FDIC v. Gleicher

January 27, 1994 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 93-1542
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR BANK OF NEW ENGLAND,
Plaintiff, Appellee,
v.
ANCHOR PROPERTIES, ET AL.,
Defendants,
RICHARD GLEICHER, INDIVIDUALLY, AND AS HE IS TRUSTEE
OF GROSVENOR PARK REALTY TRUST,
Defendant, Appellant.
ERRATA SHEET
The opinion of this court issued on January 5, 1994, is
amended as follows:
Amend the cover sheet to show that Judge Jack E. Tanner is
from the Western District of Washington and was sitting on the
District Court of Massachusetts by special designation.
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 93-1542
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR BANK OF NEW ENGLAND,
Plaintiff, Appellee,
v.
ANCHOR PROPERTIES, ET AL.,
Defendants.
RICHARD GLEICHER, INDIVIDUALLY, AND AS HE IS TRUSTEE
OF GROSVENOR PARK REALTY TRUST,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Jack E. Tanner,* Senior U.S. District Judge]
Before
Cyr, Circuit Judge,
Bownes, Senior Circuit Judge,
and Stahl, Circuit Judge.
Peter R. Beatrice, Jr., with whom Beatrice & Beatrice was on
brief for appellant.
Shannon M. Fitzpatrick, with whom Williams & Grainger was on
brief for appellee FDIC.
January 5, 1994
*Of the Western District of Washington, sitting by designation.
BOWNES, Senior Circuit Judge. This appeal asks us
BOWNES, Senior Circuit Judge.
to review the district court's grant of summary judgment
setting aside a conveyance of real property by defendant-
appellant, Richard Gleicher, as fraudulent. Gleicher
disputes that he intended to commit a fraud, and argues that
summary judgment is therefore inappropriate. Plaintiff-
appellee, the Federal Deposit Insurance Corporation (FDIC),
contends that Gleicher's conclusory remarks are insufficient
to overcome the circumstantial evidence of fraud. We affirm.
I.
FACTUAL BACKGROUND
The following facts are undisputed. In June 1987,
Gleicher borrowed $193,000 from the Bank of New England, N.A.
(BNE) in order to buy a three-family home located at 7-9
Beacon Hill Avenue in Lynn, Massachusetts. In return
Gleicher executed a demand note (the "Note") in that amount
in BNE's favor with an expiration date of May 1, 1990. The
Note was secured by a mortgage on the Lynn property.
Gleicher had several other financial dealings with
BNE. In 1988 he personally guaranteed two other loans, one
for $1.5 million to a realty trust and another for $300,000
to a limited partnership (of which Gleicher was a general
partner). The $300,000 loan was in the form of an unsecured
line of credit due to expire on December 30, 1989.
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On January 23, 1990, Deborah Stein, a loan officer
at BNE, requested an updated personal financial statement
from Gleicher. Two months later Stein tried to telephone
Gleicher because he had not furnished the requested
information. On April 11, following a succession of
unreturned messages, Stein finally succeeded in contacting
Gleicher. Stein informed Gleicher that the $300,000 line of
credit was fully drawn and had expired. She told Gleicher
that in order to renew the line, it would have to be secured
with, among other things, additional real estate. Stein
stressed the need for Gleicher to send the bank updated
personal financial statements, including tax returns. In
connection with the Note, Stein told Gleicher that BNE wanted
a recent appraisal of the mortgaged property as well as a
current cash flow statement. Finally, Stein reminded
Gleicher that the Note was a demand note and would shortly
expire, although she reassured him that the bank intended to
work with him to resolve any problems that might arise.
Similar financial information was requested of Gleicher from
a second BNE loan officer with respect to the $1.5 million
realty trust loan.
On April 16, 1990, five days after Gleicher's
conversation with Stein, he transferred a piece of property,
located at 25-27 Grosvenor Park in Lynn, from himself to the
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Grosvenor Park Realty Trust (the "Trust").1 Gleicher was
the trustee of the Trust, and his father was its sole
beneficiary. No money changed hands in this transaction.
Gleicher's most recent financial statement, dated December
31, 1989, indicated that the property was worth $260,000 and
had no outstanding mortgages. Prior to the transfer, the
Grosvenor Park property was Gleicher's sole unencumbered
asset.
