plus interest, was due on September 25, 1985, with the balance,

including interest, payable on March 25, 1986. Renewed Note 2

carried an interest rate of 27 above Moncor's Base Lending Rate.

It was dated March 18, 1985, although Massingill maintains that it

was executed on June 11, 1985. Massingill also contends that he

signed Renewed Note 2 only as a surety to accommodate Christopher,

despite the fact that the Note itself indicates that both he and

Christopher signed the Note as "Borrowers."

Note 1 itself was never in default because of failure to make

installment payments, or for any reason; however, it was subject

to acceleration under the terms of the insecurity clause in Note 1

and Note 2. On August 30, 1985, the Comptroller of the Currency

declared Moncor Bank to be insolvent, and the appellee Federal

Deposit Insurance Corporation ("FDIC") was appointed as receiver.

United Bank of Lea County, New Mexico, acquired both Note 1 and

Renewed Note 2, along with other loans which had been made by

Moncor and which were considered non-delinquent or non-classified,3

with the understanding that, within 90 days of acquisition, United

Bank could return to the FDIC those loans which United Bank did not

wish to retain. Both Note 1 and Renewed Note 2 apparently were

listed in Moncor's records as current. On October 9, 1985, during

the time that those Notes were held by United Bank, that bank

3
According to the testimony of the FDIC account officer at
trial, a "classified" loan is a loan deemed by a bank examiner,
for whatever reason, to be not collectible.

4
received and accepted the September 25, 1985, installment payments

with respect to both Notes. In determining the amounts of the

installment payments owed with regard to those two Notes, United

Bank substituted its prime rate of interest for Moncor's Base

Lending Rate, which was the rate designated in those Notes as the

benchmark from which interest due would be calculated. Shortly

thereafter, in December 1985, FDIC re-purchased those Notes and

their attendant files from United Bank. At that time, the

outstanding amount owed upon Note 1 was $240,000 principal, plus

interest, and, upon Renewed Note 2, $65,000 plus interest. The

FDIC, upon reacquiring the Notes, continued to rely upon the prime

rate of United Bank in order to compute the accruing interest.

No payments were made upon either Note at the time in which

the March 25, 1986, installments became due.4 Those were the first

payments missed in connection with either Note since the execution

of Renewed Note 2. Upon that default in connection with Note 1 and

Renewed Note 2, the FDIC demanded payment and filed suit on March

23, 1992, against Massingill for the outstanding balances due upon

both Notes. The FDIC brought its action in federal district court

pursuant to 12 U.S.C.A. § 1819(b)(2) (West 1989).5

4
Appellant Massingill maintains that at no time did he
personally make or participate in payments on any of the Notes
relevant to this case. According to Massingill, after he sold
his shares in Fiberflex to Christopher, the latter apparently
assumed responsibility for submitting payments with regard to the
Notes.
5
§ 1818(b)(2)(A) provides:

Except as provided in subparagraph (D), all suits
of a civil nature at common law or in equity to which

5
 The FDIC filed a motion for summary judgment, seeking to

recover upon both Notes by arguing that 12 U.S.C.A. § 1823(e) (West

1989)6 and the federal common-law doctrines enunciated in D'Oench,

Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956

(1942), and its progeny, barred Massingill's claims and defenses.

The district court denied the FDIC's motion for summary judgment

and, pursuant to Fed.R.Civ.P. 56(d), issued an order stating that

the applicable limitations period with regard to Note 1 prescribed

by the applicable statute had expired before the FDIC brought suit,

thereby barring the agency's claim in connection with that Note.7

the [FDIC], in any capacity, is a party shall be deemed
to arise under the laws of the United States.
6
§ 1823(e) states:

No agreement which tends to diminish or defeat the
interest of the Corporation [FDIC] in any asset
acquired by it under this section or section 1821 of
this title, either as security for a loan or by
purchase or as receiver of any insured depository
institution, shall be valid against the Corporation
unless such agreement—

(1) is in writing,

(2) was executed by the depository institution and
any person claiming an adverse interest thereunder,
including the obligor, contemporaneously with the
acquisition of the asset by the depository institution,

(3) was approved by the board of directors of the
depository institution or its loan committee, which
approval shall be reflected in the minutes of said
board or committee, and

(4) has been, continuously, from the time of its
execution, an official record of the depository
institution.
7
The statute of limitations applicable in this case,
according to both parties and the district court, is 12 U.S.C. §

6
The court also precluded Massingill from asserting an affirmative

defense that the FDIC unjustifiably had impaired the collateral

securing Renewed Note 2 by ruling that Massingill signed that Note

as a co-maker. Under Texas law, which the district court applied,

a maker of a note may not assert that defense. The court

determined that the only issues remaining for trial concerned

whether the FDIC was owner and holder of Renewed Note 2, the amount

of accrued interest owed upon the remaining balance of Renewed Note

2, and the amount of attorney fees, if any, to which the FDIC was

entitled.

