Frappier v. Countrywide Home Loans, Inc.

United States Court of Appeals
For the First Circuit

No. 10-2193

MARK FRAPPIER,

Plaintiff, Appellant,

v.

COUNTRYWIDE HOME LOANS, INC.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Michael A. Ponsor, U.S. District Judge]

Before

Boudin, Lipez and Howard,

Circuit Judges.

Valeriano Diviacchi with whom Diviacchi Law Office was on
brief for appellant.
Brook L. Ames with whom James W. McGarry, Mark T. Knights and
Goodwin Procter LLP were on brief for appellee.

July 7, 2011
 BOUDIN, Circuit Judge. In this diversity case, plaintiff

Mark Frappier sued defendant Countrywide Home Loans, Inc.

("Countrywide"), alleging that Countrywide engaged in prohibited

predatory lending practices with respect to his home mortgage loan

for a property at 26 Matthews Road in Southwick, Massachusetts (the

"home"). The district court granted Countrywide's motion for

summary judgment, and Frappier appeals.

Frappier and his second wife purchased the home in 1999

with an $88,272 mortgage loan. Over the next six years, he

refinanced the loan four times, each time pulling more equity out

of the property. The further refinancing at issue in this case was

precipitated by Frappier's March 2006 divorce from his third wife,

pursuant to which Frappier was required either to sell the home by

a set deadline or to refinance the then existing $193,000 mortgage

loan to remove his ex-wife's name from the loan.

At first, Frappier tried to sell the home, applying (with

his new girlfriend) for a mortgage loan from Countrywide on another

Southwick property (the "South Longyard Road property"), contingent

upon the sale of the home. Countrywide loan originator Richard

Mamuszka, who was paid by Countrywide strictly on commission, was

the employee who worked with Frappier and his girlfriend on their

loan application in this transaction and with Frappier in his

subsequent transactions. Sometimes the couple met with Mamuszka

but usually the dealings were by telephone.

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 In this and in the later applications, Frappier provided

information and Mamuszka filled in the application form, this first

one being completed in August 2006. Frappier says that the couple

were seeking a full-document loan, requiring verification of income

and assets, and that he submitted such documents. Countrywide

asserts that the application was for a stated income, stated asset

("SISA") mortgage loan, which involves little verification but is

based largely on the borrowers' credit score and asserted income.

Frappier's completed South Longyard Road property

application stated, inaccurately, that his employment position was

operations manager at a parish church, that his monthly base

employment income was $5,563, that he received $2,656.25 in monthly

social security income, and that his total monthly income was

therefore $8,219.25. In fact, Frappier was earning about $1,200

per month as a part-time janitor at the church, and received $2,100

per month in disability retirement income, for a total income of

$3,300 per month.

Frappier states in an affidavit, not inconsistent with

his less precise deposition testimony, that he submitted the

correct income documentation to Mamuszka, including tax returns

showing an employment income of about $1,200 per month in 2005 and

2006, and that he never told Mamuszka to list his occupation as

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operations manager or to inflate his income.1 Mamuszka testified

in his deposition that he never inflated a borrower's occupation

title or income so that the borrower could qualify for a loan. The

South Longyard Road property loan was approved but never

effectuated because Frappier was unable to sell his home in the

time required by his divorce agreement.

Because Frappier was unable to sell the home, he was

obligated to refinance his existing mortgage, and in September 2006

he asked Mamuszka about obtaining a refinancing. On September 19,

Mamuszka took by telephone Frappier's application for what the

parties agree was a SISA mortgage loan. Frappier's income and job

were the same as before. The application listed Frappier's

occupation as operations manager and his base employment income as

$5,563 per month; unlike the prior application, it did not list any

social security income. Again, the parties now dispute who was to

blame for the false statements.

The closing date--the date on which Frappier signed the

mortgage application and the mortgage loan closed--was October 27,

2006. Although Frappier's testimony is not clear on this point,

his subsequent sworn affidavit asserts that he never received a

copy of his loan application or any other documents before October

1
Elsewhere, Frappier states that Mamuszka did tell him that
Mamuszka would need to change his occupation title to make it sound
better and "would take care of it," but Frappier says that he did
not understand that to mean that Mamuszka would enter a fraudulent
occupation title or income.