On April 25, 1990, Gleicher, acting in his
individual capacity, granted a $175,000 mortgage on the
property to Harbor Financial Resources, Inc., a Massachusetts
corporation. Harbor's annual report, completed in September
1990 by Gleicher, indicated that Gleicher was the
corporation's president, treasurer, clerk and sole director.
On August 1, 1990, Gleicher defaulted on the Note.
On August 31, BNE "called in" the Note, but Gleicher did not
pay. By this time Gleicher had also defaulted on his other
two obligations to BNE. In September 1990 BNE commenced this
action in state court against a number of defendants
including Gleicher, both individually and as trustee for the
Trust, and Harbor.2 Shortly thereafter, the FDIC became the
1. Although the record is not clear on this, it would seem
that this trust was formed specifically for this transaction.
The Grosvenor Park Realty Trust was a separate and distinct
trust from the one that was loaned $1.5 million by BNE.
2. The claims brought against the other defendants were
voluntarily dismissed on December 30, 1992.
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real party in interest, and the case was removed to the
United States District Court for the District of
Massachusetts.3
In February 1991, the FDIC foreclosed on the
property that secured the Note, and auctioned it off as
required by law. After selling the property to the highest
bidder and applying the proceeds to the principal of the
Note, a deficiency of $88,000 remained.
II.
PROCEDURAL HISTORY
On January 14, 1993, the FDIC moved for summary
judgment on the remaining counts of its amended complaint.
Count V alleged that Gleicher was personally liable for the
amount of the deficiency plus accrued interest. Count VI
alleged that Gleicher's conveyance of the property located at
25-27 Grosvenor Park to the Trust, along with the subsequent
mortgage granted to Harbor, should be set aside as
3. As was the fate of many New England banking institutions
in the late 1980's, BNE was unable to survive the decline in
the real estate market, and collapsed under the weight of bad
loans. In January 1991, the FDIC was appointed Receiver of
BNE. The New Bank of New England (NBNE) was then created as
a bridge bank, and became the assignee of the FDIC as
Receiver for BNE. In July 1991, NBNE dissolved and the FDIC
was appointed as its Receiver for the purpose of winding up
its affairs. In December 1992, the FDIC was formally
substituted as the plaintiff in this action. For
simplicity's sake, we will hereinafter refer to the FDIC when
we are talking about BNE, NBNE or the FDIC.
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fraudulent. Gleicher did not submit a statement of disputed
facts or an opposition to the motion.
On March 17, 1993, a hearing was held on the FDIC's
motion for summary judgment. At that time, Gleicher,
appearing on his own behalf, handed the court an affidavit in
opposition to the FDIC's motion. After entertaining argument
from both parties, the court held:
I can't find any material issue of fact
in dispute in this case, summary judgment
is granted to the plaintiff on the
deficiency as of today. . . . [T]here is
no material issue of fact as far as this
Court can tell as to the transfer of that
property of the Grosvenor address. And
the Court finds that it was done to avoid
creditors and, therefore, fraudulent.
And it is set aside.
The court also ordered that the mortgage to Harbor be set
aside. On April 8, final judgment was entered consistent
with the court's ruling. Because it failed to appear at the
hearing, a default judgment was entered against Harbor. This
appeal ensued.4
On May 6, 1993, Gleicher filed his notice of
appeal. On June 18 the FDIC moved for sanctions and
dismissal against Gleicher based on his failure to comply
with four separate deadlines, including the one governing the
filing of his appellate brief. Rather than respond to this
4. Gleicher does not contest the deficiency judgment. In
addition, he conceded at oral argument that the mortgage
given to Harbor was invalid regardless of whether the
transfer of the property to the Trust was fraudulent or not.
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motion, Gleicher moved for an extension of time to file his
brief and to serve his appendix. This motion was filed on
July 7, eight days after his brief was originally due. The
FDIC opposed the motion and renewed its motion to dismiss.
On July 30, 1993, we granted Gleicher's motion for
an extension and awarded costs to the FDIC in connection with
its preparation of a counter-appendix. Our order explicitly
warned Gleicher and his counsel that "no further extensions
[would] be granted" beyond August 6, 1993. Moreover, we
warned them "that any continued inattention to the procedural
requirements on appeal may result in harsher sanctions."
In an unopposed motion dated October 8, the FDIC
once again moved for sanctions and dismissal. Gleicher had
allegedly failed to comply with either prong of our July 30
order: his brief was not filed until August 9, and he had
not reimbursed the FDIC for the costs of preparing the
counter-appendix despite repeated requests. On November 2,
one day before oral argument, Gleicher paid the FDIC's costs.
