Deutsche Bank National Trust Co., as Trustee v. Jennifer L. Pike

2015 DNH 196

• Court: District Court, D. New Hampshire
• Decided: October 14, 2015
• Docket: 15-cv-304-JD
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Deutsche Bank National Trust Co., as Trustee for FFMLT Trust 2005-FF2, Mortgage Pass-Through Certificates, Series 2005-FF2

v. Civil No. 15-cv-304-JD Opinion No. 2015 DNH 196 Jennifer L. Pike

O R D E R

Deutsche Bank is seeking a declaratory judgment that

Jennifer L. Pike is not entitled to a homestead exemption for

certain property on which Deutsche Bank holds the mortgage or,

alternatively, that she is subject to equitable subrogation of

her waiver of the homestead exemption in the first mortgage on

the property. Pike moves to dismiss the case, arguing that

jurisdiction is lacking and that Deutsche Bank has not stated an

actionable claim for possession of the property because it

failed to plead its compliance with RSA chapter 540. Deutsche

Bank objects to the motion.

Background

Pike moves to dismiss under Federal Rules of Civil

Procedure 12(b)(1) and 12(b)(6). When considering a motion to dismiss for lack of subject matter jurisdiction under Rule

12(b)(1), the court considers the facts alleged in the complaint

but may also consider “whatever evidence has been submitted,

such as depositions and exhibits.” Carroll v. United States,

661 F.3d 87, 94 (1st Cir. 2011) (internal quotation marks

omitted). The scope of a motion under Rule 12(b)(6) is

narrower. Generally, the court is limited to the facts alleged

in the complaint, except that the court may consider documents

referred to or incorporated into the complaint and certain other

documents when their authenticity is not disputed. Watterson v.

Page, 987 F.2d 1, 3-4 (1st Cir. 1993).

Pike states that for purposes of her motion to dismiss she

accepts as true all of the facts stated in Deutsche Bank’s

complaint. Pike does not challenge any of the fifteen exhibits

Deutsche Bank filed with the complaint. Therefore, the

background information is summarized from the complaint, and to

the extent necessary, from the exhibits submitted with the

complaint.

The property in question in this case is located at 34

Dogwood Lane, New London, New Hampshire. Jennifer Pike was

married to William Pike when Margaret H. Jenkins deeded the

property to William in 2001. In December of 2003, Jennifer and

William granted a mortgage on the property to New Century

2 Mortgage Corporation as security for a loan of $225,000, which

is referred to as the First Mortgage. Jennifer and William

released all rights of homestead as part of the First Mortgage.

In November of 2004, William obtained a loan in the amount

of $269,000, secured by a mortgage on the property, from First

Franklin Financial Corporation. That transaction is referred to

as the Second Mortgage. The loan for the Second Mortgage was

used in part to pay off the First Mortgage, which was discharged

on January 25, 2005.

William deeded the property to the Pike Family Trust in

April of 2005. William and Jennifer, as trustees of the Pike

Family Trust, deeded the property to Jennifer in November of

2006. Jennifer then deeded the property to William on February

6, 2007.

William filed a voluntary petition in bankruptcy under

Chapter 13 on February 6, 2007. A year later, the bankruptcy

proceeding was converted to Chapter 7.

The Second Mortgage was assigned to Deutsche Bank in May of

2009. Additional filings were made at the Merrimack County

Registry of Deeds to clarify the name of the holder of the

Second Mortgage.

William and Jennifer were divorced on July 3, 2013.

Deutsche Bank began foreclosure proceedings on the property on

3 July 11, 2013. As required by the divorce decree, William

transferred the property to Jennifer on July 26, 2013. The

foreclosure sale was postponed from August 12, 2013, to October

11, 2013, to December 13, 2013.

Jennifer filed a petition in state court to enjoin the

December 13, 2013, foreclosure sale, and the Superior Court

issued an injunction. Deutsche Bank moved for summary judgment

to remove the injunction, which was granted on August 14, 2014.

Jennifer appealed, and the New Hampshire Supreme Court affirmed.

Pike v. Deutsche Bank Nat’l Tr. Co., as Trustee, --- A.3d ---,

2015 WL 4266759 (N.H. Sup. Ct. May 13, 2015).

In that decision, the New Hampshire Supreme Court ruled

that Pike’s assertion of a homestead exemption did not support

an injunction against foreclosure. The court agreed with the

Superior Court that Pike could assert a homestead exemption,

pursuant to RSA 480:8-a, even if a foreclosure occurred, with

the result that she could not show that she would be in

immediate danger of irreparable harm if the foreclosure were to

proceed. The court also noted that a foreclosure would not

automatically cause her removal from the property.

