
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-2405        No. 93-1075                           IN RE BELMONT REALTY CORPORATION                                  Debtor, Appellant.                                      __________                      RHODE ISLAND HOSPITAL TRUST NATIONAL BANK,                                 Plaintiff, Appellee,                                          v.                                ELIZABETH V. BOGOSIAN,                                Defendant, Appellant.                                 ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF RHODE ISLAND                [Hon. Raymond J. Pettine, Senior U.S. District Judge]                                          __________________________                                 ____________________                                        Before                               Torruella, Circuit Judge,                                          _____________                           Campbell, Senior Circuit Judge,                                     ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________            Michael J.  McGovern with whom  Indeglia & McGovern  was on  brief            ____________________            ___________________        for appellants.            Richard  W. MacAdams  with whom  Myrna S.  Levine and  MacAdams  &            ____________________             ________________      ___________        Wieck Incorporated were on brief for appellee.        __________________                                 ____________________                                  November 29, 1993                                 ____________________                      CAMPBELL,  Senior  Circuit  Judge.    Rhode  Island                                 ______________________            Hospital  Trust  National Bank  (the  "Bank")  sued Elizabeth            Bogosian  on two separate  promissory notes, one  executed by            Belmont  Realty  Corporation  ("Belmont") and  guaranteed  by            Bogosian (the "Belmont  Note"), and one executed  by Bogosian            herself  (the  "Bogosian  Note").    Bogosian  filed  certain            defenses and counterclaims.  The district court  held that an            earlier decision  in a bankruptcy court  adversary proceeding            initiated  by Belmont  was  res  judicata  as  to  Bogosian's            counterclaims.   The district  court granted summary judgment            for  the  Bank, finding  in its  favor on  all counts  of its            amended   complaint   and   dismissing   all  of   Bogosian's            counterclaims.  Bogosian  appeals.  Belmont appeals  from the            district court's denial of its Rule 60(b) motion to amend the            court's separate  order dismissing Belmont's appeal  from the            bankruptcy  court  adversary   proceeding.    Bogosian's  and            Belmont's appeals were consolidated.   We affirm in part  and            vacate and remand in part.                                          I.                      Bogosian  created   Belmont  for  the   purpose  of            purchasing and developing  parcels of real estate  in Newport            and Middletown, Rhode Island.   She secured a loan to Belmont            of $1.2 million from the Bank.  In 1987, Belmont executed and            gave  the  Belmont Note  to  the Bank.    Bogosian personally            guaranteed  the Belmont Note.   Though she  gave one-third of                                         -2-            Belmont's stock  to her  son and one-third  to her  daughter,            Bogosian herself controlled Belmont's activities.                        Bogosian was  a partner with her brother  in a real            estate company called  E&J, which also had  outstanding loans            from the Bank.   In 1986, E&J went  into receivership because            of  a bitter  management struggle  between  Bogosian and  her            brother.   Bogosian  accepted direct  personal liability  for            one-half of E&J's debt to  the Bank and executed the Bogosian            Note in March 1989.                      Never   receiving   the    necessary   governmental            approvals for the  development of the Newport  and Middletown            properties,  Belmont defaulted on  the Belmont Note  in early            1989.   In  order  to delay  foreclosure  on the  properties,            Belmont  filed for bankruptcy protection in the United States            Bankruptcy  Court for  the  District  of  Rhode  Island  (the            "Bankruptcy  Proceeding").    In  September  1989,  the  Bank            brought  the instant  action in  the  United States  District            Court for the District  of Rhode Island (the  "District Court            Action") against Bogosian  as Guarantor of the  Belmont Note,            seeking to collect  the outstanding indebtedness due  it from            Belmont.  In October 1989,  the Bank amended its complaint to            add a  second claim  against Bogosian  based on  the Bogosian            Note.  Bogosian admits that both notes remain unpaid.                      One might think  that such facts would lead, as the            court  below described wishfully,  to "a  simple action  by a                                         -3-            lender to collect on two  promissory notes."  Over the course            of more  than four years,  however, the parties  have battled            over these  promissory notes  in three  separate arenas:  the            United States  District Court, the  United States  Bankruptcy            Court,  and  now here.    