
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT        No. 96-2009                              IN RE HELEN D. GENS, d/b/a                              HELEN GENS AND ASSOCIATES,                                      Appellant,                                          v.                             RESOLUTION TRUST CORPORATION                       (FEDERAL DEPOSIT INSURANCE CORPORATION),                                      Appellee.                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Reginald C. Lindsay, U.S. District Judge]                                              ___________________                                                                                      ____________________                                        Before                                Selya, Circuit Judge,                                       _____________                              Cyr, Senior Circuit Judge,                                   ____________________                              and Stahl, Circuit Judge.                                         _____________                                                                                      ____________________             Richard H. Gens for appellant.             _______________             Barbara  R.  Sarshik, Counsel,  FDIC,  with whom  Ann  S. DuRoss,             ____________________                              ______________        Assistant  General Counsel,  FDIC, Thomas  L. Hindes,  Senior Counsel,                                           _________________        FDIC, Joseph  G.  Butler, and  Barron  & Stadfeld  were  on brief  for              __________________       __________________        appellee.                                                                                      ____________________                                     May 5, 1997                                                                                      ____________________                    CYR,  Senior  Circuit  Judge.   Chapter  11  debtor-in-                    CYR,  Senior  Circuit  Judge.                          ______________________          possession Helen  D. Gens ("Gens") challenges  a bankruptcy court          order  which  allowed the  Federal Deposit  Insurance Corporation          ("FDIC") to amend its  proof of claim following the  bar date for          filing claims.  We affirm.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    In  July 1988,  Gens executed  a promissory  note ("the          Gens  Note")  payable to  U.S.  Funding  Inc. of  America  ("U.S.          Funding")  in the principal amount of $70,000, by signing it both          in her  "individual" capacity and in  her representative capacity          as trustee for  the Old Jail Trust ("Trust").   The Gens Note was          secured  by  a third  mortgage  on real  property  in Barnstable,          Massachusetts, owned  by the  Trust ("the Barnstable  Property").          Although  the  Barnstable  Property  was  subject  to  two  prior          mortgages, U.S.  Funding and Gens allegedly  arranged for $36,000          of  the $70,000  in  loan proceeds  to  be  used to  satisfy  the          preexisting second mortgage.   U.S. Funding promptly assigned the          Gens Note to Key Financial Services ("Key"), which assigned it to          Home Owners Savings Bank ("Home Owners").                     In October 1989, Home Owners commenced suit against Key          in  federal  district  court,  alleging  that  the  purchase-sale          agreement, whereby Home Owners acquired  the Gens Note from  Key,          had been induced  by fraud  or that Key  had breached its  title-                                      __          insurance provisions.  Home  Owners demanded either rescission or          damages for breach of contract.                                           2                     The  Trust  defaulted on  the  Gens Note  in  or about          January 1990 and the first mortgagee foreclosed on the Barnstable          Property.   The  foreclosure  sale  resulted in  no  surplus  for          application  to any  junior  lien, including  the third  mortgage          securing  the  Gens Note.   In  September  1990, Home  Owners was          declared insolvent and  the Resolution Trust  Corporation ("RTC")          was  appointed  receiver.     RTC  designated  Knutson   Mortgage          Corporation  ("Knutson") as its servicing agent on the Gens Note,          and gave Knutson a limited power of attorney.                       Meanwhile,  in  the ongoing  federal action  brought by          Home  Owners  against Key,  the  district  court entered  partial          summary  judgment for RTC and  Home Owners, finding  that Key had          breached the  purchase-sale agreement.    The attendant  district          court order  directing  Key to  repurchase  the Gens  Note  never          became final, however, apparently because RTC and Key were unable          to agree upon a repurchase price.                     Gens  commenced  a voluntary  chapter 11  proceeding in          September  1993,  but  failed to  schedule  the  Gens  Note as  a          liability.    Knutson, as  RTC's agent,  filed  a proof  of claim          ("POC")  in relation to the Gens Note in December 1993 ("original          POC"), well before the May 16,  1994 bar date for filing  claims.          The  original  POC  incorrectly  listed  Knutson  itself  as  the          creditor, failed to disclose that Knutson was  the authorized RTC          servicing  agent,  mischaracterized  the  claim as  secured,  and          mistakenly identified  February 24, 1989 (rather  than July 1988)          as the date Gens incurred the Gens Note obligation.                                           3                    Almost seven  months after the bar  date, Knutson filed          an  amended POC in relation  to the Gens  Note, correctly listing          RTC  as  the creditor,  but still  (i)  failing to  disclose that          Knutson was RTC's agent,  and (ii) incorrectly characterizing the          claim  as "secured."    Knutson eventually  submitted  additional          amended POCs correcting these deficiencies.                    Gens  objected   to  the  original  and  amended  POCs,          asserting inter alia judicial estoppel and discharge of the note,                    _____ ____          see  Mass.  Gen.  Laws  Ann.  ch.  106,     3-606.   While  these          ___          objections were pending, FDIC,  successor to RTC, was substituted          as the creditor  on all POCs filed  by Knutson.  Ultimately,  the          objections  to the original and amended POCs were rejected by the          bankruptcy court and the district court affirmed.                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________          A.   Judicial Estoppel          A.   