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
-2-
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
-3-
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").
-4-
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,
____
-5-
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
-6-
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.
-7-
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
-8-
Bogosian's fraud and breach of fiduciary duty allegations
could not succeed as a matter of law. These appeals ensued.
-9-
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
______ ______________________________
-10-
(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
-11-
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
-12-
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.
-13-
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
-14-
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.
-15-
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
-16-
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
-18-
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.
-19-
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
-20-
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.
-21-
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.
-24-
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.
__________________________________________________________
-25-