Giuffre v. Deutsche Bank National Trust Co.

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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