Judicial Estoppel               _________________                    The  companion  doctrines  of  judicial   estoppel  and          election of remedies1 essentially preclude a party from asserting          a legal or factual position "inconsistent" with its position in a          prior proceeding.   See Patriot  Cinemas, Inc. v.  General Cinema                              ___ ______________________     ______________          Corp., 834 F.2d 208, 212 (1st  Cir. 1987).  The estoppel  defense          _____          advanced  by  Gens  is   predicated  entirely  on  the  contract-          rescission claim Home Owners asserted in the federal court action                                        ____________________               1The "election  of remedies"  defense likewise derives  from          the  equitable  doctrine  of estoppel.    See  Butcher v.  Cessna                                                    ___  _______     ______          Aircraft  Co., 850 F.2d 247,  248 (5th Cir.  1988), cert. denied,          _____________                                       _____ ______          489 U.S. 1067 (1989); In re Leonardi's Int'l, Inc., 123 B.R. 668,                                ____________________________          669 (Bankr. S.D. Fla. 1991).                                          4          against  Key,  alleging inter  alia  that Key  had  made material                                  _____  ____          misrepresentations  in  negotiating the  purchase-sale agreement.          Implicit  in Home Owners' demand for  rescission of the purchase-          sale agreement  was its  averment that  Key's fraud rendered  the          purchase-sale agreement  voidable ab initio,  and therefore  that                                            __ ______          Home Owners never became a "holder" of the Gens  Note. See, e.g.,                                                                 ___  ____          In re Southern  Indus. Banking  Corp., 46 B.R.  306, 313  (Bankr.          _____________________________________          E.D. Tenn. 1985) ("A party to  a transaction induced by fraud may          elect  between two  remedies     he  may  treat the  contract  as          voidable and sue for the equitable remedy of rescission or he may          sue for damages at law under the tort theory of 'deceit.'").                    In  January 1992,  the  district court  awarded summary          judgment  to RTC  on  its contract  claim.   Gens  now  contends,          therefore, that FDIC is estopped from asserting a claim under the          Gens  Note in her bankruptcy proceeding, since its POC is legally          and factually  inconsistent with the litigation  position adopted          by  Home Owners in the  district court action,  namely, that Home          Owners  never  became  a holder  of  the  Gens  Note because  the          purchase-saleagreementwasrescindablefromitsinception.Wedisagree.2                                        ____________________               2Although  Gens  argues that  the bankruptcy  court decision          must  be reviewed  de novo,  we have  yet to determine  the exact                             __ ____          standard for  reviewing applications of the  doctrine of judicial          estoppel.  See Desjardins  v. Van Buren Community Hosp.,  37 F.3d                     ___ __________     _________________________          21,  23  (1st  Cir.  1994) (expressly  reserving  question);  cf.                                                                        ___          McNemar v. Disney Store,  Inc., 91 F.3d  610, 613 (3d Cir.  1996)          _______    ___________________          (adopting "abuse  of discretion" standard), cert.  denied, 117 S.                                                      _____  ______          Ct. 958 (1997); Data  Gen. Corp. v. Johnson,  78 F.3d 1556,  1565                          ________________    _______          (Fed. Cir. 1996)  (same); Yanez  v. United States,  989 F.2d  323                                    _____     _____________          (9th  Cir. 1993) (same).   "In reality, judicial  estoppel is not          extrinsically a matter of fact or law;  the issues that arise may          turn out  to be ones of  raw fact, abstract law,  or something in          between, e.g., the   application of a general standard to a known                                          5                    Judicial estoppel  is not  implicated unless  the first          forum  accepted the legal or  factual assertion alleged  to be at                 ________          odds with the position advanced in the current forum:                    [W]here a party assumes a certain position in                    a   legal   proceeding,   and   succeeds   in                                                    ________                    maintaining   that   position,  he   may  not                    thereafter, simply because his interests have                    changed,   assume    a   contrary   position,                    especially if  it be to the  prejudice of the                    party  who has  acquiesced  in  the  position                    formerly  taken  by  him.  .  .   .  Judicial                    estoppel  should be employed  when a litigant                    is "playing fast and loose with the  courts,"                    and  when "intentional  self-contradiction is                    being used  as a  means  of obtaining  unfair                                                _________                    advantage  in  a forum  provided  for suitors                    seeking justice."          Patriot  Cinemas, 834  F.2d  at 212  (emphasis added)  (citations          ________________          omitted).3    Similarly,  the   primary  purpose  served  by  the                                        ____________________          set  of facts."  Desjardins, 37 F.3d  at 23.  It is not necessary                           __________          to  determine the  precise standard of  review at  this juncture,          however, since the bankruptcy court ruling would be affirmed even          on plenary review.  See id.                              ___ ___               3See  United States  v.  Levasseur, 846  F.2d 786,  793 (1st                ___  _____________      _________          Cir.)  (estoppel  applies  where  party  previously  "obtained  a          litigation benefit"), cert. denied, 488 U.S. 894 (1988); see also                                _____ ______                       ___ ____          Continental Ill. Corp. v.   Commissioner, 998 F.2d 513,  518 (7th          ______________________      ____________          Cir. 1993), cert.   denied, 510 U.S. 1041 (1994) (party must have                      _____   ______          "sold"  its position  to  prior  tribunal);  Wang Lab.,  Inc.  v.                                                       ________________          Applied  Computer Sciences,  Inc., 958  F.2d 355, 358  (Fed. Cir.          _________________________________          1992); In  re A. Barletta & Sons, Inc., 185 B.R. 976, 980 (Bankr.                 _______________________________          M.D.  