
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 95-1492                               MIGUEL VILLAFA E-NERIZ,                        INSURANCE COMMISSIONER OF PUERTO RICO,                                Plaintiff - Appellant,                                          v.                    FEDERAL DEPOSIT INSURANCE CORPORATION, ET AL.,                                Defendant - Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                  [Hon. Juan M. P rez-Gim nez, U.S. District Judge]                                               ___________________                                 ____________________                                        Before                               Torruella, Chief Judge,                                          ___________                           Campbell, Senior Circuit Judge,                                     ____________________                              and Watson,* Senior Judge.                                           ____________                                _____________________               Carlos J. Morales-Bauz , with whom Rossell -Rentas & Rabell-               _______________________            _________________________          M ndez was on brief for appellant.          ______               J.   Scott  Watson,   Counsel,  Federal   Deposit  Insurance               __________________          Corporation, with  whom Ann S. DuRoss,  Assistant General Counsel                                  _____________          and  Richard J.  Osterman, Jr.,  Senior Counsel,  Federal Deposit               _________________________          Insurance Corporation, were on brief for appellee.                                 ____________________                                   February 2, 1996                                 ____________________                                        ____________________          *  Of the United States  Court of International Trade, sitting by          designation.                    TORRUELLA, Chief Judge.  This appeal seeks review of  a                    TORRUELLA, Chief Judge.                               ___________          decision  of the United States District Court for the District of          Puerto Rico, which entered summary judgment on behalf of appellee          the  Federal  Deposit  Insurance  Corporation  ("FDIC"),  in  its          corporate capacity.  Appellant Miguel  Villafa e-Neriz, Insurance          Commissioner of Puerto Rico (the "Commissioner") seeks to recover          FDIC  deposit insurance for the $50,000 value of a certificate of          deposit (the "Certificate" or the "CD") purchased by the Guaranty          Insurance  Company  ("Guaranty"),  which   was  assigned  to  the          Commissioner  simultaneously  with its  purchase.    The district          court held that the FDIC properly relied on the books and records          of an insolvent institution in making its determination  that the          Commissioner  was not entitled to   deposit insurance.   The sole          issue before us is  whether the district court erred  in granting          summary judgment  against the Commissioner in  his action against          the  FDIC in  its corporate  capacity.1   For the  reasons stated          herein, we affirm.                                      BACKGROUND                                      BACKGROUND                    The facts of  this case  are undisputed.   On July  20,          1983,  in  compliance  with  the  Puerto  Rico  Insurance  Code's          statutory  deposit requirement,  26 L.P.R.A.      801-809 (1976),          Guaranty purchased the  six-month CD from the Girod Trust Company                                        ____________________          1    In its  corporate capacity,  the  FDIC functions  as  a bank          regulator  and  insurer of  bank deposits.    12 U.S.C.     1818,          1821(a)  (1988 &  Supp. 1991).   The  Commissioner does  not seek          review of that part of the district court decision that dismissed          the complaint as against the FDIC as receiver of the former Girod          Trust Company.                                         -2-          ("Girod" or the  "Bank") in the principal amount  of $50,000.  On          the same day Guaranty  assigned and conveyed its interest  in the          Certificate  to the Commissioner.   Girod was not  a party to the          assignment.   Another  document was  executed on  the  same date,          entitled "Requisition to the Bank."  This  document stated, inter                                                                      _____          alia, that Girod would  not release the funds represented  by the          ____          CD, "whether the principal value or  income thereof," without the          Commissioner's authorization.   The Certificate was  itself given          to, and remains with, the Commissioner.                    Less than three months after purchasing the Certificate          from Girod, Guaranty executed a  loan agreement, unrelated to the          CD,  pursuant  to  which it  borrowed  $600,000  from  Girod.   A          promissory note for  that amount, payable to Girod, evidenced the          loan, and was due on April 26, 1984.  On January 17, 1984, the CD          became due, and  was "rolled over" -- extended for  a term of six          additional months --  at Guaranty's  request.   In the  meantime,          Guaranty had fallen behind on payments due to the  Bank under the          $600,000  loan agreement.   On  July 16,  1984,  the CD  came due          again.   Two  days after  its maturity,  on July  18, $50,000  in          proceeds  from  the Certificate  was  credited toward  Guaranty's          outstanding indebtedness under the $600,000 loan agreement.                    On August  16, 1984,  Girod was declared  insolvent and          the  FDIC was  appointed  as receiver.    Four months  later,  on          December  19,  1984,  Guaranty  also became  insolvent,  and  the          Commissioner was appointed  its receiver  in turn.   As such,  on          August 25, 1986, the Commissioner filed a proof of claim with the                                         -3-          FDIC, seeking payment  on the CD.  