
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-1651                        FEDERAL DEPOSIT INSURANCE CORPORATION,                              Cross-Plaintiff, Appellee,                                          v.                       SHEARSON-AMERICAN EXPRESS, INC., ET AL.,                                  Cross-Defendants.                                      __________                          BANCO COOPERATIVO DE PUERTO RICO,                                Intervenor, Appellant.                                 ____________________        No. 92-1652                        FEDERAL DEPOSIT INSURANCE CORPORATION,                              Cross-Plaintiff, Appellee,                                          v.                       SHEARSON-AMERICAN EXPRESS, INC., ET AL.,                                  Cross-Defendants.                                      __________                          PRUDENTIAL BACHE SECURITIES, INC.,                                Intervenor, Appellant.                                 ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                    [Hon. Raymond L. Acosta, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Stahl, Circuit Judge,                                        _____________                           Campbell, Senior Circuit Judge,                                     ____________________                         and Skinner,* Senior District Judge.                                       _____________________                                 ____________________            Manuel Fernandez-Bared  and Ramon Coto-Ojeda  with whom Nestor  M.            ______________________      ________________            __________        Mendez-Gomez  and McConnell  Valdes Kelley  Sifre Griggs  & Ruiz-Suria        ____________      ____________________________________________________        wereon brief forintervenor, appellant PrudentialBache Securities, Inc.                                    ____________________        *Of the District of Massachusetts, sitting by designation.            Plinio Perez Marrero for  intervenor, appellant Banco  Cooperativo            ____________________        De Puerto Rico.            Enrique Peral with  whom Munoz  Boneta Gonzalez  Arbona Benitez  &            _____________            _________________________________________        Peral,  Ann S. Duross, General  Counsel, Colleen B. Bombardier, Senior        _____   _____________                    _____________________        Counsel,  Jaclyn C. Taner, Counsel, and Richard Schwartz were on brief                  _______________               ________________        for cross-plaintiff, appellee.                                 ____________________                                    June 24, 1993                                 ____________________                      CAMPBELL, Senior Circuit Judge.   In these appeals,                                ____________________            two creditors  challenge appellee's  rights to the  assets of            the mastermind of a  multimillion dollar fraud, each creditor            claiming that it has a superior claim to the money.                      Miguel Serrano Arreche ("Serrano"), a former Puerto            Rico stockbroker, was indicted and convicted in 1985  of wire            fraud, mail  fraud, and other violations  of federal criminal            statutes.     Serrano's   misdeeds  have   been   extensively            chronicled elsewhere.   See, e.g., United  States v. Serrano,                                    ___  ____  ______________    _______            870  F.2d 1,  3-5 (1st  Cir. 1989).1   The primary  victim of            Serrano's fraud was Home Federal Savings and Loan Association            ("Home Federal"),  a Puerto Rico bank  which collapsed partly            from losses caused by Serrano.  United States v. Serrano, 870                                            _____________    _______            F.2d  at  4.     The  Federal  Savings   and  Loan  Insurance            Corporation ("FSLIC") took  control in 1985 and,  thereafter,            the appellee Federal  Deposit Insurance Corporation  ("FDIC")            became Home  Federal's successor in interest  pursuant to the            Financial Institutions Recovery,  Reform, and Enforcement Act            of 1989.  See 12 U.S.C.   1821a et seq.                      ___                   _______                                            ____________________            1.  See also United States v. Tormos-Vega, 959 F.2d 1103 (1st                ________ _____________    ___________            Cir.),  cert.  denied, 113  S. Ct.  191  (1992); FDIC  v. CNA                    _____________                            ____     ___            Casualty of  Puerto Rico,  786 F.  Supp. 1082  (D.P.R. 1991);            ________________________            United States  v.  Serrano, 680  F. Supp.  58 (D.P.R.  1988),            _____________      _______            modified, 870  F.2d 1  (1st  Cir. 1989);  FSLIC v.  Shearson-            ________                                  _____     _________            American  Express, Inc.,  658  F. Supp.  1331 (D.P.R.  1987);            _______________________            United  States  v. Tormos-Vega,  656  F.  Supp. 1525  (D.P.R.            ______________     ___________            1987), aff'd, United  States v.  Boscio, 843  F.2d 1384  (1st                   _____  ______________     ______            Cir.), cert.  denied, 488 U.S.  848 (1988); United  States v.                   _____________                        ______________            Serrano,  637 F.  Supp. 12  (D.P.R.  1985); United  States v.            _______                                     ______________            Serrano, 622 F. Supp. 517 (D.P.R. 1985).            _______                                         -3-                      The  present  action was  brought  in  1984 in  the            United  States District Court for the District of Puerto Rico            by  the  Municipality  of  Ponce,  against  defendants   that            included  Home  Federal, Serrano,  Shearson  Lehman Brothers,            Inc.,  and  Shearson  Lehman  Brothers,  Inc.  (Puerto  Rico)            (collectively "Shearson").   Home Federal  filed cross-claims            against Serrano, Shearson, and others.  Both the Municipality            of Ponce and Shearson  settled and left the case.  On October            16, 1989, the district  court entered a default judgment  for            the FDIC (now representing  Home Federal) on its cross-claims            against  Serrano,  finding Serrano  liable  to  the FDIC  for            $44,265,241.  Thereafter,  on May 17, 1990,  the FDIC secured            from the  district court an order  attaching Serrano's assets            to enforce the foregoing judgment.                      This  appeal  stems  from  efforts   by  two  other            creditors,   appellants  Prudential-Bache   Securities,  Inc.            ("Prudential") and Banco Cooperativo ("Banco"),  to intervene            in the  same district court action after certain of Serrano's            assets were transferred to the district court pursuant to the            FDIC's attachment.   Prudential and Banco  asked the district            court  to  withdraw  its order  authorizing  disbursement  of            Serrano's  funds  to the  FDIC,  and are  appealing  from its            refusal to do so.                        