                                                                                FILED
                                                                    United States Court of Appeals
                     UNITED STATES COURT OF APPEALS                         Tenth Circuit

                           FOR THE TENTH CIRCUIT                           April 13, 2017
                       _________________________________
                                                                       Elisabeth A. Shumaker
                                                                           Clerk of Court
SMS FINANCIAL JDC, LP, a Delaware
limited partnership,

     Plaintiff Counter Defendant -
     Appellee,

v.                                                        No. 16-6063
                                                   (D.C. No. 5:15-CV-00505-C)
CARY COPE; P.J.N. CORPORATION,                            (W.D. Okla.)
(possibly doing business as INSURANCE
SPECIALTY and/or INSURANCE
SPECIALTY P.I.E.), an Oklahoma
Corporation; PAMELA J. NEIBAUER;
CHEROKEE YACHT CLUB, an
Oklahoma corporation; ROBERT
FERGUSON,

     Defendants Counterclaimants -
     Appellants.
                     _________________________________

                           ORDER AND JUDGMENT*
                       _________________________________

Before BRISCOE, LUCERO, and HARTZ, Circuit Judges.
                   _________________________________




      *
        After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      This case concerns competing claims to a yacht moored in Oklahoma. Cary

Cope and the other defendants appeal the district court’s grant of summary judgment

to SMS Financial JDC, LP (“SMS”). Exercising jurisdiction under 28 U.S.C.

§ 1291,1 we reverse in part and affirm in part.

                                           I

      In February 2001, Cope filed a voluntary petition for Chapter 7 bankruptcy.

He listed the Bank of Union of El Reno (“Union”) as an unsecured, non-priority

creditor, citing his “Personal Guarantee on George Gorman Pipeline.” Cope received

a Chapter 7 discharge in August 2002.

      In 2004, Cope purchased a yacht with financing from Union. According to

Cope, Union compelled him through an unwritten agreement to sign a note reviving

his discharged, pre-petition guarantee on the Gorman Pipeline project. Union entered

into two separate promissory notes: (1) #86991, for approximately $125,000, which

Cope claims was for the yacht; and (2) #86993, for approximately $76,000, which

Cope associates with the discharged Gorman Pipeline debt.

      Cope did not sign either note; instead, Mainstream Mortgage (“Mainstream”)

was the obligor on both. Cope had no ownership interest in Mainstream, which was


      1
        Although the district court did not expressly dispose of defendants’
counterclaim, we conclude that the judgment appealed from in this case is final and
appealable. Cf. Orient Mineral Co. v. Bank of China, 506 F.3d 980, 989-90
(10th Cir. 2007) (noting that parties needed Fed. R. Civ. P. 54(b) certification to
maintain appeal because counterclaim remained pending in district court). The court
implicitly dismissed the counterclaim by rejecting defendants’ arguments and
entering summary judgment for SMS.

                                           2
owned by his friend Darren Shockey. Initially, Cope’s only direct responsibility for

the yacht transaction appears to have been a personal guarantee he gave for note

#86991 (the yacht note). Less than six months later, Cope assumed direct

responsibility for both notes #86991 and #86993. On October 19, 2004, Cope

executed and delivered promissory note #87480 for $133,277.09, payable to Union.

The funds from this note were used to pay off note #86991 (the yacht loan). As

collateral for this note, Cope pledged the yacht. On the same date, Cope also

executed and delivered promissory note #87479 in favor of Union. Union disbursed

the proceeds of that note, totaling $76,004.16, to pay off note #86993.

      In February 2007, Cope executed and delivered a new promissory note,

#91135, for $219,247.92 in favor of Union. The proceeds of this note were disbursed

as follows: $137,857.17 to pay off note #87480; $81,290.75 to pay off note #87479;

and $100 as a loan origination fee.2 Cope again pledged the yacht to secure the note,

but Union never perfected a security interest by filing it with the Coast Guard as

required by law. Cope defaulted on note #91135 in January 2010.

      After ceasing payments on note #91135, Cope re-titled the yacht in the name

of P.J.N. Corporation (“PJN”). Cope served as President of PJN. His wife, Pamela


      2
        The Disbursement Request and Authorization for this loan shows that the
$81,290.75 payment was applied to “loan #874780.” But it does not appear that such
a loan number exists. In district court, SMS indicated that the $81,290.75 payment
was applied to note #87479. Cope then argued that Union might have deliberately
inserted the non-existent loan number to cover up note #87479’s origins. We do not
need to resolve this issue because any dispute about the origin of the error in the
Disbursement Request does not represent a genuine issue of material fact.