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27. Frappier also testified that at the closing he blindly signed

but did not read the loan application or other papers that

Countrywide's attorney told him to sign because earlier "Mr.

Mamuszka said he'd take care of it. He said to sign this; I'll

take care of it, and you'll be all set." The documents state, of

course, that the signer has read them and that the information set

forth is correct.2

Countrywide then provided Frappier with a loan in the

amount of $189,500, secured by a mortgage on the home, with a fixed

interest rate of 6.875 percent for the first seven years and an

adjustable rate of up to 11.875 percent for the remainder of the

loan. The loan made Frappier's payments total between $1,500 and

$1,600 per month--similar to the monthly payments on the home that

Frappier and his third wife were making before their divorce.

On November 17, 2006--three weeks after the first home

mortgage loan closed--Mamuszka took by telephone a second home

mortgage application for Frappier, this time in the amount of

$38,500 as an equity loan for the home, Frappier aiming to pay off

credit card debt and various obligations incident to the divorce.

2
Mamuszka testified that he had a standard practice of sending
the mortgage application documents to the customer after he filled
out the forms and well before closing; that he had a standing
practice of telling the customer to review all documents to make
sure that everything was correct before signing them; and that he
did not think that he appeared at any customer's closing, including
Frappier's.

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The second mortgage was a fixed-rate mortgage at 10.375 percent,

which would require additional monthly payments of about $330.

This application once again listed Frappier's occupation

as operations manager but now listed his total monthly income as

$8,883.31--the sum of (1) the false $5,563 base employment income

figure used in both of Frappier's earlier mortgage applications and

(2) $3,320.31 in monthly social security disability income.

Frappier again says he never provided the false information and did

not read the papers before signing them; Countrywide asserts that

Mamuszka obtained everything from Frappier himself. The second

home mortgage loan closed on December 13, 2006.

In or around February 2008, Frappier began to have

trouble making payments on both mortgage loans, and he defaulted on

the loans later in the year. Countrywide foreclosed on the home

and in February 2009, sent Frappier a form listing the balance of

principal outstanding for his mortgage as $187,013.78 and the fair

market value of the property as $359,604.28.

In May 2009, Frappier filed suit against Countrywide in

Massachusetts state court, alleging a violation of Mass. Gen. Laws

ch. 93A ("Chapter 93A"), unjust enrichment, a violation of the

implied covenant of good faith and fair dealing, negligence, and

entitlement to equitable relief, namely, rescission of the loan

note and an injunction ordering the removal of the loan from his

credit history. The complaint's theory was that Countrywide

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fraudulently inflated his occupation title and income so that it

could qualify him for a mortgage loan for which he would not have

otherwise qualified and which Countrywide knew he could not repay.

If not for the mortgage loan, Frappier alleged, he could have sold

the property, paid off his prior mortgage, had more than $50,000

left over from the equity, not suffered a loan default, and not

lost the value of the payments he made to Countrywide through 2008.

Countrywide removed the case to federal court and moved

for summary judgment, which Frappier opposed, cross moving himself.

Thereafter, the district court granted Countrywide's motion,

finding that Frappier had produced no evidence that Countrywide

knew, believed, or intended that Frappier would default. The court

noted that the mortgage required monthly payments similar to the

prior mortgage on the house and that Frappier himself attributed

the default to several unforeseeable factors, such as a change in

job and increased heating costs. Frappier then appealed.

We review the district court's decision de novo, Tayag v.

Lahey Clinic Hosp., 632 F.3d 788, 791 (1st Cir. 2011), for any

error of law and to determine whether any genuine issue of material

fact barred summary judgment, Hunt v. Golden Rule Ins. Co., 638

F.3d 83, 86 (1st Cir. 2011). Ordinarily, sworn testimony by the

opposing party may preclude summary judgment, Velazquez-Garcia v.

Horizon Lines of P.R., Inc., 473 F.3d 11, 18 (1st Cir. 2007),

although evidence from the moving party may resolve factual issues

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where no contrary evidence was tendered, Statchen v. Palmer, 623

F.3d 15, 18 (1st Cir. 2010).

Countrywide argues that Frappier himself conceded that he

had supplied Mamuszka with the critical false statement that his

base monthly income was $5,563. It points to its own assertion to

this effect at the end of paragraph 13 of its statement of

undisputed material facts that Frappier's own counter-statement

failed to deny. But this was patently an oversight: Frappier's own

statement elsewhere asserted that at no time did he "instruct or

request" Mamuszka "to inflate his income" above its true $3,300

monthly figure, and he had denied in his deposition and affidavit

that he gave Mamuszka any false information about his income or

title.

