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Rhode Island v. Bogosian, 92-2405 (1993)

Court: Court of Appeals for the First Circuit Number: 92-2405 Visitors: 3
Filed: Nov. 29, 1993
Latest Update: Mar. 02, 2020
Summary: UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 92-2405 No. 93-1075 IN RE BELMONT REALTY CORPORATION Debtor, Appellant. B. The Conflict of Interest Claim ______________________________ In Bogosian's amended counterclaims, she set forth a claim of fraud.
USCA1 Opinion












UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________

No. 92-2405
No. 93-1075

IN RE BELMONT REALTY CORPORATION

Debtor, Appellant.
__________

RHODE ISLAND HOSPITAL TRUST NATIONAL BANK,

Plaintiff, Appellee,

v.

ELIZABETH V. BOGOSIAN,

Defendant, Appellant.

____________________

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Raymond J. Pettine, Senior U.S. District Judge]
__________________________

____________________

Before

Torruella, Circuit Judge,
_____________

Campbell, Senior Circuit Judge,
____________________

and Boudin, Circuit Judge.
_____________

____________________

Michael J. McGovern with whom Indeglia & McGovern was on brief
____________________ ___________________
for appellants.
Richard W. MacAdams with whom Myrna S. Levine and MacAdams &
____________________ ________________ ___________
Wieck Incorporated were on brief for appellee.
__________________


____________________

November 29, 1993
____________________














CAMPBELL, Senior Circuit Judge. Rhode Island
______________________

Hospital Trust National Bank (the "Bank") sued Elizabeth

Bogosian on two separate promissory notes, one executed by

Belmont Realty Corporation ("Belmont") and guaranteed by

Bogosian (the "Belmont Note"), and one executed by Bogosian

herself (the "Bogosian Note"). Bogosian filed certain

defenses and counterclaims. The district court held that an

earlier decision in a bankruptcy court adversary proceeding

initiated by Belmont was res judicata as to Bogosian's

counterclaims. The district court granted summary judgment

for the Bank, finding in its favor on all counts of its

amended complaint and dismissing all of Bogosian's

counterclaims. Bogosian appeals. Belmont appeals from the

district court's denial of its Rule 60(b) motion to amend the

court's separate order dismissing Belmont's appeal from the

bankruptcy court adversary proceeding. Bogosian's and

Belmont's appeals were consolidated. We affirm in part and

vacate and remand in part.

I.

Bogosian created Belmont for the purpose of

purchasing and developing parcels of real estate in Newport

and Middletown, Rhode Island. She secured a loan to Belmont

of $1.2 million from the Bank. In 1987, Belmont executed and

gave the Belmont Note to the Bank. Bogosian personally

guaranteed the Belmont Note. Though she gave one-third of



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Belmont's stock to her son and one-third to her daughter,

Bogosian herself controlled Belmont's activities.

Bogosian was a partner with her brother in a real

estate company called E&J, which also had outstanding loans

from the Bank. In 1986, E&J went into receivership because

of a bitter management struggle between Bogosian and her

brother. Bogosian accepted direct personal liability for

one-half of E&J's debt to the Bank and executed the Bogosian

Note in March 1989.

Never receiving the necessary governmental

approvals for the development of the Newport and Middletown

properties, Belmont defaulted on the Belmont Note in early

1989. In order to delay foreclosure on the properties,

Belmont filed for bankruptcy protection in the United States

Bankruptcy Court for the District of Rhode Island (the

"Bankruptcy Proceeding"). In September 1989, the Bank

brought the instant action in the United States District

Court for the District of Rhode Island (the "District Court

Action") against Bogosian as Guarantor of the Belmont Note,

seeking to collect the outstanding indebtedness due it from

Belmont. In October 1989, the Bank amended its complaint to

add a second claim against Bogosian based on the Bogosian

Note. Bogosian admits that both notes remain unpaid.

One might think that such facts would lead, as the

court below described wishfully, to "a simple action by a



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lender to collect on two promissory notes." Over the course

of more than four years, however, the parties have battled

over these promissory notes in three separate arenas: the

United States District Court, the United States Bankruptcy

Court, and now here. They leave behind them what the

district court described as a "tortuous procedural trail."