To understand the present dispute, it is  necessary            to realize that in September 1987, Serrano had petitioned for                                         -4-            bankruptcy  in the  United  States Bankruptcy  Court for  the            District  of Puerto Rico, triggering the automatic stay of 11            U.S.C.   362.   The FSLIC sought and received  partial relief            from  the stay  on January 13,  1989, permitting  the instant            action  to continue  in  the district  court  until entry  of            judgment.   Serrano's  only  significant  assets were  32,400            shares of Bayam n  Federal Savings Bank  stock, which at  one            time  had been held in a trading  account at Prudential.2  By            order  of the  bankruptcy  court,  the  stock  was  sold  for            approximately $700,000  in April  1989 and the  proceeds were            deposited  with  the  bankruptcy  court as  property  of  the            estate.  On November 17, 1988, Prudential filed its own claim            in the bankruptcy  proceeding.   On October 16,  1989, as  we            have said, the district court entered a judgment for the FDIC            in its cross-claims against Serrano.                      On  May 16,  1990, the  bankruptcy court  issued an            order dismissing  Serrano's  bankruptcy case,  but  expressly            retaining jurisdiction  to decide how to dispose of all funds            held for Serrano.   The bankruptcy court gave  all creditors,            which  included  Prudential,  eleven days  to  express  their            positions as to the disposal  of these funds, indicating that            unless otherwise ordered, they  would be returned to Serrano.            See 11 U.S.C.   349(b)(3).  That same day, after entry of the            ___                                            ____________________            2.  Earlier in 1987 Prudential had delivered the stock to the            United States  District Court  pursuant to a  court order  in            United States v. Serrano, Crim. No. 84-381(JP).              _____________    _______                                         -5-            bankruptcy petition dismissal, the FDIC moved in the district            court  for a writ of  attachment and execution,  to be served            upon  the bankruptcy  court  and any  custodian of  Serrano's            funds in that court,  attaching Serrano's funds after payment            of administrative  expenses and  directing their transfer  to            the district  court for  application to the  FDIC's judgment.            The district  court  allowed  the motion  on  May  17,  1990,            ordering the  bankruptcy court within twenty  days to deliver            to the  district court clerk the remaining funds belonging to            Serrano  subsequent  to  the  payment  of  the administrative            expenses,  and directing that Serrano refrain from collecting            the   funds.    A  copy  of  this  attachment  was  shown  to            Prudential's  counsel  on  May  18,  1990,  at  a  meeting of            creditors  called by  Prudential  at its  offices to  discuss            disposition  of the  bankruptcy  funds.   Prudential made  no            effort  in the bankruptcy court  to challenge the validity of            the attachment nor to argue that its own claim should be paid            from the bankruptcy funds in preference to the FDIC's claim.                      On June  27, 1990, the bankruptcy  court issued its            order disposing of  all the  assets in Serrano's  case.   The            bankruptcy court  clerk, after paying various  fees, expenses            and  a child  support claim, was  directed by  the bankruptcy            court to deliver the remainder to the district court clerk in            compliance with the attachment,  said funds to remain subject            to  any liens as per the bankruptcy court's previous order of                                         -6-            sale  of the stock.   Pursuant to this  order, the bankruptcy            clerk  paid over  more  than $560,000  to  the clerk  of  the            district  court.   On  August 10,  1990,  the district  court            ordered the funds disbursed to the FDIC.                      Five days after the  district court had entered its            disbursement order,  Prudential made its first  appearance in            this action.    On  August 15,  1990,  Prudential  moved  the            district court to allow it to intervene in the instant action            and  stay the  scheduled disbursement  to the  FDIC, alleging            that  it had a lien  on the attached  funds that had priority            over the  FDIC's attachment.  See  Fed. R. Civ. P.  24.3  The                                          ___                                            ____________________            3.  Federal Rule of Civil  Procedure 24 provides, in relevant            part:                      (a) Intervention  of Right.   Upon timely                          _______________________                      application anyone shall be  permitted to                      intervene  in  an action:  . . . (2) when                      the applicant claims an interest relating                      to  the property or  transaction which is                      the  subject  of   the  action  and   the                      applicant   is   so  situated   that  the                      disposition  of  the  action  may   as  a                      practical  matter  impair  or impede  the                      applicant's   ability  to   protect  that                      interest, unless the applicant's interest                      is  adequately  represented  by  existing                      parties.                      (b) Permissive Intervention.  Upon timely                          ________________________                      application  anyone  may be  permitted to                      intervene in an action: . . . (2) when an                      applicant's claim or defense and the main                      action have a question  of law or fact in                      common. . . .    In     exercising    its                      discretion   the  court   shall  consider                      whether  the   intervention  will  unduly                      delay  or  prejudice the  adjudication of                      the rights of the original parties.                                         -7-            district  court  stayed the  disbursement  pending  ruling on            Prudential's  motion to intervene.  On August 20, 1990, Banco            Cooperativo, which also had never before been a party to this            action, moved to intervene, asserting that it had a  priority            claim to the attached funds.4                      On  March  11,  1992,  the  district  court,  after            considering the  parties' motions  and exhibits  submitted in            support of their claims (and  without specifically indicating            whether it was ruling on  the motions to intervene or on  the            merits), denied  Prudential's and Banco's  claims and  lifted            the  stay of  the  disbursement of  the  funds to  the  FDIC.            Prudential and  Banco appealed  separately from the  district            court'sfinalorder. Weconsolidatedtheirappeals,and nowaffirm.5                                            ____________________            4.  Appellee  FDIC  does not  contest  the  existence of  the            appellants'   purported  claims   against  Serrano.     