UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Deutsche Bank National Trust Company, as Trustee for FFMLT Trust 2005-FF2, Mortgage Pass-Through Certificates, Series 2005-FF2
v. Civil No. 15-cv-304-JD
Jennifer L. Pike
O R D E R
Deutsche Bank brought suit against Jennifer Pike seeking a
declaratory judgment that its mortgage on Pike’s property is not
subject to her homestead interest or, alternatively, that
Deutsche Bank is entitled to equitable subrogation for the
amount it paid to satisfy a prior mortgage. Pike brought
counterclaims to quiet title to the property with respect to her
homestead interest and for a declaratory judgment that she did
not waive her homestead interest. A bench trial is scheduled to
begin on June 21, 2017.
In the course of their pretrial briefings, the parties have
addressed the issue of whether Deutsche Bank is entitled to
equitable subrogation to avoid Pike’s homestead interest.1
1 Deutsche Bank filed a trial brief asserting the right to equitable subrogation, document no. 56. Pike opposed Because that issue is fully briefed and presents an issue of law
that can be resolved without further factual development, the
court finds and rules as follows on the issue of applying
equitable subrogation in this case.
Background
In 2000, William T. Pike, Jr. married Jennifer L., who
became Jennifer L. Pike. William bought property at 34 Dogwood
Lane, New London, New Hampshire, in 2001.
On December 11, 2003, William obtained a loan from New
Century Mortgage Corporation in the amount of $225,000.00 that
was secured by a mortgage on the New London property. Although
Jennifer’s signature appears on the mortgage document, she
asserts that she did not know about the loan or the mortgage and
did not sign the mortgage. In the mortgage, the mortgagor or
mortgagors waived homestead interests in the mortgaged property.
On November 23, 2004, William obtained a second mortgage
loan, secured by the New London property, in the amount of
$269,000.00 from First Franklin Financial Corporation. William
waived his homestead interests, but Jennifer did not sign the
note or the mortgage. The New Century mortgage with a balance
application of equitable subrogation in her trial brief, document no. 50. Deutsche Bank then filed both a response to Pike’s trial brief on the equitable subrogation issue, document no. 64, and objections to the brief, document no. 68.
2 of $233,403.87 was discharged on January 25, 2005. The Pikes
then made several transfers of the property between them and a
family trust, ending with a transfer to William on February 6,
2007. The First Franklin mortgage was transferred by assignment
to Deutsche Bank on May 26, 2009.
The Pikes were divorced on July 3, 2013. Under the terms
of the divorce decree, Jennifer was awarded the property with
certain other conditions. William transferred the property to
Jennifer by deed on July 26, 2013. Jennifer continues to live
at the property.
Deutsche Bank intends to foreclose and sell the property to
satisfy the outstanding amount due on the First Franklin
mortgage. Jennifer asserts that she has a homestead interest in
the property, pursuant to RSA 480:1, which takes priority over
Deutsche Bank’s mortgage. Deutsche Bank disputes Jennifer’s
homestead interest.
Discussion
Deutsche Bank contends that its mortgage on the property is
not subject to Pike’s homestead interest because Deutsche Bank
is entitled to equitable subrogation to the New Century
mortgage, which waived the mortgagors’ homestead interests. In
support, Deutsche Bank argues that it meets the requirements for
equitable subrogation as provided in Chase v. Ameriquest Mortg.
3 Co., 155 N.H. 19 (2007). Pike contends that Deutsche Bank is
not entitled to equitable subrogation because Deutsche Bank
cannot prove that the New Franklin loan was used to satisfy the
New Century loan or that the New Franklin loan was obtained
through fraud.2 The fraud issue may be decided as a matter of
law, without further factual development at trial.
Under New Hampshire law “[e]very person is entitled to
$120,000 worth of his or her homestead, or of his or her
interest therein, as a homestead.”3 RSA 480:1 (as amended in
2015). The homestead right exists in “[t]he owner and the
husband or wife of the owner . . . during the owner’s lifetime.”
RSA 480:3-a. “The homestead right is exempt from attachment
during its continuance from levy or sale on execution and from
liability to be encumbered or taken for the payment, except in
[five specific] cases.”4 RSA 480:4.
The purpose of the homestead interest is “to secure to
debtors and their families the shelter of the homestead roof,
2 Pike also contends that equitable subrogation would not preclude her homestead interest because she did not sign the New Century mortgage.
3 The prior version of RSA 480:1 provided a homestead interest of $100,000.
4 Deutsche Bank does not argue that any of the five exceptions to the homestead right apply in this case.
4 . . . to protect and preserve inviolate a family home, . . . to
protect[] the family from destitution, and protect[] society
from the danger of its citizens becoming paupers.” Maroun v.
Deutsche Bank Nat’l Tr. Co., 167 N.H. 220, 225-26 (2014)
(internal quotation marks omitted). “Statutory homestead
protections are remedial in nature, and to effectuate their
public policy objectives are universally held to be liberally
construed; everything is to be done in advancement of the remedy
that can be given consistently with any construction that can be
put upon it.” Deyeso v. Cavadi, 165 N.H. 76, 80 (2013)
(internal quotation marks omitted).