On February 18, 1993, upon the parties' waiver of jury trial,8

a bench trial before Judge Cummings commenced. During the course

of the trial, the FDIC demonstrated that it was the owner and

holder of both Note 1 and Renewal Note 2.9 Upon the conclusion of

the presentation of evidence, Judge Cummings indicated that he

would reconsider his Rule 56(d) order in connection with the

limitations bar as to Note 1 and requested that the parties submit

memoranda and authorities with regard to Note 1, along with

proposed findings of fact and conclusions of law dealing with all

1821(d)(14). That statute, at § 1821(d)(14)(A), provides for a
limitations period of six years, "beginning on the date the claim
accrues."
8
The only evidence in the record before this Court
concerning that waiver appears in a "Minute Order" in the
district court file, which merely notes that the parties waived
any right to a jury determination and that the jury subsequently
was excused.
9
Appellant in this appeal does not contest that the FDIC is
the owner and holder of both Notes and that appellant executed
the Notes at issue in this case, along with Christopher.

7
of the issues in the case. The court also asked the parties

further to brief the question of the applicable rate of interest in

connection with the Note 1 and Renewal Note 2. At no time after

learning of the district court's decision to reconsider its earlier

order did Massingill request a jury trial or seek to introduce any

further evidence with regard to any reopened issue. After

reviewing the memoranda supplied by the parties, on March 2, 1993,

the district court reversed its earlier determination and entered

judgment in favor of the FDIC with regard to both Note 1 and

Renewal Note 2. It awarded the FDIC the outstanding principal

remaining upon those Notes; interest calculated in accordance with

the prime rate of United Bank, as the assuming bank which briefly

possessed the Notes upon Moncor's closure; and attorney fees. The

district court applied Texas law in the course of concluding that

the May 23, 1985, letter from Moncor to Christopher and Massingill

was not an effective acceleration, thereby leaving both Notes

current until their default on March 25, 1986. Consequently, the

district court decided that the FDIC had timely filed its action

with regard to both Notes and was entitled to recovery.

In the within appeal, Massingill contends that the district

court wrongly reversed its earlier order with regard to the

expiration of the limitations period as to Note 1, incorrectly

prevented Massingill from asserting his defense of impairment of

collateral in connection with Renewal Note 2, and improperly

adopted United Bank's prime rate as the benchmark for its

determination of the interest due upon both Notes. For the reasons

8
set forth infra, we affirm the judgment of the district court with

regard to each of those issues.10

II.

In this appeal, Massingill first contends that it was

improper for the district court to revisit its Rule 56(d) order.

That contention is without merit. We review the district court's

revision of the order for abuse of discretion. Harrell v. DCS

Equip. Leasing Corp., 951 F.2d 1453, 1460 (5th Cir.1992). A

partial summary judgment order in accordance with Rule 56(d) is not

a final judgment but is merely a pre-trial adjudication that

certain issues are established for trial of the case. Such an

order is interlocutory in nature, is subject to revision by the

district court, and has no res judicata effect. Avondale

Shipyards, Inc. v. Insured Lloyd's, 786 F.2d 1265, 1269-70 (5th

Cir.1986) (quoting 6 Part 2 Moore's Federal Practice ¶ 56.20 [3.-4]

); Travelers Indem. Co. v. Erickson's, Inc., 396 F.2d 134, 136

(5th Cir.1968). Although this circuit does not appear to have

determined what procedures must be followed if a court should

change its initial Rule 56(d) ruling and broaden the scope of a

trial, the Second Circuit has stated that the parties should be

afforded the opportunity to present evidence relating to the newly

revised issue. Leddy v. Standard Drywall, Inc., 875 F.2d 383, 386

(2d Cir.1989). In this case, although the court did not ask

10
In his briefs filed with this Court, Massingill does not
appear to challenge the award of attorney fees to the FDIC.
Accordingly, and because we affirm the judgment for that agency,
we leave that determination undisturbed.

9
explicitly whether the parties wished to present evidence with

regard to Note 1, it did request additional authorities concerning

that Note and asked the parties if they had anything further they

wished to present. There appears to have been ample opportunity at

that time for appellant to have objected to the procedure proposed

by the court and to have requested a jury determination.

Accordingly, the district court did not in any event abuse its

discretion in the manner in which it re-opened the question of

limitations for consideration.

III.