A. The Bankruptcy Proceeding
_________________________

Initially, Bogosian ignored the District Court

Action, and a default judgment was entered against her. Her

attentions may have been on the bankruptcy court where, in

January 1990, Belmont filed an adversary complaint (the

"Adversary Proceeding") against the Bank. Belmont asserted

various claims based on an alleged oral agreement by the Bank

not to call the Belmont Note until the purchased properties

could be developed.

Less than six months later, the bankruptcy court

issued a decision (the "Belmont Decision") dismissing

Belmont's adversary complaint. The bankruptcy court

determined that the alleged oral agreement would be

unenforceable by virtue of the Statute of Frauds, R.I. Gen.

Laws. 9-1-4, and the parol evidence rule. See In re
___ ______

Belmont Realty Corp., 116 Bankr. 21 (Bankr. D.R.I. 1990).
_____________________

Belmont appealed from the Belmont Decision to the district

court (the "Bankruptcy Appeal").





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B. The District Court Action
_________________________

Meanwhile, in March 1990, the district court

withdrew the default judgment against Bogosian. The court

allowed her to file counterclaims against the Bank asserting

what were in essence the same claims based on an alleged oral

agreement by the Bank not to call the Belmont Note, that had

constituted Belmont's claims against the Bank in the

Adversary Proceeding. On August 24, 1990, the district court

dismissed Bogosian's counterclaims on the grounds that the

parol evidence rule would prohibit introduction of evidence

of the alleged oral agreement at trial.

In December 1990, however, the district court

granted a motion by Bogosian to file amended counterclaims

based on "newly discovered" information. The amended

counterclaims were based on the same alleged oral agreement

by the Bank, as well as new allegations of fraud and an

alleged conflict of interest that the Bank had with respect

to Bogosian's estranged family members.

C. The Consent Order and the Dismissal of the
___________________________________________________
Bankruptcy Appeal
_________________

At that point, there were two cases pending in the

district court relating to Belmont and the Belmont Note

the Bankruptcy Appeal and the District Court Action. Due to

the similarity of the issues involved in both cases, the

parties agreed that the Bankruptcy Appeal should be continued

nisi pending resolution of the District Court Action. Thus,
____


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on February 22, 1991, the district court entered a Consent

Order setting out the agreement. The Order stated that the

District Court Action "may resolve all pending issues," but

made it clear that if "further proceedings in [the Bankruptcy

Appeal] become necessary or desirable, any party may initiate

it in the same manner as if this order had not been entered."

In effect, the order simplified the proceedings so

that the issues between the parties would be resolved in the

District Court Action rather than in the Bankruptcy Appeal.

The Order did not refer to any agreement as to the res

judicata effects of the Belmont Decision in the Adversary

Proceeding.

The appeal notwithstanding, the Belmont Decision

already constituted a final judgment for res judicata

purposes. See Katchen v. Landy, 382 U.S. 323, 334 (1966)
___ _______ _____

(normal rules of res judicata apply to decisions of

bankruptcy courts); Turshen v. Chapman, 823 F.2d 836, 839
_______ _______

(4th Cir. 1987) (in bankruptcy case, a final resolution of an

adversary proceeding has preclusive effect even if underlying

bankruptcy proceeding continues); Wright, Miller & Cooper,

Federal Practice and Procedure: Jurisdiction 4433 (1981)

(judgment has preclusive effect while appeal is pending).

So long as the bankruptcy proceeding was pending,

however, the parties were under no practical compulsion to

negotiate any agreement about the res judicata effects of the



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Belmont Decision. If the Bank raised a res judicata defense

to Bogosian's counterclaims in the District Court Action,

Belmont could simply reopen the Bankruptcy Appeal, pursuant

to the Consent Order. It was not in the Bank's interest to

raise the res judicata defense in the District Court Action

because Belmont and Bogosian had an effective way to counter,

i.e., by reopening the Bankruptcy Appeal.
____

The Consent Order, however, did not spell out any

agreement as to what would happen to the Bankruptcy Appeal if

the underlying Bankruptcy Proceeding were dismissed. This

potentiality occurred little more than a year later. On

February 28, 1992, the United States Trustee filed a motion

to dismiss the Bankruptcy Proceeding on the grounds that

Belmont had failed to confirm a plan of reorganization and

had never filed monthly cash flow and profit and loss

statements, as required by the Trustee. The bankruptcy court

dismissed the Bankruptcy Proceeding on March 20, 1992.

