Giuffre v. Deutsche Bank National Trust Co. , 759 F.3d 134 ( 2014 )

United States Court of Appeals
For the First Circuit
No. 13-2222
GUY GIUFFRE,
Plaintiff, Appellant,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY; HOMEWARD RESIDENTIAL, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
Before
Lynch, Chief Judge,
Howard and Kayatta, Circuit Judges.
David G. Baker on brief for appellant.
Mark B. Johnson and Johnson & Borenstein, LLC on brief
for appellee Deutsche Bank National Trust Company.
Marissa I. Delinks, Maura K. McKelvey, and Hinshaw &
Culbertson LLP on brief for appellee Homeward Residential, Inc.
July 17, 2014
KAYATTA, Circuit Judge. Plaintiff Guy Giuffre alleges
that he fell victim to a fraudulent "foreclosure rescue" scheme in
which he allowed an attorney to take title to his home and strip it
of most or all of its equity by granting a new mortgage. When the
lawyer's scheme fell apart, Giuffre got his home back, but the
mortgage remained in place. Having made no payments on the loan
secured by the mortgage, and facing foreclosure as a result,
Giuffre filed this lawsuit in an effort to shift the burden of his
plight to the mortgagee. Finding no basis in Giuffre's pleadings
to hold the bank responsible for the harm the attorney inflicted on
him, the district court dismissed the lawsuit. We affirm.
I. Background
We describe the facts as they are alleged in Giuffre's
complaint, drawing all plausible inferences in his favor, and
borrowing from the district court's able summary.1 See Giuffre v.
Deutsche Bank Nat. Trust Co., 2013 WL 4587301 (D. Mass. Aug. 27,
2013). In 2006, struggling to pay the mortgage on his house in
Massachusetts, Giuffre filed for bankruptcy. On the advice of his
attorney, however, he voluntarily dismissed his bankruptcy to
pursue an alternative "foreclosure rescue" scheme.
Under the scheme, Giuffre sold his home to a different
attorney, Alec Sohmer, for $625,000, as reflected in a recorded
deed, and paid off his preexisting mortgage, on which he apparently
1
We also add some detail from public records and documents
that the parties treat as incorporated into the complaint. See,
e.g., Maloy v. Ballori-Lage, 744 F.3d 250, 251 n.1 (1st Cir. 2014).
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owed slightly more than $400,000. Sohmer obtained a new mortgage
on the property in the amount of $500,000 from Option One Mortgage
Corporation (which later transferred the mortgage to Deutsche
Bank). At the same time, Sohmer transferred the property for a
nominal price to a trust of which he was the trustee and Giuffre
was the main but not sole beneficiary. Giuffre's complaint is
silent as to whether he ultimately received any funds from these
transactions.
Sohmer had assured Giuffre that although Giuffre no
longer owned the property he could reside there while paying rent
to Sohmer, which would presumably go to the mortgage, and obtain a
new mortgage in his own name after two years. This plan soon
failed, because Sohmer demanded rent payments that Giuffre could
not afford--and that exceeded the mortgage payments that drove
Giuffre into bankruptcy. Sohmer eventually initiated eviction
proceedings. Sohmer also failed to make payments on the new
mortgage, and the bank sought to foreclose.
Soon after, Sohmer filed for bankruptcy, putting the
foreclosure on hold. Meanwhile, reacting to Sohmer's mistreatment
of Giuffre and other homeowners, the Massachusetts Attorney General
pursued various legal remedies. Ultimately, the bankruptcy court
approved a settlement that aimed to "restore [Sohmer's victims], to
the extent possible, to the positions they occupied prior to the
Foreclosure Avoidance Transactions." See In re Sohmer, No. 06-
14073 (Bankr. D. Mass. 2006), Dkt. 716, at 3. In the settlement,
several lenders to which Sohmer gave mortgages, including Option
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One, agreed to make certain efforts to mitigate the harm arising
from Sohmer's conduct.2
The trustee in Sohmer's bankruptcy eventually conveyed
Sohmer's interest in the home to Giuffre. In 2012, Deutsche Bank
sought relief from the automatic stay to pursue foreclosure
proceedings, but the bankruptcy court held that because the
property had been transferred out of the estate, the stay did not
apply. Giuffre's pleadings contain no suggestion that Deutsche
Bank has yet initiated a foreclosure.
Giuffre initiated this case in Massachusetts land court,
seeking to have the mortgage declared void. Deutsche Bank removed
it to federal court.3 The district court eventually granted the
defendants' motion to dismiss, holding that Giuffre had failed to
state a claim that the mortgage was void. Three weeks later,
Giuffre filed a motion captioned "Motion for Leave to File First
Amended Complaint," attaching an amended complaint that added
detail to his original complaint, lengthening it from thirty-eight
paragraphs to sixty-five paragraphs. The court denied the motion,
finding that it "lack[ed] the power to allow amendment of [the]
complaint" because Giuffre had "not moved for post-judgment relief
2
Giuffre does not argue that the settlement demonstrates any
wrongdoing by Option One. In the bankruptcy proceedings, he
opposed the settlement and chose not to opt in. He notes that he
does not expect to recover any money from Sohmer, as "it does not
appear likely that there will be any assets for distribution to
creditors such as Giuffre."