Appellant also asserts that the district court erred in

ruling that Note 1 was not validly accelerated by the May 23, 1985,

letter from Moncor which demanded payment of the entire amount of

the Note. In so ruling, the district court applied Texas law as

the law of the forum.11 Because the court concluded that the

acceleration was invalid, it determined, inter alia, that the Note

was not in default until March 25, 1986, and, accordingly, that the

FDIC's suit was timely filed.12 The district court also found that

11
We review de novo the district court's choice-of-law
determination. Arochem Corp. v. Wilomi, Inc., 962 F.2d 496, 498
(5th Cir.1992).
12
If the district court correctly concluded that the May 23,
1985, letter did not constitute a valid acceleration of Note 1,
appellant does not dispute that the FDIC's suit upon that Note
was timely filed. Similarly, if the district court was incorrect
in that the May 23, 1985, letter effectively did accelerate Note
1, the FDIC does not appear to challenge appellant's assertion
that appellee's suit would be untimely with regard to that Note.
See FDIC v. Belli, 981 F.2d 838, 840 (5th Cir.1993) (stating that
"a cause of action 'accrues,' when 'it comes into existence,'
U.S. v. Lindsay, [346 U.S. 568, 569, 74 S.Ct. 287, 288, 98 L.Ed.
300 (1953) ]," as, in that case, when the maker breached the note

10
"Moncor took action inconsistent with any continued acceleration or

demand on Note 1, after the demand letter of May 23, 1985," and

stated that "[t]he renewal and extension transaction [with regard

to Renewed Note 2] concluded after the letter of May 23, 1985,

establishes that Moncor abandoned any demand or acceleration as to

Note 1."

IV.

In this appeal, we are presented with, but need not discuss,

a number of choice-of-law issues. Although federal law applies in

accordance with 12 U.S.C.A. § 1819(b)(2)(A) (West 1989), neither

party argues for the creation of a federal common-law rule as the

substantive rule of decision in ascertaining whether or not

Moncor's demand letter effected an acceleration; rather, they

differ simply as to which state-law rule is the more appropriate.13

See United States v. Kimbell Foods, Inc., 440 U.S. 715, 740, 99

S.Ct. 1448, 1464-65, 59 L.Ed.2d 711 (1979). Also, neither

appellant Massingill nor the FDIC addresses the issue of whether we

should use conflicts principles of the forum state or the federal

common law of conflicts (whatever that may be) to determine which

state's substantive law governs this non-diversity case. See

Detroit Edison Co. v. Pacific Ins. Co., 742 F.Supp. 287, 289

(M.D.N.C.1990) (holding that Klaxon Co. v. Stentor Electric Mfg.

and the bank demanded payment).
13
Appellee, in its brief filed with this Court, does appear
to attempt to utilize D'Oench, Duhme, and presumably 12 U.S.C. §
1823(e), to preclude appellant's claim of acceleration. However,
that issue need not be reached in connection with this appeal.

11
Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), does not

bind courts in non-diversity, federal question cases, and that

courts "should apply a federal common law of conflicts to select

the proper state law" (citing with approval Edelmann v. Chase

Manhattan Bank, N.A., 861 F.2d 1291, 1294 (1st Cir.1988))), aff'd

without op., 944 F.2d 901 (4th Cir.1991). Instead, appellant, both

before this Court and in the district court, maintains that this

Court should utilize New Mexico law, pursuant to Texas

conflict-of-law rules. Appellee FDIC does not address the

choice-of-law issue in its briefs to this Court, other than to say

that, as the law of the forum, Texas law should apply.

In any event, we need not make any choice-of-law decisions

because, as we shall demonstrate, there is no conflict in the

result reached in this case regardless of whether the substantive

law of Texas or that of New Mexico is applied. See FDIC v.

Cardinal Oil Well Servicing Co., Inc., 837 F.2d 1369, 1370 n. 1

(5th Cir.1988).

V.

Under principles of Texas law, the district court correctly

held that the May 23, 1985, letter did not constitute a valid

acceleration of Note 1, thereby leaving Note 1 current until its

default on March 25, 1986.

Texas law requires that a maker of a promissory note be

afforded notice of intent to accelerate and an opportunity to cure

the default. Any notice of acceleration is ineffective unless

preceded by a proper notice of intent to accelerate. Ogden v.

12
Gibraltar Sav. Ass'n, 640 S.W.2d 232, 234 (Tex.1982). The two

types of notice constitute separate rights of the borrower, and

each is obligatory.

Notice of intent to accelerate is necessary in order to
provide the debtor an opportunity to cure his default prior to
harsh consequences of acceleration and foreclosure. Proper
notice that the debt has been accelerated, in the absence of
a contrary agreement or waiver, cuts off the debtor's right to
cure his default and gives notice that the entire debt is due
and payable.