Countrywide cites to us two precedents on failure to deny

a statement of undisputed facts. Both, however, are readily

distinguishable;3 and based on a practical rather than a technical

approach to the problem, City of Waltham v. U.S. Postal Serv., 11

F.3d 235, 243 (1st Cir. 1993) (Breyer, C.J.); see also Swallow v.

Fetzer Vineyard, 46 F. App'x 636, 638-39 (1st Cir. 2002), Frappier

did contradict Mamuszka's version. Indeed, the district court's

3
In Stonkus v. City of Brockton School Dep't, 322 F.3d 97,
100, 102 (1st Cir. 2003), the plaintiff filed no opposition to the
defendant's motion for summary judgment or statement of undisputed
material facts; in Zimmerman v. Puccio, 613 F.3d 60, 63 (1st Cir.
2010), the district court deemed the plaintiffs' statement of facts
admitted in the absence of proper opposition by the defendants.

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own local rule says statements of undisputed facts will be deemed

admitted "unless controverted by the statement required to be

served by opposing parties." D. Mass. Local R. 56.1 (emphasis

added).

Thus, whether Frappier deceived Mamuszka or Mamuszka

deliberately falsified the loan application is a question of fact

suitable for trial. If the latter, Mamuszka would have defrauded

his own employer, not Frappier. The problem for Countrywide is

that Massachusetts' Supreme Judicial Court ("SJC") has read chapter

93A to hold that making a loan that the lender knows cannot be paid

back may be an "unfair or deceptive act[] or practice[]," Mass.

Gen. Laws ch. 93A, § 2(a), giving the borrower a cause of action.

Commonwealth v. Fremont Inv. & Loan, 897 N.E.2d 548 (Mass. 2008).

The holding of Fremont was that Chapter 93A prohibits

"the origination of a home mortgage loan that the lender should

recognize at the outset the borrower is not likely to be able to

repay." 897 N.E.2d at 560. The district court acknowledged

Fremont but found that Frappier had not produced evidence that

Countrywide knew, should have known, or intended to set him up for

default through the October 2006 home mortgage loan. The reasons

given, however, do not seem to us to justify summary judgment.

First, the district court reasoned that Countrywide

should not have anticipated Frappier's default because the terms of

the October 2006 mortgage were comparable to the terms of

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Frappier's previous mortgage in that they required similar $1,500

to $1,600 monthly payments, at least while the introductory rate

was still in effect (as it was when Frappier defaulted). But

Frappier argues that although the introductory rate monthly

payments were similar, his circumstances were visibly different.

The 2005 mortgage issued by the previous lender had two

borrowers--Frappier and his third wife--and Frappier says that both

were income earners contributing to the monthly payments; in

contrast, Frappier was the only borrower for the October 2006

Countrywide loan. Countrywide argues that Frappier produced no

evidence that his third wife contributed to the monthly payments,

but it is undisputed that she was a co-borrower listed on the

mortgage, and anyway, in most two-income households, income of each

spouse lessens the joint burden.

Second, the district court reasoned that Countrywide

should not have anticipated Frappier's default because, in his

deposition testimony, Frappier attributed the default to several

factors, including the fact that he changed jobs, the high cost of

heating oil, and other incidental expenses. But this hardly means

that Countrywide should not have recognized at the outset that

Frappier was likely to default.

Frappier's argument is that the mortgage was doomed to

foreclosure from the start because it required him to pay about

three-quarters of his income to cover debts, including about half

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of his income to Countrywide alone; and although he was able to

manage payments for about eighteenth months, even then the balance

of principal outstanding was still over $187,000, and it was

unreasonable from the outset to anticipate that he could repay the

loan.

Countrywide makes additional arguments not relied upon by

the district court as to why it should not have anticipated

Frappier's default. One is that Frappier told Mamuszka that his

monthly income was $5,563, and, indeed, the loan applications

stated that his monthly base income was $5,563. But whether

Frappier so represented to Mamuszka is a disputed question of

material fact; and Frappier also claims to have signed the

applications without knowing that they contained false information

inserted by Mamuszka--again something that Countrywide might

dispute at trial.

