128 F.3d 20 (1st Cir. 1997), 97-1049, Salois v. Dime Sav. Bank of New York, FSB

Docket Nº:97-1049, 97-1050.
Citation:128 F.3d 20
Party Name:RICO Bus.Disp.Guide 9411 Robert SALOIS and Dianne E. Salois, Ninon R.L. Freeman, and David M. Leary and Linda Scurini-Leary, Individually and on behalf of Others Similarly Situated, Plaintiffs, Appellants, v. The DIME SAVINGS BANK OF NEW YORK, FSB, Harry W. Albright, Jr., John B. Pettit, Jr., William J. Mellin, William J. Candee Iii, William A. Vol
Case Date:November 03, 1997
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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128 F.3d 20 (1st Cir. 1997)

RICO Bus.Disp.Guide 9411

Robert SALOIS and Dianne E. Salois, Ninon R.L. Freeman, and

David M. Leary and Linda Scurini-Leary,

Individually and on behalf of Others

Similarly Situated,

Plaintiffs, Appellants,



Jr., John B. Pettit, Jr., William J. Mellin, William J.

Candee Iii, William A. Volckhausen, James E. Kelly, Ralph

Spitzer, Robert G. Turner, Brian Geraghty, Lawrence W.

Peters, E. Judd Staley III, and John Doe Companies,

Defendants, Appellees.

Robert SALOIS, et al. Plaintiffs, Appellees,


The DIME SAVINGS BANK OF NEW YORK, et al. Defendants, Appellants.

Nos. 97-1049, 97-1050.

United States Court of Appeals, First Circuit

November 3, 1997

Heard Sept. 5, 1997.

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[Copyrighted Material Omitted]

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Evans J. Carter, Framingham, MA, with whom Hargraves, Karb, Wilcox & Galvani was on brief, for appellants.

William S. Eggeling, Providence, RI, with whom Roscoe Trimmier, Jr., Darlene C. Lynch, Jane E. Willis, and Ropes & Gray, Boston, MA, were on brief, for appellees.

Before SELYA, BOUDIN, and STAHL, Circuit Judges.

STAHL, Circuit Judge.

In the mid-1980s defendant The Dime Savings Bank of New York, FSB ("Dime") made mortgage loans to plaintiffs Dianne and Robert Salois, David M. Leary and Linda Scurini-Leary, and Ninon R.L. Freeman. Plaintiffs now appeal from the district court's dismissal on statutes of limitations grounds of various federal and Massachusetts statutory claims as well as common-law contract and fraud claims arising from the mortgage transactions. 1 Defendant cross-appeals from the court's denial of its motion for Fed.R.Civ.P. 11 sanctions against plaintiffs' attorneys. We affirm the district court's ruling that statutes of limitations barred all of plaintiffs' claims and uphold the district court's denial of Dime's motion for Rule 11 sanctions because that denial was not an abuse of the court's discretion.



Because plaintiffs challenge the district court's dismissal of their claims under Fed.R.Civ.P. 12(b)(6), we recite the facts and reasonable inferences raised by the facts in their favor. See Aybar v. Crispin-Reyes, 118 F.3d 10, 13 (1st Cir.1997).

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Dime is a federally-chartered savings bank. Between July 1, 1986, and December 31, 1989, Dime, through its wholly owned subsidiary, Dime Real Estate Services--Massachusetts, Inc. ("DRES-MA"), made over four thousand (4,000) home mortgage loans on residential homes located in Massachusetts, totalling over six hundred million dollars ($600,000,000). DRES-MA ceased to exist in 1990. 2

Dime marketed to Massachusetts residential home purchasers an adjustable rate loan product known as the Impact Loan. In evaluating applications for Impact Loans, Dime required only minimal verification of the employment status, assets, and income of prospective borrowers, basing its lending decisions instead on the value of the property subject to the mortgage. Moreover, Dime loan officers operated under instructions to push Impact Loans to the virtual exclusion of other types of mortgage loans. This effort was part of Dime's national campaign to expand rapidly its home lending business.

A principal feature of an Impact Loan was an initial "teaser" interest rate of 7.5 percent for the first six months with a cap of 9.5 percent for the second six months. Thereafter, the rate would adjust to conform to the Cost of Funds Index plus three percent, with a cap of 13.9 percent. This arrangement was designed to result in negative amortization, a situation in which monthly loan payments fall short of the actual monthly interest due on the loan. The unpaid interest, or "deferred interest," is then added to the principal and begins to accrue interest itself, causing the principal owed to increase despite the borrower's regular payments. The terms of the Impact Loan provided that no payments or portions of payments would apply to the principal until all "deferred interest," or negative amortization, had been paid. Once the principal balance reached 110 percent of the original principal amount, the loan contracts required mortgagors to make fully amortizing payments; that is, mortgagors were required to increase their monthly payments to cover the additional principal plus interest.