Id. Appellant never received a notice of intent and was not given

the opportunity to cure his default prior to the letter of May 23,

1985. A "demand for payment of the overdue installment [must] be

made prior to exercising the option to accelerate." Allen Sales &

Servicenter, Inc. v. Ryan, 525 S.W.2d 863, 866 (Tex.1975).

Appellant contends that, according to the terms of the Note, he

waived all rights to notice.14 Nevertheless, even if the terms of

the waiver are sufficient to relinquish notice of acceleration,

that waiver does not also surrender the borrowers' right to notice

of intent to accelerate. Under Texas law, such a waiver must be

expressed clearly and specifically. See Shumway v. Horizon Credit

14
Both Notes 1 and 2 provide in pertinent part:

WAIVERS: Borrowers and any other Liable Party(ies)
waive(s) presentment, protest, demand, notice of
nonpayment, notice of dishonor, notice of protest and
all other demands and notices with regard to this Note
and any guaranty of it. They agree that any renewal of
the Note, any extension or postponement of the time of
payment or any other indulgence by Bank, any
substitution, exchange or release of any Collateral or
the addition or release of any party primarily or
secondarily liable for payment of the Note may be made,
without notice or consent, without prejudice to Bank
and without releasing Borrower or any Liable Party.

13
Corp., 801 S.W.2d 890, 894 and n. 7 (Tex.1991).

Waiver of "notice", without referring specifically either
to notice of acceleration or notice of intent to accelerate,
is sufficient to waive notice of acceleration because the
waiver relates to the right of acceleration in the note. It
is not sufficient to waive notice of intent to accelerate
because it is not clear from the acceleration provision or the
waiver provision that the maker otherwise has the right to
notice of intent to accelerate, in addition to notice of
acceleration. Waiver of "notice", in only so many words, does
not refer clearly and unequivocally either to notice of intent
to accelerate, or to both types of notice.

Id. at 894 n. 7.

Moncor's May 23, 1985, letter also failed to accelerate Note

1 for a different reason. Texas law requires that a letter

purporting to accelerate an installment debt be accompanied by

further affirmative action enforcing the declared demand or

acceleration in order to be effective. See City Nat'l Bank v.

Pope, 260 S.W. 903, 905 (Tex.Civ.App. San Antonio 1924); 11

Am.Jur.2d Bills & Notes § 296 (1963). "[T]he intention to

accelerate maturity must be evidenced by clear and unequivocal acts

followed by affirmative action towards enforcing the declared

intention." Curtis v. Speck, 130 S.W.2d 348, 351

(Tex.Civ.App.1939, writ ref'd); see also Purnell v. Follett, 555

S.W.2d 761, 764 (Tex.Civ.App. Houston 14th Dist.1977). In this

case, Moncor's letter specifically stated that its reason for

demanding payment of the balance upon the Notes was Massingill's

refusal to renew the defaulted note, thereby implying that a

reconsideration of that refusal would lead Moncor to withdraw its

demand. Moreover, Moncor expressly indicated that, if payment of

the balance upon both Notes was not rendered within ten days, it

14
would pursue legal action. Moncor's failure so to do illustrates

the lack of affirmative action necessary for a valid acceleration

pursuant to Texas law. Thus, for the several reasons indicated

supra, there was no valid acceleration under Texas law in May 1985,

and therefore the statute of limitations did not begin to run until

the later default of both Note 1 and Renewal Note 2 in March 1986.

See Pope, 260 S.W. at 905.

VI.

An analysis of this case under the law of New Mexico presents

a more difficult problem. That state's law in this area is not as

developed as is that of Texas, and one of the parties to this case,

the FDIC, failed completely to provide any New Mexico authorities

in its briefs and argument to this Court. Nevertheless, this Court

has examined New Mexico law and concludes that, under New Mexico

law as well as under Texas law, the district court was correct in

determining that the May 23, 1985, letter did not trigger the

statute of limitations in this case.

That letter most likely does satisfy the requirements of New

Mexico law for a valid acceleration. New Mexico does not seem to

distinguish between a notice of intent to accelerate and a notice

to accelerate. In order for a holder of a note to accelerate the

debt, the Supreme Court of New Mexico merely requires that

the holder can [not] exercise the option [to accelerate] by
some secret mental process on her part not evidenced by some
form of affirmative action, such as by bringing suit thereon,
or say, by entering the entire unpaid balance as immediately
due and payable upon her books of account. It is imperative
that some act, signifying an intention to accelerate must
appear.... There may be other possible affirmative acts other
than demand or notice by which an option could be exercised

15
 under the language of this note; without doubt it could be
exercised simply by bringing suit.