They  leave  behind them  what  the            district court described as a "tortuous procedural trail."                 A.   The Bankruptcy Proceeding                      _________________________                      Initially,  Bogosian  ignored  the  District  Court            Action, and a default judgment  was entered against her.  Her            attentions  may have been  on the bankruptcy  court where, in            January  1990,  Belmont  filed  an  adversary  complaint (the            "Adversary Proceeding") against  the Bank.   Belmont asserted            various claims based on an alleged oral agreement by the Bank            not  to call the Belmont Note  until the purchased properties            could be developed.                      Less than six  months later,  the bankruptcy  court            issued  a   decision  (the  "Belmont   Decision")  dismissing            Belmont's  adversary   complaint.     The  bankruptcy   court            determined   that  the   alleged  oral  agreement   would  be            unenforceable by virtue  of the Statute of  Frauds, R.I. Gen.            Laws.    9-1-4,  and the  parol  evidence rule.    See In  re                                                               ___ ______            Belmont Realty  Corp., 116  Bankr. 21  (Bankr. D.R.I.  1990).            _____________________            Belmont  appealed from the  Belmont Decision to  the district            court (the "Bankruptcy Appeal").                                         -4-                 B.   The District Court Action                       _________________________                      Meanwhile,  in  March  1990,  the  district   court            withdrew  the default judgment  against Bogosian.   The court            allowed  her to file counterclaims against the Bank asserting            what were in essence the same claims based on an alleged oral            agreement by the Bank not to call the Belmont  Note, that had            constituted  Belmont's   claims  against  the  Bank   in  the            Adversary Proceeding.  On August 24, 1990, the district court            dismissed Bogosian's counterclaims  on the  grounds that  the            parol  evidence rule would  prohibit introduction of evidence            of the alleged oral agreement at trial.                      In  December  1990,  however,  the  district  court            granted  a motion by  Bogosian to file  amended counterclaims            based  on  "newly  discovered"   information.    The  amended            counterclaims were based  on the same alleged  oral agreement            by  the Bank,  as well  as new  allegations of  fraud and  an            alleged conflict of interest  that the Bank had with  respect            to Bogosian's estranged family members.                 C.   The  Consent  Order   and  the  Dismissal   of  the                      ___________________________________________________                      Bankruptcy Appeal                      _________________                      At that point, there were two cases  pending in the            district court  relating to Belmont  and the Belmont  Note               the Bankruptcy Appeal and the  District Court Action.  Due to            the  similarity of  the issues  involved  in both  cases, the            parties agreed that the Bankruptcy Appeal should be continued            nisi pending resolution of the District Court Action.   Thus,            ____                                         -5-            on  February 22, 1991,  the district court  entered a Consent            Order setting out  the agreement.  The Order  stated that the            District Court Action  "may resolve all pending  issues," but            made it clear that if "further proceedings in [the Bankruptcy            Appeal] become necessary or desirable, any party may initiate            it in the same manner as if this order had not been entered."                      In effect, the order  simplified the proceedings so            that the issues between the  parties would be resolved in the            District Court Action  rather than in the  Bankruptcy Appeal.            The  Order did  not refer  to  any agreement  as  to the  res            judicata effects  of the  Belmont Decision  in the  Adversary            Proceeding.                       The  appeal notwithstanding,  the Belmont  Decision            already  constituted  a  final   judgment  for  res  judicata            purposes.   See Katchen  v. Landy, 382  U.S. 323,  334 (1966)                        ___ _______     _____            (normal  rules  of   res  judicata  apply  to   decisions  of            bankruptcy courts);  Turshen v.  Chapman, 823  F.2d 836,  839                                 _______     _______            (4th Cir. 1987) (in bankruptcy case, a final resolution of an            adversary proceeding has preclusive effect even if underlying            bankruptcy proceeding  continues); Wright,  Miller &  Cooper,            Federal Practice and  Procedure:  Jurisdiction    4433 (1981)            (judgment has preclusive effect while appeal is pending).                      So long as  the bankruptcy proceeding was  pending,            however,  the parties were  under no practical  compulsion to            negotiate any agreement about the res judicata effects of the                                         -6-            Belmont Decision.  If the  Bank raised a res judicata defense            to  Bogosian's  counterclaims in  the District  Court Action,            Belmont  could simply reopen  the Bankruptcy Appeal, pursuant            to the  Consent Order.  