3
Defendant Homeward Residential adopts all of Deutsche
Bank's arguments, and we make no distinction between the two
defendants.
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pursuant to Rule 59 or 60." On the same day, Giuffre filed his
notice of appeal, stating that he was appealing both the dismissal
of his complaint and the denial of his motion to amend.
II. Appellate Jurisdiction
We begin by considering the defendants' challenge to our
appellate jurisdiction. The defendants note that Giuffre filed his
notice of appeal thirty-four days after the district court
dismissed his complaint. A party seeking to appeal a district
court decision ordinarily must file a notice of appeal within
thirty days of the entry of the judgment or order being appealed,
lest we lack jurisdiction over the appeal. Fed. R. App. P.
4(a)(1)(A); Bowles v. Russell, 551 U.S. 205, 209 (2007).
But there are exceptions to the thirty-day limit. As
relevant here, when a party files a timely motion in the district
court to alter or reconsider an earlier judgment, the party can
then wait until the court decides that later motion (and up to
thirty days afterwards) before appealing the original judgment.
Fed. R. App. P. 4(a)(4)(A).
Our jurisdiction therefore turns on whether Giuffre filed
a motion to alter or reconsider the district court's order
dismissing his complaint. Giuffre points to his motion for leave
to amend, claiming that it also functioned in substance as a motion
to alter or amend the court's dismissal order. While the caption
of the motion does not help Giuffre's cause ("Motion for Leave to
File First Amended Complaint"), Giuffre asks us to focus on the the
body of the motion, specifically the portion challenging the
court's decision to dismiss the complaint. The motion noted that
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between briefing on the defendants' motion to dismiss and the
court's order, the First Circuit released an important decision,
Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir.
2013), which the district court relied on in dismissing the
complaint. Because the district court cancelled oral argument on
the motion to dismiss, Giuffre explained, he never had an
opportunity to address Culhane, and he thought "the court's
interpretation of Culhane [was] too narrow." Giuffre's motion also
pointed out that the district court's dismissal order was silent as
to whether an amendment was permitted. In seeking leave to amend
his complaint, therefore, Giuffre's misdirected and misbegotten
motion could be read, in part, as asking the court to alter its
earlier order to allow amendment.
In responding to Giuffre's motion below, Deutsche Bank
itself gave the motion just such a reading, volunteering that the
motion was "an amalgamation of a motion to amend and a motion for
reconsideration." The bank nevertheless argued, and maintains on
appeal, that the motion should be treated as solely a motion to
amend the complaint, not one qualifying as extending the time limit
for filing a notice of appeal.
We disagree. In characterizing motions for these
purposes, we focus on their substance, not their labeling. Perez-
Perez v. Popular Leasing Rental, Inc., 993 F.2d 281, 283 (1st Cir.
1993). In substance, Giuffre's motion challenged the legal
foundation of the dismissal order and called on the judge to either
revoke that order or alter it to allow him leave to amend. These
are "classic Rule 59 claim[s]," id., albeit ones presented in a
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misleading manner. Given that even Deutsche Bank nevertheless
recognized the motion as serving in part as a request to alter the
earlier judgment, and so informed the district court, we find the
poorly presented request for relief to qualify, barely, as
extending the time limit for filing a notice of appeal. We
therefore deem Giuffre's appeal of the dismissal order timely.
III. Analysis
We review the district court's decision to dismiss de
novo and may affirm "on any basis available in the record."
Lemelson v. U.S. Bank Nat. Ass'n, 721 F.3d 18, 21 (1st Cir. 2013).
Giuffre concedes that he transferred title to his
property to Sohmer. He also concedes that Sohmer granted a
mortgage to Option One. Under Massachusetts law, when Sohmer
granted the mortgage, he transferred to Option One "legal title"
while retaining "equitable title," the right to eventually
reacquire legal title when the mortgage debt was paid in full.
Bevilacqua v. Rodriguez, 460 Mass. 762, 774-75 (2011). Giuffre
later reacquired equitable title from the trustee in Sohmer's
bankruptcy,4 and Deutsche Bank acquired legal title from Option
One.
In the words of Giuffre's brief on appeal, his complaint
"sought a declaration from the land court voiding the mortgage as
having been obtained by fraud, deceit and misrepresentation." Yet,
in the complaint's actual allegations, and in his brief on appeal,
Giuffre does not allege that the grant of the mortgage by Sohmer to
4
Giuffre cites this transfer as giving him ownership of the
property, but the bankruptcy trustee could not convey legal title
to the property because Sohmer's estate did not have it.