Belmont did not object, and the dismissal was considered

voluntary.

Neither Belmont nor Bogosian attempted to reopen

the Bankruptcy Appeal. The district court, having been

advised of the consensual dismissal of the Bankruptcy

Proceeding, "passed," i.e., dismissed, the Bankruptcy Appeal
____

on April 30, 1992.





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Once the Bankruptcy Appeal was dismissed, Bogosian

lost her ability to pursue that appeal as a counterweight to

any assertion by the Bank of a res judicata defense to her

counterclaims in the District Court Action. By leave of the

court, the Bank accordingly amended its Answer to Amended

Counterclaims to include defenses of res judicata and

collateral estoppel. Shortly thereafter, in June, 1992, the

Bank filed its motion for summary judgment.

Several months later, Belmont filed a motion in the

district court pursuant to Rule 60(b) of the Federal Rules of

Civil Procedure, seeking to amend the district court's order

passing the Bankruptcy Appeal. Belmont asked the court to

clarify that the dismissal was "without prejudice to the

right of Elizabeth V. Bogosian to raise any defense or make

any assertion in the [District Court Action]." The district

court denied the motion.

On November 20, 1992, the district court granted in

entirety the Bank's motion for summary judgment. As for the

Belmont Note, the district court dismissed Bogosian's amended

counterclaims on res judicata grounds. The court rejected

Bogosian's argument that the Consent Order should be

construed to prohibit the Bank from raising its res judicata

defenses. Regarding the Bogosian Note, the court dismissed

Bogosian's amended counterclaims on the grounds that





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Bogosian's fraud and breach of fiduciary duty allegations

could not succeed as a matter of law. These appeals ensued.

















































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II.

As the issues pertaining to the Belmont Note and

the Bogosian Note are distinct, we begin by considering the

grant of summary judgment to the Bank on the Belmont Note.

The key issue on appeal, as it was below, is whether the

Belmont Decision in the Adversary Proceeding was res judicata

in the District Court Action. We hold that it was. We

disagree with the district court only in respect to

Bogosian's fraud in the inducement claim, based on an alleged

conflict of interest on the part of the Bank. We are

uncertain at this time whether the Belmont decision had

preclusive effect on that issue.

A. The Application of Res Judicata.
________________________________

In granting summary judgment in favor of the Bank

on its suit to collect on the Belmont Note, the district

court held:

having had the opportunity to litigate
these issues in the Bankruptcy Court,
having received a final judgment on the
merits (right or wrong), and having
failed to protect its rights with respect
to the appellate process, [Belmont] and
those in privity with it cannot attempt
to relitigate these issues in this
proceeding. On the facts of this case,
any other result would undermine the
primary goal of the doctrine of res
judicata -- that there be finality in
litigation.

The district court's point was well taken. In

Dennis v. R.I. Hospital Trust Nat. Bank, 744 F.2d 893, 898
______ ______________________________



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(1st Cir. 1984), we explained that the "claim preclusion"

aspect of res judicata bars the relitigation of any claim

"that was, or might have been, raised in respect to the
________________

subject matter of the prior litigation." Id. (emphasis in
___

original) (citations omitted). "Issue preclusion" or

"collateral estoppel," on the other hand, prohibits

relitigation "of any factual or legal issue that was actually
________

decided in previous litigation 'between the parties, whether

on the same or on a different claim.'" Id. (emphasis in
___

original) (quoting Restatement, Second, Judgments 27

(1982)). We emphasized that "[a]n issue may be "actually"

decided even when it is not explicitly decided, for it may
__________

have constituted, logically or practically, a necessary

component of the decision reached." Id. (emphasis in
___

original). See Wright, Miller & Cooper, supra, 4402.
___ _____

With the exception of the conflict of interest

allegations discussed in section B below, we have no doubt

that the issues and claims litigated in the Adversary

Proceeding were substantially the same issues and claims with

respect to the Banks's alleged oral promise that defendant

Bogosian sought to litigate with respect to the Belmont Note

in the District Court Action. As the district court noted in

granting summary judgment, Belmont had every incentive to

litigate those matters exhaustively in the Adversary

Proceeding. On appeal, Bogosian's principal contention is



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that the usual rules of res judicata should not apply in this

case.