“[I]n Chase, [the New Hampshire Supreme Court] invoked
equitable principles to reach beyond the literal language of the
homestead exceptions because there had been ‘fraud and egregious
conduct’ in obtaining the funds used to refinance the
homestead.” Deyeso, 165 N.H. at 80 (quoting Chase, 155 N.H. at
26). Specifically, in Chase, the plaintiff’s husband forged her
signature to obtain the loan from the defendant that paid off
the first mortgage with the result that the plaintiff received a
benefit from the fraudulently obtained mortgage and then hoped
to use her homestead interest to protect that benefit. Chase,
155 N.H. at 23. The court concluded that in the exercise of its
equitable powers and because the defendant met the elements of
5 the doctrine of equitable subrogation, the defendant could
succeed to the rights and position of the first mortgagee and
could recover the amount paid to satisfy the first mortgage,
free from the plaintiff’s homestead interest. Id. at 28.
Here, Deutsche Bank acknowledges that there was no fraud in
obtaining the First Franklin mortgage. To the extent Deutsche
Bank argues that fraud occurred if William forged Jennifer’s
signature on the New Century mortgage, that situation, even if
proved, would not show that the First Franklin loan and mortgage
were obtained through fraud or misconduct. Importantly, other
improper motives in buying or financing property do not cause
the court to invoke equitable principles under Chase as long as
the funds at issue were not obtained “through fraud or
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Deutsche Bank National Trust Company, as Trustee for FFMLT Trust 2005-FF2, Mortgage Pass-Through Certificates, Series 2005-FF2
v. Civil No. 15-cv-304-JD
Jennifer L. Pike
O R D E R
Deutsche Bank brought suit against Jennifer Pike seeking a
declaratory judgment that its mortgage on Pike’s property is not
subject to her homestead interest or, alternatively, that
Deutsche Bank is entitled to equitable subrogation for the
amount it paid to satisfy a prior mortgage. Pike brought
counterclaims to quiet title to the property with respect to her
homestead interest and for a declaratory judgment that she did
not waive her homestead interest. A bench trial is scheduled to
begin on June 21, 2017.
In the course of their pretrial briefings, the parties have
addressed the issue of whether Deutsche Bank is entitled to
equitable subrogation to avoid Pike’s homestead interest.1
1 Deutsche Bank filed a trial brief asserting the right to equitable subrogation, document no. 56. Pike opposed Because that issue is fully briefed and presents an issue of law
that can be resolved without further factual development, the
court finds and rules as follows on the issue of applying
equitable subrogation in this case.
Background
In 2000, William T. Pike, Jr. married Jennifer L., who
became Jennifer L. Pike. William bought property at 34 Dogwood
Lane, New London, New Hampshire, in 2001.
On December 11, 2003, William obtained a loan from New
Century Mortgage Corporation in the amount of $225,000.00 that
was secured by a mortgage on the New London property. Although
Jennifer’s signature appears on the mortgage document, she
asserts that she did not know about the loan or the mortgage and
did not sign the mortgage. In the mortgage, the mortgagor or
mortgagors waived homestead interests in the mortgaged property.
On November 23, 2004, William obtained a second mortgage
loan, secured by the New London property, in the amount of
$269,000.00 from First Franklin Financial Corporation. William
waived his homestead interests, but Jennifer did not sign the
note or the mortgage. The New Century mortgage with a balance
application of equitable subrogation in her trial brief, document no. 50. Deutsche Bank then filed both a response to Pike’s trial brief on the equitable subrogation issue, document no. 64, and objections to the brief, document no. 68.
2 of $233,403.87 was discharged on January 25, 2005. The Pikes
then made several transfers of the property between them and a
family trust, ending with a transfer to William on February 6,
2007. The First Franklin mortgage was transferred by assignment
to Deutsche Bank on May 26, 2009.
The Pikes were divorced on July 3, 2013. Under the terms
of the divorce decree, Jennifer was awarded the property with
certain other conditions. William transferred the property to
Jennifer by deed on July 26, 2013. Jennifer continues to live
at the property.
Deutsche Bank intends to foreclose and sell the property to
satisfy the outstanding amount due on the First Franklin
mortgage. Jennifer asserts that she has a homestead interest in
the property, pursuant to RSA 480:1, which takes priority over
Deutsche Bank’s mortgage. Deutsche Bank disputes Jennifer’s
homestead interest.
Discussion
Deutsche Bank contends that its mortgage on the property is
not subject to Pike’s homestead interest because Deutsche Bank
is entitled to equitable subrogation to the New Century
mortgage, which waived the mortgagors’ homestead interests. In
support, Deutsche Bank argues that it meets the requirements for
equitable subrogation as provided in Chase v. Ameriquest Mortg.