Having  received no payment on          the claim, the Commissioner filed a complaint against the FDIC in          the  Superior Court of  Puerto Rico on  May 22,  1991, seeking to          recover  the proceeds of the CD.   The FDIC removed the action to          federal  court pursuant to 12  U.S.C.   1819(b),  and the parties          filed cross-motions  for summary judgment.  Without ruling on the          motions, the district court requested submission of briefs on the          application of  12 U.S.C.    1823(e).   The court then  held that          that section  barred the Commissioner's reliance  upon either the          Assignment or  the Requisition,  and ordered summary  judgment in          favor of the FDIC.  On appeal in Villafa e-Neriz v. FDIC, 20 F.3d                                           _______________    ____          35 (1st Cir. 1994), this Court reversed the judgment of the lower          court and  remanded the  case for further  proceedings consistent          with  its opinion.    On February  7,  1995, the  district  court          entered  summary  judgment  dismissing the  complaint.      It is          undisputed  that the entire amount of the Certificate was set off          against Guaranty's  indebtedness, that the CD  no longer appeared          on the bank's books and records  at the time the bank failed, and          that  the  Certificate  itself  remains  in  the   Commissioner's          possession.                                        DISCUSSION                                      DISCUSSION                                A.  Standard of Review                                A.  Standard of Review                                    __________________                    This case centers on whether the FDIC, in its corporate          capacity,  was  correct  in  determining  there  was  no  insured          deposit. As the essential facts are not in  dispute, and all that          is  before us is  a question of  law, our review  of the district                                         -4-          court's decision is de novo.  See, e.g., FDIC v. Keating, 12 F.3d                              _______   ___  ____  ____    _______          314, 316 (1st Cir. 1993).  This Circuit has not yet decided which          standard  a  district  court   should  use  when  reviewing  FDIC          insurance claim determinations.                      There  is  a  dispute  among  the  circuits as  to  the          underlying  standard that should apply  to the review  of an FDIC          insurance claim  determination.   The majority of  circuits which          have addressed the  issue apply the deferential standard  set out          in Section  706 of  the Administrative  Procedure Act  ("APA"), 5          U.S.C.    701-706 (1994).  See, e.g., Metro County Title, Inc. v.                                     ___  ____  ________________________          FDIC, 13 F.3d 883, 886 (5th Cir.  1994) (direct petition to court          ____          of appeals for review  of FDIC determination); Nimon v.  RTC, 975                                                         _____     ___          F.2d 240 (1992) (direct  petition to court of appeals  for review          of  Resolution Trust  Corporation determination);  In  re Collins                                                             ______________          Sec. Corp., 998 F.2d 551, 553 (8th Cir. 1993) (review of district          __________          court decision); Fletcher Village Condominium Ass'n. v. FDIC, 864                           ___________________________________    ____          F.  Supp. 259,  263  (D. Mass.  1994).    The APA  mandates  that          reviewing courts  set aside agency findings  that are "arbitrary,          capricious,  an   abuse  of  discretion,  or   otherwise  not  in          accordance  with  law."    5  U.S.C.    706(2)(A).    Under  this          deferential standard a court would "review the evidence  anew and          determine  whether the  administrative action  was arbitrary  and          capricious."  First Nat'l Bank of Fayetteville v. Smith, 508 F.2d                        ________________________________    _____          1371,  1374 (8th Cir. 1974),  cert. denied, 421  U.S. 930 (1975);                                        ____________          see, e.g., Hymel v. FDIC, 925 F.2d 881, 883 (5th Cir. 1991).            ___  ____  _____    ____                    However, a recent decision  by the D.C. Circuit creates                                         -5-          a second  option, holding that review of  FDIC determinations, to          be  undertaken at  the district  court level,  should be  de novo                                                                    __ ____          rather than under the  deferential APA standard.  See  Callejo v.                                                            ___  _______          RTC, 17 F.3d 1497 (D.C. Cir. 1994).  The Callejo  court based its          ___                                      _______          rejection of  the APA on its reading of 12 U.S.C.   1821(f) (1988          &  Supp. 1991),  which provides  for judicial review  of disputed          deposit insurance  claims, and  its revision under  the Financial          Institutions  Reform,  Recovery,  and Enforcement  Act  of  1989.          Callejo, 17 F.3d at 1501 (concluding that   1821(f)(3) "supplants          _______          the APA and sets up a different relationship between the agencies          and the courts"); see  Pub. L. No. 101-73, 103 Stat.  183 (1989);                            ___          cf. Pennsylvania v. FDIC, 881 F. Supp. 979, 983 (E.D. Penn. 1995)          ___ ____________    ____          (rejecting Callejo's  logic  but  nonetheless  applying  de  novo                     _______                                       __  ____          standard of review on other grounds).  This Circuit has expressly          adopted  the aspect  of  the Callejo  decision  which holds  that                                       _______          initial jurisdiction to review claims for insurance benefits lies          in  the district  court  rather than  in  the court  of  appeals.          