Banco            Cooperativo  claims that it sued Prudential  in a Puerto Rico            court in  1984, seeking  damages for embezzlement  by Serrano            during his  tenure, in  1980, as  an officer of  Prudential's            Institutional Department.  In 1985, Prudential filed a third-            party  complaint against  Serrano in  that case,  asking that            Serrano be held liable  for the amount of any  judgment which            may be  entered against Prudential  in the action  brought by            Banco Cooperativo.                 Banco  claims  that  it eventually  received  a judgment            against  Serrano in  the  amount of  $295,000 plus  interest.                     _______            (Banco does not  explain how it  obtained a judgment  against            Serrano when it had sought damages only from Prudential.)  At            the time Prudential filed its motion to  intervene, its claim            against Serrano  was still contingent, as  final judgment had            not yet been rendered in its third-party action.            5.  The district  court  had jurisdiction  over  this  action            pursuant to 28 U.S.C.   1331, because the original plaintiff,            Municipality  of Ponce,  brought  federal claims  against the            defendants.   This  court has  jurisdiction over  the appeals                                         -8-                                          I.                                          I.            No. 92-1652 - Prudential            No. 92-1652 - Prudential            ________________________                      Appellant Prudential raises three issues on appeal.            The  first,  discussed  in  Section  A  below,  concerns  the            validity  of  the  FDIC's  attachment,  an  issue  implicitly            decided by the bankruptcy  court's order to release Serrano's            funds in  compliance with  the attachment.   We hold,  infra,                                                                   _____            that  res judicata  bars  Prudential from  raising the  issue                  ___ ________            anew.                      The   other  two   issues  raised   by  Prudential,            discussed  in Sections B and C below, concern the priority of            its  alleged lien  relative to  the FDIC's  attachment.   The            questions of  priority among liens on  Serrano's property and            of the validity  of Prudential's lien     unlike the validity            of  the FDIC's attachment    formed no part of the bankruptcy            court's decision and so are not barred from being raised now.            The  bankruptcy court, when it ordered the funds to be turned            over  in compliance  with the  FDIC's attachment,  made clear            that "said funds remain subject to any liens as per our order            of  sale."  The bankruptcy court's order of sale, dated April            27,  1989,  approved  the  liquidation of  the  stock  shares            "provided the  proceeds from the surrender of  the shares are            to  be  deposited  with  the   Clerk  of  the  United  States            Bankruptcy  Court for  the  District of  Puerto  Rico, in  an                                            ____________________            pursuant to 28 U.S.C.   1291.                                         -9-            interest  bearing account  with liens,  if any,  attaching to                                       __________________________________            said proceeds . . . ." (emphasis added).  The court dismissed            _____________            the bankruptcy petition before ever adjudging the validity of            Prudential's  alleged  secured  claim  on  the  proceeds  and            without deciding  whether the FDIC's attachment took priority            over  other liens on the proceeds.   Res judicata, therefore,                                                 ___ ________            does not bar Prudential from now raising those questions, and            we address them on their merits.                  A.  Validity of FDIC's Attachment                 A.  Validity of FDIC's Attachment                     _____________________________                      Prudential's  first argument  is that  the district            court  should have  declared the  FDIC's attachment  null and            void because  it was obtained  in violation of  the automatic            stay allegedly still in  effect in Serrano's bankruptcy case.            See 11  U.S.C.   362.  It is Prudential's theory that Fed. R.            ___            Civ. P. 62(a), applying by force of Bankruptcy Rules 7062 and            9014, extended the  automatic stay of 11 U.S.C.   362 for ten            days  after  the  bankruptcy  court  had  dismissed Serrano's            bankruptcy  petition.   This  argument  has  met with  little            success in other cases  involving similar circumstances.  See                                                                      ___            In re de Jesus Daez, 721 F.2d 848, 851-52 (1st Cir. 1983); In            ___________________                                        __            re  Weston, 101  B.R. 202,  203-06 (Bankr.  E.D. Cal.  1989),            __________            aff'd, 967 F.2d 596 (9th Cir. 1992), cert. denied, 113 S. Ct.            _____                                ____________            973 (1993).   Prudential's  standing to challenge  an alleged            violation  of the automatic stay is also problematic.  See In                                                                   ___ __            re Pecan Groves of Arizona, 951 F.2d 242, 245 (9th Cir. 1991)            __________________________                                         -10-            ("Language  from many  cases indicates  that, if  the trustee            does not  seek to  enforce the protections  of the  automatic            stay,  no  other  party  may challenge  acts  purportedly  in            violation of the automatic stay.").  We do not pass  on these            issues, however, as we  are satisfied, infra, that Prudential                                                   _____            is  barred by res judicata from raising the automatic stay as                          ___ ________            a bar.6    We add that  it would be difficult to  pass on the            merits of the automatic stay issue from the record now before            us,  which does not include  a full report  of the bankruptcy            proceedings   and,  in  particular,  omits  much  information            relevant to the stay and to orders issued lifting the stay in            respect to the district court proceeding in question.                        This court recently explained:                      The doctrine  of  res judicata  bars  all                                        ___ ________                      parties    and    their   privies    from                      relitigating issues which were  raised or                      could  have  been  raised  in  a previous                      _________________________                      action, once a court has entered  a final                      judgment  on the  merits in  the previous                      action.      United   States    v.   Alky                                   _______________         ____                      Enterprises,  Inc.,  969 F.2d  1309, 1314                      __________________                      (1st Cir. 1992).   