Pa. 1995); In re  Pierce Packing Co.,  169 B.R. 421, 429-30                           _________________________          (Bankr. D. Mont. 1994); In re UNR Indus., Inc., 143 B.R. 506, 526                                  ______________________          (Bankr. N.D. Ill. 1992),  vacated on other grounds, 173  B.R. 149                                    _______ __ _____ _______          (N.D. Ill. 1994);  Phillips v.  FDIC (In re  Phillips), 124  B.R.                             ________     ____  _______________          712, 719 (Bankr. W.D. Tex. 1991); In re Merritt  Logan, Inc., 109                                            __________________________          B.R. 140, 147-48 (Bankr. E.D. Pa. 1990); cf. also Crown Life Ins.                                                   ___ ____ _______________          Co. v. American Nat'l Bank and Trust Co. of Chicago, 35 F.3d 296,          ___    ____________________________________________          299 (7th Cir. 1994)  ("An election of remedy  occurs only when  a          party  accepts the  benefit  of pursuing  the initial  remedy.");          Leonardi's Int'l,  Inc.,  123 B.R.  at 669  ("An election  . .  .          _______________________          between legally  inconsistent remedies can  be made  at any  time          prior to the entry  of [final] judgment."); Collumb v.  Wyatt (In                                                      _______     _____  __          re  Wyatt),  6 B.R.  947,  951-52 (Bankr.  E.D.N.Y.  1980) ("'The          _________                                          6          "election  of remedies"  doctrine  is "to  prevent double  [viz.,                                                                      ____          sequential] recoveries  for the same  wrong."  Tavormina  v. Fir,                                                         _________     ____          Inc. (In re Alchar Hardware Co.), 764 F.2d  1530, 1534 (11th Cir.          ____  _________________________          1985).                      Contrary to Gens' contention, RTC permissibly displaced          its contract-rescission  claim  by  moving  for  partial  summary          judgment  on  its alternative  claim  that Key  had  breached the          purchase-sale agreement.  See  Fed. R. Civ. P. 8(e)(2)  ("A party                                    ___          may also state  as many separate claims [in its  complaint] . . .          as the party has[,] regardless of consistency . . .  .").4  Under          an   express  provision  in   the  purchase-sale  agreement,  the          exclusive  remedy for its breach  was the repurchase  of the Gens          Note  by  Key  upon demand  by  Home  Owners.    Thus,  unlike  a          rescindment, which  necessarily presumes  a disaffirmance of  the          purchase-sale agreement by Home Owners ab ovo, the RTC breach-of-                                                 __ ___          contract claim  implicitly acknowledged a valid  contract whereby          Home  Owners became  the  holder  of  the  Gens  Note  until  Key          repurchased the  Note.  Accordingly, the  current FDIC litigation                                        ____________________          purpose of [the]  doctrine [of  election of remedies]  is not  to          prevent  recourse to any remedy,   but to  prevent double redress          for a single wrong.'") (citation omitted).               4See, e.g.,  Desjardins,  37 F.3d  at  23 ("There  are  many                ___  ____   __________          situations, especially at the outset of litigation, where a party          is free to assert a position from which it later withdraws     or          even to assert, in the alternative, two inconsistent positions of          its potential claims and  defenses."); Fort Vancouver Plywood Co.                                                 __________________________          v.  United States, 860 F.2d 409, 415  (Fed. Cir. 1988) ("With the              _____________          enactment  of   the  Federal   Rules  of  Civil   Procedure,  the          traditional  election doctrine was  relaxed."); Grogan v. Garner,                                                          ______    ______          806  F.2d 829, 838 (8th Cir. 1986) ("[T]he doctrine [of election]          is remedial, and  neither it  nor the federal  rules of  pleading          require an election of substantive theories.").                                            7          position  is   not  inconsistent   with  that  advanced   by  its          predecessor, RTC,  since Home Owners  and RTC failed  to persuade          the district court that the purchase-sale agreement was voidable,          hence invalid from its inception.5            B.   Validity of Knutson Authorization          B.   Validity of Knutson Authorization               _________________________________                    Next, Gens contends that  the original and amended POCs          submitted by RTC are  invalid because Knutson was  not authorized          to act as agent for RTC.  See Fed. R. Bankr. P. 3001(b) ("A proof                                    ___          of  claim shall  be executed  by the  creditor or  the creditor's          authorized  agent  .  .  .  .");  see  also  Fed.  R.  Bankr.  P.                                            ___  ____          9010(a)(2).   Gens asserts that it would have demonstrated, at an          evidentiary  hearing,  that  RTC  regulations, see  12  C.F.R.                                                            ___          1606.4;   see  also   12  U.S.C.      1441a(n)(6),  presumptively                    ___  ____          disqualified  Knutson from serving as an RTC agent because, as an          affiliate of Home Owners, presumably it was complicit in whatever          financial  misfeasance  or malfeasance  led  to  the Home  Owners          insolvency.  As  the bankruptcy court aptly noted,  however, Gens          lacked standing to challenge Knutson's agency status.                    The  RTC  regulation  pursuant  to  which  Knutson  was                                        ____________________               5Furthermore,  RTC had  a  legal obligation  to  file a  POC          against the Gens estate in order to preserve the position of Home          Owners,  which  then  held   an  unsecured  claim  against  Gens.          Finally, should Key repurchase the  Gens Note, FDIC would realize          no  double recovery, since Key  would become the  claim holder of          record.  See Fed. R. Bankr. P. 3001(e)(2).                   ___               The "election  of remedies"  argument fails for  yet another          reason.   Since the  Trust and Gens  did not default  on the Gens          Note  until  January 1990,  Home Owners  had no  available remedy          against Gens in  1989 when  it filed its  complaint against  Key.          