Massachusetts  v.  FDIC,  47  F.3d  456,  458  (1st  Cir.  1995).          _____________      ____          However,  the  decision in  that  case was  limited  to Callejo's                                                                  _______          jurisdictional holding.  Id. at 460.  Thus, Massachusetts v. FDIC                                   ___                _____________    ____          does not determine the district court's standard of review in the          present case, and  our decision to  postpone the discussion  does          not clash with our earlier decision.                     The  district  court  did  not explicitly  state  which          standard  of  review it  was applying,  although  it did  make an          isolated   reference,  midway   through   its  opinion,   to  the                                         -6-          "arbitrary, capricious and  contrary to law"  standard.  We  need          not  determine  which standard  the  district  court should  have          applied  at this time,  since we agree  with the  FDIC that under          either  the APA "arbitrary and capricious" or the Callejo de novo                                                            _______ __ ____          standard, the  district  court's decision  is correct.   Thus  we          postpone discussion regarding  the applicable standard  of review          in light of Callejo for another day.                      _______                           B.  Was this an insured deposit?                           B.  Was this an insured deposit?                               ____________________________                    At  the core  of the  parties' dispute  is whether  the          Commissioner  was  entitled to  deposit  insurance.   That  issue          depends on whether  there was an insured  deposit at the time  of          Girod's failure, a question  which in turn hinges on  whether and          when erroneous  bank records  are conclusive.   It is  undisputed          that the Bank's account records did not disclose the existence of          an  account on  the  date Girod  failed,  and that  the  original          Certificate is in  the possession  of the  Commissioner, and  has          been since July 1983.  The FDIC argues that under its regulations          and the applicable case law, it is justified in relying solely on          the failed Bank's account records, so that its refusal to provide          insurance  was  proper.   The  Commissioner  counters that  under          Puerto  Rico  law  the FDIC  should  have  known  the setoff  was          improper,  because   the  Certificate  was  not   in  the  bank's          possession.   Because  we  agree with  the  FDIC, we  affirm  the          decision of the court below.                    In  the Federal  Deposit  Insurance Act,  12 U.S.C.              1811-1831(d) (1982)  (as amended), Congress  defined "deposit" to                                         -7-          mean "the unpaid balance  of money or its equivalent  received or          held by  a bank  or savings  association in  the usual course  of          business and  for  which it  has given  or is  obligated to  give          credit,  either conditionally or unconditionally,  . . . or which          is evidenced by  its certificate of deposit . . . ."  12 U.S.C.            1813(l)(1) (Supp. 1995).  "Insured deposit" is defined in turn as          "the net amount due to  any depositor for deposits in  an insured          depository institution  as determined under sections  1817(i) and          1821(a) of this  title."  12  U.S.C.   1813(m)(1)  (1988 &  Supp.          1991).                     The  FDIC   contends  that  it  is   entitled  to  rely          exclusively  on the account records of  the failed institution --          and so it did  not have to look further afield  to track down the          Certificate.  Our analysis  of the FDIC regulations, the  body of          case law,  and the  policy concerns underlying  these regulations          leads  us  to agree.   First,  the FDIC  regulations, promulgated          under congressional authorization, Abdulla  Fouad & Sons v. FDIC,                                             _____________________    ____          898  F.2d 482, 484 (5th  Cir. 1990), themselves  provide that the          amount of  an insured  deposit at  the closing  of a  failed bank          shall be  "the balance of principal  and interest unconditionally          credited to the deposit account as  of the date of default of the          insured depository institution."  12 C.F.R.   330.3(i)(1) (1995).          Indeed, the regulations specify that, while ownership under state          law  is  one prerequisite  for  insurance  coverage, the  deposit          account records are controlling:                      Deposit  insurance  coverage  is  also  a                      function of the  deposit account  records                                         -8-                      of the insured depository institution, of                      recordkeeping requirements,  and of other                      provisions  of this  part, which,  in the                      interest  of  uniform national  rules for                      deposit    insurance     coverage,    are                      controlling  for purposes  of determining                      deposit insurance coverage.          12  C.F.R.     330.3(h)  (including  regulatory  exceptions   not          relevant here).  Reviewing  courts have treated these regulations          implementing  and interpreting  the statutory  provisions dealing          with deposit  insurance  with  some  deference.2    See  FDIC  v.                                                              ___  ____          Philadelphia Gear Corp., 476 U.S.  426, 437-38 (1986); see, e.g.,          _______________________                                ___  ____          Raine v.  