The essential elements                      of res judicata, or claim preclusion, are                         ___ ________                      (1) a final judgment  on the merits in an                      earlier  action;  (2)   an  identity   of                      parties or privies in  the two suits; and                      (3) an identity of the cause of action in                      both the  earlier and later suits.   Kale                                                           ____                                            ____________________            6.  Although the district court did not rely upon the grounds            of  res judicata,  and  the parties  ignored  this theory  on                ___ ________            appeal, we  may do so as  we need not limit  ourselves to the            exact  grounds for  decision  utilized below.   Watterson  v.                                                            _________            Page, 987 F.2d 1, 7 n.3  (1st Cir. 1993); Aunyx Corp v. Canon            ____                                      __________    _____            U.S.A.,  Inc., 978 F.2d 3,  6 (1st Cir.  1992), cert. denied,            _____________                                   ____________            113 S. Ct. 1416 (1993).                                         -11-                      v. Combined Insurance Co. of America, 924                         _________________________________                      F.2d 1161, 1165 (1st Cir.), cert. denied,                                                  ____________                      ___ U.S. ___,  112 S. Ct. 69, 116  L. Ed.                      2d 44 (1991).            Aunyx  Corp. v. Canon  U.S.A., Inc., 978 F.2d  3, 6 (1st Cir.            ____________    ___________________            1992), cert.  denied, 113  S. Ct.  1416  (1993) (emphasis  in                   _____________            original).  "The normal rules of  res judicata and collateral                                              ___ ________            estoppel apply  to the  decisions of the  bankruptcy courts."            Katchen v.  Landy, 382  U.S. 323,  334 (1966);  Chicot County            _______     _____                               _____________            Drainage  Dist. v.  Baxter State Bank,  308 U.S.  371, 375-78            _______________     _________________            (1940);  Turshen v.  Chapman,  823 F.2d  836,  839 (4th  Cir.                     _______     _______            1987);  see generally  1B  James Wm.  Moore  et al.,  Moore's                    ___ _________                        ______   _______            Federal Practice   0.419[3] (2d ed. 1993).  Orders, judgments            ________________            and decrees of the  bankruptcy court from which an  appeal is            not  timely taken  are  final,  1  Collier  on  Bankruptcy                                                  _______________________            3.03[4], at 3-179 (Lawrence P. King ed., 15th ed. 1993), even            if erroneous.   Union Joint  Stock Land Bank  v. Byerly,  310                            ____________________________     ______            U.S. 1, 7-8 (1940);  Van Huffel v. Harkelrode, 284  U.S. 225,                                 __________    __________            227  (1931).    While  actions  taken  in  violation  of  the            automatic stay  are often  characterized as void  and without            effect, orders of the bankruptcy court modifying the  stay or            finding  no violation,  even  if erroneous,  are entitled  to            respect  and are not subject to collateral attack.  See Union                                                                ___ _____            Joint Stock Land Bank,  310 U.S. at 7-8 ("The  District Court            _____________________            did  not  lose  jurisdiction  by  erroneously  construing  or            applying   provisions  of   the   statute   under  which   it            administered the  bankrupt estate.   Its order  was voidable,                                         -12-            but  not  void, and  was not  to  be disregarded  or attacked            collaterally  . . . .");  1B  Moore's  Federal  Practice                                               __________________________            4.19[3-.2], at 635.                      All  the elements  of  res judicata  are met  here.                                             ___ ________            First,  by its  final order  on June  27, 1990,  transferring            Serrano's  funds  in  compliance  with  the  attachment,  the            bankruptcy  court   rendered  a   final  judgment   that  the            attachment was valid.  After  dismissing Serrano's bankruptcy            case,  the  bankruptcy  court  had  retained jurisdiction  to            determine whether to return  the debtor's funds to him  or to            another, and gave  all the creditors, of whom  Prudential was            one,  eleven  days to  "express  their  positions as  to  the            disposal of  these funds."  Prudential's  counsel appeared at            the hearing in the  bankruptcy court directly before issuance            of the  order dismissing the  bankruptcy case, at  which time            the court indicated that that order was contemplated and said            that it intended to grant the creditors ten or eleven days to            "let me know what I should do with these funds."  In fact, on            May 17, 1990, Prudential's  counsel invited the attorneys for            other creditors,  including the FDIC's counsel,  to a meeting            at  Prudential's offices  to discuss  the disposition  of the            funds.   This meeting took  place on  May 18, 1990,  at which            time  the FDIC's counsel showed  to Prudential a  copy of the            attachment order it had just obtained in the  district court.            Notwithstanding the foregoing,  Prudential never advised  the                                         -13-            bankruptcy court  of its  present contention that  the FDIC's            attachment was  invalid, being  in supposed violation  of the            automatic  stay, nor  did  it urge  the  bankruptcy court  to            refuse to honor the attachment.  Prudential's inaction is  in            notable  contrast  to  that  of  another  creditor,  Shearson            Lehman, which, on June 5, 1990, moved the bankruptcy court to            declare  the attachment  null and  void in  violation  of the            automatic  stay      the  very   same  contention  Prudential            belatedly  raises  now.    Shearson  Lehman's contention  was            expressly denied by the bankruptcy court on June 27, 1990, in            its  final order.  In  that same order,  the bankruptcy court            disposed of  the balance of  the funds in  express compliance            with  the attachment,  after  first ordering  the payment  of            certain  fees,  expenses and  other  items.   The  bankruptcy            court's  June  27  order  constituted   an  appealable  final            judgment.   In re Parque Forestal, Inc., 949 F.2d 504, 508-09                        ___________________________            (1st Cir. 1991).  However, Prudential took no appeal.                      Second, Prudential  does not  deny that, as  one of            Serrano's  creditors,  it  was  a  party  to  the  bankruptcy            proceedings,  nor that it  was fully cognizant  on May 16-18,            1990, of the bankruptcy  court's dismissal of Serrano's case,            of  its   retention  of  jurisdiction,  and   of  the  FDIC's            attachment.   