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Frangos v. Bank of New York Mellon

United States District Court, D. New Hampshire

January 15, 2019

Thomas Frangos
v.
Bank of New York Mellon f/k/a The Bank of New York, as Trustee for the Certificateholders of CWABS, Inc., Asset Backed Certificates, Series 2005-AB2; New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing; Bank of America, N.A.

          Kristina Finley, Esq. Terrie L. Harman, Esq. Timothy Laurent Chevalier, Esq. Jonathan M. Flagg, Esq. Michael P. Trainor, Esq. John Harold McCann, Esq. Olga L. Gordon, Esq. Geraldine L. Koronis, Esq.

          ORDER ON APPEAL

          JOSEPH N. LAPLANTE, UNITED STATES DISTRICT JUDGE

         This appeal turns on whether the Bankruptcy Court abused its discretion by denying the appellant's motion to amend his adversary complaint before granting the appellees' motions to dismiss that complaint. Appellant Thomas Frangos brought an adversary complaint in the United States Bankruptcy Court, claiming that the mortgage that he executed in 2005 was invalid because he did not hold title to the mortgaged property at that time and, further, that this invalidity of the underlying mortgage rendered invalid his reaffirmation agreement, approved by the Bankruptcy Court during a separate Chapter 7 proceeding. In this appeal, Frangos argues that the Bankruptcy Court erred by denying his motion to amend that adversarial complaint to include the Frances Ann Frangos 2002 Revocable Trust u/t/d March 12, 2002 as a plaintiff because the Trust held title to the property at the time of the mortgage.

         This court has jurisdiction to hear appeals from “final judgments, orders, and decrees” of the Bankruptcy Court under 28 U.S.C. § 158(a)(1). See also L.R. 77.4. Finding no error in the Bankruptcy Court's decision to deny Frangos leave to amend his complaint, the court affirms it.

         I. Standard of review

         When hearing an appeal from the Bankruptcy Court, this court applies the same standards of review governing appeals of civil cases to the appellate courts. See Groman v. Watman (In re Watman), 301 F.3d 3, 7 (1st Cir. 2002). As such, this court reviews the Bankruptcy Court's “findings of fact for clear error and conclusions of law de novo.” Old Republic Nat'l Title Ins. Co. v. Levasseur (In re Levasseur), 737 F.3d 814, 817 (1st Cir. 2013). It reviews a “denial of leave to amend [a complaint] for abuse of discretion, ” and “defer[s] to the [Bankruptcy Court's] hands-on judgment so long as the record evinces an adequate reason for the denial.” Nikitine v. Wilmington Tr. Co., 715 F.3d 388, 389 (1st Cir. 2013)

         II. Background

         Plaintiff Thomas Frangos and his wife, Ann Frangos, [1]executed a mortgage on property located at 33 Gosport Road in Portsmouth, New Hampshire on April 26, 2005. The mortgage secured a note, executed by Frangos alone, promising to repay a loan for $599, 000. The mortgage names “Thomas A. Frangos, a married person, ” as the borrower and references both Thomas and Ann Frangos as individuals.

         At the time the mortgage was executed, however, title to the property was held in the name of the Trust, with Ann Frangos as trustee. The mortgage does not mention the Trust. Shortly after the Frangoses executed the mortgage, the Trust conveyed the property to Frangos, though Frangos -- who effectuated the transfer -- now contends that he lacked authority to do so.

         Frangos filed a Chapter 7 bankruptcy petition on November 20, 2007, and received his discharge on January 9, 2009. During those proceedings, Frangos signed a bankruptcy reaffirmation agreement, reaffirming the mortgage in the amount of $710, 499.58. Frangos once again defaulted on the loan in 2009. Appellee Bank of New York Mellon (BNYM), which held both the note and the mortgage, began foreclosure proceedings in 2013.[2] This led to a series of lawsuits brought by the Frangoses to prevent that foreclosure.

         The Frangoses first brought claims for breach of contract, breach of the covenant of good faith and fair dealing, and injunctive relief against appellees BNYM and Bank of America, the loan's former servicer. See generally Frangos v. Bank of America, N.A., 2015 WL 6829104, at *1 (D.N.H. Nov. 6, 2015) (“Frangos I”) (Barbadoro, J.). The court dismissed the Frangoses' breach of the covenant claim and granted summary judgment to the defendants on their claims for breach of contract and injunctive relief. Id. Foreclosure proceedings recommenced.

         Undeterred, Frangos filed a second lawsuit. This time, in addition to injunctive relief, Frangos challenged the validity of the mortgage, brought claims against BNYM and appellee New Penn Financial, LLC, doing business as Shellpoint Mortgage Servicing, for violations of state and federal laws against unfair debt collection, see 15 U.S.C. § 1692 et seq. and N.H. Rev. Stat. Ann. § 358-C, and asserted a claim against Bank of America for misrepresentation of the amount due on the Frangoses' monthly mortgage payments. See generally Frangos v. Bank of New York Mellon, 2017 WL 4876284, at *1 (D.N.H. Oct. 27, 2017) (“Frangos II”) (McCafferty, J.). After amending the complaint, Frangos moved to join the Trust as an indispensable party to that action. See Fed. R. Civ. P. 19(a). The court denied that motion, concluding, among other things, that Frangos and the Trust shared an interest in proving the mortgage's invalidity and avoiding foreclosure, and that the Trust was not a required party under Rule 19(a) because of this shared interest. Id., 2017 WL 4876284, at *3. The court then dismissed Frangos's misrepresentation claim as barred by the economic loss doctrine. Id., 2017 WL 4876284, at *2. Frangos voluntarily dismissed his remaining claims “without prejudice” during the pendency of a motion to dismiss those claims.[3]

         While Frangos's action was pending before Judge McCafferty, he filed the adversary complaint in the Bankruptcy Court that give rise to this appeal. In this complaint, Frangos alleged (1) that the mortgage was void because the Trust owned the property at the time the mortgage was executed; and (2) the reaffirmation and loan modification agreements were void because the mortgage was void.[4] He further alleged that, under Rule 19, Ann Frangos, as trustee of the Trust, must be added to the action as a plaintiff.

         The appellees moved to dismiss Frangos's adversary complaint, invoking the doctrines of res judicata and judicial estoppel. The Bankruptcy Court granted that motion. It found that res judicata barred Frangos's claims challenging the mortgage's validity in light of Frangos I and that judicial estoppel also barred them because Frangos sought approval of the reaffirmation agreement during his Chapter 7 bankruptcy proceedings.[5] Frangos does not challenge this decision on appeal.[6]

         At the same time that it dismissed his complaint, the Bankruptcy Court denied Frangos leave to amend his complaint to add the Trust as a party pursuant to Rule 19(a). In doing so, it found that the Trust's only beneficiaries were Thomas and Ann Frangos, that their children were designated as successor beneficiaries, that Ann served as the trustee, and that the Trust was revocable.[7] Because of this unity of interests, and referencing Frangos II, the Bankruptcy Court concluded that adding the Trust as a plaintiff would not “in any way change the res judicata effect of the prior litigation between Mr. Frangos ...


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