Plaintiffs secured residential Impact Loans from DRES-MA in 1986 and 1987. To induce plaintiffs to enter the loan contracts, Dime downplayed the negative amortization feature of the Impact Loans, and discouraged plaintiffs from hiring their own attorneys by telling them that Dime attorneys would "handle things" and "protect" them. Six months into the loans, monthly statements revealed increases in the owed principal, and, in the second year, deferred interest began to appear on the statements. Although the initial loan documents contained the information from which plaintiffs could have discovered that their loan payments would increase, plaintiffs contend that teasing this information out of the documents would have required computation skills, computer software, and a level of sophistication that they did not, and could not have been expected to, possess. In addition, plaintiffs argue that Dime charged them excessive fees for closing the loan contracts, serviced their loans improperly by providing unsatisfactory responses to their queries about negative amortization, and altered the Saloises' loan impermissibly by requesting that the Saloises sign "corrective" documents that lifted a two percent per month cap on the interest rate applicable to the loan.

At the time of the complaint, plaintiffs Robert and Diane Salois continued to hold their mortgage. Plaintiffs David M. Leary and Linda Scurini-Leary had defaulted, and the mortgage on their home was foreclosed on in 1991. Plaintiff Ninon R.L. Freeman paid her loan in full in 1993. The Saloises were alerted to their potential claims when they consulted an attorney about their financial situation in late September, 1994, and Ms. Freeman and the Learys were similarly advised in mid-1995. The Saloises filed this action on September 1, 1995, in the United States District Court for the District of Massachusetts, as a putative class action on behalf of all persons who secured residential mortgage loans from Dime in Massachusetts between July 1, 1986, and December 31, 1989. Dime responded on October 5, 1995,

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with a motion to dismiss the complaint as untimely. On November 10, 1995, Dime further moved for Rule 11 sanctions, alleging that there was no legal or factual basis for plaintiffs' claims. The Saloises filed an amended complaint on February 9, 1996, which added the Learys and Ms. Freeman as plaintiffs. In a margin order dated November 6, 1996, the district court denied the Rule 11 motion and, on November 13, 1996, dismissed the complaint on statutes of limitations grounds. Because the court never acted on plaintiffs' motion for class certification, no class was certified. This appeal and cross-appeal followed.



  1. Plaintiffs' Claims

    On appeal, plaintiffs contend that the district court erred in dismissing their actions on statutes of limitations grounds, arguing that the claims are subject to equitable tolling and thus are timely. They further contend that their claims warrant relief on the merits. We begin with the statutes of limitations issue because, if plaintiffs claims in fact are time-barred, that finishes the case.

    Arguing for equitable tolling, plaintiffs draw on federal and Massachusetts law providing that fraud, fraudulent concealment, and wrongs resulting in inherently unknowable injuries toll limitations periods, and on Massachusetts law providing that limitations periods may be tolled by the existence of and breach of a fiduciary duty. The heart of plaintiffs' allegations is that Dime fraudulently concealed the fact that their loans would definitely, rather than only possibly, go into negative amortization and accrue deferred interest. Plaintiffs assert that this information became available only after they consulted a knowledgeable attorney who was able to decipher the meaning of the facts and figures contained in their loan documents. Further, plaintiffs contend that issues of fact relating to the propriety of tolling should have precluded the district court from dismissing their claims based on the pleadings alone. We are not persuaded.

    As an initial matter we note that plaintiffs' TILA, RESPA, and Parity Act claims are subject to one-year statutes of limitations. 3 Thus, these claims must have accrued no earlier than September 1, 1994. The claims for breach of fiduciary duty; fraud, deceit, and misrepresentation; civil conspiracy; and negligent misrepresentation, negligent hiring and supervision, and vicarious liability are governed by a three-year limitations period. 4 These claims must therefore have accrued no earlier than September 1, 1992. Plaintiffs' claims under RICO and the Massachusetts Consumer Credit Cost Disclosure and Consumer Protection Acts are subject to four-year limitations periods. 5 Thus, these claims must have accrued no earlier than September

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    1, 1991. Finally, plaintiffs' claim for breach of contract is governed by a six-year limitations period. 6 Thus, the contract cause of action must have accrued no earlier than September 1, 1989.

    A cause of action generally accrues at the time of the plaintiff's injury, or, in the case of a breach of contract, at the time of the breach. See Cambridge Plating Co., Inc. v. Napco, Inc., 991 F.2d 21, 25 (1st Cir.1993) (discussing Massachusetts law). Therefore, plaintiffs' claims arose when Dime allegedly induced them to sign loan contracts by...

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