               Not for Publication in West's Federal Reporter

          United States Court of Appeals
                      For the First Circuit

No. 13-2324

                           CARLOS MONTANO,

                        Plaintiff, Appellee,

                                    v.

                    EDGAR F. MORALES-RAMIREZ,

                       Defendant, Appellant,

  GLORIA SANTIAGO; CONJUGAL PARTNERSHIP MORALES-SANTIAGO; ALFRED
    RAMIREZ-DE ARELLANO; GEORGINA PAREDES; JANE DOE I; CONJUGAL
 PARTNERSHIP JIMENEZ-DOE I; RAFAEL JIMENEZ; RUBEN LUNA; JANE DOE
      II; CONJUGAL PARTNERSHIP LUNA-DOE II; JAREM DEVELOPMENT
                            CORPORATION,

                              Defendants.


           APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF PUERTO RICO
        [Hon. Aida M. Delgado-Colón, U.S. District Judge]


                                 Before

                       Lynch, Chief Judge.
              Thompson and Kayatta, Circuit Judges.


     José A. Hernández-Mayoral, with whom Héctor M. Laffitte,
Gustavo Gelpí, and McConnell Valdés LLC were on brief, for
appellant.
     Juan Carlos Deliz, with whom William A. Graffam and Jiménez
Graffam & Lausell were on brief, for appellee.



                             June 10, 2014
           LYNCH, Chief Judge.       The district court chose to enforce

a judgment that incorporated the terms of a settlement agreement

between Carlos Montano and Edgar F. Morales-Ramirez ("Morales") by

requiring Morales to provide a letter of credit in the sum of

roughly $540,000 to the United States Department of Education

("DOE").   This was the relief sought by Montano.

           Morales appeals, arguing the settlement agreement does

not by its terms provide for or authorize such a letter of credit.

The genesis of the district court's order lies in the fact that in

2006, the DOE determined that the International College of Business

& Technology ("International"), a school in which Montano and

Morales each had an ownership interest, owed the DOE $1,365,078 for

International's failure to comply with regulatory and statutory

provisions governing its receipt of student financial aid under

Title IV of the Higher Education Act of 1965 ("Title IV"), 20

U.S.C. §§ 1070 et seq.

           On   April   2,   2008,   Montano    sued   Morales   in   federal

district court in Puerto Rico alleging, inter alia, that Morales

had   mismanaged   International.       Under   the    supervision    of   the

district court, the parties reached a settlement on September 16,

2011.   The settlement agreement reflected the fact that, by 2002,

Morales was responsible for and in full control of International

and another school the parties co-owned, while Montano was in

control of two others.


                                     -2-
            The terms of the settlement provided that Morales would

"assume full responsibility for any and all liabilities that have

arisen or may arise from International."           (emphasis added).

Morales "further agree[d] to hold harmless, defend (with counsel of

his own choosing) and indemnify Mr. Montano for any claims filed

against Morales for the liabilities assumed by Mr. Morales herein."

As to International's specific liability to the DOE, the settlement

agreement provided:

            Mr. Morales agrees that as to any amount the
            [DOE] is demanding or may demand in the future
            in connection to International . . . , Mr.
            Morales[] be deemed to have been in control of
            [that institution] since February 2002 forward
            and therefore Mr. Morales agrees to assume
            full   responsibility,   if  any,   for   said
            liability.

(emphasis added).    Pursuant to the settlement agreement and at the

request of the parties, the district court dismissed the case with

prejudice on September 20, 2011, but retained jurisdiction to

enforce the settlement's terms, which were incorporated into the

judgment.

            On May 16, 2012, Montano moved to enforce the judgment

after the DOE refused to recertify his schools for Title IV

financial    aid   programs   due    to   International's   outstanding

liability. The DOE had determined that Montano was responsible for

roughly $540,000 of International's liability based on his formal

40% ownership stake in International during the time it had



                                    -3-
incurred the liability.   This DOE refusal to recertify has caused

and will continue to cause harm to Montano.

          Montano   specifically    requested   a   letter   of   credit,

explaining that the DOE would process his schools' recertification

applications only after receipt of a letter of credit or an escrow

agreement that would guarantee payment of Montano's share of

International's debt.1    The DOE would not accept a bond as a

guarantee of payment.     Accordingly, on January 31, 2013, the

district court ordered Morales "to post a letter of credit to the

benefit of the []DOE for the amount of Montano's alleged portion of

International's liability in the format already approved by the

[]DOE."

          Morales moved for reconsideration.        On October 9, 2013,

the district court denied that motion and again ordered Morales to

post the letter of credit.2   The district court noted that Morales

had lost a civil suit against the DOE contesting its $1,365,078


     1
        A letter of credit is:
     [a]n instrument under which the issuer (usu. a bank), at
     a customer's request, agrees to honor a draft or other
     demand for payment made by a third party (the
     beneficiary), as long as the draft or demand complies
     with specified conditions, and regardless of whether any
     underlying agreement between the customer and the
     beneficiary is satisfied.
Black's Law Dictionary 987 (9th ed. 2009).
     2
        On December 9, 2013, this court denied Morales's emergency
motion to stay the district court's October 9, 2013 order.      On
December 12, 2013, the district court ordered Morales to post the
letter of credit by December 30, 2013. Morales has not complied.
There are ongoing proceedings in the district court.

                                   -4-
assessment against International.    Although Morales had told the

district court he would not appeal from the judgment affirming

International's liability to the DOE, he has since appealed.

          Morales argues that he is obligated only to indemnify

Montano under the settlement agreement and that as a matter of

indemnity law he should not have to post a letter of credit until

Montano first pays the DOE $540,000.   Not so.   Morales's agreement

to "hold harmless, defend (with counsel of his own choosing) and

indemnify Mr. Montano" supplements the more comprehensive promise

to "assume full responsibility for any and all liabilities that

have arisen or may arise from International."    (emphasis added).

          The district court's order is consistent with the broad

language of the settlement agreement, which goes beyond a mere

promise to indemnify, as well as the stipulation that Montano "has

had absolutely no responsibility, liability, involvement or control

in International . . . since February 2002 to date."   It is also in

accord with Morales's obligation of good faith and fair dealing

under Puerto Rico law.3     See P.R. Laws Ann. tit. 31, § 3375

(requiring a good faith performance of contracts); Citibank Global

Mkts. v. Rodríguez Santana, 573 F.3d 17, 27 (1st Cir. 2009) (noting


     3
        In January 2012 Morales reached an agreement with the DOE
that ensured his second school, L'Image Educational Corporation,
would not be denied recertification due to International's
liability. That agreement did not seek to ensure the eligibility
of Montano's schools for federal funds, although the DOE has
refused their recertification due only to International's
liability.

                               -5-
that the Puerto Rico Supreme Court has said that contracts must be

construed in good faith). Further, the district court was involved

in the parties' settlement negotiations and is uniquely positioned

to understand their intent.   See F.A.C., Inc. v. Cooperativa de

Seguros de Vida de P.R., 449 F.3d 185, 192 (1st Cir. 2006).   As a

result, the district court did not exceed its remedial power to

enforce its judgment when it directed Morales to post a letter of

credit.

          The district court's order is affirmed.

          So ordered.




                               -6-