Further, Gleicher did not attend a scheduled CAMP5
settlement hearing in this case despite repeated efforts to
secure his participation by both the FDIC and the CAMP
staff.6
5. Civil Appeals Management Program.
6. At oral argument Gleicher's counsel was unable to offer a
satisfactory explanation for any of these failings.
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Under Fed. R. App. P. 3(a) the failure of a party
"to take any step other than the filing of a timely appeal .
. . is ground . . . for such action as the court of appeals
deems appropriate, which may include dismissal." Of course,
dismissal is a drastic step, and financial sanctions are the
more common course of action. See, e.g., Christopher W. v.
Portsmouth Sch. Comm., 877 F.2d 1089, 1099 (1st Cir. 1989)
(appellees held responsible for costs as sanction for
untimely filing of brief). Dismissal under Rule 3(a) has
recently been discussed by the Third Circuit:
Dismissal of an appeal for failure to
comply with procedural rules is not
favored, although Rule 3(a) does
authorize it in the exercise of a sound
discretion. That discretion should be
sparingly used unless the party who
suffers it has had an opportunity to cure
the default and failed to do so.
Moreover, before dismissing an appeal, we
believe that a court should consider and
weigh such factors as whether the
defaulting party's action is willful or
merely inadvertent, whether a lesser
sanction can bring about compliance and
the degree of prejudice the opposing
party has suffered because of the
default.
Horner Equip. Int'l, Inc. v. Seascape Pool Ctr., Inc., 884
F.2d 89, 93 (3d Cir. 1989).
In our estimation, Gleicher's conduct at least
approaches the level of behavior which would warrant
dismissal. First, our July 30 order clearly placed Gleicher
and his counsel on notice of the necessity of adhering to the
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rules of this court. Second, in light of this notice we find
it difficult to believe that Gleicher's intransigence has
been inadvertent. Nevertheless, because the FDIC has not
suffered any prejudice as a result of Gleicher's failure to
follow required procedures, apart from being inconvenienced,
we have allowed the appeal to go forward.
III.
THE MERITS
The sole issue raised by Gleicher is whether his
affidavit raises a triable issue as to his intent.
Our review of summary judgment decisions is
plenary. Levy v. FDIC, 7 F.3d 1054, 1056 (1st Cir. 1993).
Summary judgment is appropriate when, based upon the
pleadings, affidavits, and depositions, "there is no genuine
issue as to any material fact," and where "the moving party
is entitled to judgment as a matter of law." Fed. R. Civ. P.
56(c); see Gaskell v. Harvard Co-Op Soc'y, 3 F.3d 495, 497
(1st Cir. 1993). A material fact is one which has the
"potential to affect the outcome of the suit under applicable
law." Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703
(1st Cir. 1993). In applying this standard, we view the
record in the light most favorable to the nonmoving party.
Levy, 7 F.3d at 1056.
Under this framework, the nonmoving party, in this
case Gleicher, bears the burden of placing at least one
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material fact into dispute after the movant offers evidence
of the absence of a genuine issue. Darr v. Muratore, No. 93-
1154, slip op. at 9 (1st Cir. Nov. 1, 1993). We have
recognized that, "[e]ven in cases where elusive concepts such
as motive or intent are at issue, summary judgment may be
appropriate if the nonmoving party rests merely upon
conclusory allegations, improbable inferences, and
unsupported speculation." Medina-Munoz v. R.J. Reynolds
Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990). This being the
rule, "[b]rash conjecture, coupled with earnest hope that
something concrete will materialize, is insufficient to block
summary judgment." Dow v. United Bhd. of Carpenters, 1 F.3d
56, 58 (1st Cir. 1993).
As a preliminary matter, the FDIC contends that
because Gleicher's affidavit was not filed until sixty-three
days after its motion for summary judgment was served, we
should not consider the affidavit in ruling on the summary
judgment motion. See D. Mass. R. 7.1(B)(2).7 Further, the
FDIC points out that Gleicher failed to submit a statement of
disputed facts, and therefore, its factual assertions must be
7. Rule 7.1(B)(2) provides in pertinent part:
A party opposing a motion, shall file an
opposition to the motion within fourteen
(14) days after service of the motion
. . . . Affidavits and other documents
setting forth or evidencing facts on
which the opposition is based shall be
filed with the opposition.