The 1990 default by  the Trust and Gens thus  constituted a legal          wrong distinct and severable from the breach of contract by Key.                                           8          designated is designed (i) to "ensure that contractors [hired  by          RTC] meet  minimum standards  of competence,  integrity, fitness,          and experience and are  held to the highest standards  of ethical          conduct in  performing services  for RTC,"  (ii) to prevent  "the          direct or indirect use  of information gained through performance          of a  contract . .  . for personal  gain not contemplated  by the          contract,"   and  (iii)   to  preclude   "the  use   of  personal          relationships or  improper influence  to gain  unfair competitive          advantage  in obtaining  contracts  with the  RTC."  12 C.F.R.             1606.1.    The RTC  regulation  thus  identifies two  conceivable          classes of  intended  beneficiaries:   (1) competing  contractors                                                     _________  ___________          which  are  unfairly  denied  RTC  contract  bids;  and  (2)  the                                                                        ___          taxpaying  public,  which may  be  harmed by  RTC  revenue losses          _________  ______          resulting from "insider" conflicts of interest.                    Gens   plainly   cannot   qualify   under   the   first          classification, as she is not a competing contractor.  See, e.g.,                                                                 ___  ____          New Hampshire Right to Life Political Action Comm. v. Gardner, 99          __________________________________________________    _______          F.3d 8, 15 (1st Cir. 1996) ("[U]nder the principle of jus tertii,                                                                ___ ______          the plaintiff  ordinarily 'must assert [her] own legal rights and          interests, and cannot  rest [her]  claim to relief  on the  legal          rights  or  interests  of third  parties.'")  (citation omitted).          Moreover, no  standing is  conferred upon Gens,  individually, by          the generalized taxpayer benefit  theme which actuates the second          classification.  See  Libertad v.  Welch, 53 F.3d  428, 436  (1st                           ___  ________     _____          Cir.  1995) (noting  that  claimant normally  may not  adjudicate          "abstract questions  of wide public significance  which amount to                                          9          generalized   grievances  more  appropriately  addressed  by  the          legislature").  Nothing in the statute, the RTC regulation or the          attendant case law remotely suggests that Congress or  the agency          itself  intended  to confer  standing  on chapter  11  debtors to          enforce  the RTC regulation.6  See, e.g., Dubois v. United States                                         ___  ____  ______    _____________          Dep't  of Agric.,  102  F.3d  1273,  1281  (1st  Cir.  1996)  (to          ________________          demonstrate "standing," complainant  must establish, inter  alia,                                                               _____  ____          that  her  claim does  not fall  "outside  the zone  of interests          protected by the specific law invoked") (quoting Allen v. Wright,                                                           _____    ______          468 U.S. 737, 751 (1984)); Benjamin v. Aroostook Med. Ctr., Inc.,                                     ________    _________________________          57 F.3d 101, 104 (1st Cir. 1995).7            C.   Amendments to Original POC          C.   Amendments to Original POC               __________________________                    Gens next  contends that the bankruptcy  court erred in          permitting RTC to amend its  original POC (i.e., December  1993),                                                     ____          which  incorrectly  stated that  Knutson  was  the claim  holder,          without  disclosing  that it  was acting  as  RTC's agent.   Gens          represents  that she  reasonably believed  Knutson held  no valid                                        ____________________               6Furthermore,  even  assuming  she  had  standing,  Gens has          alleged no  facts suggesting  that Knutson contributed  either to          Home Owners'  insolvency or to any  "substantial loss" occasioned          RTC.               7Gens argues  that the  POCs filed by  Knutson were  invalid          because they were  not signed  by RTC's  attorney.   See Fed.  R.                                                               ___          Bankr. P.  9010(a); 9011(a).   But see Fed. R.  Bankr. P. 3001(b)                                         ___ ___          (POC may be signed by creditor or its authorized agent); compare,                                                                   _______          e.g., Official  Bankruptcy Form  1 (providing space  for attorney          ____          signature) with  Official Bankruptcy Form 10  (POC form providing                     ____          no attorney-signature  line).   We need  not resolve  the present          claim, however, since Gens  concededly failed to raise it  in the          bankruptcy  court.   See  Juniper  Dev. Group  v.  Kahn   (In  re                               ___  ___________________      ____    ______          Hemingway Transp.,  Inc.), 993  F.2d 915, 935  (1st Cir.),  cert.          ________________________                                    _____          denied, 510 U.S. 914 (1993).          ______                                          10          claim in its own right.  Further, she argues, since RTC failed to          file a POC  in its own name  prior to the bar date,  there was no          timely POC to be amended.                    A bankruptcy  court ruling  allowing an amendment  to a          POC is reviewed for abuse of discretion, under three criteria:                    First, the proposed  amendment must not  be a                    _____                    veiled attempt  to  assert a  distinctly  new                    right  to payment  as  to  which  the  debtor                    estate was not fairly alerted by the original                    proof of  claim.  Second, the  amendment must                                      ______                    not  result  in  unfair  prejudice  to  other                    holders  of  unsecured  claims   against  the                    estate.  Third, the need to amend must not be                             _____                    the product of bad faith  or dilatory tactics                    on the part of the claimant.             Juniper Dev. Group v.  Kahn (In re Hemingway Transp.,  Inc.), 954          __________________     ____  ______________________________          F.2d  1, 10 (1st Cir. 1992) (citations omitted) (emphasis added).          Leave to  amend a  POC should  be "freely  given when  justice so          requires."  See  Fed. R. Bankr.  