It was not  in the Bank's interest to            raise  the res judicata defense in  the District Court Action            because Belmont and Bogosian had an effective way to counter,            i.e., by reopening the Bankruptcy Appeal.            ____                      The Consent Order,  however, did not spell  out any            agreement as to what would happen to the Bankruptcy Appeal if            the  underlying Bankruptcy Proceeding  were dismissed.   This            potentiality  occurred little  more than  a year  later.   On            February 28,  1992, the United States Trustee  filed a motion            to  dismiss the  Bankruptcy Proceeding  on  the grounds  that            Belmont had  failed to confirm  a plan of  reorganization and            had  never  filed monthly  cash  flow  and  profit  and  loss            statements, as required by the Trustee.  The bankruptcy court            dismissed  the  Bankruptcy  Proceeding  on  March  20,  1992.            Belmont  did not  object, and  the  dismissal was  considered            voluntary.                      Neither Belmont  nor Bogosian  attempted to  reopen            the  Bankruptcy  Appeal.   The  district  court,  having been            advised  of  the  consensual   dismissal  of  the  Bankruptcy            Proceeding, "passed," i.e., dismissed, the Bankruptcy  Appeal                                  ____            on April 30, 1992.                                         -7-                      Once the Bankruptcy  Appeal was dismissed, Bogosian            lost her ability to pursue  that appeal as a counterweight to            any  assertion by the  Bank of a res  judicata defense to her            counterclaims in the District Court  Action.  By leave of the            court, the  Bank accordingly  amended its  Answer to  Amended            Counterclaims  to   include  defenses  of  res  judicata  and            collateral  estoppel.  Shortly thereafter, in June, 1992, the            Bank filed its motion for summary judgment.                      Several months later, Belmont filed a motion in the            district court pursuant to Rule 60(b) of the Federal Rules of            Civil  Procedure, seeking to amend the district court's order            passing the Bankruptcy  Appeal.  Belmont  asked the court  to            clarify  that the  dismissal was  "without  prejudice to  the            right of Elizabeth  V. Bogosian to raise any  defense or make            any assertion in  the [District Court Action]."  The district            court denied the motion.                      On November 20, 1992, the district court granted in            entirety the Bank's motion for  summary judgment.  As for the            Belmont Note, the district court dismissed Bogosian's amended            counterclaims  on res judicata  grounds.  The  court rejected            Bogosian's  argument   that  the  Consent  Order   should  be            construed to prohibit the Bank  from raising its res judicata            defenses.  Regarding  the Bogosian Note, the  court dismissed            Bogosian's  amended   counterclaims  on   the  grounds   that                                         -8-            Bogosian's  fraud and  breach of  fiduciary duty  allegations            could not succeed as a matter of law.  These appeals ensued.                                         -9-                                         II.                      As  the issues pertaining  to the Belmont  Note and            the Bogosian  Note are distinct, we begin  by considering the            grant of  summary judgment to  the Bank on the  Belmont Note.            The key  issue on  appeal, as  it was  below, is  whether the            Belmont Decision in the Adversary Proceeding was res judicata            in the  District Court  Action.   We hold  that it  was.   We            disagree  with  the   district  court  only  in   respect  to            Bogosian's fraud in the inducement claim, based on an alleged            conflict  of  interest on  the  part  of the  Bank.   We  are            uncertain  at  this  time whether  the  Belmont  decision had            preclusive effect on that issue.                 A.   The Application of Res Judicata.                      ________________________________                      In granting summary  judgment in favor of  the Bank            on  its suit  to collect  on the  Belmont Note,  the district            court held:                      having  had the  opportunity to  litigate                      these  issues  in the  Bankruptcy  Court,                      having received a  final judgment on  the                      merits  (right  or   wrong),  and  having                      failed to protect its rights with respect                      to the  appellate process,  [Belmont] and                      those in  privity with it  cannot attempt                      to  relitigate   these  issues   in  this                      proceeding.   On the facts of  this case,                      any  other  result  would  undermine  the                      primary  goal  of  the  doctrine  of  res                      judicata  --  that there  be  finality in                      litigation.                      The  district court's  point was  well  taken.   In            Dennis v.  