3 Co., 155 N.H. 19 (2007). Pike contends that Deutsche Bank is
not entitled to equitable subrogation because Deutsche Bank
cannot prove that the New Franklin loan was used to satisfy the
New Century loan or that the New Franklin loan was obtained
through fraud.2 The fraud issue may be decided as a matter of
law, without further factual development at trial.
Under New Hampshire law “[e]very person is entitled to
$120,000 worth of his or her homestead, or of his or her
interest therein, as a homestead.”3 RSA 480:1 (as amended in
2015). The homestead right exists in “[t]he owner and the
husband or wife of the owner . . . during the owner’s lifetime.”
RSA 480:3-a. “The homestead right is exempt from attachment
during its continuance from levy or sale on execution and from
liability to be encumbered or taken for the payment, except in
[five specific] cases.”4 RSA 480:4.
The purpose of the homestead interest is “to secure to
debtors and their families the shelter of the homestead roof,
2 Pike also contends that equitable subrogation would not preclude her homestead interest because she did not sign the New Century mortgage.
3 The prior version of RSA 480:1 provided a homestead interest of $100,000.
4 Deutsche Bank does not argue that any of the five exceptions to the homestead right apply in this case.
4 . . . to protect and preserve inviolate a family home, . . . to
protect[] the family from destitution, and protect[] society
from the danger of its citizens becoming paupers.” Maroun v.
Deutsche Bank Nat’l Tr. Co., 167 N.H. 220, 225-26 (2014)
(internal quotation marks omitted). “Statutory homestead
protections are remedial in nature, and to effectuate their
public policy objectives are universally held to be liberally
construed; everything is to be done in advancement of the remedy
that can be given consistently with any construction that can be
put upon it.” Deyeso v. Cavadi, 165 N.H. 76, 80 (2013)
(internal quotation marks omitted).
“[I]n Chase, [the New Hampshire Supreme Court] invoked
equitable principles to reach beyond the literal language of the
homestead exceptions because there had been ‘fraud and egregious
conduct’ in obtaining the funds used to refinance the
homestead.” Deyeso, 165 N.H. at 80 (quoting Chase, 155 N.H. at
26). Specifically, in Chase, the plaintiff’s husband forged her
signature to obtain the loan from the defendant that paid off
the first mortgage with the result that the plaintiff received a
benefit from the fraudulently obtained mortgage and then hoped
to use her homestead interest to protect that benefit. Chase,
155 N.H. at 23. The court concluded that in the exercise of its
equitable powers and because the defendant met the elements of
5 the doctrine of equitable subrogation, the defendant could
succeed to the rights and position of the first mortgagee and
could recover the amount paid to satisfy the first mortgage,
free from the plaintiff’s homestead interest. Id. at 28.
Here, Deutsche Bank acknowledges that there was no fraud in
obtaining the First Franklin mortgage. To the extent Deutsche
Bank argues that fraud occurred if William forged Jennifer’s
signature on the New Century mortgage, that situation, even if
proved, would not show that the First Franklin loan and mortgage
were obtained through fraud or misconduct. Importantly, other
improper motives in buying or financing property do not cause
the court to invoke equitable principles under Chase as long as
the funds at issue were not obtained “through fraud or
misconduct.” Deyeso, 165 N.H. at 81.
Deutsche Bank’s argument that equitable subrogation is
appropriate here because Pike was not a victim of wrongdoing
under the First Franklin mortgage is inapposite to balancing the
equities in this case. The material consideration is whether
Deutsche Bank was the victim of fraud, and it is undisputed that
no fraud occurred when William Pike obtained the First Franklin
loan and mortgage. Contrary to Deutsche Bank’s theory, Pike
would not receive a windfall through her homestead interest but
instead would receive the protection intended and provided by
6 RSA 480:1. In addition, the length of the default does not
justify equitable remedies because the remedy for default is
provided in the mortgage agreement. See, e.g., First Franklin
Mortgage, doc. no. 20-4, ¶ 22. Further, the Pikes’ divorce
decree provides no basis for applying equitable subrogation in
favor of Deutsche Bank in this case.
Therefore, as a matter of law, the circumstances in this
case do not meet the threshold requirement of fraud or
misconduct that would support the use of equitable subrogation
to overcome the protections provided by RSA 480:1. See Deyeso,
165 N.H. at 81-82.
Conclusion
For the foregoing reasons, the court finds and rules, based
on the parties’ briefs, documents nos. 50, 56, 64, and 68, that
Deutsche Bank cannot avoid Pike’s homestead interest in the New
London property based on the doctrine of equitable subrogation.
Therefore, Deutsche Bank’s request in Count II for a
declaratory judgment that it is entitled to equitable
subrogation is denied.
7 No evidence, testimony, or argument for purposes of
supporting or opposing the application of equitable subrogation
will be allowed at trial.
SO ORDERED.
__________________________ Joseph DiClerico, Jr. United States District Judge
June 12, 2017
cc: Stephen T. Martin, Esq. Kevin P. Polansky, Esq.