In many circumstances a signatory may be bound by the

contents of a document he signed even if he has not read it; but

Massachusetts, along with other courts, is often more forgiving at

least where deliberate fraud by the other side confronts mere

negligence by the signer. E.g., King v. Motor Mart Garage Co., 146

N.E.2d 365, 367 (Mass. 1957).

Indeed, it appears Massachusetts may go even further.

Thus, in Commonwealth v. H&R Block, Inc., 25 Mass. L. Rep. 92, 2008

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Mass. Super. LEXIS 427, at *29 (Mass. Super. Nov. 25, 2008) (Gants,

J.), the court held that under Chapter 93A, a SISA loan

may be an unfair or deceptive act if the
lender used this vehicle to issue loans based
on loan applications that it knew or should
have known were false, and thereby in some
fashion encouraged or tolerated the borrower's
false representations.

See also Silva v. OneWest Bank, FSB, 27 Mass. L. Rep. 61, 2010

Mass. Super. LEXIS 106, at *9 (Mass. Super. May 19, 2010); Fazio v.

Bank of America, NA, 27 Mass. L. Rep. 81, 2010 Mass. Super. LEXIS

108, at *9 (Mass. Super. May 13, 2010).

Countrywide next argues that even if Frappier's monthly

income was only $3,300, he still would have qualified for the loan

and should have been able to repay it because payment would still

be slightly less than half his income. But Countrywide's own

practices certainly do not control whether the loan was foreseeably

likely to go into default--Countrywide was protected either way by

the value of the house--and Frappier has some evidence based on

Countrywide's own documents that the true $3,300 income figure

would have failed Countrywide's minimum debt-to-income ratio.4

Countrywide argues that the documents are inadmissible on

summary judgment because they have not been authenticated. We need

4
Frappier's monthly mortgage debt obligations on the October
2006 mortgage were close to half of his real income ($1,500 to
$1,600 on his $3,300 income); and, if one included his other non-
mortgage debts of which Frappier says Countrywide was aware, his
total debt-to-income ratio would be 73.57 percent.

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not decide this issue because Frappier, who admittedly has the

burden of establishing the elements required by Fremont, has at

least raised triable issues as to both what Countrywide knew and

whether it would have made the loan knowing Frappier's true income.

After all, if Mamuszka did raise Frappier's income level without

the latter's knowledge, it was arguably because he thought it

necessary to secure and justify the loan.

Besides his principal Chapter 93A claim, Frappier brought

a claim for unjust enrichment to recover all paid interest on the

October 2006 mortgage loan. To recover for unjust enrichment under

Massachusetts law, Frappier must show that (1) Countrywide

knowingly received a benefit (2) at his expense (3) under

circumstances that would make retention of that benefit unjust.

See Mass. Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 552

F.3d 47, 57 (1st Cir. 2009). Frappier's theory of injustice is

more or less the same as his chapter 93A theory.

The district court dismissed the claim for the same

reason as the chapter 93A claim: solely on the ground that there

was no evidence in the record to conclude that Countrywide had any

reason to believe that Frappier was at a heightened risk of

default, so Frappier's payment of interest to Countrywide could not

have been unjust. If there are other reasons to support the

dismissal, Countrywide has not identified them, so this claim too

must be remanded.

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 Frappier's third claim was based on yet another theory--

the covenant of good faith and fair dealing, FAMM Steel, Inc. v.

Sovereign Bank, 571 F.3d 93, 100 (1st Cir. 2009)--and in part on a

second transaction. Countrywide, Frappier contends, did not care

whether he was able to repay the October 2006 loan and, in granting

him the December 2006 loan, Countrywide reduced the equity that he

had in the home, increased the sum of his monthly mortgage

payments, and thus increased his risk of default on the October

2006 loan.

It may be debatable whether the state court glosses on

the covenant concept make it a third vehicle for Frappier's "likely

to default" theory that underpins the first two claims. See

generally FAMM Steel, 571 F.3d at 100; Shawmut Bank, N.A. v.

Wayman, 606 N.E.2d 925, 928 (Mass. App. Ct. 1993). In any event,

the district court dismissed the claim on the same ground as the

other two and we must remand it too so far as the claim is directed

to the October 2006 loan.