R.I. Hospital Trust  Nat. Bank, 744 F.2d  893, 898            ______     ______________________________                                         -10-            (1st Cir.  1984), we  explained that  the "claim  preclusion"            aspect of  res judicata  bars the  relitigation of  any claim            "that  was, or  might have  been,  raised in  respect to  the                            ________________            subject matter  of the prior  litigation."  Id.  (emphasis in                                                        ___            original)  (citations  omitted).      "Issue  preclusion"  or            "collateral   estoppel,"   on  the   other   hand,  prohibits            relitigation "of any factual or legal issue that was actually                                                                 ________            decided in previous litigation  'between the parties, whether            on  the same  or on a  different claim.'"   Id.  (emphasis in                                                        ___            original)  (quoting  Restatement,   Second,  Judgments     27            (1982)).   We emphasized that  "[a]n issue may  be "actually"            decided even  when it is  not explicitly decided, for  it may                                          __________            have  constituted,  logically  or  practically,  a  necessary            component  of  the  decision  reached."    Id.  (emphasis  in                                                       ___            original).  See Wright, Miller & Cooper, supra,   4402.                        ___                          _____                      With  the  exception of  the  conflict  of interest            allegations discussed  in section B  below, we have  no doubt            that  the  issues  and  claims  litigated  in  the  Adversary            Proceeding were substantially the same issues and claims with            respect  to the Banks's  alleged oral promise  that defendant            Bogosian sought to litigate with respect to the Belmont  Note            in the District Court Action.  As the district court noted in            granting  summary  judgment, Belmont  had every  incentive to            litigate  those   matters  exhaustively   in  the   Adversary            Proceeding.   On appeal, Bogosian's  principal contention  is                                         -11-            that the usual rules of res judicata should not apply in this            case.                      Before  turning  to   this  argument,  we   briefly            consider  and  reject  three  other  arguments  now  made  by            Bogosian.   First, Bogosian  argues that  the district  court            should not  have applied res  judicata because she was  not a            party  nor  in  privity  with   a  party  in  the   Adversary            Proceeding.   The  court  below,  however, accurately  stated            that,                      It is  undisputed  that Mrs.  Bogosian  is  an                      officer  of [Belmont],  that she  participated                      directly in  obtaining the loan  for [Belmont]                      to purchase  the Newport and  Middletown, R.I.                      properties, that  she signed  the Guaranty  of                      the [Belmont]  indebtedness at  issue in  this                      case,  and that  she was  very  active in  the                      bankruptcy proceedings.   Thus, privity exists                      between defendant Bogosian and [Belmont].            Bogosian points  to nothing  that makes  us doubt either  the            conclusion  of law  or the  finding of  fact by  the district            court.   See Restatement, Second, Judgments   59(3)(a) (1982)                     ___            (judgment against a closely-held corporation is conclusive as            to  shareholder who  actively participates  in  an action  on            behalf   of  the   corporation,  unless   interests   of  the            shareholder  and  corporation  are   so  different  that  the            shareholder deserves an opportunity to relitigate issues).                      Second, Bogosian contends that the bankruptcy court            did  not have jurisdiction to  adjudicate the validity of her            guaranty  and that  "the preclusive  effect  of a  Bankruptcy                                         -12-            Court  must reflect the reality of its limited jurisdiction."            See  Latham v. Wells Fargo Bank, 896  F.2d 979, 983 (5th Cir.            ___  ______    ________________            1990).  Bogosian forgets, however, that res judicata includes            issue, as  well as claim,  preclusion.  She does  not dispute            that the bankruptcy court properly exercised its jurisdiction            over  Belmont's   claims  and  that  the  issues  necessarily            considered in Belmont's claims were the same as in Bogosian's            counterclaims  in  the  District Court  Action.    Given that            Bogosian and Belmont were in privity, Bogosian is barred from            litigating  those same issues  again, even if  the bankruptcy            court did not have jurisdiction over her personal claims.                      Third, Bogosian contends that the Bank procured the            Belmont  Decision through  discovery  fraud,  by  failing  to            produce  an   internal  Bank  memorandum  in   the  Adversary            Proceeding.  The memo, prepared by the loan officer, lists as            "Source of  Repayment"  for the  Belmont  Note the  "Sale  of            assets/Conversion of  property  for resale  and  refinance  a            mortgage."  