P. 7015.8  The  bankruptcy court                      ___          did not abuse its discretion.                    First, in order to "fairly alert" the debtor  estate, a          POC  need  only  "provide[]  adequate notice  of  the  existence,          nature, and amount of  the claim as well as the creditor's intent          to hold the estate liable."   Unioil, Inc. v. H.E. Elledge (In re                                        ____________    ____________  _____          Unioil,  Inc.), 962 F.2d 988, 992 (10th Cir. 1992).  The original          _____________          POC, accompanied by a copy  of the Gens Note, see Fed.  R. Bankr.                                                        ___          P. 3001(c), met the  general notice requirement.  As  Knutson was                                        ____________________               8Bankruptcy Rule  7015 makes Fed.  R. Civ. P.  15 (governing          amendments  to complaints)  applicable in  adversary proceedings.          Although  this case arose as  a contested matter,  rather than an          adversary proceeding,  Fed. R. Bankr. P.  9014 permits Bankruptcy          Rule  7015 to be applied in contested matters.  In re Stavriotis,                                                          ________________          977 F.2d 1202, 1204 (7th Cir. 1992).                                          11          duly  authorized  to file  the original  POC  for RTC,  see supra                                                                  ___ _____          Section  II.B,  the mere  failure  to  disclose Knutson's  agency          status in no sense affected the validity of the claim itself.  As          the  Tenth  Circuit  correctly  recognized in  Unioil,  a  simple                                                         ______          substitution  of the  real party  in interest  (viz., RTC)  for a                                                          ____          related  party  mistakenly  listed  in the  original  POC  (viz.,                                                                      ____          Knutson qua agent) represents a proper ground for amendment.  See                  ___                                                   ___          Unioil, 962  F.2d at  992 (permitting amendment  where a  trustee          ______          (rather than the trust) was incorrectly listed as creditor).9                    Second,  Gens points  to no  unfair prejudice  from any          deficiency  in the original POC.  See Hemingway Transp., 954 F.2d                                            ___ _________________          at 10;  see  also Unioil,  962  F.2d at  993  (noting that  party                  ___  ____ ______          opposing  amendment must  show actual  prejudice).   Instead, she          suggests  simply  that  allowing  the  RTC  amendment  prejudices          unsecured   creditors,   who   may   receive   less   under   any          reorganization plan than would  have been received were  the FDIC          claim not allowed.  But the standard Gens proposes would preclude          virtually any amendment, since  it dispenses with the requirement          that  the debtor  or  trustee  show  "unfair" prejudice.    Thus,          something more  than mere creditor disappointment  is required to          preclude amendment.  See In re  Stoecker, 5 F.3d 1022, 1028  (7th                               ___ _______________                                        ____________________               9Nor would the two remaining defects in the original POC bar          amendment.   First, as trustee for  the Old Jail  Trust, Gens had          every reason  to know that  the original characterization  of the          POC,  as  "secured,"  was  mistaken, since  the  first  mortgagee          already had  foreclosed on  the Barnstable Property  securing the          Gens  Note.  Second, the mistaken date assigned to the underlying          debt  instrument was  a minor  defect, given  that the  Gens Note          itself was attached to the POC.                                           12          Cir.  1993); In  re Outdoor Sports  Headquarters, Inc.,  161 B.R.                       _________________________________________          414, 422  (Bankr. S.D. Ohio 1993); In re Brown, 159 B.R. 710, 716                                             ___________          n.5  (Bankr.  D.N.J. 1993);  In re  Dietz,  136 B.R.  459, 468-69                                       ____________          (Bankr. E.D. Mich. 1992).                     Gens neither alleged nor demonstrated that any creditor          acted in  detrimental reliance on any  representation or omission          in  the original  POC.    See,  e.g.,  Brown,  159  B.R.  at  716                                    ___   ____   _____          (permitting POC  amendment from unsecured to  secured, given that          "no  evidence  has  been  offered that  anyone  relied  to  their          detriment  upon the claims as  originally filed").   Nor did Gens          allege  either bad faith or dilatory motive.  Moreover, these RTC          amendments  occurred long before the formulation  of a chapter 11          plan.  See Holstein v. Brill, 987 F.2d 1268, 1270 (7th Cir. 1993)                 ___ ________    _____          (characterizing  confirmation   of   debtor  plan   as   "passing          milestone"  that makes  it  more  likely  POC  amendment  may  be          prejudicial).                      To be sure, Knutson demonstrated considerable laxity in          executing its agency responsibilities, especially its seven-month          delay in submitting  amended proofs  of claim.   Were there  some          showing  in  these  circumstances  that RTC  gained  a  strategic          advantage  or  that  other  parties  in  interest  were  unfairly          prejudiced,  the case for disallowance  of the amended POCs would          have been much stronger.   Absent any such showing,  however, the          court did not abuse its discretion in permitting RTC to amend its          original POC.  "It is well accepted that  the bankruptcy court is          guided by the principles  of equity, and that the  court will act                                          13          to assure that ' . . . substance will not give way to form, [and]          that  technical  considerations  will  not   prevent  substantial          justice from being done.'"   Pepper v. Litton, 308 U.S. 295,  305                                       ______    ______          (1939) (citation omitted).           D.   Impairment of Collateral           D.   Impairment of Collateral               ________________________                    Lastly,  Gens challenges  the  bankruptcy court  ruling          dismissing her "impairment of  collateral" defense without  first          affording her an evidentiary  hearing.  