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Option One was itself marred by any fraud, much less fraud that
would void the transaction. Instead, he attacks only the dealings
between himself and Sohmer, claiming that Sohmer fraudulently
induced him to transfer the property to Sohmer. Giuffre cites no
authority supporting the notion that a mortgage can be declared
void simply because it was granted by someone who previously
acquired the property through this kind of fraud. Such a rule
would have sweeping implications, opening any mortgage to question
based on conduct unknowable to the mortgagee. Unsurprisingly,
Massachusetts does not allow claims based on fraudulent inducement
against a subsequent purchaser for value, except if the plaintiff
establishes that the purchaser had notice of the fraud. See Somes
v. Brewer, 19 Mass. 184, 195 (1824) ("[W]here a grantee obtained a
deed of land by fraud . . . and afterwards conveyed the land to a
bona fide purchaser for a valuable consideration without notice of
the fraud, . . . such purchaser had a valid title against the first
grantor."); Bevilacqua, 460 Mass. at 777 n.11 (2011) (same); Altman
v. Stiegel, 349 Mass. 768, 768 (1965) (applying the same principle
to a mortgagee). A later transferee has notice for these purposes
if it "has actual knowledge," "received a notice," or "has reason
to know" based on "the facts and circumstances known to him at the
time." Demoulas v. Demoulas Super Markets, Inc., 424 Mass. 501,
547 (1997).
Giuffre's complaint did not allege that Option One knew
of Sohmer's fraud or had any reason to deduce that it had occurred.
Consequently, a factfinder accepting Giuffre's allegations as true
would conclude that Option One received legal title to Giuffre's
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home without notice of fraud, and that Deutsche Bank now validly
holds it, allowing the bank to foreclose if the terms of repayment
in the mortgage are not satisfied.
Seeking to bypass this fundamental obstacle to his claim,
Giuffre asserts that the mortgage cannot be enforced because the
debt to Deutsche Bank is "nonexistent," because Giuffre "does not
owe Deutsche Bank any money," and because he "never signed and
never agreed to grant." These claims misunderstand and misconstrue
the situation. The debt certainly exists: Option One lent
$500,000 to Sohmer, and Giuffre concedes that this debt was not
discharged in Sohmer's bankruptcy. Because Sohmer granted a
mortgage, Option One (and later Deutsche Bank) acquired legal title
to the property, regardless of Giuffre's lack of consent. And in
practical terms Giuffre must indeed make loan payments if he hopes
to retain the property: Giuffre's interest in the property as a
holder of equitable title constitutes a right to "reacquire legal
title by paying the debt which the mortgage secures." Lemelson,
721 F.3d at 24 (internal quotation marks omitted).
Finally, Giuffre says that "[e]quity should intervene and
restore title to Giuffre," noting that "[i]t is hard to see that
Deutsche Bank would be harmed [as it] surely has recourse to title
insurance." While we are certainly sympathetic to Giuffre's
apparent mistreatment at the hands of his prior lawyer, his
complaint provides no legal basis for making Deutsche Bank (or its
insurer) pay for the lawyer's wrongdoing.
IV. Giuffre's Motion to Amend his Complaint
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Giuffre's proposed amendments to his complaint do not
repair the fundamental problems described above with his attempt to
hold Deutsche Bank responsible for Sohmer's wrongdoing. We
therefore affirm the district court's denial of Giuffre's motion to
amend. See Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st
Cir. 1996) (holding that a motion to amend should be denied as
futile if "the complaint, as amended, would fail to state a claim
upon which relief could be granted.").
Giuffre's amended complaint does gesture towards a claim
that Option One knew or should have known of Sohmer's fraud, but it
ultimately falls far short of supporting such a claim. Stripping
away several purely conclusory allegations, Giuffre's amended
complaint alleges only that Option One should have known that
Giuffre "was the individual who would be paying the mortgage"
because Giuffre was a beneficiary of the trust holding the
property, and that the bank nevertheless "conducted no due
diligence to determine whether Giuffre could afford the mortgage."
But the relevant fraud here is not that Giuffre had too little
financial capacity. Rather, the underlying fraud as alleged by
Giuffre is that Sohmer was lying and self-dealing. Giuffre's
allegations offer no hint as to how Option One should have
discovered that fraud, even if Giuffre were correct (which we
doubt) that Option One owed a duty to the beneficiaries of a trust
to which the bank's borrower intended to transfer the property.
Giuffre's amended complaint also includes two entirely
new counts raising issues unrelated to Sohmer's fraud, one
questioning whether Deutsche Bank holds the promissory note and the
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other related to the securitization of the mortgage. Giuffre has
never claimed that he was unaware of the facts giving rise to these
new claims when he first filed the suit eighteen months before the
proposed amendment. We are confident that the district court would
have properly rejected Giuffre's last-ditch attempt to mutate the
case to avoid dismissal, pressed after more than a year and a half
of litigation. In short, this is a classic case of "undue delay."
See Nikitine v. Wilmington Trust Co., 715 F.3d 388, 390-91 (1st
Cir. 2013). In any event, Giuffre fails to adequately plead facts
supporting his new claims, and so they are also futile.
V. Conclusion
For the foregoing reasons, we affirm the dismissal of
Giuffre's complaint and the denial of his motion for leave to amend
his complaint. Double costs are awarded to the appellees.
So ordered.
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