The document, to our eyes, simply lists potential            sources  of repayment  of the  loan;  it does  not amount  to            evidence of  a promise not  to require repayment  until after            the  completion  of  Belmont's  project.    But  even  if the            document were more persuasive, there is absolutely nothing in            the  record suggesting  that the  Bank  engaged in  discovery            fraud,  as the bankruptcy court specifically refused to allow                                                         _______            Belmont to engage  in discovery before the  Belmont Decision.                                         -13-            In re Belmont, 116 Bankr. at 24.  Moreover, the document  was            _____________            produced  in the District  Court Action several  weeks before            the Belmont Decision in the Adversary Proceeding; at no  time            did  Belmont attempt  to bring  it  to the  attention of  the            bankruptcy court.                      Bogosian's fourth  and principal  argument here  is            that the Bank  must be deemed by implication to have "waived"            any res  judicata effects  of the  Belmont  Decision when  it            agreed,  in the  Consent Order,  to  have the  merits of  the            counterclaims decided  in  the District  Court Action  rather            than in  the Bankruptcy Appeal.   Bogosian contends  that the            parties' obvious desire to have their dispute decided in  the            District  Court Action rather  than in the  Bankruptcy Appeal            leads ineluctably  to the  conclusion that  the res  judicata            effects  of the  Belmont  Decision  were  to  be  permanently            cancelled.                      This scenario,  however,  ignores  the  fact  that,            under the Consent Order, the Bankruptcy  Appeal was merely to            be continued nisi, with both parties being expressly entitled                         ____            to  initiate  further  proceedings in  that  appeal  at will.            Nothing was said  about waiving the  res judicata effects  of            the Belmont Decision, there being no need  to do so since, as            previously discussed, any attempt of  the Bank to raise a res            judicata  defense in  the  District  Court  Action  could  be                                         -14-            counteracted  by   Belmont's  reopening  of   its  Bankruptcy            Appeal.1    It  was when  Belmont  voluntarily  dismissed its            bankruptcy  petition and the  Bankruptcy Appeal was "passed,"            that  the  happy balance  of  power  that had  supported  the            compromise came to an end.  The Bank  could thereafter assert            res judicata with impunity.                      In  effect, Bogosian is asking this Court to supply            in the  Consent Order  a missing contract  term to  which the            parties never expressly  agreed, namely, an agreement  by the            Bank to forego its res judicata defense.  We see no reason to            do  so.   Nothing  in  the  Consent  Order, expressly  or  by            implication, shows  an intent  by the Bank  to waive  its res            judicata defense.  If the  parties foresaw the possibility of            the current situation, their failure to have provided  for it            could well  have been due  to their inability to  find common            ground.   See  E.  Allan  Farnsworth,  Contracts      7.15-16                      ___                          _________            (1982).   We see  nothing unjust  about  leaving the  parties            where  they have found  themselves, i.e, without  any special                                            ____________________            1.  Nor would the unresolved res judicata issue have lingered            to destabilize  any judgment  later reached  in the  District            Court Action.   Res judicata  is an affirmative defense.   If            the Bank had allowed the  District Court Action to proceed to            judgment without  raising it,  res judicata  would have  been            deemed waived at that point.  Wright, Miller & Cooper, supra,                                                                   _____              4405.  The judgment  would stand, even if inconsistent with            the Belmont Decision.  Of course, the chances are slight that            the  judgments would  remain inconsistent  for  long, as  the            Bankruptcy  Appeal could  then be  reopened  and the  Belmont            Decision reversed (if  need be, to achieve  consistency), the            same judge and court being in control of both proceedings.                                         -15-            agreement,  express or  implied, that  would  bar use  of the            still viable res judicata defense.                      This holding is supported by the fact that Bogosian            could easily have  avoided this result either  by seeing that            Belmont's bankruptcy proceeding was maintained or by promptly            reopening the Bankruptcy  Appeal.  She  failed to do  either.            Now, after failing to protect herself, she asks this court to            step in  and provide protection     either by reading  into a            Consent  Order  an  agreement  that  does not  exist,  or  by            requiring  the district court  to amend its  order dismissing            the Bankruptcy Appeal.                      Under  United States v. Munsingwear, Inc., 340 U.S.                             _____________    _________________            36 (1950),  we are  not required  to do  either.  There,  the            Supreme  Court held  that  a judgment  could be  accorded res            judicata  effect in a  subsequent litigation even  though the            original judgment was  rendered unreviewable  because it  was            dismissed  as  moot  by  the  appellate  court.    The  Court            acknowledged that the usual course is for the appellate court            to  dismiss  the  appeal  with  instructions  to  vacate  the            judgments below,  destroying their  preclusive effects.   But            when the party  that lost below fails to request a vacatur of                                                     _______            the lower court  judgments, the appellate court  does not err            when it allows the judgments to stand.                      The   case   is   therefore   one  where   the                      [appellant], having  slept on its  rights, now                      asks us  to do  what by  orderly procedure  it                      could  have   done  for  itself.     The  case                                         -16-                      illustrates not the  hardship of res judicata,                                                       ___ ________                      but  the  need for  it  in providing  terminal                      points for litigation.            Id. at 41.            ___                      Here, too,  Bogosian and Belmont  "slept on [their]            rights" at  their peril.   The district court's  "passing" of            the  Bankruptcy  Appeal  did  not  automatically  vacate  the            Belmont  Decision, and absent  a request for  vacatur, it was            not error for the district court to fail to order vacatur sua                                                                      ___            sponte.              ______                      Five months after the district judge  dismissed the            appeal and  over four  months after the  Bank raised  its res            judicata  defense,  Belmont finally  moved  pursuant to  Rule            60(b)  that the judge amend his order  to make clear that the            Belmont Decision  had no preclusive  effect.  Even if  such a            motion  could  be  generously  construed  as  a  request  for            vacatur,  it is doubtful  that such a  request sufficed under            Munsingwear.   As the  district court  noted, Belmont  should            ___________            have acted sooner to  protect its right to an appeal.   As in            Munsingwear, "if  there  is hardship  in  this case,  it  was            ___________            preventable."  Munsingwear, 340 U.S. at 39.                           ___________                      Bogosian might have presented  a colorable argument            that  the  district  court erred  in  passing  the Bankruptcy            Appeal when  it was  not in  fact moot.   While  there is  no            controlling law in  this Circuit, the apparent  majority rule            in other jurisdictions is that bankruptcy courts may continue                                         -17-            to exercise  jurisdiction over pending  adversary proceedings            even after a dismissal of a related bankruptcy petition.  See                                                                      ___            2  Collier  on Bankruptcy     349.03  &  nn. 4a,  4b  (1993);            Bankruptcy  Service, L.  Ed.    3C:99  (1989).   Some  courts            continue  to exercise jurisdiction "for cause shown" under 11            U.S.C.    349(b).  See,  e.g., In  re Morris,  950 F.2d  1531                               ___   ____  _____________            (11th Cir. 1992).  Some retain jurisdiction for other reasons            or as  a matter of  course.  See,  e.g., In re  Carraher, 971                                         ___   ____  _______________            F.2d 327 (9th Cir. 1992); In re Pocklington, 21 Bankr. 199, 7                                      _________________            Collier Bankr.  Cas. 2d  185 (Bankr. S.D.  Cal. 1982);  In re                                                                    _____            Lake Tahoe Land Co., 12 Bankr. 479,  4 Collier Bankr. Cas. 2d            ___________________            1089 (Bankr. D. Nev. 1981).                      But Belmont  never contested  the dismissal of  the            appeal  below, and neither Bogosian nor  Belmont has made the            argument  on appeal  that the  dismissal was  in error.   The            argument   is  therefore  waived.    Moreover,  even  if  the            dismissal was  in error, Belmont could have cured any harmful            effect with a simple motion to  vacate the Bankruptcy Court's            judgment.    Under   Munsingwear,  Belmont  must   share  the                                 ___________            responsibility for seeing to it that lower court judgments do            not prejudice them later.                      We therefore  affirm the district  court's decision            to apply res judicata in the District Court Action.  We  also            affirm  the district court's  denial of Belmont's  Rule 60(b)            motion.  Except for the one fraud claim  based on conflict of                                         -18-            interest  described below,  we  affirm  the district  court's            grant of summary judgment against  Bogosian as to the Belmont            Note.                   B.   