She claimed that  a prior          holder  of the  Gens  Note     presumably  U.S. Funding      used          $36,000  of the loan proceeds  to pay off  the preexisting second          mortgage on  the Barnstable  Property, but  failed to  obtain and          record  the mortgage discharge.  Thus,  the mortgage securing the          Gens Note  remained third  in priority,  rather than climbing  to          second priority.                    Pursuant  to Mass.  Gen.  Laws.  Ann.  ch.  106,     3-          606(1)(b), "[t]he holder discharges any party to the [negotiable]          instrument  to the extent  that without such  party's consent the          holder  .  .  .  unjustifiably impairs  any  collateral  for  the          instrument  given by  or on  behalf of  the party  or any  person          against whom  he has  a  right of  recourse."   An impairment  of          collateral  may  result  if  the  conduct  of  the  holder  of  a          collateralized negotiable instrument unjustifiably diminishes the          physical value of the collateral, releases the  collateral to the          principal  obligor before the loan is repaid, or fails to perfect          its security interest in the collateral.  See Rose v. Homsey, 197                                                    ___ ____    ______          N.E.2d  603, 605-06 (Mass. 1964);  see also Hawaii  Broad. Co. v.                                             ___ ____ __________________                                          14          Hawaii Radio, Inc.,  919 P.2d  1018, 1029 (Haw.  Ct. App.  1996);          __________________          White v. Household Fin. Corp., 302 N.E.2d 828, 835 (Ind. Ct. App.          _____    ____________________          1973).  Nevertheless, in most jurisdictions a party  asserting an          "impairment  of collateral"  defense  must prove  she signed  the          negotiable  instrument  (viz.,  promissory  note)  merely  as  an                                   ____          accommodation party  for the principal  debtor, rather than  as a          borrower.   See  James  A. White  &  Robert S.  Summers,  Uniform                      ___                                           _______          Commercial Code    13-16 (3d ed. 1988).10            _______________                    An   accommodation  maker   is  one   "who  signs   the          [negotiable]  instrument  in  any  capacity for  the  purpose  of          lending [her] name  to another party  to it,"   Mass. Gen.  Laws.          Ann. ch. 106,   3-415(1).  Frequently, accommodation parties sign          debt instruments to enable the principal obligor to obtain a loan          which  would  not have  been  granted  absent the  accommodation.          Although an accommodation party is liable to the lender under the          debt instrument,  her liability is  that of  a surety only.   Id.                                                                        ___          cmt. 1.  Thus, the accommodation maker reasonably expects that if          called  upon  for  payment  following  the   principal  obligor's          default, she will  be subrogated to  the lender's rights  against          the principal  obligor, including  the right of  recourse against                                        ____________________               10The latent confusion  in this regard stems from  the broad          language in U.C.C.    3-606, which  refers to  "any party to  the                                                          ___ _____          [negotiable] instrument."   See FDIC v. Blue  Rock Shopping Ctr.,                                      ___ ____    _________________________          Inc., 766 F.2d 744, 749 (3d Cir. 1985) (outlining caselaw split).          ____          We have found  no Massachusetts case  which determines whether  a          nonaccommodation obligor on a promissory note may also invoke the          U.C.C.    3-606  defense.   Since Gens  and the  bankruptcy court          implicitly accepted the majority rule    that Gens must establish          accommodation  status    and because we  affirm on an alternative          ground,  we need  not  address the  unresolved  Massachusetts-law          question.                                           15          any collateral securing the underlying debt instrument.  See  id.                                                                   ___  ___          cmt. 5;  see also FDIC v. Blue Rock Shopping Ctr., Inc., 766 F.2d                   ___ ____ ____    _____________________________          744, 749 (3d Cir.  1985); accord Restatement of Security     104,                                    ______          141  (1941).   Therefore, to  the extent the  holder of  the debt          instrument unjustifiably devalues or releases the collateral,  or          fails  to perfect  its  rights in  the  collateral against  third          parties,  the  right  of  recourse  may  be  diminished,  thereby          entitling  the accommodation  maker to  a commensurate  discharge          from liability under the debt instrument.  See Blue Rock Shopping                                                     ___ __________________          Ctr., 766 F.2d at 751.          ____                    The bankruptcy court considered Gens'  second signature          conclusive  evidence that  she had  signed the  Gens Note  in her          "individual" capacity, that is,  as a principal coborrower rather          than  an accommodation maker.  It also concluded that the purport          of  Gens'  second signature  on the  Gens  Note was  not rendered          ambiguous, either by the anterior designation of the Trust as the          sole "Borrower" or the failure to designate a "Co-borrower."                    Citing considerable case authority, Gens maintains that          all accommodation makers necessarily sign promissory notes either          in   their   "individual"    or   "representative"    capacities.          Consequently, she argues,  these designations cannot conclusively          resolve  a signatory's  accommodation status.11   Since  the Gens          Note must therefore be considered facially ambiguous, Gens argues                                        ____________________               11See, e.g., FDIC v. Trans Pacific Indus., Inc., 14 F.3d 10,                 ___  ____  ____    __________________________          12 (5th Cir.  1994) (rejecting  FDIC's "attempts  to nullify  the          import"  of the  "borrower"  identification  block in  promissory          note,  which reflected corporation  as sole borrower  and did not          designate corporate officer as coborrower).                                           16          that  a  hearing should  have  been conducted  to  consider parol          evidence that the parties  to the Gens Note (viz.,  U.S. Funding,                                                       ____          the  Trust, and Gens) all understood  that Gen's second signature          was intended only  as an accommodation  endorsement.  See,  e.g.,                                                                ___   ____          Mass.  