Nor  can Prudential  deny that  it knew  of the            bankruptcy  court's invitation  to  all creditors  to express            their positions as to the future disposition of the funds.                                         -14-                      Despite  this, Prudential  complains that  since it            received  no formal  notice from  the  district court  of the            FDIC's attachment, it was not a party to the dispute over the            attachment.   We  cannot  see,  for  purposes of  any  action            Prudential might have taken in the bankruptcy court, that the            absence  of  notice from  the  district  court was  material.            Prudential  was fully  cognizant  that  the bankruptcy  court            intended to take action  in June on the question  of disposal            of Serrano's assets, including  the effect of the attachment.            Yet  Prudential took no steps to pursue the matter before the            bankruptcy  judge, including    in particular    to raise the            bankruptcy-related issue of the  effect of the automatic stay            on the validity  of the  attachment.  We  are satisfied  that            Prudential was a  party to the proceedings  in the bankruptcy            court over  the ultimate  disposition of Serrano's  assets               proceedings   that  ended   with   the   bankruptcy   court's            recognition of  the FDIC's district court  attachment and its            direction to turn over the assets in compliance therewith.                        Finally,  Prudential's  current  challenge  to  the            attachment based  on the  automatic stay implicates  the very            same underlying  issue resolved by the  bankruptcy court when            it  gave effect  to the attachment.   The  bankruptcy court's            final  order of June 27, 1990 necessarily required it to have            determined whether or not the FDIC's attachment was  valid so            as  to be entitled to  effect.  The  bankruptcy court clearly                                         -15-            had  jurisdiction  to   make  that   determination  and,   in            particular,  had  jurisdiction  to  adjudicate  any claim  of            invalidity  based on  purported  violation of  the  automatic            stay.   See 11 U.S.C.   105(a)  (authorizing bankruptcy court                    ___            to "issue any  order, process, or judgment  that is necessary            or appropriate to carry out the provisions of  this title.");            11 U.S.C.    362(d), (f) (authorizing  court to grant  relief            from  stay); 1 Collier  on Bankruptcy    362.01[1],  at 362-9                           ______________________            ("[T]he bankruptcy  court, as a court of equity exercising in                                                                       __            rem jurisdiction over assets in its  custody and control, can            ___            protect its  jurisdiction by injunction, whether  or not such            power is expressly  set forth . . . ."); see  generally In re                                                     ______________ _____            Continental  Air   Lines,  61  B.R.  758   (S.D.  Tex.  1986)            ________________________            (discussing jurisdiction of bankruptcy court over enforcement            of automatic stay).                      As  already  noted,   another  creditor,   Shearson            Lehman, moved in the bankruptcy court to  have the attachment            declared  null  and  void  for  precisely  the  same  reasons            Prudential now  advances, viz.,  that the FDIC  had allegedly                                      ___            violated  the automatic stay  when it sought  and received an            order  from the  district court  attaching bankruptcy  assets            within  one  day after  the  bankruptcy  court had  dismissed            Serrano's petition.7   The  bankruptcy court included  in its                                            ____________________            7.  The  text of  Prudential's  current brief  on this  issue            matches verbatim whole portions  of Shearson's motion on this                    ________            issue before the bankruptcy court.                                         -16-            June 27, 1990  order a specific  denial of Shearson  Lehman's            motion,  indicating  by  that  ruling its  absence  of  doubt            concerning the  existence of jurisdiction  to adjudicate  the            claimed bar of the automatic stay.                        Prudential never  made a similar motion  nor in any            way challenged  the attachment  in the bankruptcy  court, nor            did it  appeal from the bankruptcy  court's order recognizing            the FDIC's  attachment.  Instead, after  the bankruptcy court            had  acted  and  the  attachment  had  been  fully  executed,            Prudential petitioned to intervene in the attaching  district            court  for  the  purpose  of  arguing,  post  hoc,  that  the            bankruptcy  automatic stay  had invalidated  the attachment.8            By the time of  its petition, a final judgment  giving effect            to the attachment was in effect  in the bankruptcy court.  As            res  judicata now bars a collateral  attack on the bankruptcy            ___  ________            court's judgment, we treat the FDIC's attachment as valid.                 B.  Pledge Agreement                 B.  Pledge Agreement                     ________________                      Prudential says that, even  assuming the FDIC had a            valid attachment  on the  stock proceeds, Prudential  holds a            superior lien on the proceeds  by virtue of a form signed  by                                            ____________________            8.  While  Prudential  was not  formally  noticed  as to  the            attachment, it learned  about it from  the FDIC's counsel  on            May  18,  1990,  and, as  an  additional  course,  could have            promptly sought to  intervene in the district  court in hopes            of  quashing  the attachment  before it  was executed  in the            bankruptcy  court.   Instead,  Prudential  waited for  nearly            three months,  until well after execution  of the attachment,            before doing anything.                                          -17-            Serrano  to  open  a  brokerage account  at  Prudential  (the            "Customer   Agreement").9    Prudential   contends  that  the            Customer  Agreement operated,  under  Puerto Rico  law, as  a            "pledge" of any securities held in the brokerage account.  By            virtue of this pledge, Prudential reasons, it acquired a lien            over  the Bayam n  Federal  stock shares  and their  proceeds            prior  to the  FDIC's attachment  because the  stock  was, up            until 1987, held in Serrano's account at Prudential.                       The district court correctly rejected Prudential's            argument.  Puerto Rico  law provides, "A pledge shall  not be            effective against a  third person, when evidence of  its date            is  not shown by authentic  documents."  31  L.P.R.A.   5023.            The Supreme Court of  Puerto Rico has stated:   "An authentic                                            ____________________            9.  