Carmichael v. Rice, 49 N.M. 114, 158 P.2d 290, 292 (1945) (emphasis

added); see also Comer v. Hargrave, 93 N.M. 170, 598 P.2d 213, 214

(1979). The above-quoted language in Carmichael indicates that the

Supreme Court of New Mexico in that case simply assumed that mere

notice or demand for payment, such as that contained in Moncor's

letter, suffices to exercise an optional acceleration clause such

as that present in Note 1 and Note 2 in this case. Nothing in the

case law indicates any more rigid requirements of action or of

notice of the type called for by Texas jurisprudence, and none of

the New Mexico decisions of which this Court is aware construes

waivers of notice in the strict manner in which they are treated by

Texas courts. Accordingly, under New Mexico law, Note 1 (and Note

2 as well) does appear to have been accelerated on May 23, 1985.

See 32 Am.Jur.2d Fed.Pract. & Proced. § 295 (1982) (noting that "a

decision of a state's highest court must be accepted by federal

courts as authoritative on state law unless it can be said with

some assurance that the state's highest court itself will not

follow the decision in the future").

However, that does not end our inquiry. The district court

found that any demand or acceleration by Moncor presented in its

May 23, 1985, letter was abandoned in the light of Moncor's ensuing

conduct, namely the renewal of the defaulted Note 2 and the

subsequent unconditional acceptance of installments due in

connection with both Note 1 and Renewed Note 2. We accept the

findings of the district court unless they are clearly erroneous.

16
Fed.R.Civ.P. 52(a).

Exercise of the option to accelerate is not irrevocable,
and the holder of a note who has exercised his option of
considering the whole amount due may subsequently waive this
right and permit the obligation to continue in force under its
original terms for all purposes, including the determination
of when the statute of limitations begins to run on the right
to sue.

11 Am.Jur.2d Bills & Notes § 296 (1963) (footnotes omitted). New

Mexico does not appear to have passed upon the question of whether

or how a holder may abandon or waive an already-exercised option to

accelerate. "If a federal court must apply state law on an issue

on which there are no state cases, it must attempt to predict what

the state courts would hold if faced with the issue." 32 Am.Jur.2d

Fed.Pract. & Proced. § 299 (1982). Locating no aid in New Mexico

case law or statutes, we turn to the decisions of other states in

order to discover whether they reinforce the general principle

permitting waiver which is enunciated in American Jurisprudence,

Second.

In examining the decisions of those state courts which have

discussed the issue of waiver, we note that several courts have

concluded in rather sweeping fashion that a holder's acceptance of

"payment on delinquent interest and principal after notice of

acceleration ... waive[s] its notice and reinstate[s] the loan."

United States v. Colombine Coal Co., 27 Utah 2d 140, 493 P.2d 983,

984 (1972); see also Mitchell v. Federal Land Bank, 206 Ark. 253,

174 S.W.2d 671, 674 (1943); Bisno v. Sax, 175 Cal.App.2d 714, 346

P.2d 814, 820 (1959); Barday v. Steinbaugh, 130 Colo. 10, 272 P.2d

657, 658 (1954) (asserting that holder's "mere inaction" in

17
accepting payment "after notice of election of acceleration ...

[and] without notice to defendants that [holder] was not waiving

her rights as to the acceleration" constituted waiver); Pope, 260

S.W. at 904-5.

Other courts, while not speaking quite so expansively, have

permitted a determination of waiver where "the record shows a clear

abandonment or waiver of any declared intention to take advantage

of [acceleration]." Wentland v. Stewart, 236 Iowa 661, 19 N.W.2d

661, 664 (1945); see also Andregg v. Sparrow, 152 Kan. 744, 107

P.2d 739, 740-41 (1940) (discussing waiver for the purpose of

limitations where delinquent debtor paid overdue interest and some

interest not yet due); Paul Londe & Assoc., Inc. v. Rathert, 522

S.W.2d 609, 610-11 (Mo.Ct.App.1975) (upon surveying states' case

law and noting that some allow for waiver upon "mere acceptance of

a payment," the court concludes that "in order to prove an implied

waiver the acts or omissions of the party alleged to have waived

his rights must be so consistent with and indicative of the

intention to relinquish the particular right or benefit that no

other reasonable explanation is possible"); cf. Annotation,

Acceptance of past-due interest as waiver of acceleration clause in

note or mortgage, 97 A.L.R.2d 997 § 7 (1964) (listing cases in

which waiver was determined to exist and those in which claims of

a waiver were denied).

Those few cases in which courts have concluded that no waiver

has been made are largely distinguishable from the instant case.