Although the injunction was lifted, Deutsche Bank did not

begin foreclosure proceedings. Instead, Deutsche Bank filed

suit here. In the complaint, Deutsche Bank is seeking a

4 declaratory judgment that its security interest in the property

is not subject to a homestead exemption claimed by Pike, or

alternatively, that it is entitled to equitable subrogation so

that any homestead exemption does not apply to the amount paid

to discharge the First Mortgage. Deutsche Bank further seeks a

judgment that it may foreclose on the property and evict Pike.

Discussion

Pike moves to dismiss the declaratory judgment action on

the ground that the court lacks jurisdiction because Deutsche

Bank does not have standing to seek a declaratory judgment on

the issue of her homestead exemption or the issue is not ripe.

Pike also contends that this court lacks jurisdiction to evict

her from the property, which would require a possessory action

that cannot be heard in federal court. Further, Pike asserts

that Deutsche Bank failed to state a claim for a possessory

action to evict her under RSA chapter 540.

In response, Deutsche Bank argues that the issue of Pike’s

right to a homestead exemption and whether equitable subrogation

would extinguish the exemption are justiciable controversies.

Deutsche Bank states that it has not brought a possessory action

or sought a writ of possession but instead is seeking only “that

the Court determine the viability of Pike’s claimed homestead

exemption and its entitlement to equitable subrogation.” Obj.

5 at 10. Based on Deutsche Bank’s representation in its

objection, Deutsche Bank has abandoned that part of the

declaratory judgment action which seeks a judgment that it may

foreclose and that it may “evict the Defendant” from the

property.

Therefore, as narrowed through Deutsche Bank’s objection to

the motion to dismiss, the two issues presented in the

declaratory judgment action are whether Pike has a right to a

homestead exemption and, alternatively, whether Deutsche Bank is

entitled to equitable subrogation of the release of the

homestead exemption in the First Mortgage. Pike’s motion

challenges the court’s jurisdiction to hear those claims.

A. Standard

In considering a motion to dismiss for lack of jurisdiction

under Rule 12(b)(1), the court “construes the Complaint

liberally and treat[s] all well-pleaded facts as true, according

the plaintiff[] the benefit of all reasonable inferences.” Town

of Barnstable v. O’Connor, 786 F.3d 130, 138 (1st Cir. 2015)

(internal quotation marks omitted). The plaintiff who invokes

the court’s jurisdiction bears the burden of showing that it

exists. Aversa v. United States, 99 F.3d 1200, 1209 (1st Cir.

1996).

6 B. Case or Controversy

Under the Declaratory Judgment Act, “[i]n a case of actual

controversy within its jurisdiction,” a federal court “may

declare the rights and other legal relations of any interested

party seeking such declaration . . . .” 28 U.S.C. § 2201. “[A]

case of actual controversy” under the Act is the same as a case

or controversy that is justiciable under Article III of the

United States Constitution. MedImmune, Inc. v. Genentech, Inc.,

549 U.S. 118, 126 (2007). To satisfy the Article III case-or-

controversy requirement, “the dispute [must] be definite and

concrete, touching the legal relations of the parties having

adverse legal interests, and [must] be real and substantial and

admit of specific relief through a decree of a conclusive

character, as distinguished from an opinion advising what the

law would be upon a hypothetical state of facts.” Id. at 127.

Standing focuses on the plaintiff’s relationship to the

dispute and requires the plaintiff to show “(1) an injury in

fact, (2) a sufficient causal connection between the injury and

the conduct complained of, and (3) a likelihood that the injury

will be redressed by a favorable decision.” Susan B. Anthony

List v. Driehaus, 134 S. Ct. 2334, 2341 (2014). Ripeness,

another aspect of the case or controversy analysis, depends on

whether the issues are fit for judicial decision and what

7 hardship will ensue if the dispute is not resolved. Roman

Catholic Bishop of Springfield v. City of Springfield, 724 F.3d

78, 89 (1st Cir. 2013).

The parties have not addressed this plethora of standards

in any detail. Rather than challenging Deutsche Bank’s standing

to bring its claims, Pike appears to argue that no case or

controversy exits as to the issue of her homestead exemption

because Deutsche Bank has not begun foreclosure proceedings or a

possessory action, and therefore, she has not asserted a

homestead exemption. Deutsche Bank contends the parties’

litigation in state court demonstrates that a live controversy

about Pike’s homestead exemption exists and is justiciable.