The Customer Agreement provided, in part:                           I [Serrano] agree, as  follows, with                      respect to  all the  accounts in which  I                      have  an interest  alone or  with others,                      which  I have  opened  or  open with  you                      [Prudential] for the purchase and sale of                      securities and commodities:                      . . .                           Any   and   all   credit   balances,                      securities, or contracts relating thereto                      and all  other property of  whatever kind                      belonging  to me  or in  which I  have an                      interest  held by  you or carried  for my                      accounts  shall be  subject to  a general                      lien for the discharge of  my obligations                      to    you   (including    unmatured   and                      contingent obligations) however arising .                      . . .                                         -18-            document is a legalized document, which is publicly attested,            which  is legally valid by itself."  Ramos Mimoso v. Tribunal                                                 ____________    ________            Superior,  93 P.R.R. 538, 540 (1966).  A private agreement or            ________            writing  is not  an authentic  document; a  document verified            before  a  notary public  is an  authentic  document.   In re                                                                    _____            Santos & Nieves, Inc., 814 F.2d 57, 60 (1st Cir. 1987); Ramos            _____________________                                   _____            Mimoso,  93  P.R.R. at  541.   The  record here  supports the            ______            district court's finding that  no notarized or other properly            authenticated  document  evidenced   the  date  of  Serrano's            alleged  pledge  of  the stock  shares.    The only  document            alleging  to  show the  date of  the  supposed pledge  is the            Customer Agreement, which is merely signed by the parties and            not notarized.                      Prudential concedes that no notarized  or otherwise            "authentic"  document  exists to  evidence  the  date of  the            pledge,  but argues that it is sufficient that the purpose of                                                               _______            the authentic document requirement was fulfilled.  Prudential            filed a copy of the Customer Agreement in 1987 with the clerk            of a court in which criminal proceedings against Serrano were            being conducted,  and now  argues that this  filing satisfies            the policy behind 31 L.P.R.A.   5023.  However, the authentic            document  rule  is  "a  formal  and  absolute  rule"  that is            strictly construed.  In re  Supermercados San Juan, Inc., 575                                 ___________________________________            F.2d  8, 12 (1st Cir.  1978); Trueba v.  Zalduondo, 34 P.R.R.                                          ______     _________            713,  716  (1925).    Neither  section  5023  nor  any  cases                                         -19-            interpreting   it  support   Prudential's  theory   that  the            authentic document  requirement  can be  fulfilled simply  by            filing a copy of an unnotarized document in court.                      Prudential  attempts  to  analogize  this  case  to            Trueba  v. Zalduondo,  34  P.R.R. 713  (1925),  in which  the            ______     _________            Supreme  Court  of  Puerto  Rico  held  that  a  transfer  of            corporate  stocks as collateral for  a loan that was recorded            in  the  corporations'  official  records was  valid  against            later-attaching  third parties, even  though the transfer did            not comply with the  authentic document rule codified  in the            predecessor statute to  31 L.P.R.A.   5023.   However, Trueba                                                                   ______            expressly held  that section  13 of the  Private Corporations            Act,  (now codified  as  14 L.P.R.A.     1509), and  not  the            predecessor  to  31 L.P.R.A.     5023,  governed under  those            circumstances.   The Trueba decision  "was based on  the fact                                 ______            that  stock  so transferred  would  be  authenticated by  the            public and formal records of the corporation as a transfer of            a security  interest."  In  re Supermercados San  Juan, Inc.,                                    ____________________________________            575 F.2d at 12.  The Trueba court did not create an exception                                 ______            to section 5023  and, in fact, reiterated that  the authentic            document rule "is a  rigid rule."  Trueba, 34  P.R.R. at 716.                                               ______            Because  Prudential  does   not  contend  that  the   Private                                         -20-            Corporations Act, as opposed  to 31 L.P.R.A.    5023, governs            this case, Trueba is inapposite.10                         ______                      The district court correctly held that Prudential's            purported pledge agreement did  not comply with the authentic            document requirement of 31  L.P.R.A.   5023 and thus  was not            valid against the FDIC as a pledge.                 C.  Puerto Rico Agency Law                 C.  Puerto Rico Agency Law                     ______________________                      Prudential argues that it acted  as Serrano's agent            for  the purchase  and  sale  of  securities  and,  as  such,            acquired a statutory lien on all securities held on behalf of            Serrano, including  the Bayam n  Federal  stock.   Prudential            points to a  Puerto Rican statute providing  that, "The agent            may retain  the things which are the objects of the agency in            pledge   until  the   principal   pays   the  indemnity   and            reimbursement referred  to in the two  preceding sections [              4462, 4463]."   31 L.P.R.A.   4464.  Prudential misinterprets            the  statute, however.    Even if  Prudential were  Serrano's            agent, section  4464 does  not give it  a lien  on the  stock            proceeds superior to the FDIC's attachment because Prudential                                            ____________________            10.  Prudential's citation of In re Las Colinas, Inc., 294 F.                                          _______________________            Supp. 582 (1968),  vacated and remanded,  426 F.2d 1005  (1st                               ____________________            Cir.  1970), is  similarly unhelpful.   Even  if parts  of it            remain  good law, the relevant issue in that case was whether            certain  collateral, transferred after a pledge agreement was            notarized  and signed,  constituted  a valid  pledge of  that            collateral.  Id.  at 602-03;  see also Omega  Int'l Corp.  v.                         ___              ________ __________________            Interstate  Steel de Puerto Rico, Inc., 590 F. Supp. 844, 850            ______________________________________            (D.P.R.  1984)  (explaining  In   re  Las  Colinas).    Here,                                         _____________________            Prudential  concedes  that  there  was  no  notarized  pledge            agreement.                                         -21-            did not "retain the things," viz.,  the Bayam n Federal stock                                         ___            certificates.  The stock  was transferred to a court  in 1987            pursuant to  a court order, and  was subsequently liquidated.            We find no  authority for the  proposition that section  4464            creates statutory liens on  things, let alone their proceeds,            which are not retained by the agent.   For this reason alone,            the  district court's ruling that  Prudential does not have a            lien  over the stock pursuant  to Puerto Rico  agency law was            plainly correct.11                      The  district court  did  not err  in finding  that            Prudential  had  no  lien   with  priority  over  the  FDIC's            attachment  and in  dismissing Prudential's  claims  over the            funds attached by the FDIC.12                                         II.                                         II.            No. 92-1652 - Banco Cooperativo             No. 92-1652 - Banco Cooperativo             _______________________________                      Appellant Banco Cooperativo says that it obtained a            judgment and  award of  damages against Serrano  on September            15, 1987 from  a Puerto Rico court in a  civil action.  Banco                                            ____________________            11.  The  district court  also  found that  section 4464  was            inapplicable   because   Serrano's   alleged   liability   to            Prudential is  unrelated to the stock  shares previously held            in  his   account  and  because  the   liability  was  merely            contingent,  not due and payable.  See I-II Jose Puig Brutau,                                               ___            Fundamentos de Derecho Civil 545-46 (2d ed. 1976).            ____________________________            12.  Prudential  also makes  various arguments  based  on New            York law.  We do not consider any of them as Prudential makes            no argument  on  appeal  that  the district  court  erred  in            determining that Puerto  Rico law, not New York  law, governs            this case.  See Fed. R. App. P. 28(a)(3), (5).                        ___                                         -22-            never executed the judgment, attached the  funds that are the            subject of this appeal,  or otherwise obtained a lien  on any            of Serrano's  property.   Banco also  concedes that  the FDIC            obtained  a valid  judgment  against Serrano  on October  16,            1989,  and properly  executed the  judgment by  attaching the            funds at issue on May 17, 1990.  Banco contends, nonetheless,            that  Puerto Rico  law gives  its claim  on  Serrano's assets            priority over the FDIC's.                      We agree  with the district court  that the statute            on which Banco  relies, 31  L.P.R.A.   5194,  does not  apply            here.  The first provision of Title 31, Chapter 399 provides:            "Credits shall be classified for their graduation and payment            in  the  order and  manner specified  in  this chapter."   31            L.P.R.A.   5191.  31 L.P.R.A.   5194 provides in part:                      With  regard to  all  other personal  and                      real property of  the debtor,  preference                      shall be given to: . . .                           (4)  Indebtedness  which  without  a                      special privilege appear:                                (a) In a public instrument.                                (b) In a final judgment, should                                they  have  been the  object of                                litigation.                           These credits  shall have preference                      among   themselves   according   to   the                      priority  of dates of the instruments and                      of the judgments.            Banco interprets section  5194(4) to mean  that its claim  to            the  funds has  "preference"  over the  FDIC's claim  because            Banco obtained  its judgment two  years before  the FDIC  was            awarded  its judgment.  Under Banco's interpretation, section                                         -23-            5194(4) makes irrelevant the fact that  the FDIC attached the            property in dispute and Banco did not.                       The Supreme  Court of Puerto  Rico has consistently            held otherwise,  finding that  31  L.P.R.A.    5194 does  not            supplant  the standard  rule  that, as  between two  judgment            creditors without  other liens, the first  creditor to attach            has priority.   In  Oronoz & Co.  v. Alvarez,  23 P.R.R.  497                                ____________     _______            (1916),  the  Court rejected  the  argument  that a  creditor            always  has priority  if  it has  a  judgment antedating  the            judgment  of other  creditors.    Id.  at  500.    The  Court                                              ___            explained:                      We  have  recently   decided  that   mere                      priority  in  judgment  gives  the  prior                      creditor  no lien.  Auffant v. Succession                                          _______    __________                      of Manuel de J.  Ramos et al., [23 P.R.R.                      _____________________________                      385  (1916)].    An  attachment  or other                      similar  step  is necessary  to  give the                      judgment  a  priority   and  as   between                      judgment  creditors  the first  to attach                      has  the  priority.    It is  a  race  of                      diligence.   The priority of  payments to                      which sections 1822 et seq. of the  Civil                                          _______                      Code [31 L.P.R.A.    5191 et seq.] relate                                                _______                      has no application to attachments.            Id.  The Court reaffirmed the  first-to-attach rule in Puerto            ___                                                    ______            Rico  Bedding Mfg.  Corp. v.  Herger,  91 P.R.R.  503 (1964),            _________________________     ______            writing  that,  "There  is  no  question  that  among  common            creditors the first one who attaches has preference over  the            others . . . ."   Id. at 507.   The Court  clarified that the                              ___            preference  created by  attachment  "does not  go beyond  the            right which the  debtor may have over the property attached,"                                         -24-            meaning  that  valid  liens  already  on  the  property  when            attached  cannot be  defeated  by an  attachment.   Id.    In                                                                ___            Empresas  Capote, Inc.  v. Superior  Court, 3  P.R. Sup.  Ct.            ______________________     _______________            Off'l Translations  1067 (1975), the Supreme  Court of Puerto            Rico reiterated,  "It should be remembered  that, grounded on            the  axiom  prior tempore  portior  jure,  even among  common                        ____________________________            creditors,  '. . . the first one who attaches has preferences            over the others, but  such preference does not go  beyond the            right which the debtor may have over the property attached.'"            