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deemed admitted. See D. Mass. R. 56.1;8 see also United
States v. Parcel of Land, 958 F.2d 1, 5 (1st Cir. 1992)
(omission of statement of disputed facts has "the legal
effect of ``admitt[ing] the government's factual assertions.'"
(quoting United States v. One Lot of U.S. Currency, 927 F.2d
30, 32 (1st Cir. 1991)) (internal quotation marks omitted)).
Gleicher avers that his opposition to the FDIC's
motion was evidenced in various correspondence with the
district court,9 and, that his pro se status entitled him to
some leeway with regard to the district court's rules. We
have consistently held that a litigant's "pro se status [does
not] absolve him from compliance with the Federal Rules of
Civil Procedure." United States v. Heller, 957 F.2d 26, 31
(1st Cir. 1992) (quoting Feinstein v. Moses, 951 F.2d 16, 21
(1st Cir. 1991)). This applies with equal force to a
8. Rule 56.1 states:
Opposition to motions for summary
judgment shall include a concise
statement of the material facts of record
as to which it is contended that there
exists a genuine issue to be tried . . .
. Material facts of record set forth in
the statement required to be served by
the moving party will be deemed for the
purposes of the motion to be admitted by
opposing parties unless controverted by
the statement required to be served by
opposing parties.
9. At the hearing before the district court, Gleicher
directed the court's attention to his letter of January 18
addressed to the court and copied to opposing counsel, in
which he "respectfully request[ed]" a hearing on the summary
judgment motion.
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district court's procedural rules. Moreover, Gleicher's
characterization of himself as a pro se litigant is at best
dubious. A pro se litigant is "one who does not retain a
lawyer and appears for himself in court." Black's Law
Dictionary 1221 (6th ed. 1990). Although Gleicher did appear
on his own behalf at the summary judgment hearing, the record
indicates that, at the time of the hearing, Gleicher had no
fewer than two attorneys of record.10 Both of these
attorneys were served with the FDIC's summary judgment motion
and were still counsel of record for Gleicher at the time his
responsive papers were due.
Under the circumstances, we are receptive to the
FDIC's argument that Gleicher's affidavit should be ignored.
Nevertheless, we will bend over backwards to be fair and
consider that document as part of the summary judgment
record.
Both state and federal fraudulent conveyance laws
are implicated in this action. Under federal law, the FDIC
acting in its capacity as a receiver for an insured
institution, may avoid a transfer of any interest of any
10. At the summary judgment hearing the FDIC indicated that
the law firm of Gordon & Wise had moved to withdraw as
counsel for Gleicher, although it had not received a copy of
the motion. Gleicher's other record counsel, Peter R.
Beatrice, never moved to withdraw, and has resurfaced as
Gleicher's counsel on this appeal. It was Beatrice who
originally filed answers for Gleicher, in both his individual
capacity and as trustee of the Trust, and for Harbor.
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person who is a debtor of the institution if the transfer was
made "with the intent to hinder, delay, or defraud" the
institution or the FDIC. 12 U.S.C. 1821(d)(17)(A).
Similarly, under Massachusetts law, a transfer made with
"actual intent . . . to hinder, delay or defraud either
present or future creditors, is fraudulent," and may be
avoided. Mass. Gen. L. ch. 109A 7, 9 (1990).11
According to the FDIC, it has presented conclusive
circumstantial evidence that Gleicher fraudulently
transferred the property at issue. We have acknowledged that
"[i]t is often impracticable, on direct evidence, to
demonstrate an actual intent to hinder, delay or defraud
creditors." Max Sugarman Funeral Home, Inc. v. A.D.B.
Investors, 926 F.2d 1248, 1254 (1st Cir. 1991) (involving
voidable fraudulent transfers under 548(a)(1) of Bankruptcy
Code). Thus, courts frequently infer fraudulent intent from
the circumstances surrounding a transfer, placing particular
emphasis on certain indicia or badges of fraud. Id.Among the more common badges of fraudulent intent
at the time of a transfer are:
11. It is unclear whether 12 U.S.C. 1821(d)(17) "embodies
a separate federal fraudulent conveyance law, or whether it
merely codifies [Massachusetts] law." Resolution Trust Corp.
v. Cruce, 972 F.2d 1195, 1201 (10th Cir. 1992) (quotation
omitted). In the present action, the parties have proceeded,
as did the district court, on the shared assumption that
there is no substantive difference between the two statutes.
