USCA1 Opinion
April 20, 1995 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-1957
RICHARD SIMONE AND LINDA SIMONE,
Plaintiffs, Appellants,
v.
WORCESTER COUNTY INSTITUTION FOR SAVINGS,
Defendant, Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
___________________
____________________
Before
Torruella, Chief Judge,
___________
Selya and Boudin, Circuit Judges.
______________
____________________
Richard Simone and Linda Simone on brief pro se.
______________ ____________
Lucille B. Brennan and Fletcher, Tilton & Whipple, P.C. on brief
__________________ _________________________________
for appellee.
____________________
____________________
Per Curiam. Plaintiff-Appellants Richard and Linda
__________
Simone ("the Simones") appeal from the district court's
affirmance of the bankruptcy court's dismissal of their
complaint and allowance of the counterclaim by the defendant,
Worcester County Institution for Savings ("WCIS"). They also
appeal from the district court's denials of their motion to
reconsider pursuant to Fed. R. Civ. P. 59(e) and motion for
relief from judgment pursuant to Fed. R. Civ. P. 60(b). "In
an appeal from district court review of a bankruptcy court
order, we independently review the bankruptcy court's
decision, applying the 'clearly erroneous' standard to
findings of fact and de novo review to conclusions of law.
__ ____
No special deference is owed to the district court's
determinations." Grella v. Salem Five Cent Savings Bank, 42
______ _____________________________
F.3d 26, 30 (1st Cir. 1994).
The Simones argue on appeal that the bankruptcy
court erred in concluding that defendant bank did not violate
either its common law duty or Mass. Gen. L. ch. 93A in
failing to characterize their property as a two-family
dwelling when advertising the foreclosure sale of the
property. The Simones also contend that the bankruptcy
court's error in granting plaintiffs' counsel's motion to
sequester all witnesses, including Linda Simone (a party to
the case), entitles them to a new trial. Finally, they argue
that the district court erred in denying their Rule 60(b)(2)
-2-
motion seeking relief from the judgment on the ground of
"newly discovered evidence" showing partiality of the
bankruptcy court judge who presided at the June, 1992
trial.1
I. Breach of Common Law Duty of Mortgagee to
_________________________________________
Mortgagor
_________
Massachusetts law regarding a mortgagee's
responsibility to a mortgagor in the context of a foreclosure
sale is as follows:
The law governing a mortgagee's
responsibility to the mortgagor in the
exercise of a power of sale is relatively
straightforward. The mortgagee "must act
in good faith and must use reasonable
diligence to protect the interests of the
mortgagor." The motgagee's duty is more
exacting when it becomes the buyer of the
property. "When a party who is intrusted
with a power to sell attempts also to
become the purchaser, he will be held to
the strictest good faith and the utmost
diligence for the protection of the
rights of his principal." Consistent
with these requirements, the mortgagee
has a duty "to obtain for the property as
large a price as possible."
Williams v. Resolution GGF Oy., 417 Mass. 377, 382-83 (1994)
________ __________________
(citations omitted). However, "[t]he rule that 'mere
inadequacy of [the foreclosure sale] price alone does not
necessarily show bad faith or lack of due diligence' has been
____________________
1. The Simones' brief contains myriad vague and unsupported
claims of tampering with evidence and improper behavior by
counsel for both parties. We reject those claims as
completely unsupported by the record.
-3-
repeated or applied by this court in many cases." Seppala &
_________
Aho Construction Co. v. Peterson, 373 Mass. 316, 328 (1977).
____________________ ________
The bankruptcy court made the following factual
findings at the June 4, 1992, proceeding:
I find that the fair market value of the
property at the time of the sale was
$135,000. . . . I find that it was more
likely than not -- whether or not the
sale was advertised as a two-family sale
or as a sale with an in-law apartment or
words of that affect . . . that in June
of '91, it was more likely than not that
no qualified bidders would appear who
would be prepared to bid more than
seventy percent of fair market value. I
find that the bank acted in accordance
with custom that has developed over the
last few years in bidding in at what it
believed to be seventy percent of the
fair market value. . . . I do find that
there were code violations, and . . .
this property as a two-family, would have
been in violation of the zoning bylaw . .
. , even though a certificate of
occupancy had been issued.
In light of those findings, the court ruled that the
advertisements placed by WCIS were not unreasonable. The
appraiser, on whom the bank relied, "was not acting
unreasonably in determining that this was essentially a . . .
single-family home."
The burden is on appellants to prove that the
bankruptcy court's factual findings are clearly erroneous.
See In re Payeur, 22 B.R. 516, 519 (U.S. Bankruptcy Panel for
___ ____________
the First Circuit, 1982). Under the "clear error" standard
of review, reversal is warranted only if after reviewing the
-4-
entire record, the reviewing court is left with a "'definite
and firm conviction that a mistake has been committed.'"