Before turning to this argument, we briefly

consider and reject three other arguments now made by

Bogosian. First, Bogosian argues that the district court

should not have applied res judicata because she was not a

party nor in privity with a party in the Adversary

Proceeding. The court below, however, accurately stated

that,

It is undisputed that Mrs. Bogosian is an
officer of [Belmont], that she participated
directly in obtaining the loan for [Belmont]
to purchase the Newport and Middletown, R.I.
properties, that she signed the Guaranty of
the [Belmont] indebtedness at issue in this
case, and that she was very active in the
bankruptcy proceedings. Thus, privity exists
between defendant Bogosian and [Belmont].

Bogosian points to nothing that makes us doubt either the

conclusion of law or the finding of fact by the district

court. See Restatement, Second, Judgments 59(3)(a) (1982)
___

(judgment against a closely-held corporation is conclusive as

to shareholder who actively participates in an action on

behalf of the corporation, unless interests of the

shareholder and corporation are so different that the

shareholder deserves an opportunity to relitigate issues).

Second, Bogosian contends that the bankruptcy court

did not have jurisdiction to adjudicate the validity of her

guaranty and that "the preclusive effect of a Bankruptcy



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Court must reflect the reality of its limited jurisdiction."

See Latham v. Wells Fargo Bank, 896 F.2d 979, 983 (5th Cir.
___ ______ ________________

1990). Bogosian forgets, however, that res judicata includes

issue, as well as claim, preclusion. She does not dispute

that the bankruptcy court properly exercised its jurisdiction

over Belmont's claims and that the issues necessarily

considered in Belmont's claims were the same as in Bogosian's

counterclaims in the District Court Action. Given that

Bogosian and Belmont were in privity, Bogosian is barred from

litigating those same issues again, even if the bankruptcy

court did not have jurisdiction over her personal claims.

Third, Bogosian contends that the Bank procured the

Belmont Decision through discovery fraud, by failing to

produce an internal Bank memorandum in the Adversary

Proceeding. The memo, prepared by the loan officer, lists as

"Source of Repayment" for the Belmont Note the "Sale of

assets/Conversion of property for resale and refinance a

mortgage." The document, to our eyes, simply lists potential

sources of repayment of the loan; it does not amount to

evidence of a promise not to require repayment until after

the completion of Belmont's project. But even if the

document were more persuasive, there is absolutely nothing in

the record suggesting that the Bank engaged in discovery

fraud, as the bankruptcy court specifically refused to allow
_______

Belmont to engage in discovery before the Belmont Decision.



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In re Belmont, 116 Bankr. at 24. Moreover, the document was
_____________

produced in the District Court Action several weeks before

the Belmont Decision in the Adversary Proceeding; at no time

did Belmont attempt to bring it to the attention of the

bankruptcy court.

Bogosian's fourth and principal argument here is

that the Bank must be deemed by implication to have "waived"

any res judicata effects of the Belmont Decision when it

agreed, in the Consent Order, to have the merits of the

counterclaims decided in the District Court Action rather

than in the Bankruptcy Appeal. Bogosian contends that the

parties' obvious desire to have their dispute decided in the

District Court Action rather than in the Bankruptcy Appeal

leads ineluctably to the conclusion that the res judicata

effects of the Belmont Decision were to be permanently

cancelled.

This scenario, however, ignores the fact that,

under the Consent Order, the Bankruptcy Appeal was merely to

be continued nisi, with both parties being expressly entitled
____

to initiate further proceedings in that appeal at will.

Nothing was said about waiving the res judicata effects of

the Belmont Decision, there being no need to do so since, as

previously discussed, any attempt of the Bank to raise a res

judicata defense in the District Court Action could be





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counteracted by Belmont's reopening of its Bankruptcy

Appeal.1 It was when Belmont voluntarily dismissed its

bankruptcy petition and the Bankruptcy Appeal was "passed,"

that the happy balance of power that had supported the

compromise came to an end. The Bank could thereafter assert

res judicata with impunity.