For example, in Oakland Nat'l Bank v. Anderson, 81 Mich.App. 432,

18
265 N.W.2d 362, 364 (1978), the Court of Appeals of Michigan

declined to consider an overdue payment made after acceleration a

waiver, in part noting that the payment "did not cure all the

defaults which existed at the time." In this case, Massingill and

Christopher's renewal of the defaulted Note 2 after receipt of the

May 23, 1985, Moncor letter did rectify the actual default of which

Moncor complained. No payments in connection with Note 1 were

missed until March 1986. Additionally, the bulk of the decisions

in which a waiver has been determined not to exist deal with

situations in which the holder of the note already had brought suit

against the maker prior to the late payment. See, e.g., 97

A.L.R.2d at 1015-16. We have been unable to locate any state

decision which unequivocally forbids the possibility of waiver in

circumstances analogous to those present before us.

In sum, because the dominant trend among those states which

have considered the issue is to allow abandonment or waiver in

situations such as the one before us, we hereby conclude that New

Mexico likewise would so rule if it were confronted with that

question. The district judge in this case, regardless of whether

we apply the more generous or the more restrictive standard of

proof necessary to establish a waiver, possessed ample evidence to

reach his determination of waiver or abandonment. Moncor, in its

demand letter of May 23, 1985, expressly stated that the reason for

its demand was the refusal of Massingill to renew the defaulted

Note 2. Upon that Note's subsequent renewal, Moncor declined to

pursue its threat of legal recourse. Moreover, the effective date

19
typed on Renewed Note 2 is March 18, 1985, pre-dating both the

predecessor Note 2 default and the demand letter from Moncor and

illustrating the parties' intent that the renewal cancel any

pre-existing default. Both Moncor and United continued to accept

payments upon both Note 1 and Renewed Note 2 without exacting any

penalty or reserving any rights with regard to acceleration. In

the light of all of those circumstances, we cannot say that the

district court's finding of abandonment was clearly erroneous.

VII.

Massingill also complains that he unjustly was denied a jury

trial with regard to the limitations issue. He argues that, when

he waived his asserted right to jury determination, he so did in

reliance upon the district court's narrowing of the issues for

trial in the Rule 56(d) order. Consequently, Massingill contests

the propriety of the district court's delivery of factual findings

with regard to limitations.

"Fed.R.Civ.P. 39(a) prescribes that a jury waiver be embodied

in one of two forms: either a written stipulation filed with the

court or "an oral stipulation made in open court and entered in the

record.' " Tray-Wrap, Inc. v. Six L's Packing Co., Inc., 984 F.2d

65, 68 (2d Cir.1993). In this case, the parties agreed orally in

court, and a "Minute Order" was entered into the district court

record to that effect. Nowhere in the transcript of the

proceedings or in that "Minute Order" is there any indication by

appellant that the waiver was limited to those issues remaining for

trial after the Court's Rule 56(d) order. More importantly,

20
appellant did not object at trial when the court stated that it was

reconsidering the limitations defense and asked for post-trial

briefs regarding that issue. In fact, appellant submitted the

requested memorandum and made no mention of the jury issue until

this appeal. Cf. FMC Corp. v. AERO Indus., Inc., 998 F.2d 842, 845

(10th Cir.1993) (stating that defendant "waived any right he may

have had to a jury trial by signing the pretrial order and

participating in the bench trial").

Whether or not [appellant's] silence is construed as a
waiver, properly speaking, of its right to jury trial, the
questions it now presents raise issues not raised before the
trial court, and such issues will not ordinarily be considered
on appeal. [Appellant's] silence on the matter at trial and
until now certainly suggested to the trial court and opposing
parties that it acquiesced in the court's proposed plan.
[Appellant] may not now deny that it waived its right to a
jury trial and demand a new trial only after it has lost on
the merits and failed to make a timely objection before the
district court. Therefore, all of the evidence having been
heard, the findings of the trial court must be accepted unless
clearly erroneous.

Molett v. Penrod Drilling Co., 826 F.2d 1419, 1424 (5th Cir.1987),

cert. denied, 493 U.S. 1003, 110 S.Ct. 563, 107 L.Ed.2d 558 (1989)

(footnotes omitted) (denying party's entitlement to jury when that

party "remained silent as the trial judge announced his intention

to decide the third-party claims himself and to discharge the

jury," id. at 1423). The requisite time for appellant's objection

in the district court below was upon that court's indication that

it wished to reconsider its earlier order. Accordingly,

appellant's claim of error with regard to his waiver of a jury

21
trial is hereby denied.15

VIII.

With regard to Renewed Note 2, appellant claims that the

district court improperly precluded him from raising his

affirmative defense that the FDIC unjustifiably impaired the

collateral securing that Note. Section 1823(e)16 does not "protect

the FDIC against the consequences of its own conduct with respect

to the asset after acquiring it." FDIC v. Blue Rock Shopping

Center, Inc., 766 F.2d 744, 753 (3d Cir.1985).