I.C.C. v. Holmes Transp., Inc., 983 F.2d 1122 (1st Cir. 1993)
______ ____________________
(citation omitted).
WCIS hired ATR Appraisal Consultants ("ATR") to
prepare two appraisals of the subject property, one in
November, 1990 (prior to the first scheduled sale of the
property, which was postponed when the Simones filed for
bankruptcy) and one in May, 1991 (prior to the second
scheduled sale of the property). The November appraisal
noted in an addendum that the property consisted of a "multi-
level style dwelling with finished basement set up as an in-
law apartment." ATR explained its decision to treat the
dwelling as a single-family as follows:
As the basement apartment contained
windows which did not appear to be code
and as its present layout created
functional problems, the subject was
treated as a single family residence with
finished basement. It should also be
noted that current zoning requirements
require an 8,000 sq. ft. lot for a two
family dwelling. It is not known if a
permit was filed in order to obtain a
variance to allow for a two-family
building.
The November report estimated the market value of the
property to be $144,000.
ATR's May 1991 report, noting that "market appears to
be declining," estimated the property's market value to be
$135,000. The second appraisal also treated the dwelling as
-5-
a single-family given the condition of the unit revealed by
the November, 1990 inspection. (ATR was unable to re-enter
the apartment for inspection in May, 1991.) Both reports
relied primarily upon the "Sales Comparison Approach" as
yielding the most accurate estimate of the property's market
value. ATR noted that "[t]ypically the price paid at
foreclosure is substantially less than the indicated Market
_____________
Value of the foreclosed property." The May 1991 report
estimated a foreclosure sale value of between $108,000 and
$115,000.
The Simones contend that ATR's appraisals were
unreasonable in failing to treat the dwelling as a two-family
and in failing to apply the "income approach" to estimating
its market value. That contention is undercut, however, by
their own appraiser's report. Thomas Head, an appraiser
hired by the Simones, testified at trial that his November,
1991 appraisal, which treated the dwelling as a two-family,
estimated the market value of the property at that time to be
$135,000. Therefore, whether treating the dwelling as a
single-family with a finished basement or as a two-family,
the appraisals arrived at the same estimated market value.
In addition, ATR researched the value of the property as a
two-family dwelling and concluded in a June 18, 1991 letter
to WCIS that the estimated value would remain in the $135,000
to $145,000 range. At trial, Kimberly Comeau (one of
-6-
the two ATR appraisers who prepared the reports) testified
that her visit to the Building Department for the City of
Worcester had revealed that current zoning required a minimum
lot size of 8,000 square feet for a two-family dwelling at
the relevant location. Given that the subject lot contained
only 7,960 square feet and that there was no evidence that a
special permit had been granted, Ms. Comeau concluded that
the use of the property as a two-family dwelling would
violate the applicable zoning laws. The Simones argue that
the Certificate of Occupancy issued to them by the Building
Department in 1987, when they converted the basement to an
apartment, demonstrates that the unit does not violate the
zoning laws.
Even assuming, without deciding, that ATR erred in
concluding that the use of the property as a two-family
dwelling violated the zoning laws, that error would not
invalidate its estimate of market value or its treatment of
the dwelling as a single-family. As Ms. Comeau stated at
trial, ATR's decision to appraise the dwelling as a single-
family dwelling was based upon a conclusion that "the highest
and best use of the subject property was as a single-family
residence." She explained that she believed that the
property would not be purchased as a two-family for the
following reasons:
Well, based on our findings upon the
inspection in which the layout of the
-7-
basement unit was awkward and
unconventional. We also had some
questions as to possible code violations.
In addition, we did consider the two-
family market; and due to risk involved
in the two-family market, we determined
that the highest and best use of the
property was that of a single-family.
A May 17, 1991, Code Inspection Report noted several
violations in the basement apartment. Although that report
was not received by WCIS until after the sale of the
property, it confirms ATR's impression (noted in its reports)
that code violations were present in the basement unit.2
WCIS admits that it considered the income from the
second unit in granting a second mortgage on the subject
property and that it insured the property as a two-family.
Those decisions, however, may merely reflect the actual use
of the property as a two-family dwelling at the relevant
times. It does not necessarily follow, and the Simones have
failed to demonstrate, that WCIS was obligated to advertise
the property as a two-family because it was being used as
such at the time of the sale. ATR determined that single-
family occupancy was the "highest and best use of the
property", i.e., "the most profitable and feasible" use.
____________________
2. The code inspection was performed in response to reports
of violations by the upstairs tenant, who allegedly offered
to purchase the property for $154,900 in February, 1991. The
Simones cite the offer as evidence that WCIS could have
obtained a higher price for the property if it had been
advertised as a two-family. Mr. Simone admitted at his
deposition, however, that the sale fell through for unknown
reasons.
