[NOT FOR PUBLICATION NOT TO BE CITED AS PRECEDENT] United States Court of Appeals For the First Circuit

No. 99-1486

BEAL BANK S.S.B., F/K/A BEAL BANC S.A.,

Plaintiff, Appellant,

v.

RICHARD H. KROCK,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, U.S. District Judge]

Before

Torruella, Chief Judge, Lynch and Lipez, Circuit Judges.

David D. Pavek, Pavek & Associates, William V. Sopp, and Finnegan, Hickey, Dinsmoor & Johnson on brief for appellant. Alan M. Spiro and Edwards & Angell, LLP on brief for appellee.

January 3, 2000

LYNCH, Circuit Judge. Beal Bank sued Richard Krock on a note with a face amount of $350,000. The district court entered judgment for Krock, finding Beal Bank had orally modified the note and that Krock owed nothing. On appeal, this court affirmed the court's holding that there was an agreed-upon oral modification of the original contract and remanded for a calculation of the proper amount owed. See Beal Bank S.S.B. v. Krock,

(1st Cir. 1998) (unpublished table decision). On remand, the district court recalculated the amount and found again that Krock owed nothing to the Bank. The Bank appeals. The property secured by the note was sold for $1,505,000, which, according to the oral modification of the agreement, meant that $403,333.33 would be applied as an offset to Krock's debt. The Bank's position is that Krock owed $432,020.39 under the note. That amount is the undisputed note amount of $381,888.88 (the $350,000 principal plus 8% "contract rate" interest), plus 13% "default rate" interest after Krock's default in paying the November 1, 1994 installment, plus a sum for late charges of 5% due on the past-due installment and accelerated balance. Accordingly, the Bank says that, after the offset, Krock still owes it monies. Krock argues that because the Bank never gave written notice of a default or opportunity to cure, as required by the note, the note was not accelerated nor was default interest rate triggered. Krock says that the Bank cannot claim default because the parties orally modified their agreement and the Bank agreed to take no further action until the sale. Accordingly, Krock says, the interest rate remained at 8%, not 13%, and no late charge can be imposed. Krock says that the amount owed under the note at the contract interest rate was $399,710.43, which is less than the offset amount. The district court agreed with Krock and, so, found no money was due. Beal Bank erroneously argues it is entitled to de novo review of the district court's decision. Barring this, it says that the findings of fact made by the district court are clearly erroneous. The district court's decision is based on findings of fact and we review them under a clearly erroneous standard. See Fleet Nat'l Bank v. H & D Entertainment, Inc.,

(1st Cir. 1996). The Bank argues there is no notice or opportunity to cure requirement because the note says that in event of default, the note becomes immediately payable without notice or demand. The Bank selectively quotes from the note in making this argument: it does not quote from the language of the note concerning default, but rather from the language concerning covenants. The covenant language, however, is inapt because the default alleged by the Bank is Krock's failure to make the November 1, 1994 payment, an event covered by an earlier portion of the agreement. Even if notice were required, the Bank says that Krock had actual notice because Krock's counsel acknowledged, in a letter of November 10, 1994, that Krock was aware of his default. Because Krock was so aware, the Bank argues that the purpose, under Massachusetts law, for having notice requirements -- so individuals can protect their interests in real property -- was essentially served here. In any event, Beal Bank says, it was not open to the district court on remand to determine that there was no default. Krock replies that Beal Bank has misled the court by failing to inform us of two key phrases in the note. Those phrases are: Following the occurrence and continuation beyond the applicable cure period of an "Event of Default" as defined herein . . . .

and one of the definitions of "Event of Default":

[a failure] to pay any . . . obligation . . . when such payment is due, which failure remains uncured after five (5) days after written notice thereof . . . .

Thus, Krock says that there was a notice requirement under the note, that the Bank admits it did not give notice, and that, in any event, the oral modification meant there was no default and the Bank was not entitled to accelerate the note balance. An event of default triggers acceleration, at the holder's option, but both the note and Massachusetts law require written notice first. See Clark v. Trumble,

(Mass. App. Ct. 1998). The trial judge's findings of fact are supported and are certainly not clearly erroneous. The district court found there was no event of default because the Bank agreed orally to take no further action until the property was sold. Even if there had been an event of default, the note contains a requirement of notice and the opportunity to cure before the debt could be accelerated. The Bank does not dispute that it did not give notice or an opportunity to cure, and so neither the default interest rate nor acceleration were triggered. Nothing in this court's earlier opinion precluded the district court from making these determinations. We affirm the decision of the district court. Counsel for the Bank are required to show cause within ten days of the date of this opinion why they should not be required personally to pay an award to Krock of his attorney's fees for this appeal and double his costs of appeal because of their misrepresentation to this court of the pertinent language of the note. See 28 U.S.C. 1912; Fed. R. App. P. 38; Thomas v. Digital Equip. Corp.,

(1st Cir. 1989).