Under New Hampshire law, “[e]very person is entitled to

$100,000 worth of his or her homestead, or of his or her

interest therein, as a homestead.” RSA 480:1. Pike asserted

the homestead exemption and successfully enjoined the previous

foreclosure proceeding, until summary judgment was affirmed in

Deutsche Bank’s favor. Although the New Hampshire Supreme Court

held that Pike’s claim of a homestead exemption was premature

because it could be raised even after foreclosure, that ruling

does not preclude jurisdiction here. See Verizon New England,

Inc. v. Int’l Bhd. of Elec. Workers, Local No. 2322, 651 F.3d

176, 189-90 (1st Cir. 2011) (holding that denial of an

8 injunction does not preclude a declaration of disputed rights

when the court is asked to determine the legal significance of

past events).

Deutsche Bank’s claims for declaratory judgment are not

contingent on facts that might be developed in the course of a

future foreclosure proceeding or a possessory action. Instead,

Deutsche Bank relies on existing documents and past events to

allege that Pike is not entitled to a homestead exemption.

Specifically, Deutsche Bank alleges that Pike released her

homestead exemption by transferring the property to William in

February of 2007, that the exemption was extinguished by the

divorce decree in July of 2013 while the property was owned by

William, and that Pike waived or subordinated her exemption

under the terms of the divorce decree. Alternatively, Deutsche

Bank claims that it is entitled, by equitable subrogation, to

the protection of the homestead exemption waiver in the First

Mortgage. As such, the claims are real and substantial, not

hypothetical. See MedImmune, 549 U.S. at 127.

Further, Deutsche Bank argues that a declaratory judgment

on the issue of the homestead exemption addresses its risk of

loss in a foreclosure action. In particular, a judgment denying

the claims would allow Deutsche Bank to avoid the expense of a

9 foreclosure proceeding and a possessory action if its recovery

would be significantly reduced by the homestead exemption.

In sum, the circumstances presented here show that a live

case or controversy exists about whether Pike is entitled to a

homestead exemption. A declaratory judgment on the claims

Deutsche Bank presents would provide specific relief, not an

advisory opinion based on hypothetical facts. Deutsche Bank has

standing to pursue its declaratory judgment action. Therefore,

the court is satisfied that jurisdiction exists to hear the

declaratory judgment claims in this case.

C. Declaratory Judgment Act

Although not raised by the parties, the Declaratory

Judgment Act only “confers a discretion on the courts rather

than an absolute right upon the litigant” to have claims

decided. Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995);

accord MedImmune, 549 U.S. at 136. For that reason, even when

subject matter jurisdiction exists, a court may decline to enter

a declaratory judgment if it determines “that a declaratory

judgment will serve no useful purpose,” meaning that

“considerations of practicality and wise judicial

administration” counsel against adjudicating the claims. Id. at

288; see also Denovellis v. Shalala, 124 F.3d 298, 314 (1st Cir.

1997) (concluding that declaratory judgment claim to address

10 employer’s discriminatory intent with no opportunity for relief

would be “a fruitless endeavor”). A declaratory judgment is

appropriate, however, when the judgment would relieve the

parties of uncertainty as to their legal rights. See, e.g.,

Sophos, Inc. v. RPost Holdings, Inc., 2014 WL 7409588, at *2 (D.

Mass. Dec. 30, 2014) (deciding to hear declaratory judgment

action to “relieve [plaintiff] of uncertainty as to any

infringement of the Defendants’ patents”).

In this case, no parallel state court proceeding is pending

and the case was not removed from state court. In the absence

of a competing state forum or proceeding, issues that often

inform the decision of whether to exercise discretion to hear a

declaratory judgment action do not pertain here. Cf. Kiely v.

Canty, --- F. Supp. 3d ---, 2015 WL 1959198, at *4 (D. Mass.

Apr. 30, 2015) (listing factors to consider when case was

removed or state court proceeding is pending); Seaton Ins. Co.

v. Clearwater Ins. Co., 736 F. Supp. 2d 472, 474-75 (D.R.I.

2010).

Although Deutsche Bank’s requests for a declaratory

judgment are based on state law, in the absence of a parallel

state proceeding, considerations of practicality and wise

judicial administration do not necessarily weigh in favor of

dismissing the declaratory judgment action. Pike has not argued

11 that the court should decline to exercise its discretion in this

case. Further, as is noted above, a declaratory judgment on the

issues raised by Deutsche Bank will serve a useful purpose by

establishing whether Pike is entitled to a homestead exemption.

Therefore, the court, in its discretion, will not dismiss

the case.

Conclusion

For the foregoing reasons, the defendant’s motion to

dismiss (document no. 9) is denied.

SO ORDERED.

__________________________ Joseph DiClerico, Jr. United States District Judge

October 13, 2015

cc: Michael P. Robinson, Esq. Stephen T. Martin, Esq.