-8-
WCIS reasonably relied upon that determination in advertising
the property.
The Simones argue that if the property had been
advertised as a two-family dwelling, there would have been
more bidders and, consequently, a higher purchase price would
have resulted. Plaintiff's professional auctioneer witness,
however, only testified that if the property were advertised
as a two-family, it would have attracted a "different
audience." Given ATR's reasonable conclusion that the
"highest and best use" of the property was as a single-
family, WCIS' decision to advertise it as such did not
violate its duty to the Simones.
Based upon the above evidence, we conclude that the
bankruptcy court did not err in dismissing the complaint.
After reviewing the entire record, we are not left with the
"definite and firm conviction," I.C.C. v. Holmes Transp.,
______ ________________
Inc., 983 F.2d at 1129, that the bankruptcy court's
____
conclusion that WCIS acted in good faith was mistaken. Nor
are we persuaded that the court was mistaken in concluding
that WCIS reasonably relied upon ATR's determination that the
property was essentially a single family home.3 The
bankruptcy court properly concluded that the Simones failed
____________________
3. We note that the record indicates that the Simones did
not object to the advertisement of the dwelling as a single-
family until after the sale occurred, although the first
advertisement was published approximately six months earlier,
in November, 1990.
-9-
to prove that the advertisement and sale of the foreclosed
property amounted to a breach of WCIS' common law duty to the
Simones.
II. Mass. Gen. L. ch. 93A Violation
_______________________________
The complaint also alleged that WCIS' advertisement
and sale of the foreclosed property violated c. 93A 2 and
9. Section 2(a) of chapter 93A makes unlawful "unfair or
deceptive acts or practices in the conduct of any trade or
commerce." Section 9 authorizes suit by "[a]ny person, other
than a person entitled to bring action under section eleven
of this chapter, who has been injured by another person's use
or employment of any method, act or practice declared to be
unlawful by section two . . . ." Section 11 authorizes suit
by persons who "engage[] in the conduct of any trade or
commerce."
It is unclear, and neither the bankruptcy court nor
the district court addressed the issue, whether the Simones
were "engaged in the conduct of trade or commerce" and,
therefore, required to bring suit under 11. The test is
"whether the defendant's conduct giving rise to the 93A
violation occurred in connection with . . . a plaintiff
individual acting in a business context." Michael C.
Gilleran, The Law of Chapter 93A 8.5 (1989 & Supp. 1994).
______________________
At the time of the foreclosure and sale, the Simones were
renting the subject dwelling to two families, and were no
-10-
longer living there themselves. Section 1(b) defines trade
and commerce to include "the rent . . . of . . . any
property."
It is unnecessary to resolve this issue, however,
since the Simones have failed to meet the requisite standard
under either 11 or 9. "The defendant in a 9 case will
or will not have violated 9 depending on whether the
defendant acted in an equitable manner toward the plaintiff.
The equity standard in 9 cases requires that the
defendant's conduct not have violated some established
concept of unfairness or otherwise be immoral, unethical,
oppressive or unscrupulous." M. Gilleran, supra, 4.7
_____
(citing cases); see also Gerli v. G.K. Hall & Co., 851 F.2d
___ ____ _____ _______________
452, 454 (1st Cir. 1988). "A plaintiff claiming unfairness
under 11 must show rascality, that is, a violation of
conventional business ethical norms." M. Gilleran, supra,
_____
4.8 (citing cases); see also Midwest Precision Services, Inc.
___ ____ ________________________________
v. PTM Inds. Corp., 887 F.2d 1128, 1139 (1st Cir. 1989).
_______________
The bankruptcy court specifically found that WCIS
acted in good faith and that it behaved in a commercially
reasonable manner. Given those findings, which were not
clearly erroneous, we conclude that the Simones failed to
establish that WCIS' conduct violated Mass. Gen. L. ch. 93A.
Therefore, the bankruptcy court did not err in dismissing
that claim.
-11-
III. Sequestering of Witnesses
_________________________
The Simones argue on appeal, as they did in their
motion for reconsideration, that the sequestering of Linda
Simone during the trial violated their rights. Fed. R. Evid.
615 provides, in relevant part, as follows:
At the request of a party the court
shall order witnesses excluded so that
they cannot hear the testimony of other
witnesses, and it may make the order of
its own motion. This rule does not
authorize exclusion of (1) a party who is
a natural person . . . .
The district court ruled as follows in response to the
Simones' motion for reconsideration:
Having reviewed the trial transcript
in connection with appellants' contention
that Linda Simone was improperly
sequestered at trial, and having
concluded that she was sequestered
pursuant to the motion of counsel for the
Simones, it is hereby Ordered that
appellants' motion to reconsider is
DENIED.