Reed, 14  F.3d 280, 283  (5th Cir. 1994);  Collins, 998          _____     ____                                       _______          F.2d at 555; cf. Chevron U.S.A. Inc. v. Natural Resources Defense                       ___ ___________________    _________________________          Council,  Inc.,  467  U.S.  837,  842-44  (establishing  doctrine          ______________          treating  agency's  view of  a  statute with  deference  when the          statute is ambiguous), reh'g denied, 468 U.S. 1227 (1984).                                 ____________                    Second, a series of  policy considerations underlie the          FDIC's practice of  relying on  the books and  records in  making          deposit  insurance  determinations.   In purchase  and assumption          transactions,3  the  FDIC  often  must  make  its  determinations                                        ____________________          2    The  Commissioner asks  us  to  note  that "deposit  account          records"  are defined  to  include certificates  of deposits  and          "other books and records of the insured depository institution, .          . . which relate to the insured depository  institution's deposit          taking  function."  12 C.F.R.    330.1(d) (1995).   This language          proves unhelpful, however,  since it is undisputed that there was          no Certificate among the  Bank's records at the time  of failure.          Had the  Certificate  remained in  the records,  this case  would          likely not have arisen.          3   A  purchase and  assumption transaction  occurs when,  in its          capacity  as  receiver, the  FDIC sells  a failed  bank's healthy          assets to a purchasing  bank in exchange for that  bank's promise          to pay the  depositors of  the failed bank.   FDIC-receiver  next          sells the  'bad'  assets  to itself  as  FDIC-corporate.    FDIC-                                         -9-          overnight.  See Raine, 14 F.3d at 283 ("We will not undermine the                      ___ _____          speed and efficiency of bank  takeovers by imposing a requirement          upon the FDIC  to locate  and evaluate every  possible avenue  of          disputed  liability  in implementing  the  takeover  of a  failed          bank."); McCloud v. FDIC, 853 F.  Supp. 556, 559 (D. Mass. 1994).                   _______    ____          Making  quick determinations both facilitates the public's access          to its savings, Abdulla Fouad, 898 F.2d at 485, and maintains the                          _____________          going concern  value of the failed  bank, Raine, 14 F.3d  at 283.                                                    _____          Finally,  the  regulations  also avoid  fraudulent  increases  in          insurance coverage  by preventing the creation  of separate trust          accounts after default has occurred.  See Baskes v. FSLIC, 649 F.                                                ___ ______    _____          Supp. 1358, 1360 (N.D. Ill. 1986).                    Third,  there is "a well-grounded history of permitting          the FDIC  to  rely exclusively  on the  books and  records of  an          insolvent institution  in effectuating the takeover  of banks and          in  making the  many deposit  insurance determinations  which are          necessary to that task."  Raine, 14 F.3d at 283; see McCloud, 853                                    _____                  ___ _______          F. Supp. at 559  (describing the "seemingly solid phalanx  of law          establishing the  conclusiveness of bank  account records");  see                                                                        ___          also  Abdulla Fouad,  898 F.2d  at 484  (providing statutory  and          ____  _____________          regulatory basis  for FDIC reliance on  deposit account records).                                        ____________________          receiver  uses the money received  to pay the  purchasing bank to          make  up  the difference  between  what the  purchasing  bank was          willing to pay for  the good assets and what  it must pay out  to          the  failed  bank's depositors.    FDIC-corporate  then tries  to          collect  on  the  bad  assets.    This  purchase  and  assumption          generally  needs  to be  executed  with  speed, often  overnight.          Timberland  Design, Inc. v. First  Serv. Bank For  Sav., 932 F.2d          ________________________    ___________________________          46, 48 (1st Cir. 1991).                                         -10-          This  reliance on  the  books  and  records  draws  on  the  FDIC          regulations:    the  "FDIC's  longstanding  practice  of  looking          primarily  at  the  failed  bank's  deposit  account  records  in          determining   insurance   claims   is   clearly   a   permissible          interpretation of  [its] statutory mandates."   Collins, 998 F.3d                                                          _______          at 554.  Indeed, the case law the FDIC cites states that a bank's          closing  is  "the seminal  point"  of  the FDIC's  determination.          "That event not  only trigger[s] the liquidation process,  but it          also  cast[s] in  stone the  relationship of  [plaintiff] to  the          bank."  FDIC  v. McKnight, 769 F.2d 658, 661 (1985), cert. denied                  ____     ________                            ____________          sub  nom.,  All Souls  Episcopal Church  v.  FDIC, 475  U.S. 1010          _________   ___________________________      ____          (1986).                    In fact, the case law supports the FDIC's dependence on          the  books and records  of the Bank  at the time  of failure even          though  the   balance  was  a  result   of  alleged  unauthorized          activity.4  See Abdulla  Fouad, 898 F.2d at 484-85  (finding that                      ___ ______________          plaintiff's  position that  the  FDIC should  have searched  bank          credit  files  and other  records  before  denying a  claim  goes          against  statutory and  regulatory authority);  Fletcher Village,                                                          ________________                                        ____________________          4  This circuit has not previously reached the issue of whether a          bank's correctly  recorded but unauthorized activity precludes an          insurance claim.  