The Conflict of Interest Claim                      ______________________________                      In Bogosian's amended counterclaims, she set  forth            a  claim  of  fraud.    She  based  much  of  this  claim  on            allegations that were, or could  have been, litigated in  the            Adversary  Proceeding or on allegations that pertained to the            Bogosian Note rather  than the  Belmont Note.   The  district            court   properly  granted  summary   judgment  as   to  these            allegations.                      Bogosian made one factual allegation concerning the            Belmont  Note,   however,  that  apparently  could  not  been            considered in  the Adversary  Proceeding.   She claimed  that            before  agreeing  to borrow  the  money for  the  Newport and            Middletown properties from  the Bank,  she sought  assurances            that the  Bank was  not conducting business  with any  of her            brothers.    Given  the  acrimonious  dissolution  of several            businesses in which  she shared interests with  her brothers,            Bogosian  was allegedly  concerned that  a  Bank relationship            with  the brothers  would amount to  a conflict  of interest.            According to Bogosian,  the Bank falsely represented  that it            was  not engaging in business with her brothers, fraudulently            inducing Belmont to accept a  loan and to execute the Belmont            Note.                                         -19-                      In  granting summary  judgment, the  district court            barred this  counterclaim along with  all the others.   Issue            preclusion would  not have  barred  this claim,  however.   A            fraud in  the inducement claim  pertains to an  inducement to            enter  into a  contract  rather than  to  the contract  terms            themselves.   Such a claim  would not normally, therefore, be            decided on statute of frauds  or parol evidence grounds.  The            district court may have  believed that this claim could  have            been raised in  the Adversary Proceeding, hence  was properly            barred  on claim preclusion  grounds.  Without  knowing more,            however, we cannot  affirm the summary judgment  dismissal of            this claim.  On appeal, Bogosian asserts that she  discovered            this conflict  of interest  misrepresentation only after  the            District Court  Action began.   Her assertion is  hardly air-            tight:  she  could have learned about  this misrepresentation            after the District Court Action  commenced but still in  time            to  bring it to the attention  of the bankruptcy court in the            Adversary  Proceeding.    Nevertheless,  in  the  light  most            favorable to Bogosian,  it would be reasonable to  infer that            Belmont did not  know the full dimensions of  its fraud claim            at the time of the Belmont Decision.  Depending on the reason            for Belmont's  ignorance, claim  preclusion might  not apply.            See Wright, Miller & Cooper, supra,   4415.            ___                          _____                      As  the district court's  reasoning in barring this            particular fraud claim was not clear from its order, we think                                         -20-            it is best to  vacate summary judgment  as to this claim  and            remand  for  further  proceedings.   The  district  court may            choose  to accept  additional  argument  as  to  whether  the            allegations of conflict of interest could have been raised in            the Adversary Proceeding or whether for any other  reason the            claim should now be barred.  Or else the  court may determine            inter  alia whether Bogosian  has created a  genuine issue of            _____  ____            material fact  on the merits  of the  claim so as  to survive            summary judgment.                                         -21-                                         III.                      We turn last to the Bogosian Note.  Bogosian admits            executing the Bogosian Note for $242,408 on January 19, 1989.            She does not dispute on  appeal the district court's findings            that it was  payable (at latest) 18 months later  and has not            to date  been paid.   Nevertheless, she has alleged  that the            Bank made  certain materially false representations  in order            to encourage her to accept personal liability for one half of            E&J's outstanding  debt to  the Bank.   She argues  on appeal            that  she created  a genuine  issue  of material  fact as  to            claims of fraud and breach  of fiduciary duty, and that these            claims should have survived summary judgment.                      Her fraud claim rests  on two factual  allegations.            First, Bogosian declares that shortly before she executed the            Bogosian Note, the  Bank had begun the process of terminating            her credit and calling in her Belmont Note guaranty.  Second,            she avows  that the Bank  "feigned an interest"  in providing            additional  financing to  her if  she  executed the  Bogosian            Note.                      The district court held that a fraud claim based on            these allegations could not succeed as  a matter of law.   We            agree.  