Gen. Laws. Ann.  ch. 106,    3-415(3)  (expressly allowing          parol evidence  of accommodation status except  as to holders-in-          due-course); United Beef Co. v. Childs, 27 N.E.2d 962, 964 (Mass.                       _______________    ______          1940)  (same); see also Butler v. Nationsbank, 58 F.3d 1022, 1027                         ___ ____ ______    ___________          (4th Cir. 1995) (outlining multi-factored, intent-based "purpose"          and "proceeds" tests for determining accommodation status); First                                                                      _____          Dakota  Nat'l Bank  v. Maxon,  534 N.W.2d  37, 41-42  (S.D. 1995)          __________________     _____          (same).12                                        ____________________               12FDIC counters  that 12  U.S.C.   1823(e)  (codification of          D'Oench   Duhme  doctrine)   barred  parol   evidence   of  Gens'          _______________          accommodation status, or that FDIC's status as a federal or state          holder in due course barred Gens from invoking the U.C.C.   3-606          defense.   See  Mass. Gen.  Laws. Ann.  ch. 106,    3-415(3) ("As                     ___          against  a holder  in  due  course  and  without  notice  of  the          accommodation oral  proof of the accommodation  is not admissible          to  give  the  accommodation  party  the  benefit  of  discharges          dependent on his  character as  such.").  Since  FDIC's right  to          invoke  either doctrine in this case is open to serious question,          we express no opinion on its contentions.  See, e.g., O'Melveny &                                                     ___  ____  ___________          Myers  v.  FDIC,  512  U.S.  79  (1994)  (generally  discouraging          _____      ____          adoption  of federal  common-law rules  especially protective  of          FDIC);  Varel v. Banc One  Capital Partners, Inc.,  55 F.3d 1016,                  _____    ________________________________          1021 (5th Cir. 1995) (D'Oench inapplicable where issue is not the                                _______          enforceability of a secret, unwritten side agreement, but whether          to allow parol evidence concerning the intendment of an ambiguous          written contract provision);  Capitol Bank and  Trust Co. v.  604                                        ___________________________     ___          Columbus  Ave.  Realty Trust  (In  re  604 Columbus  Ave.  Realty          ____________________________   __________________________________          Trust), 968 F.2d 1332, 1350-51 (1st Cir. 1992) (holding that FDIC          _____          is not  entitled  to  federal  holder-in-due-course  status  when          acting  in its  capacity as  receiver); Calaska Partners  Ltd. v.                                                  ______________________          Corson, 672 A.2d 1099, 1104 (Me.  1996) (FDIC as receiver of bulk          ______          purchaser not a holder in due course under state law); Mass. Gen.          Laws.  Ann. ch.  106,     3-302(3) (denying  holder-in-due-course          status   to  party  who  acquired   note  "as  part   of  a  bulk          transaction").                                          17                    Even were we to assume arguendo that Gens was  entitled                                           ________          to an  evidentiary hearing  to determine  whether she  signed the          Gens  Note as  an accommodation  maker, she  failed to  set forth          allegations which would establish the second essential element in          her  affirmative  defense     a  cognizable  "impairment" of  the          collateral.   See RTC  v. Feldman,  3 F.3d 5,  9 (1st  Cir. 1993)                        ___ ___     _______          (appellate court may affirm  on any ground supported  by record),          cert. denied, 510 U.S. 1163 (1994).  As her section 3-606 defense          _____ ______          is founded exclusively  on the claim that  her subrogation rights          were frustrated, supra, Gens  was required to do more  than prove                           _____          that U.S. Funding or another holder failed to obtain and record a          mortgage discharge.13                    Section   3-606  plainly  requires  evidence  that  the          holder's  dereliction   actually  resulted  in  a   loss  to  the          accommodation  party.  See Mass. Gen. Laws. Ann. ch. 106,   3-606                                 ___          ("The holder discharges any party to the instrument to the extent                                                              __ ___ ______          . . . the holder . . . unjustifiably impairs [the] collateral . .                                        ____________________               13Citing Providence,  Fall River & Newport  Steamboat Co. v.                        ________________________________________________          Massachusetts Bay S.S. Corp.,  38 F.2d 674 (D. Mass.  1930), Gens          ____________________________          contends  that the  holder's mere  failure to  record a  mortgage          discharge warrants  her total release from  liability because the          Barnstable Property obviously was  of sufficient value to satisfy          the Gens Note  in July 1988, and the holder's  failure to perfect          its security  interest unquestionably increased her  risk of loss                                                               ____          without her consent, even if no actual loss occurred.   Since the                                          ______          cited  case predates  the adoption  of the  Massachusetts Uniform          Commercial  Code  in  1958,  it  is  both  legally  and factually          inapposite.   See id. at 675 (noting  that the court was "dealing                        ___ ___          not with  the question how  far a  surety who has  guaranteed the          performance of  a contract is released  by subsequent alterations          in it by  the contracting parties, but with a  change made by the          creditor in the state  of facts on which an  independent contract          of guaranty rests"); cf. infra note 14.                               ___ _____                                          18          .  .").14   Gens  alleged no  facts  which would  demonstrate any          actual diminution of her subrogation rights. See FDIC v. Blanton,                                                       ___ ____    _______          918 F.2d  524, 530 (5th Cir.  1990) (burden of proof  is on party          alleging discharge).                    First, she did not allege that any  creditor obtained a                                        ____________________               14Although we have found  no Massachusetts case precisely in          point, the clear majority trend among U.C.C. jurisdictions  is to          require the  accommodation maker  to prove actual  loss from  the          impairment.   