See  FDIC v. Fedders Air Conditioning,  35 F.3d                            ___  ____    ________________________          18, 23 (1st  Cir. 1994).   Indeed,  in the  present case's  first          appearance  before  this  court,  we noted  we  had  not  decided          "whether or  to what  extent we would  be willing  to follow  the          Eighth Circuit's holding in In re Collins."  Villafa e-Neriz,  20                                      _____________    _______________          F.3d  at  40 n.6.   In  affirming  the district  court's decision          today, we  adopt much of  the logic  of the Collins  decision, as                                                      _______          well as the  decisions of  the district  court for  Massachusetts          which have decided similar  cases.  See Fletcher Village,  864 F.                                              ___ ________________          Supp. at 265 (adopting the reasoning of Collins); McCloud, 853 F.                                                  _______   _______          Supp. at 559.                                         -11-          864 F. Supp. at  265 ("To hold the FDIC liable for the errors and          omissions  inherent in  almost  any  routine banking  transaction          would divert the  FDIC from  its core mission  of protecting  the          banking  system  from  an  ultimate  catastrophe.").    In  their          analysis, "[t]hese  cases reflect the severe  tension between two          values:   the  legitimate expectations  of the depositor  and the          regulator's desire to rely upon existing  records to expedite the          handling of bank emergencies."  Fedders Air Conditioning, 35 F.3d                                          ________________________          at 23.                    The Eighth Circuit's analysis in  the factually similar          In re Collins  proves illustrative.  In  that case, as here,  the          _____________          purchaser  of a  certificate  assigned the  proceeds  to a  third          party,  Collins.    The  proceeds,  however,  were  paid  to  the          purchaser's account,  and  the CD  account was  reflected on  the          institution's account  records as closed.   Collins, 998  F.2d at                                                      _______          552-53.  The trustee  for the bankrupt Collins sought  to recover          from  the institution for paying  out the CD  account despite the          assignment,   alleging  negligence   and   breach  of   contract.          Following the institution's insolvency, the FDIC in its corporate          capacity   denied  deposit  insurance,  and  the  trustee  sought          judicial review of its denial.  Id. at 553.  The court of appeals                                          ___          held that the  FDIC properly relied on  the books and records  of          the failed institution to deny deposit insurance, noting that the          institution's "mistaken payment  may not have affected  Collins's          rights  against  the  bank, but  it  did  extinguish the  insured          amount."   Id.  at 554.   In short,  it reasoned  that "[d]eposit                     ___                                         -12-          insurance  protects  depositors  from  loss  due  to  the  bank's          insolvency, not  loss from  the bank's  pre-insolvency mistakes."          Id. at 555.  We find the Eighth Circuit's reasoning convincing in          ___          the present case as well.                    The  Commissioner  seeks  to  differentiate  Collins on                                                                 _______          several bases.  First, he argues that the mistake  in Collins was                                                                _______          a simple bank error,  id. at 552-53, while the  "cancellation" in                                ___          the current case is not a  simple mistake, but rather was illegal          on its face.   We do not find the distinction  relevant.  In both          cases,  the  account was  cancelled  without regard  to  the CD's          assignment,  and  the  bank's   records  had  not  reflected  the          assignment.  Second, he finds it significant that the decision in          Collins  noted  not only  that  the account  in  controversy been          _______          closed  at least  a  full  year  before  the  bank  was  declared          insolvent,  but also that the insolvent bank had not paid deposit          insurance premiums  for the account.   See id. at 553-54.   Here,                                                 ___ ___          the Commissioner contests, Girod paid  deposit insurance premiums          on the CD account, which  was cancelled less than a  month before          the  bank was  taken  over  and a  few  days  after the  Treasury          Department of Puerto Rico conducted the investigation that led to          the  bank's  closing.    Again,  we  are  not  convinced  of  the          distinction.  In  Collins, the court's determination was based on                            _______          the fact that the  records of a failed bank indicated the amounts          that  were insured, and the accounts for which the FDIC collected          deposit  insurance premiums.  The length of time that the account          was  closed, or the insurance  premiums unpaid, was  not the key:                                         -13-          the crucial factor was the reasonableness of the FDIC reliance on          the  records.  See id. at 554.  Collins noted that the CD account                         ___ ___          _______          was  not an  insured deposit  for which  premiums were  paid, and          found that Collins'  trustee had "confus[ed] the right to recover          from  the bank  with  the  right  to  withdraw  from  an  insured          account."  Id.                       ___                    Raine  v. Reed  offers another  example of  an analysis                    _____     ____          upholding  the FDIC's exclusive reliance on the books and records          of  a failed  institution.   Raine was  a victim  of unauthorized          withdrawals from automatic teller machines, who notified her bank          of the  withdrawals and  sought to  have her  account re-credited          pursuant to the Electronic Funds Transfer Act ("EFTA"), 15 U.S.C.             1693-1693r.   Raine, 14  F.3d at 281-82.   At the time  of its                           _____          failure, the  bank had not provisionally  re-credited the account          pending  final   resolution  of  her  request,   as  required  by          regulations  implementing  the EFTA.    Raine  contended she  was          entitled  to deposit insurance on  the basis that  she should not          suffer because of the bank's mistakes.  Id. at 282.  However, the                                                  ___          Fifth Circuit found that                      [t]he  disputed  amount  was  simply  not                      credited   to   her   account   at   all,                      conditionally  or  otherwise.   Thus, the                      account  cannot  be  covered  by  deposit                      insurance  because  no  credit   for  the                      amounts  withdrawn  was  entered  on  the                      bank's books at the time of failure.          Id.  at 283.  The court relied  on the "well-grounded history" of          ___          allowing   the  FDIC   to  rely   exclusively  on   an  insolvent          institution's books and  records, even where the bank  itself has                                         -14-          committed a  mistake, as well as the  policy rationales discussed          above, in upholding the FDIC's use of the books and records.  Id.                                                                        ___          According to the court, "[t]he regulations are clear  and simple,          either the amount is credited to the account, in which case it is          covered by deposit insurance, or the  amount is not on the books,          in which case  it becomes a general liability of  the bank."  Id.                                                                        ___          at 284.                    The Commissioner offers no authority  contradicting our          analysis of the FDIC regulations, policy considerations, and case          law  supporting the use of  the failed bank's  records.  Instead,          the  Commissioner  counters  with  two arguments.      First,  he          contends that even if the FDIC relied on Girod's existing records          at the time of its failure in 1984, it should have concluded that          the   Certificate  had   not  been   properly  cancelled.     The          Commissioner  relies on 7 L.P.R.A.    3 (1981),  which states, in          pertinent part, that                       [t]he  term  "deposit certificate"  shall                      mean any deposit which has been evidenced                      by   a   receipt  or   written  agreement                      containing  the  term   for  which   such                      deposit  has been  made  and  which  also                      requires presentation at the bank for its                      _________________________________________                      collection.                      __________          (emphasis added).   He concludes  from this  language that  since          Puerto  Rico law mandates that  the original of  a certificate of          deposit be presented to the bank for collection, an FDIC official          reviewing Girod's records  regarding the CD's "cancellation"  had          to be alerted that the Certificate was still  valid by the simple          fact that the original was not contained in the customer profile.                                         -15-          By failing to do so, the Commissioner contends, the FDIC did  not          give  the  proper  weight  to these  Puerto  Rican  recordkeeping          requirements.                    We  do not find this argument convincing.  On its face,          the  statute  sets  out  the requirements  for  presentation  for          collection, which  is not at  issue here.  We  are concerned with          what records  should remain in the  bank after a  setoff, and the          language is silent on this point.  The sole case the Commissioner          cites to support its argument that the statute should be  read to          require  that the original of a certificate must be presented for          setoff, Walla Corp.  v. Banco Commercial de  Mayaguez, 114 D.P.R.                  ___________     _____________________________          216  (1983)   (holding  that  where   bank  set  off   loan  with          certificates  effectively  assigned to  third  party, bank  could          compensate the CDs with the  loans debtor had with it), does  not          mention  the statute.  We could find no case law on point.  Given          the plain meaning of the statute,  and the absence of evidence to          support  the Commissioner's reading of the statute, we reject his          position.                     The  Commissioner's  second   argument  relies  on   an          exception to  the general rule that the  records of a failed Bank          are  conclusive.  That exception states  that "records that would          otherwise be conclusive evidence  may be attacked as fraudulent."          Collins, 998  F.2d at  555; see, e.g.,  Jones v.  FDIC, 748  F.2d          _______                     ___  ____   _____     ____          1400, 1405 (10th  Cir. 1984); McCloud, 853 F. Supp.  at 559.  The                                        _______          Commissioner argues to  this court  that there was  fraud in  the          transaction  assigning  the  Certificate,  and  therefore  he  is                                         -16-          entitled to attack the conclusiveness of Girod's records.                    