As to the first allegation,  the Bank was entitled to            monitor  Bogosian's  creditworthiness   without  keeping  her            updated on its assessment.  See Centerre Bank of Kansas City,                                        ___ _____________________________            N.A. v. Distributors, Inc., 705 S.W. 2d 42,  52 (Mo. Ct. App.            ____    __________________                                         -22-            1985).  As  to the second, we  find nothing in the  record to            make us doubt the district court's finding that the Bank made            no material misrepresentation, proof of which is necessary to            substantiate  a claim  for  intentional  fraud.    Given  the            negotiating  context in which anyone with Bogosian's business            sense should  have  known  that the  Bank  had  a  legitimate            interest  in  non-committal encouragement,  Bogosian's  claim            that the Bank "feigned interest" is simply too thin a reed on            which to base a fraud claim.   Indeed, it is difficult to see            how  her version  of the  facts amounts  to an  allegation of            misrepresentation at all.                      Bogosian also  attempted to  make out  a breach  of            fiduciary  duty claim against the Bank, pointing primarily to            her long-term  business relationship  with Bank  loan officer            Robert  Baggessen, and  to the  fact that  she had  given him            authority to withdraw funds from  several of her accounts  to            make  payments on her and her  companies' debts.  In order to            evaluate  whether  a  fiduciary   relationship  existed,  the            district court considered  several factors: (1)  the reliance            of Bogosian on the Bank;  (2) the relationship of the parties            prior  to the  transaction complained  of;  (3) the  parties'            relative business capacities; and (4) Bogosian's readiness to            follow  the bank's guidance in complicated transactions.  See                                                                      ___            Simpson  v. Dailey,  496  A.2d  126, 129  (R.I.  1985).   The            _______     ______            district  court, noting that Bogosian was a sophisticated and                                         -23-            experienced businessperson who was  represented by counsel at            allrelevant times,found thatnofiduciary dutyhad beenviolated.                      Again, we  agree.   We have  previously noted  that            courts  are split  on whether  a  fiduciary relationship  may            exist between  a bank and  a borrower.   Reid v. Key  Bank of                                                     ____    ____________            Southern Maine,  Inc., 821 F.2d  9, 16 (1st  Cir. 1987).   No            _____________________            state or federal court in  Rhode Island appears to have since            found such a relationship to  exist.  See Fleet National Bank                                                  ___ ___________________            v.  Liuzzo,  766  F. Supp.  61,  68  (D.R.I. 1991)  (granting                ______            summary judgment in favor of lender, finding no evidence that            lender and borrower intended a fiduciary relationship  beyond            relationship of debtor-creditor).                      But as in Reid, where  we upheld a directed verdict                                ____            denying a claim  based on fiduciary duty, the  facts here are            such that we need not decide the broader legal issue.  A good            business  relationship with  a  banker,  with  whom  one  has            discussed one's underlying business at length, is not enough.            Some  kind   of  dependency   for  advice   that  makes   the            relationship more than a normal banker-client relationship is            necessary.   See Reid, 821  F.2d at 17 (applying  Maine law).                         ___ ____            We do  not believe  that a reasonable  jury could  have found            that such a special relationship  existed here.  We therefore            affirm the district court's grant of summary judgment against            Bogosian as to the Bogosian Note.                                         IV.                                         -24-                      In  conclusion,  we  affirm the  grant  of  summary            judgment  against appellant Bogosian as to the Bogosian Note.            We  also  affirm summary  judgment  as to  the  Belmont Note,            except  for  the  fraud  in the  inducement  claim  based  on            allegations of  conflict  of  interest.   We  remand  to  the            district court  for further  proceedings on  that claim.   We            also affirm  the district  court's denial  of Belmont's  Rule            60(b)  motion  for  the district  court  to  amend  its order            dismissing the Bankruptcy Appeal.                      Affirmed  in part and vacated and remanded in part.                      __________________________________________________            Each party shall  bear its own costs of  this appeal, without            _____________________________________________________________            prejudice  to appellee's  right to recover  its own  costs of            _____________________________________________________________            this appeal from appellant if appellee prevails on remand.            __________________________________________________________                                         -25-