See,  e.g., Alcock  v. Small  Bus. Admin.,  50 F.3d                        ___   ____  ______     __________________          1456, 1462 (9th  Cir. 1995)  ("A clear majority  of state  courts          place the burden on  the guarantor to prove actual  prejudice and                                                      ______  _________          limit   the   discharge  to   the   extent   of  the   impairment          demonstrated.") (emphasis added);   Myers v. First State Bank  of                                              _____    ____________________          Sherwood, 732  S.W.2d 459, 461  (Ark.) ("[T]he surety  must prove          ________          two elements in order to be entitled to a discharge     'that the          holder of the note was responsible for the loss or impairment  of          the collateral, and the extent to which the impairment results in                                                                 _______ __          loss.'") (emphasis added)  (quoting Van Balen  v. Peoples Bank  &          ____                                _________     _______________          Trust Co., 626 S.W.2d 205, 209-10 (Ark. Ct. App. 1981)), modified          _________                                                ________          on  other  grounds, 741  S.W.2d 624  (Ark.  1987); Bank  South v.          __  _____  _______                                 ___________          Jones, 364  S.E.2d 281, 285 (Ga. Ct.  App. 1987) ("[A] failure to          _____          perfect a lien  on pledged  corporate stock [does  not] effect  a          discharge where it was shown  that the stock had no value  at the          time the action [to  collect on the debt] was  commenced."); Hurt                                                                       ____          v. Citizens Trust  Co., 196 S.E.2d 349,  351 (Ga. Ct. App.  1973)             ___________________          (noting that appellant has  "not shown how the failure  to record          the leases and  assignments resulted in  any damage")); Rempa  v.                                                                  _____          LaPorte  Prod. Credit Ass'n, 444  N.E.2d 308, 313  (Ind. Ct. App.          ___________________________          1983) (see  infra); T.O. Stanley Boot Co. v. Bank of El Paso, 847                 ___  _____   _____________________    _______________          S.W.2d  218, 223 (Tex. 1992) ("If the creditor breaches his duty,          the surety  is  discharged on  the  note  to the  extent  of  his          loss."); Century 21 Prods., Inc. v. Glacier Sales, 875 P.2d 1238,                   _______________________    _____________          1242  (Wash.  Ct.  App.  1994)  ("Should a  creditor  impair  the          collateral, the surety  will be  discharged to the  extent he  is          harmed by the impairment."), rev'd on other grounds, 918 P.2d 168                                       _____ __ _____ _______          (Wash.  1996);  see  generally  Carolyn  Edwards,  Impairment  of                          ___  _________                     ______________          Collateral Under Section 3-606 of the Uniform Commercial Code, 12          _____________________________________________________________          U. Dayton  L. Rev. 509, 522 n.81 (1987) ("A number of courts have          concluded that an unjustifiable impairment of collateral includes          a  failure to perfect a security interest if such failure results          in a loss  to the surety as subrogee."); cf.  also Revised U.C.C.                                                   ___  ____          3-605(f)  (discharge for  impairment of  collateral only  "to the          extent the impairment causes the party asserting discharge to pay          more than  that party  would have been  obliged to pay  . .  . if          impairment had not occurred.").                                          19          superior right of recourse against the Barnstable Property due to          the  fact   that  the  preexisting  second   mortgage  was  never          discharged  of  record.   In addition,  the  auction sale  of the          Barnstable  Property conducted  pursuant  to  the  first-mortgage          foreclosure resulted in no surplus for application  to any junior          lien, including the second mortgage.  Accordingly, the record can          support   no  finding   that  any   junior  lien   was  impaired.          Consequently, Gens'  liability would not have  been affected even          if she had  been able to establish that she  signed the Gens Note          as an accommodation  maker.   See, e.g., Rempa  v. LaPorte  Prod.                                        ___  ____  _____     ______________          Credit  Ass'n, 444 N.E.2d 308,  313 (Ind. Ct.  App. 1983) ("Thus,          _____________          where  the party  asserting the  impairment establishes  that the          creditor  did not  perfect its  lien but  fails to  establish the          extent  to which  that failure  resulted in  loss, the  party has          failed  to  establish  its   affirmative  defense  of  pro  tanto                                                                 ___  _____          release.").15                                         III                                         III                                      CONCLUSION                                      CONCLUSION                                      __________                                        ____________________               15Moreover, Gens merely  alleged that no  mortgage discharge          was recorded.  She did not allege that the $36,000,  see supra p.                                 ___                           ___ _____          2,  was  never  applied   to  the  preexisting  second  mortgage.          Therefore, assuming the  underlying debt was in fact  fully paid,          it would seem extremely unlikely that the mortgagee or any of its          assignees could have asserted a  viable right to recourse against          the  Barnstable Property.  See,  e.g., Beaton v.  Land Court, 326                                     ___   ____  ______     __________          N.E.2d  302, 307  (Mass.)  (noting  that  "a court  acting  under          general  principles of  equity jurisprudence  has broad  power to          reform,   rescind,  or  cancel   written  instruments,  including          mortgages,"  and that  the  discharging party  could simply  have          brought  suit  to compel  the mortgagee  to  cancel the  note and          "issue  a  discharge  of  mortgage  in  a  form  appropriate  for          recording"), appeal dismissed, 423 U.S. 806 (1975).                       ______ _________                                          20                    Accordingly,  the district  court judgment  is affirmed          and costs are awarded to the appellee.                    SO ORDERED.                    SO ORDERED.                    __ _______                                          21