We agree with the district court that by moving for the
sequestration of witnesses, specifically including Linda
Simone, and by failing to object during the bankruptcy
proceeding to the sequestering of Linda Simone, the Simones
waived the issue. Cf. United States v. Abbott, 30 F.3d 71,
___ _____________ ______
73 (7th Cir. 1994) (failure to move for exclusion of witness
at trial constitutes waiver of argument on appeal that court
erred in failing to exclude witness); Hull v. Merck & Co.,
____ ___________
758 F.2d 1474, 1478 (11th Cir. 1985) (denying request for new
-12-
trial where plaintiff had been excluded from courtroom in
violation of Fed. R. Evid. 615(1), but plaintiff -- after
returning to the courtroom -- agreed to proceed with trial).
Moreover, the Simones have failed to demonstrate any
prejudice as a result of Linda Simone's exclusion from the
courtroom. See United States v. Bobo, 586 F.2d 355, 366 (5th
___ _____________ ____
Cir. 1978) (party seeking reversal on basis of violation of
Fed. R. Evid. 615 must demonstrate prejudice therefrom),
cert. denied, 440 U.S. 976 (1979).
_____ ______
IV. Partiality Claim
________________
The Simones argue that the Bankruptcy Judge ought
to have disqualified himself from presiding over the June 4,
1992, trial. They argue that his previous employment as an
attorney at a law firm where defense counsel was then working
as a paralegal, required his recusal. They further suggest
an additional conflict: that the judge's former law firm
represented WCIS. A motion for recusal was not made to the
bankruptcy court. Instead, the Simones raised the partiality
issue for the first time in their Rule 60(b)(2) motion for
relief from judgment on the ground of newly discovered
evidence. The motion was filed and denied while the Simones'
motion for reconsideration pursuant to Fed. R. Civ. P. 59(e)
was pending. The Simones did not appeal from the denial of
their Rule 60(b) motion and WCIS argues that, therefore, they
-13-
have waived the issue. We need not decide the question of
waiver since we conclude that the partiality claim is
entirely without merit.
WCIS admits that its counsel "from October, 1978
through June 1985, . . . was a paralegal employed at the law
firm of Bowditch & Dewey and during that time often worked
with Judge Queenan, who, during that same period, was a
lawyer and member of the firm." Contrary to the Simones'
contention on appeal, however, those circumstances do not
require recusal. The relevant statute provides as follows:
Any justice, judge or magistrate of the
United States shall disqualify himself in
any proceeding in which his impartiality
might reasonably be questioned.
28 U.S.C. 455. This court has interpreted the statute to
require disqualification "`only if the facts provide what an
objective, knowledgeable member of the public would find to
be a reasonable basis for doubting the judge's
__________ _____
impartiality.'" In re Allied Signal, Inc., 891 F.2d 967, 970
_________________________
(1st Cir. 1989) (citations omitted), cert. denied, 495 U.S.
_____ ______
957 (1990). WCIS' counsel's employment, seven years earlier,
as a paralegal at the firm where the Bankruptcy Judge then
worked as an attorney, and her work with the Judge, on
matters unrelated to the present controversy, do not provide
a "reasonable basis for doubting the judge's impartiality" in
this case. See Singer v. Wadman, 745 F.2d 606, 608 (10th
___ ______ ______
Cir. 1984) (holding that judge's former partnership with a
-14-
lawyer for one of the defendants did not require
disqualification), cert. denied, 470 U.S. 1028 (1985).
_____ ______
Nor does the Simones' allegation that the
Bankruptcy Judge's former law firm represented WCIS require
recusal. "[A] charge of partiality must be supported by a
factual basis." Allied Signal, 891 F.2d at 970. Here, the
_______ _____ _____________
Simones have provided only the following vague suggestion of
partiality:
[The Bankruptcy Judge] at one point
either worked at the Law Firm of
Bowdwitch & Dewey of Worcester Ma. or
Fletcher Tilton & Whipple of Worcester,
Ma. and . . . either of these two Firms
handled the accounts for W.C.I.S. Bank.
Even if the factual basis were adequate, the alleged
relationships would not necessarily require recusal. See
___
National Auto Brokers v. General Motors Corp., 572 F.2d 953
_____________________ ____________________
n.9 (2d Cir. 1978) (citing 455(b)(2) and noting that
"[e]ven under the more stringent requirements of the current
statute, . . . the prior representation of [defendant] by
[judge's prior law firm and judge] as to unrelated matters
would not require him to recuse himself"), cert. denied, 439
_____ ______
U.S. 1072 (1979).
For all the foregoing reasons, we affirm the
______
district court's affirmance of the bankruptcy court's
dismissal of this case.
-15-