In effect, Bogosian is asking this Court to supply

in the Consent Order a missing contract term to which the

parties never expressly agreed, namely, an agreement by the

Bank to forego its res judicata defense. We see no reason to

do so. Nothing in the Consent Order, expressly or by

implication, shows an intent by the Bank to waive its res

judicata defense. If the parties foresaw the possibility of

the current situation, their failure to have provided for it

could well have been due to their inability to find common

ground. See E. Allan Farnsworth, Contracts 7.15-16
___ _________

(1982). We see nothing unjust about leaving the parties

where they have found themselves, i.e, without any special



____________________

1. Nor would the unresolved res judicata issue have lingered
to destabilize any judgment later reached in the District
Court Action. Res judicata is an affirmative defense. If
the Bank had allowed the District Court Action to proceed to
judgment without raising it, res judicata would have been
deemed waived at that point. Wright, Miller & Cooper, supra,
_____
4405. The judgment would stand, even if inconsistent with
the Belmont Decision. Of course, the chances are slight that
the judgments would remain inconsistent for long, as the
Bankruptcy Appeal could then be reopened and the Belmont
Decision reversed (if need be, to achieve consistency), the
same judge and court being in control of both proceedings.

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agreement, express or implied, that would bar use of the

still viable res judicata defense.

This holding is supported by the fact that Bogosian

could easily have avoided this result either by seeing that

Belmont's bankruptcy proceeding was maintained or by promptly

reopening the Bankruptcy Appeal. She failed to do either.

Now, after failing to protect herself, she asks this court to

step in and provide protection either by reading into a

Consent Order an agreement that does not exist, or by

requiring the district court to amend its order dismissing

the Bankruptcy Appeal.

Under United States v. Munsingwear, Inc., 340 U.S.
_____________ _________________

36 (1950), we are not required to do either. There, the

Supreme Court held that a judgment could be accorded res

judicata effect in a subsequent litigation even though the

original judgment was rendered unreviewable because it was

dismissed as moot by the appellate court. The Court

acknowledged that the usual course is for the appellate court

to dismiss the appeal with instructions to vacate the

judgments below, destroying their preclusive effects. But

when the party that lost below fails to request a vacatur of
_______

the lower court judgments, the appellate court does not err

when it allows the judgments to stand.

The case is therefore one where the
[appellant], having slept on its rights, now
asks us to do what by orderly procedure it
could have done for itself. The case


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illustrates not the hardship of res judicata,
___ ________
but the need for it in providing terminal
points for litigation.

Id. at 41.
___

Here, too, Bogosian and Belmont "slept on [their]

rights" at their peril. The district court's "passing" of

the Bankruptcy Appeal did not automatically vacate the

Belmont Decision, and absent a request for vacatur, it was

not error for the district court to fail to order vacatur sua
___

sponte.
______

Five months after the district judge dismissed the

appeal and over four months after the Bank raised its res

judicata defense, Belmont finally moved pursuant to Rule

60(b) that the judge amend his order to make clear that the

Belmont Decision had no preclusive effect. Even if such a

motion could be generously construed as a request for

vacatur, it is doubtful that such a request sufficed under

Munsingwear. As the district court noted, Belmont should
___________

have acted sooner to protect its right to an appeal. As in

Munsingwear, "if there is hardship in this case, it was
___________

preventable." Munsingwear, 340 U.S. at 39.
___________

Bogosian might have presented a colorable argument

that the district court erred in passing the Bankruptcy

Appeal when it was not in fact moot. While there is no

controlling law in this Circuit, the apparent majority rule

in other jurisdictions is that bankruptcy courts may continue



-17-















to exercise jurisdiction over pending adversary proceedings

even after a dismissal of a related bankruptcy petition. See
___

2 Collier on Bankruptcy 349.03 & nn. 4a, 4b (1993);

Bankruptcy Service, L. Ed. 3C:99 (1989). Some courts

continue to exercise jurisdiction "for cause shown" under 11

U.S.C. 349(b). See, e.g., In re Morris, 950 F.2d 1531
___ ____ _____________

(11th Cir. 1992). Some retain jurisdiction for other reasons

or as a matter of course. See, e.g., In re Carraher, 971
___ ____ _______________

F.2d 327 (9th Cir. 1992); In re Pocklington, 21 Bankr. 199, 7
_________________

Collier Bankr. Cas. 2d 185 (Bankr. S.D. Cal. 1982); In re
_____

Lake Tahoe Land Co., 12 Bankr. 479, 4 Collier Bankr. Cas. 2d
___________________

1089 (Bankr. D. Nev. 1981).