                                           3
Neibauer, was its sole shareholder. PJN was dissolved in 2009 or 2010. As part of

the dissolution, PJN sold or distributed the yacht to Neibauer, who then leased it to

defendant Robert Ferguson.

       The Federal Deposit Insurance Corporation (“FDIC”) subsequently placed

Union into receivership. On February 28, 2014, the FDIC sold note #91135, along

with other Union assets, to SMS. None of the records that SMS acquired from the

FDIC contain evidence of an agreement, written or otherwise, to include debt that

Cope owed prior to his bankruptcy petition in a post-bankruptcy note.

       SMS sought a judgment against Cope for the amount due under note #91135,

plus interest, and an order awarding and delivering the yacht to SMS. Defendants

counterclaimed, seeking a declaratory judgment that note #91135 was paid, void,

unenforceable, or extinguished, and that SMS’ security interest in the yacht was void

and unenforceable. The district court granted SMS’ motion for summary judgment.

                                             II

       Our standard of review is well established:

       We review the district court’s grant of summary judgment de novo, viewing
       the evidence in the light most favorable to the non-moving party. Summary
       judgment is appropriate when there is no genuine issue of material fact and
       the movant is entitled to judgment as a matter of law. We may affirm on
       any basis supported by the record, even though not relied on by the district
       court.

McCarty v. Gilchrist, 646 F.3d 1281, 1284-85 (10th Cir. 2011) (quotations

omitted). Because jurisdiction in this case is based on diversity of citizenship, we




                                             4
apply the substantive law of the forum state, Oklahoma. Hayes Family Tr. v. State

Farm Fire & Cas. Co., 845 F.3d 997, 1005 (10th Cir. 2017).3

                                           A

      Defendants argue that SMS lacks standing to sue on note #91135 because the

note was not properly assigned to SMS. SMS provided the district court with a copy

of the note, together with a facially valid allonge assigning it to SMS. But

defendants contend that the allonge and other documents completing the assignment

are invalid because, by the time an SMS representative signed them, the power of

attorney (“POA”) that empowered the SMS representative to act for the FDIC had

expired.

      Under Oklahoma law, a promissory note is a negotiable instrument that may be

enforced only by someone with standing; that is, someone who is a party to the note

or someone in privity thereto. Wells Fargo Bank, N.A. v. Heath, 280 P.3d 328, 334

(Okla. 2012). One establishes standing by presenting a copy of a facially enforceable

note. Deutsche Bank Nat’l Tr. Co. v. Roesler, 348 P.3d 707, 712 (Okla. Civ. App.




      3
         Defendants contend that this case is founded on “federal question”
jurisdiction because the issues and claims involved the application of 12 U.S.C.
§ 1823(e) and SMS’ status as a holder in due course from the FDIC. But these issues
arose as part of SMS’ attempt to counter various defenses, not as part of SMS’
“well-pleaded complaint,” and thus do not give rise to federal question jurisdiction.
See Devon Energy Prod. Co. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1202
(10th Cir. 2012) (“Under the well-pleaded complaint rule, a suit arises under federal
law only when the plaintiff’s statement of his own cause of action shows that it is
based on federal law.” (quotations omitted)).

                                           5
2015). SMS satisfied this requirement by presenting to the district court the note and

a facially valid allonge assigning the note to itself.

       Issues about the continuing validity of the underlying POA at the time of

assignment, and its effect on the validity of the allonge and other documents, are

relevant only to the merits of SMS’ action. See id. (“[A]ttaching a copy of a facially

enforceable note to a petition establishes a prima facie case for standing. All further

questions regarding the final legal right of a plaintiff or claimant to foreclose on the

note remain merits questions.”).4 In district court, defendants did not contest the

validity of the documents assigning the note and security agreement to SMS. Nor did

they argue that the allonge and other assignment documents were invalid due to an

expired POA. Thus, defendants forfeited this issue. See Entek GRB, LLC v. Stull

Ranches, LLC, 840 F.3d 1239, 1243 (10th Cir. 2016).