Countrywide argues in the alternative that the attack on

the December loan is an independent claim for a different

transaction essentially forfeited because Frappier did not mention

the December second home mortgage or any facts pertaining to it in

his complaint. This is correct and a new transaction cannot be

asserted for the first time at summary judgment. However, the

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district court might on remand allow an amendment to the complaint.

Kunelius v. Town of Stow, 588 F.3d 1, 19 (1st Cir. 2009).

Frappier's fourth claim was based on negligence. Under

Massachusetts law, Frappier would have to show (1) a legal duty of

care owed by Countrywide to him, (2) a breach of that duty, (3)

proximate or legal cause, and (4) actual damage or injury. Primus

v. Galgano, 329 F.3d 236, 241 (1st Cir. 2003). In wielding this

theory, Frappier is not clear as to what action he is attacking;

but the most coherent version is that Countrywide should be liable

if it were merely careless in extending a loan he was unlikely to

repay. However, "under Massachusetts law, the relationship between

a lender and a borrower, without more, does not establish a

fiduciary relationship."5

Frappier argues that he worked with Mamuszka for months,

had his personal telephone number, and trusted him because Mamuszka

repeatedly offered to "take care" of his mortgage. Massachusetts

case law does allow some room for unusual facts in which one side

invites, and the other side reposes, a special trust and reliance.

FAMM Steel, 571 F.3d at 102 (citing Broomfield v. Kosow, 212 N.E.2d

556, 560 (Mass. 1965)). But Frappier cites no case involving facts

5
FAMM Steel, 571 F.3d at 102 (citing Superior Glass Co. v.
First Bristol Cnty. Nat'l Bank, 406 N.E.2d 672, 674 (Mass. 1980)).
See also Clark v. Rowe, 701 N.E.2d 624, 629 (Mass. 1998); Urman v.
South Bos. Sav. Bank, 674 N.E.2d 1078, 1081 (Mass. 1997); Nat'l
Shawmut Bank of Bos. v. Hallett, 78 N.E.2d 624, 628 (Mass. 1948);
cf. FDIC v. Fordham (In re Fordham), 130 B.R. 632, 648 (Bankr. D.
Mass. 1991).

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as mundane as his own, and the examples we have found are far more

extreme. E.g., Patsos v. First Albany Corp., 741 N.E.2d 841 (Mass.

2001); Warsofsky v. Sherman, 93 N.E.2d 612, 614-16 (Mass. 1950).

Frappier's more developed argument is that Fremont should

be read or extended to support a common law negligence claim

against a bank that carelessly overextends credit. But the

Superior Court author of the Fremont doctrine, now on the SJC

himself, went out of his way to say that "an act may violate

Chapter 93A without constituting a cause of action under any common

law tort," Commonwealth v. Fremont Inv. & Loan, 23 Mass. L. Rep.

567, 2008 Mass. Super. LEXIS 46, at *24 (Mass. Super. Feb. 25,

2008) (Gants, J.). Chapter 93A usually requires a level of fault

going beyond mere negligence,6 and if common law negligence is to

be expanded in Massachusetts, it should be done by the state

courts.

Finally, Frappier sued for rescission/equitable relief

and asked for an injunction ordering the removal of the October

2006 home mortgage loan from his credit history. The district

court found that the count did not articulate a cause of action and

that there were no facts in the case that would justify the

6
See Baena v. KPMG LLP, 453 F.3d 1, 3 (1st Cir. 2006); Damon
v. Sun Co., Inc., 87 F.3d 1467, 1484 n.10 (1st Cir. 1996); see also
Darviris v. Petros, 812 N.E.2d 1188, 1192-93 (Mass. 2004); Meyer v.
Wagner, 709 N.E.2d 784, 793 (Mass. 1999); Walsh v. Chestnut Hill
Bank & Trust Co., 607 N.E.2d 737, 740 (Mass. 1993).

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requested injunctive relief. On appeal, Frappier has not offered

a contrary argument.

Accordingly, we affirm the district court's decision

insofar as it dismissed (1) the covenant claim relating to the

December loan, (2) the negligence claim in its entirety, and (3)

the rescission/equitable relief claim, but we vacate the dismissal

of the other claims and also the covenant claim so far as it may

relate only to the October 2006 loan, and we remand the case for

proceedings consistent with this opinion. Costs are awarded to the

appellant.

It is so ordered.

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