Massingill claims that he is entitled to assert that defense

because he signed Renewed Note 2 as an accommodation maker, or

surety, not as a co-maker. However, the face of that Note

indicates that both he and Christopher signed the instrument as

co-makers; any oral agreements to the contrary would be barred by

§ 1823(e). See Langley v. FDIC, 484 U.S. 86, 91-92, 108 S.Ct. 396,

401-02, 98 L.Ed.2d 340 (1987).17 Accordingly, the district court

15
Additionally, appellant's claim that the testimony of the
FDIC account officer was admitted erroneously by the trial judge
requires little comment. There was nothing improper in the
officer's testimony, as he was a subsequent custodian of the Bank
files concerning the Notes and was therefore competent to testify
regarding their contents. See Miss. River Grain Elev., Inc. v.
Bartlett & Co., Grain, 659 F.2d 1314, 1318-19 (5th Cir.1981).
16
See note 6, supra, for text of statute.
17
In Langley, the Supreme Court commented:

One purpose of § 1823(e) is to allow federal and
state bank examiners to rely on a bank's records in
evaluating the worth of the bank's assets.... Neither
the FDIC nor state banking authorities would be able to
make reliable evaluations if bank records contained
seemingly unqualified notes that are in fact subject to
undisclosed conditions.

22
correctly determined that Massingill signed Renewed Note 2 as a

co-maker.

There may be a question as to whether Texas law denies to a

co-maker the defense of impairment of collateral. See FDIC v.

Blanton, 918 F.2d 524, 530 (5th Cir.1990). Under New Mexico law,

a co-maker in Massingill's situation seemingly may raise that

defense and obtain discharge "to the extent the impairment causes

[him] to pay more than [he] would have been obliged to pay, taking

into account the rights of contribution, if impairment had not

occurred." N.M.Stat.Ann. § 55-3-605(f) and offic. cmt. 7 (Michie

1992). However, we need not tarry in connection with any

difference between Texas and New Mexico case law in this regard in

the light of this circuit's decision in United States v. Unum,

Inc., 658 F.2d 300 (5th Cir.1981). In that case, Judge Politz

employed a "uniform [federal] rule" to determine that "a maker of

a note, as opposed to a surety, is not entitled to invoke this

defense" of impairment of collateral. Id. at 304. Judge Politz

noted that Texas and Alaska, the states at issue in that case,

"have both adopted the Uniform Commercial Code (UCC)," but, in any

case,

we are not constrained to follow any modifications to the
model UCC made by a forum state, nor are we bound by decisions
of the forum state courts. We opt to follow the model UCC and
those cases which best supplement the UCC and further its
purposes and design.

Id. at 304 and n. 2.

For that reason, we affirm the district court's decision to

Id.

23
prevent appellant from asserting a defense of impairment of

collateral in this case.

IX.

The final issue presented for resolution in this appeal

concerns the appropriate rate of interest to be applied to Note 1

and Renewed Note 2. The district court accepted the FDIC's

contention, as a matter of law, that the agency properly could

apply the prevailing prime rate of the bank which assumed the

Notes, i.e. United Bank, in lieu of the presently unascertainable

"Base Lending Rate" of the defunct Moncor Bank, in order to

determine the rate of interest due upon the Notes. We agree.

As a preliminary matter, we note that appellant Massingill

relies entirely upon cases interpreting Texas law in support of his

claim. Appellee FDIC also cites exclusively to decisions

construing Texas law.18

Art. 5069-1.03, the Texas statute relied upon by appellant,

designates that:

When no specific rate of interest is agreed upon by the
parties, interest at the rate of six percent per annum shall
be allowed on all accounts and contracts ascertaining the sum
payable, commencing on the thirtieth (30th) day from and after
the time when the sum is due and payable.

18
Massingill additionally argues that, in this case, the
result reached under the applicable New Mexico statute would be
"analogous" to that gleaned from the relevant Texas code
provision. Compare N.M.Stat.Ann. § 55-3-112 (Michie 1992) with
Tex.Rev.Civ.Stat.Ann. art. 5069-1.03 (West 1993). Appellant's
characterization of New Mexico law seems questionable. See
N.M.Stat.Ann. § 56-8-3 (Michie 1983) (providing that the judgment
rate of interest "shall not be more than fifteen percent
annually," substantially higher than the six percent prescribed
by the Texas statute).

24
 In this case, both Note 1 and Renewed Note 2 provide that

interest shall be computed until paid as follows:

A variable rate equal to 1/27 per year above Bank's Base
Lending Rate. Base Lending Rate is the rate set from time to
time by Bank, below which loans will not usually be made.