Because we can see no material difference between the two,
our conclusions apply with equal strength under either law.
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(1) actual or threatened litigation
against the debtor; (2) a purported
transfer of all or substantially all of
the debtor's property; (3) insolvency or
other unmanageable indebtedness on the
part of the debtor; (4) a special
relationship between the debtor and the
transferee; and (5) retention by the
debtor of the property involved in the
putative transfer.
Id. (citations omitted). We have held that "the confluence
of several [badges of fraud] can constitute conclusive
evidence of an actual intent to defraud." Id. at 1254-55.
Briefly summarized, the FDIC's circumstantial
evidence of fraudulent intent consists of the following:
Gleicher transferred his sole unencumbered asset to a trust,
of which he was trustee and his father the beneficiary. The
transfer was made for no documented consideration and came
just five days after a major creditor asked for updated
financial information. Gleicher's personal financial
situation was rapidly deteriorating. Only nine days after
the transfer, Gleicher granted a $175,000 mortgage in the
property, enuring to his personal benefit, to a corporation
that he controlled. Within four months, Gleicher had
defaulted on all of his obligations to the bank.
In response, Gleicher musters the following:
12. The transfer of 25-27 Grosvenor
Park. Lynn was not a transfer to avoid
creditors.
13. The beneficiary of the 25-27
Grosvenor Park Trust is my father.
Transfer was made to a trust for his
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benefit to compensate him for services
rendered to me and my companies over the
course of time.
14. At the time that I made this
transfer, I had no reason to believe that
any creditor would be looking to this
asset to satisfy any other obligation.
My assets exceeded my liabilities. I
informed BNE that I had $200,000.00 in
cash.
15. Until at least July 1990, I had
enough liquid assets to pay my
$193,000.00 obligation to BNE in full. I
was solvent at the time of the transfer
of the property on Grosvenor Park.
16. I was able to pay my obligations as
they came due.
17. Since January 9, 1990, I have not
owned or controlled Harbor Financial
Resources, Inc.
Gleicher Affidavit at 2. We find the affidavit deficient for
several reasons.
First, Gleicher contends that the transfer was made
to his father as compensation for past services rendered.
But, Gleicher has not specified what these services were,
when they were rendered, what their value was, or for what
company they were performed. Gleicher's father has not
submitted an affidavit in connection with this action. In
fact, there is no indication that he was ever made aware of
his gain. Moreover, while Gleicher tells us that he repaid
his devoted and hardworking father with a valuable asset,
Gleicher immediately mortgaged that asset for his personal
benefit, thus depriving his father of any benefit from it.
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Next, Gleicher maintains that he was solvent at the
time of the transfer and had the means to satisfy the entire
$193,000 note. Gleicher has not, however, attached any
documents indicating his financial condition at the time of
the transfer. Moreover, given the uncontroverted facts
concerning Gleicher's diminishing net worth, and the timing
of the transfer in relation to the inquiries by BNE
employees, Gleicher's solvency at the time of the transfer
would not dispel the powerful inferences of fraud.
Finally, Gleicher contends that, at the time of the
transfer, he had no relationship with Harbor. Once again,
Gleicher has not attached any documentary evidence to support
this claim; a claim squarely contradicted by Harbor's annual
report subscribed to by Gleicher himself in September 1990.
In Carteret Sav. & Loan Ass'n v. Jackson, 812 F.2d
36 (1st Cir. 1987), we reviewed a district court's grant of
summary judgment on plaintiff's claim of fraudulent
conveyance under Massachusetts law, where a husband and wife
transferred their house to their daughter for one dollar
within months of two large judgments being entered against
them. Id. at 40. There was also evidence indicating that,
at the time of the transfer, the defendants could not satisfy
all of their obligations. Id. The Carteret defendants
"argued that plaintiff's evidence was insufficient, but they
presented no evidence of their solvency, nor made other
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showing that would establish the existence of a genuine issue
for trial." 812 F.2d at 40. We affirmed summary judgment
and held that, "[w]here this was a family transfer without
consideration, we can see but one conclusion." Id.Our case is strikingly similar. Given the presence
of multiple badges of fraud, and Gleicher's inability to
produce even a single properly documented fact casting any
doubt on the FDIC's position, we too can see only one
conclusion, namely, that the transfer was fraudulent.
Because we find this appeal to be frivolous we
assess double costs against appellant. See Fed. R. App. P.
38.
Affirmed, with double costs to appellee.
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