Id. at 1078-79  (quoting Puerto  Rico Bedding  Mfg. Corp.  v.            ___                      ________________________________            Herger, 91 P.R.R. 503, 507 (1964)).            ______                      Some  provisions  of  Chapter  399  other  than  31            L.P.R.A.     5194  create statutory  preferences,  a  concept            equivalent to statutory liens,  on certain types of property.            These  statutory preferences  take priority  over attachments            even if the  preference holder does  not formally attach  the            property.   For example,  31 L.P.R.A.    5192(1)  creates, in            essence, a seller's lien "for the amount of the sale of [the]            personal property which may be in possession of the debtor to            the extent of the value of the same."  31 L.P.R.A.   5192(1);            see In re Jack's Club &  Hotel, 138 F. Supp. 620, 622 (D.P.R.            ___ __________________________            1956).  Thus,  the credit of a manufacturer who  was not paid            for  mattresses and bed frames it  sold to a retail store had            priority over the credit of another creditor who attached the            items  in  the store.   Puerto  Rico  Bedding Mfg.  Corp., 91                                    _________________________________                                         -25-            P.R.R. at 507-09.  While the attachment created a preference,            or lien, in favor of the attaching creditor, "such preference            does not go  beyond the right which the debtor  may have over            the property attached."  Id. at 507-08.  That is, 31 L.P.R.A.                                     ___              5192, without  the need for execution  or attachment, gives            the  seller an interest in the  property sold that diminishes            the  debtor's interest  in the  property and  that  cannot be            defeated by attaching creditors.   See also Heirs of  Garriga                                               ________ _________________            v. O'Meara, 28 P.R.R. 332, 334-35 (1920) (discussing priority               _______            of the statutory  preferences created by  31 L.P.R.A.    5192            over attachments).                      In contrast, 31 L.P.R.A.    5194(4) does not create            a  seller's lien  or  any other  type  of statutory  lien  on            property  of the  debtor.   It  does  not refer  to  specific            property of  the debtor or specific  transactions between the            creditor and debtor.  Compare 31 L.P.R.A.   5192(3) (creating                                  _______            lien for the costs of transportation on  goods transported by            creditor) and 31 L.P.R.A.    5192(6) (creating lien on  fruit                      ___            crops  in  favor  of creditor  who  provided  seeds) with  31                                                                 ____            L.P.R.A.    5194(4) (referring to no specific property).  The            silence of   5194(4) implies that a general judgment creditor            must execute its judgment by attaching property, such as  the            debtor's cash or stock certificates,  before it can claim any            sort of "lien" on that property.                                           -26-                      Here,  the  FDIC  and  Banco   were  both  judgment            creditors,  but the  FDIC, by  attaching the  stock proceeds,            obtained a  lien on  those proceeds  which has  priority over            Banco's unexecuted judgment against the debtor.  Banco had no            lien   or  other  legally-recognized   property  interest  in            Serrano's assets at the  time of the attachment.  All  it had            was an unsecured credit in its favor as the result of a court            judgment.   Thus, the  FDIC's attachment  reached all  of the                                                              ___            funds  released by the bankruptcy court and is not subject to            a claim by Banco.                      For these  reasons, the district court  did not err            in  determining that  31  L.P.R.A.    5194(4)  does not  give            Banco, which did not execute its judgment, priority over  the            FDIC,  which  obtained a  valid  attachment  of the  funds.13                                            ____________________            13.  We have considered and found  no merit in Banco's myriad            other arguments.  For  example, we do not have  the authority            to declare Oronoz & Co. to  be wrongly decided by the  Puerto                       ____________            Rico  Supreme Court  or mistranslated  by the  official court            translator, as Banco urges  us to do.  The case  of Rodr guez                                                                _________            v. Solivellas & Co., 49 P.R.R. 618 (1936), which discussed 31               ________________            L.P.R.A.     5194,  held  that a  prior  mortgage  on certain            property had priority over  a cautionary notice of attachment            on  the property.  It  did not hold,  as appellant maintains,            that attachments  have no  effect on  the rights  of judgment            creditors with prior claims, but relied instead upon the same            principle  discussed above,  that "[an]  attachment is  valid            only  as regards any balance left after cancelling the former            security."  Id. at 623.                        ___                                         -27-            Therefore,   the  district  court  properly  dismissed  Banco            Cooperativo's claim.14                                         III.                                         III.                      In conclusion,  we find no error and  so affirm the            district court's order in  Appeal No. 92-1652, dismissing the                                                  _______            claims of  Prudential, and in Appeal  No. 92-1651, dismissing                                                      _______            the  claim  of Banco  Cooperativo to  the  funds held  by the            court.                      Affirmed.  Costs to appellee.                        ________   _________________                                            ____________________            14.  Banco complains  that  the district  court  should  have            "reprobated"  or sanctioned the FDIC  for acting in bad faith            when  it obtained its attachment.   Banco did  not raise this            issue  in  a  timely  fashion,  waiting  until it  moved  for            reconsideration of the district  court's Opinion and Order to            bring the issue to  the court's attention.  Consequently,  we            will not  consider it on  appeal.   See Brown v.  Trustees of                                                ___ _____     ___________            Boston  Univ.,  891  F.2d 337,  352  (1st  Cir. 1989),  cert.            _____________                                           _____            denied, 496 U.S. 937  (1990).  Moreover, we find  no evidence            ______            in  the record to support Banco's allegations of bad faith on            the FDIC's part.                                         -28-