                                             B

       Defendants next argue that note #91135 is unenforceable because it revived

Cope’s discharged, pre-bankruptcy guarantee on the Gorman Pipeline project in

violation of 11 U.S.C. § 524(c). The district court rejected this argument because the

record does not link the note to Cope’s discharged debt. It further reasoned that



       4
         Although we are not required to follow the reasoning of an intermediate state
court, “we should do so unless we are convinced that reasoning is incorrect.” Home
Loan Inv. Co. v. St. Paul Mercury Ins. Co., 827 F.3d 1256, 1263 (10th Cir. 2016).
We are persuaded by the Oklahoma Court of Civil Appeals’ reasoning concerning the
sufficiency of documentation to establish standing under state law, as well as the
distinction between standing and merits issues in foreclosure actions.

                                             6
defendants’ allegations were barred by D’Oench, Duhme & Co. v. FDIC, 315 U.S.

447 (1942), and its codification at 12 U.S.C. § 1823(e).

       We conclude that there is a genuine dispute of material fact as to whether note

#91135 violated § 524(c) and thus the district court erred in granting summary

judgment to SMS. Section 524 provides a debtor with broad protections from

attempts to collect a dischargeable debt. A creditor seeking to reaffirm such a debt

by entering into an agreement with the debtor, “the consideration for which, in whole

or in part, is based on a [dischargeable] debt,” must do so prior to discharge and

comply with stringent disclosure and approval requirements. § 524(c), (d) (emphasis

added). Union did not satisfy these requirements. Giving defendants, who were the

non-movants on summary judgment, the benefit of all reasonable inferences, see

Asarco, LLC v. Noranda Mining, Inc., 844 F.3d 1201, 1207 (10th Cir. 2017), the

facts in this case could permit a reasonable jury to infer that at least a portion of the

consideration for note #91135 was based on Cope’s discharged Gorman Pipeline

debt. Cope testified that a Union representative told him that he would have to repay

the Gorman Pipeline guarantee if he wanted the yacht loan. Although the original

promissory notes showed Mainstream as obligor, the two notes were signed the same

day, and it is uncontested that one of them, #86991, provided the purchase money for

the yacht. According to Cope, the amount of the other note, #86993, approximated

the amount left unpaid on the Gorman Pipeline guarantee. Cope eventually took

responsibility for both notes, which were restructured with him as obligor, as notes

#87479 and #87480. And note #91135 was used to repay notes #87479 and #87480,

                                             7
and thus a portion of the consideration for note #91135 could be viewed as traceable

to Cope’s agreement to repay the discharged Gorman Pipeline guarantee.

      The district court also based its grant of summary judgment to SMS on the

D’Oench doctrine, codified at 12 U.S.C. § 1823(e). Section 1823(e) provides that a

borrower cannot assert an agreement with a failed bank against attempts by the FDIC

or its assignees to collect on a promissory note, unless the agreement is in writing,

was executed contemporaneously by the bank and the obligor, was approved by the

bank’s board of directors, and was made an official record of the bank. A principal

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.” Langley v. FDIC, 484 U.S. 86, 91-92 (1987).

      In Langley, the Supreme Court distinguished, for § 1823(e) purposes, between

agreements procured by fraud in the factum and those procured by fraud in the

inducement. 484 U.S. at 93-94. The former are “entirely void . . . thus leaving no

right, title or interest” in the FDIC “that could be diminished or defeated.” Id.

(quotation omitted). The latter are merely voidable. Id. at 94. Section 1823(e)

protects voidable agreements because otherwise the FDIC would be subject “to a

wide range of other undisclosed defenses that make a contract voidable, such as

certain kinds of mistakes and innocent but material misrepresentations.” Id. Thus,

even an agreement procured by fraud that is not void is still shielded by § 1823(e)

                                           8
and may be enforced by the FDIC and its successors-in-interest, see id. at 94, but an

agreement that is void may not be enforced, id. at 93-94.

      We must therefore determine whether an unlawful reaffirmation agreement,

represented by a promissory note based in part on a discharged debt, is a “void”

agreement or merely a “voidable” one. We conclude such agreements are best

considered “void” for several reasons. Reaffirmation agreements entered into

without compliance with the requirements of § 524(c) have generally been described

as “void and unenforceable,” rather than merely voidable. E.g., Republic Bank of

Cal., N.A. v. Getzoff (In re Getzoff), 180 B.R. 572, 574 (9th Cir. BAP 1995).