But Belmont never contested the dismissal of the

appeal below, and neither Bogosian nor Belmont has made the

argument on appeal that the dismissal was in error. The

argument is therefore waived. Moreover, even if the

dismissal was in error, Belmont could have cured any harmful

effect with a simple motion to vacate the Bankruptcy Court's

judgment. Under Munsingwear, Belmont must share the
___________

responsibility for seeing to it that lower court judgments do

not prejudice them later.

We therefore affirm the district court's decision

to apply res judicata in the District Court Action. We also

affirm the district court's denial of Belmont's Rule 60(b)

motion. Except for the one fraud claim based on conflict of



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interest described below, we affirm the district court's

grant of summary judgment against Bogosian as to the Belmont

Note.

B. The Conflict of Interest Claim
______________________________

In Bogosian's amended counterclaims, she set forth

a claim of fraud. She based much of this claim on

allegations that were, or could have been, litigated in the

Adversary Proceeding or on allegations that pertained to the

Bogosian Note rather than the Belmont Note. The district

court properly granted summary judgment as to these

allegations.

Bogosian made one factual allegation concerning the

Belmont Note, however, that apparently could not been

considered in the Adversary Proceeding. She claimed that

before agreeing to borrow the money for the Newport and

Middletown properties from the Bank, she sought assurances

that the Bank was not conducting business with any of her

brothers. Given the acrimonious dissolution of several

businesses in which she shared interests with her brothers,

Bogosian was allegedly concerned that a Bank relationship

with the brothers would amount to a conflict of interest.

According to Bogosian, the Bank falsely represented that it

was not engaging in business with her brothers, fraudulently

inducing Belmont to accept a loan and to execute the Belmont

Note.



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In granting summary judgment, the district court

barred this counterclaim along with all the others. Issue

preclusion would not have barred this claim, however. A

fraud in the inducement claim pertains to an inducement to

enter into a contract rather than to the contract terms

themselves. Such a claim would not normally, therefore, be

decided on statute of frauds or parol evidence grounds. The

district court may have believed that this claim could have

been raised in the Adversary Proceeding, hence was properly

barred on claim preclusion grounds. Without knowing more,

however, we cannot affirm the summary judgment dismissal of

this claim. On appeal, Bogosian asserts that she discovered

this conflict of interest misrepresentation only after the

District Court Action began. Her assertion is hardly air-

tight: she could have learned about this misrepresentation

after the District Court Action commenced but still in time

to bring it to the attention of the bankruptcy court in the

Adversary Proceeding. Nevertheless, in the light most

favorable to Bogosian, it would be reasonable to infer that

Belmont did not know the full dimensions of its fraud claim

at the time of the Belmont Decision. Depending on the reason

for Belmont's ignorance, claim preclusion might not apply.

See Wright, Miller & Cooper, supra, 4415.
___ _____

As the district court's reasoning in barring this

particular fraud claim was not clear from its order, we think



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it is best to vacate summary judgment as to this claim and

remand for further proceedings. The district court may

choose to accept additional argument as to whether the

allegations of conflict of interest could have been raised in

the Adversary Proceeding or whether for any other reason the

claim should now be barred. Or else the court may determine

inter alia whether Bogosian has created a genuine issue of
_____ ____

material fact on the merits of the claim so as to survive

summary judgment.



































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III.

We turn last to the Bogosian Note. Bogosian admits

executing the Bogosian Note for $242,408 on January 19, 1989.

She does not dispute on appeal the district court's findings

that it was payable (at latest) 18 months later and has not

to date been paid. Nevertheless, she has alleged that the

Bank made certain materially false representations in order

to encourage her to accept personal liability for one half of

E&J's outstanding debt to the Bank. She argues on appeal

that she created a genuine issue of material fact as to

claims of fraud and breach of fiduciary duty, and that these

claims should have survived summary judgment.

