551 B.R. 696
Bankr. D.N.H.2016Background:
- Debtor defaulted on a mortgage to Envoy; Envoy foreclosed by power of sale on July 30, 2015 and had 60 days (until Sept. 28, 2015) under N.H. RSA § 479:26 to record the foreclosure deed and affidavit.
- Debtor filed Chapter 13 on Aug. 27, 2015 (prepetition foreclosure deed not yet recorded); case converted to Chapter 7 on Oct. 6, 2015 and Trustee recorded a § 544(a) lien-notice on Oct. 7, 2015.
- Envoy sought relief from the automatic stay in September/October 2015 and a Form Order granting relief was entered as uncontested on Oct. 14, 2015; Envoy recorded the foreclosure deed on Nov. 3, 2015.
- Trustee filed an adversary complaint seeking a declaratory judgment that the Trustee’s § 544(a) lien is first in priority because Envoy recorded the foreclosure deed outside the statutory safe-harbor, and arguing Envoy’s mortgage was extinguished by the deed (merger).
- Envoy moved to dismiss, arguing its recording was timely because the stay extended the safe-harbor, and that the mortgage was not extinguished (merger inapplicable); the Court granted the motion to dismiss.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the foreclosure deed recorded within the § 479:26 safe-harbor? | Trustee: recording was untimely; stay did not prevent recording (Hazelton controls after conversion). | Envoy: stay applied; Form Order and LaPointe required relief from stay so recording was timely within extended 10-day period. | Held: Recording was untimely. Conversion to Chapter 7 ended any stay; deed recorded after the extended period. |
| Did the Form Order establish as law of the case that a stay prevented recording? | Trustee: Form Order did not preserve a stay for recording; conversion mooted that aspect. | Envoy: Form Order implicitly found stay applied, precluding Trustee from challenging timeliness. | Held: Form Order simply granted relief to the extent the stay actually applied; it did not decide the stay’s scope; law-of-the-case estoppel rejected. |
| Did recording the foreclosure deed outside the safe-harbor extinguish Envoy’s mortgage (merger), making property subject to Trustee’s intervening lien? | Trustee: 1991 amendment to § 479:26 meant sale void “only as to” intervening liens — legislature meant mortgage is extinguished and title subject to intervening lien. | Envoy: Merger does not apply where an intervening lien exists or merger would disadvantage mortgagee; mortgage remains senior and unforeclosed. | Held: Merger did not extinguish Envoy’s mortgage. Court followed F.D.I.C. v. Holden’s reasoning: mortgage remains unforeclosed and senior to intervening lien. |
| Can Trustee obtain declaratory relief that his § 544(a) lien is first priority? | Trustee: Yes, because Envoy’s recording was untimely and merger extinguished mortgage. | Envoy: No; recording was timely (or mortgage survived), so Trustee’s claim fails. | Held: Trustee failed to state a claim; dismissal granted. |
Key Cases Cited
- Barrows v. Boles, 141 N.H. 382 (N.H. 1996) (mortgagor lacks interest after foreclosure auction under New Hampshire law)
- In re LaPointe, 505 B.R. 589 (1st Cir. BAP 2014) (foreclosure sale is complete at the auction; bankruptcy stay does not preserve redemption after gavel falls)
- In re Beeman, 235 B.R. 519 (Bankr. D.N.H. 1999) (interpreting § 1322(c)(1) to require stay relief to record foreclosure deed in Chapter 13 until sale process complete)
- Stantons v. Thompson, 49 N.H. 272 (N.H. 1870) (merger doctrine does not apply when an intervening recorded interest exists)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard for plausibility)
- Arizona v. California, 460 U.S. 605 (U.S. 1983) (law-of-the-case principle)