Further, a key distinction between a void and a voidable obligation is whether it is

subject to ratification by the debtor. See Restatement (Second) of Contracts § 163,

cmt. c (“[T]he recipient of a misrepresentation may be held to have ratified the

contract if it is voidable but not if it is ‘void.’”). An improperly reaffirmed debt is

not subject to ratification. In re Lee, 356 B.R. 177, 182-83 (Bankr. N.D. W. Va.

2006). Moreover, discharge in bankruptcy is itself a defense, classed with fraud in

the factum, that can defeat even the rights of a holder in due course. See U.C.C.

§ 3-305(2)(c), (d) (Am. Law Inst. & Nat’l Conf. Comm’rs Uniform State Laws 2014).

Finally, as previously noted, § 524(c) prohibits reaffirmation of agreements that rely

even in part on consideration based on a discharged debt. For this reason, most

courts have held that giving new consideration (like a yacht loan) to persuade a

debtor to reaffirm will not validate a non-complying agreement. As one court has

explained,

                                            9
      Section 524(c) is not concerned with the consideration that the debtor
      received; instead, it invalidates non-complying agreements where any part
      of the consideration given by the debtor involves his promise to pay a
      discharged debt. . . . Every reaffirmation agreement involves some element
      of new consideration. Otherwise, the debtor would not agree to pay the
      discharged debt. If new consideration saved a non-complying reaffirmation
      agreement, little would remain of the protection afforded by § 524(c).

In re Zarro, 268 B.R. 715, 720-21 (Bankr. S.D.N.Y. 2001).

      We have not determined that note #91135 is void, only that a genuine issue of

material fact remains concerning whether it is void. If § 524(c) renders the

promissory note void, then that “would take the instrument out of § 1823(e).”

Langley, 484 U.S. at 93. Therefore we reverse summary judgment on this issue.

                                           C

      Finally, defendants argue that the district court should not have given priority

to SMS’ security interest in the yacht because Union never perfected this security

interest by filing it with the Coast Guard. See 46 U.S.C. § 31321(a)(1); Bank of the

W. v. Sailing Yacht Serendipity, 101 F. Supp. 3d 238, 248 (E.D.N.Y. 2015). It is

undisputed that SMS’ interest was not properly recorded. But even so, the interest is

valid against “a person having actual notice of the sale, conveyance, mortgage,

assignment, or related instrument.” § 31321(a)(1).

      PJN had actual notice because Cope was its president and his knowledge was

imputed to PJN. We also agree with the district court that Neibauer had implied

actual notice. Authority from other courts on this point is persuasive. See, e.g.,

Mullane v. Chambers, 349 F. Supp. 2d 190, 194-97 (D. Mass. 2004) (discussing and

applying standard), aff’d, 438 F.3d 132 (1st Cir. 2006). As noted in Mullane,

                                          10
       If a person has knowledge of such facts as would lead a fair and prudent
       man, using ordinary thoughtfulness and care, to make further accessible
       inquiries, and he avoids the inquiry, he is chargeable with the knowledge
       which by ordinary diligence he would have acquired. Knowledge of facts,
       which, to the mind of a man of ordinary prudence, beget inquiry, is actual
       notice, or, in other words, is the knowledge which a reasonable
       investigation would have revealed.

Id. at 194-95 (quoting The Tompkins, 13 F.2d 552, 554 (2d Cir. 1926)). The facts

in this case would lead a fair and prudent person to inquire about the yacht’s

status. Neibauer knew she had bought the yacht, it was titled in her name, and she

leased it to Ferguson. Thus, both PJN and Neibauer had actual or implied actual

notice of SMS’ superior lien.

                                            IV

       We REVERSE the district court’s grant of summary judgment to SMS

enforcing note #91135 and remand for further proceedings. To the extent that the

underlying obligation represented by note #91135 is enforceable, we AFFIRM the

district court’s summary judgment determination that SMS’ putative security interest

is also enforceable against defendants with actual notice.


                                             Entered for the Court


                                             Carlos F. Lucero
                                             Circuit Judge




                                            11