Here, the parties to Note 1 and Renewed Note 2 agreed upon an

applicable rate of interest; unfortunately, due to the

unanticipated failure of Moncor Bank, that rate no longer can be

applied. Accordingly, Art. 5069-1.03 does not apply. See Blanton,

918 F.2d at 532; In Re Moore/Minshew/Shea, No. 90-41512, slip op.

at 7 (Bankr.E.D.Tex. Aug. 25, 1992).

Texas law provides that "a specific prematurity interest rate

continues after maturity when the contract is silent as to

postmaturity interest." Blanton, 918 F.2d at 532 (5th Cir.1990).

No provision for postmaturity interest appears upon the face of the

Notes. Thus, this Court must determine whether the prematurity

rate is ascertainable and, if so, must utilize that rate.

Several courts have allowed the substitution of an assuming

bank's prime rate for that of the defunct lender. See Blanton, 918

F.2d at 532 and n. 10; FDIC v. La Rambla Shopping Center, Inc.,

791 F.2d 215, 223 (1st Cir.1986); FDIC v. Condo Group Apts., 812

F.Supp. 694, 699 (N.D.Tex.1992); FDIC v. Cage, 810 F.Supp. 745,

747 (S.D.Miss.1993); In Re Moore/Minshew/Shea, slip op. at 1, 6.

The fact that the Notes in question refer to Moncor's "Base Lending

Rate" rather than to its prime rate does not adversely affect the

FDIC's position. Black's Law Dictionary defines the prime rate as

"the most favorable interest rates charged by a commercial bank on

25
short-term loans to its best (i.e. most credit worthy) customers."

Black's Law Dictionary 813 (6th ed. 1990). Both Note 1 and Renewed

Note 2 define the Base Lending rate as the "rate set from time to

time by Bank, below which loans will not usually be made." If

there is any difference between the two rates, such difference

would reasonably be expected to render the base rate higher than

the prime; thus the FDIC's use of the latter in this case redounds

to the benefit of appellant, not the FDIC. Cf. In Re

Moore/Minshew/Shea, slip op. at 3 (using terms "base" and "prime"

interchangeably); Amberboy v. Societe de Banque Privee, 831 S.W.2d

793, 803 (Tex.1992) (Doggett, J., concurring and dissenting)

(defining "Basic Rate" in that particular case as "equal to the sum

of the prime interest rate ... plus 2 percent (2%) per annum

(emphasis omitted)).

In the light of the foregoing discussion, this Court need not

decide whether the term "Base Lending Rate" carries a fixed meaning

in the context of all commercial transactions. We decide merely

that, in this case, use of United Bank's prime rate by the FDIC is

a permissible, reasonable alternative which, if it does differ from

Moncor's Base Lending Rate, more likely than not errs in favor of

appellant.19

19
In several opinions permitting substitution, the courts
have noted in support of their decisions that the prime rate of
the substituted bank was "analogous" to that of the failed
institution, Blanton, 918 F.2d at 532; that the substituted rate
was "commonly used," Cage, 810 F.Supp. at 747; or that the
substituted lender "uses the same methods of calculating its own
prime" as did the defunct bank. In Re Moore/Minshew/Shea, slip
op. at 1. See also La Rambla, 791 F.2d at 223 (commenting that
the rate of the substituted bank "was the same" as the rate of

26
 X.

For the reasons set forth supra in this Opinion, we hereby

affirm the judgment of the district court in all respects.

AFFIRMED.

the failed bank). But see Condo Group Apts., 812 F.Supp. at 699
(no mention of any similarity between the substituted and the
failed banks' rates). As noted supra, appellant's primary
contention with regard to the propriety of the use of United's
interest rate centers upon the perceived disjuncture between a
"Base Lending Rate" and a prime rate. To the extent that
appellant also claims a material difference between the prime
rates of Moncor and of United, we view that claim to have no
merit. Although we would prefer the record in this case to have
been more clear, there is no evidence that Moncor and United
employed dramatically different methods of calculating their
prime rates or that their rates varied to any significant degree.
Both banks are or were located in New Mexico and presumably
competed in similar markets. At trial, the FDIC account officer
testified that application of the assuming bank's rate, upon the
re-acquisition of the Notes from that bank, was the "usual
custom" of the FDIC, and noted that the FDIC simply applied the
same rate that United itself had utilized while it held Note 1
and Renewal Note 2—a rate to which it does not appear either
Christopher or Massingill objected at the time. Cf. In Re
Moore/Minshew/Shea, slip op. at 6 (stating that the use of the
failed bank's prime rate in the note at issue in that case "was
not a material aspect of the contract").

27