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.,

(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.,

(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,

(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,

(quoting Chase,

). 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,

. 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.

.

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,

.

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,

.

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.

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