However,  we  refuse  to  consider  the  Commissioner's          argument, since he  raises it for the first time  on appeal.5  It          is well established that this court will not consider an argument          presented for  the first time on  appeal.  See Clauson  v. Smith,                                                     ___ _______     _____          823  F.2d 660,  666 (1st  Cir. 1987)  (collecting cases).   While          exceptions to this  rule exist, they  apply only "'in  horrendous          cases  where  a  gross  miscarriage  of  justice  would  occur,'"          Johnston v. Holiday Inns, Inc., 595 F.2d 890, 894 (1st Cir. 1979)          ________    __________________          (quoting  Newark Morning  Ledger Co. v.  United States,  539 F.2d                    __________________________     _____________          929, 932 (3d Cir. 1976)), and this is not  such a case.  That the          Commissioner's argument involves no new facts, just a new theory,          is irrelevant.   See Ondine  Shipping Corp. v.  Cataldo, 24  F.3d                           ___ ______________________     _______          353, 355 (1st Cir. 1994) ("This assertion is neither original nor          persuasive.").                    Therefore,  since   we  find  that  under   either  the                                        ____________________          5   We note in passing that  the Commissioner argues on the basis          of fraud in  the transaction underlying the  records, since there          is  no  question  that  the  records  themselves  were  accurate.          However,  the  cases the  Commissioner seeks  to  rely on  in his          argument -- McCloud, Abdulla Fouad, and Collins -- all discuss an                      _______  _____________      _______          exemption based on fraud in a bank's recordkeeping.  See Collins,                                                               ___ _______          998 F.2d at 556  (noting that there was "no  allegation of fraud"          where the bank's records "accurately reflected payout of $100,000          to  the  wrong  party.");  Abdulla  Fouad,  898  F.2d  at  485-86                                     ______________          (refusing to extend  exception to include  proof directed to  the          deposit  account  recording);  McCloud,   853  F.  Supp.  at  560                                         _______          (concluding  that, where there  was evidence that  the records of          deposits were altered during the course of fraudulent conduct  by          the bank president, "it was arbitrary, capricious and contrary to          law for the agency to consider the customer profile as of the day          of  the bank's default as conclusive"  (footnote omitted)).  Thus          we question whether the Commissioner would have met with success,          even if he had both  raised this argument in the court  below and          demonstrated that there was fraud in the transaction.                                         -17-          arbitrary  and capricious  standard or a  more demanding  de novo                                                                    __ ____          review the FDIC was correct in relying solely on Girod's records,          and  reject the  Commissioner's  arguments based  on Puerto  Rico          banking  law and fraud, we affirm the district court's holding on          these issues.                     C.  Application of the McCarran-Ferguson Act                     C.  Application of the McCarran-Ferguson Act                         ________________________________________                    The Commissioner  raises one final argument against the          FDIC's  insurance determinations,  based on  Section 2(b)  of the          McCarran-Ferguson  Act.  59 Stat.  33, 34 (1945),  as amended, 15          U.S.C.   1012(b).  Section 2(b) states, in pertinent part:                      No Act of Congress shall be  construed to                      invalidate, impair, or supersede  any law                      enacted by  any State for  the purpose of                      regulating the business of  insurance, or                      which  imposes  a fee  or  tax upon  such                      business,  unless  such Act  specifically                      relates  to  the  business  of  insurance                      . . . .          15  U.S.C.    1012(b) (1994).   This  statute creates "a  form of          inverse  preemption,  letting  state  law  prevail  over  general          federal rules--those  that do  not 'specifically relate[]  to the          business of insurance.'"  NAACP v. American Family Mut. Ins. Co.,                                    _____    _____________________________          978  F.2d 287, 293  (7th Cir. 1992), cert.  denied, ___ U.S. ___,                                               _____________          113  S. Ct. 2335, 124 L.Ed.2d 247 (1993); see United States Dep't                                                    ___ ___________________          of the  Treasury v. Fabe,  ___ U.S.  ___, ___, 113  S. Ct.  2202,          ________________    ____          2211, 124  L.Ed.2d 449 (1993)  (noting that the  Act "transformed          the  legal   landscape  by   overturning  the  normal   rules  of          preemption.").   As the Supreme Court  has explained, "'Congress'          purpose  was broadly to give  support to the  existing and future          state  systems   for  regulating  and  taxing   the  business  of                                         -18-          insurance.'"  Fabe, 113  S. Ct. at 2207 (quoting  Prudential Ins.                        ____                                _______________          Co.  v. Benjamin, 328 U.S. 408, 429  (1946)).  Indeed, the quoted          ___     ________          language  of Section 2(b) "impos[es] what is, in effect, a clear-          statement rule, a rule  that state laws enacted 'for  the purpose          of  regulating  the  business  of  insurance'  do  not  yield  to          conflicting   federal   statutes   unless   a   federal   statute          specifically requires otherwise."  Id. at 2211.                                             ___                    The Commissioner seizes on Section 2(b) to contend that          the district  court's decision  "renders meaningless"  the Puerto          Rico Insurance Code provisions requiring that insurance companies          make  statutory deposits.  See  26 L.P.R.A.     801-809.  Because                                     ___          Guaranty assigned the CD  to the Commissioner in order  to comply          with this  statute, the Commissioner concludes  that the district          court's  decision  upholding  the   FDIC's  refusal  of   deposit          insurance  impairs the  Commissioner's  ability  to regulate  the          business  of insurance  in  Puerto Rico,  and therefore  violates          Section  2(b).     The  decision,   the  Commissioner   contends,          particularly impairs "obtaining  eligible deposits from insurance          companies to comply with the statutory deposit requirement of the          Insurance Code, whose ultimate aim is to protect policyholders in          case of the insurer's insolvency."  (Appellant's Brief, at 20).                    The Supreme Court  has set out the factors required for          a  federal  statute to  fall  within  the McCarran-Ferguson  Act.          First,  the  federal   statute  must   "invalidate,  impair,   or          supersede" the state act.   Second, the federal statute  must not          "specifically relat[e]  to the business of  insurance."  Finally,                                         -19-          the  state law  must  have  been  enacted  "for  the  purpose  of          regulating the business of insurance."  Fabe, 113 S. Ct. at 2208.                                                  ____          We need go  no further than the first factor  in our analysis, as          the Commissioner's  argument that  the application of  the Puerto          Rico Insurance Code is impaired fails.                    The  Supreme  Court  faced  the  question  of  when  an          "impairment" occurs in SEC  v. National Sec., Inc., 393  U.S. 453                                 ___     ___________________          (1969).  In that case, the SEC sought to unwind the merger of two          insurance  companies which  had  been approved  by  the state  of          Arizona, on the basis that the merger was obtained through use of          fraudulent misrepresentations.    Arizona argued  that the  SEC's          action  would violate  the  McCarran-Ferguson Act.   The  Supreme          Court,  finding  that the  essential  question  was "whether  the          McCarran-Ferguson  Act  bars a  federal  remedy  which affects  a          matter  subject  to  state  insurance regulation,"  id.  at  462,                                                              ___          disagreed.                        The gravamen  of  the complaint  was  the                      misrepresentation,  not the merger. . . .                      Nevertheless, [the state] contend[s] that                      any  attempt to  interfere with  a merger                      approved  by  state  insurance  officials                      would "invalidate,  impair, or supersede"                      the  state  insurance laws  .  .  . .  We                      cannot    accept   this    overly   broad                      restriction on federal power.                         It  is clear that  any "impairment" in                      this case is a most indirect one.          Id. at  462-63.  The courts have relied on this logic to conclude          ___          that   "application  of a  federal law  [will] be  precluded only          where  the federal  law expressly  prohibit[s] acts  permitted by          state law, or vice  versa."  Merchants Home Delivery  Serv., Inc.                                       ____________________________________                                         -20-          v. Frank  B. Hall  &  Co., 50  F.3d 1486,  1492  (9th Cir.  1995)             ______________________          (holding that application of a  federal law which prohibited acts          also  prohibited  by  state  insurance law  did  not  invalidate,          impair,   or  supersede  state   law,  despite   their  differing          remedies),  cert. denied  sub nom.,  Prometheus Funding  Corp. v.                      ______________________   _________________________          Merchants Home Delivery  Serv., Inc.,  ___ U.S. ___,  116 S.  Ct.          ____________________________________          418, ___ L.Ed.2d ___  (1995); see American Family Mut.  Ins. Co.,                                        ___ ______________________________          978  F.2d  at 296-97  (drawing  on  analogies  to the  principles          governing federal preemption of state law).                      Application  of this  "direct  conflict"  test  quickly          defeats the  Commissioner's argument.   In short, nothing  in the          district  court opinion -- or the FDIC regulations -- impairs the          Commissioner's authority  or  ability  to  obtain  deposits  from          insurance  companies  to  comply   with  the  statutory   deposit          requirement.   The  opinion and  regulations merely set  out what          records the FDIC may rely on  in making insurance determinations.          The  Commissioner's loss is the product of events, not a conflict          between federal and Commonwealth  statutes.  In the absence  of a          direct  prohibition, we  refuse to  hold that  there has  been an          impairment merely because  in this circumstance a  CD assigned to          the  Commissioner was  set  off against  the insurance  company's          indebtedness.  Cf. Merchants Home Delivery, 50 F.3d at 1492 ("The                         ___ _______________________          language of   2(b) is inconsistent with a congressional intent to          allow states to preempt the field of insurance regulation.").                                        CONCLUSION                                      CONCLUSION                    For the reasons stated above, we affirm.                                                     affirm.                                                     ______                                         -21-