Her fraud claim rests on two factual allegations.

First, Bogosian declares that shortly before she executed the

Bogosian Note, the Bank had begun the process of terminating

her credit and calling in her Belmont Note guaranty. Second,

she avows that the Bank "feigned an interest" in providing

additional financing to her if she executed the Bogosian

Note.

The district court held that a fraud claim based on

these allegations could not succeed as a matter of law. We

agree. As to the first allegation, the Bank was entitled to

monitor Bogosian's creditworthiness without keeping her

updated on its assessment. See Centerre Bank of Kansas City,
___ _____________________________

N.A. v. Distributors, Inc., 705 S.W.2d 42, 52 (Mo. Ct. App.
____ __________________



-22-















1985). As to the second, we find nothing in the record to

make us doubt the district court's finding that the Bank made

no material misrepresentation, proof of which is necessary to

substantiate a claim for intentional fraud. Given the

negotiating context in which anyone with Bogosian's business

sense should have known that the Bank had a legitimate

interest in non-committal encouragement, Bogosian's claim

that the Bank "feigned interest" is simply too thin a reed on

which to base a fraud claim. Indeed, it is difficult to see

how her version of the facts amounts to an allegation of

misrepresentation at all.

Bogosian also attempted to make out a breach of

fiduciary duty claim against the Bank, pointing primarily to

her long-term business relationship with Bank loan officer

Robert Baggessen, and to the fact that she had given him

authority to withdraw funds from several of her accounts to

make payments on her and her companies' debts. In order to

evaluate whether a fiduciary relationship existed, the

district court considered several factors: (1) the reliance

of Bogosian on the Bank; (2) the relationship of the parties

prior to the transaction complained of; (3) the parties'

relative business capacities; and (4) Bogosian's readiness to

follow the bank's guidance in complicated transactions. See
___

Simpson v. Dailey, 496 A.2d 126, 129 (R.I. 1985). The
_______ ______

district court, noting that Bogosian was a sophisticated and



-23-















experienced businessperson who was represented by counsel at

allrelevant times,found thatnofiduciary dutyhad beenviolated.

Again, we agree. We have previously noted that

courts are split on whether a fiduciary relationship may

exist between a bank and a borrower. Reid v. Key Bank of
____ ____________

Southern Maine, Inc., 821 F.2d 9, 16 (1st Cir. 1987). No
_____________________

state or federal court in Rhode Island appears to have since

found such a relationship to exist. See Fleet National Bank
___ ___________________

v. Liuzzo, 766 F. Supp. 61, 68 (D.R.I. 1991) (granting
______

summary judgment in favor of lender, finding no evidence that

lender and borrower intended a fiduciary relationship beyond

relationship of debtor-creditor).

But as in Reid, where we upheld a directed verdict
____

denying a claim based on fiduciary duty, the facts here are

such that we need not decide the broader legal issue. A good

business relationship with a banker, with whom one has

discussed one's underlying business at length, is not enough.

Some kind of dependency for advice that makes the

relationship more than a normal banker-client relationship is

necessary. See Reid, 821 F.2d at 17 (applying Maine law).
___ ____

We do not believe that a reasonable jury could have found

that such a special relationship existed here. We therefore

affirm the district court's grant of summary judgment against

Bogosian as to the Bogosian Note.

IV.



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In conclusion, we affirm the grant of summary

judgment against appellant Bogosian as to the Bogosian Note.

We also affirm summary judgment as to the Belmont Note,

except for the fraud in the inducement claim based on

allegations of conflict of interest. We remand to the

district court for further proceedings on that claim. We

also affirm the district court's denial of Belmont's Rule

60(b) motion for the district court to amend its order

dismissing the Bankruptcy Appeal.

Affirmed in part and vacated and remanded in part.
__________________________________________________

Each party shall bear its own costs of this appeal, without
_____________________________________________________________

prejudice to appellee's right to recover its own costs of
_____________________________________________________________

this appeal from appellant if appellee prevails on remand.
__________________________________________________________



























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Source:  CourtListener

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