569 B.R. 1
D.N.H.2017Background
- In Nov. 2013 Licka Hosch executed a mortgage to Envoy; she defaulted and Envoy was the high bidder at a July 30, 2015 foreclosure sale. Envoy did not record the foreclosure deed until Nov. 13, 2015.
- Hosch filed Chapter 13 on Aug. 27, 2015; Envoy moved for relief from the automatic stay on Sept. 22, 2015. Hosch’s case converted to Chapter 7 on Oct. 6, 2015 and a Chapter 7 trustee (plaintiff) was appointed.
- The trustee recorded an intervening § 544 lien on Oct. 7, 2015. The bankruptcy court granted Envoy relief from stay on Oct. 14, 2015 (stayed 14 days under Rule 4001(a)(3)); Envoy recorded the foreclosure deed after the stay period expired.
- The trustee sued (adversary) seeking: declaratory relief that the trustee’s lien is senior to Envoy’s title (Counts I–II) and that Envoy’s mortgage merged into its fee and was extinguished so Envoy cannot re-foreclose (Count III). Envoy moved to dismiss.
- The bankruptcy court found Envoy recorded the deed late under RSA 479:26 but held Envoy’s mortgage was not extinguished by merger and therefore remained senior to the trustee’s lien; the trustee’s complaint failed to state viable claims. The district court affirmed and denied certification to the N.H. Supreme Court.
Issues
| Issue | Trustee's Argument | Envoy's Argument | Held |
|---|---|---|---|
| Was Envoy’s foreclosure deed recorded timely under RSA 479:26 given the automatic stay and conversion? | Recording after sale transferred title subject to trustee’s intervening § 544 lien; statute’s safe-harbor extended only to 10 days after stay removal, so trustee’s lien survived. | Envoy argues it properly waited for the bankruptcy court to rule on its pending stay-relief motion and recorded within 10 days of the effective order. | Deemed untimely: conversion to Chapter 7 ended stay effect for recording; Envoy’s recording occurred beyond the 10-day safe-harbor and was untimely. |
| Does untimely recording under RSA 479:26(II) mean the purchaser takes subject to intervening liens and the mortgagee’s mortgage is extinguished (i.e., no right to re-foreclose)? | The 1992 amendment and its legislative history impose a penalty: late-recorded foreclosure deeds give intervening lienholders a permanent priority (mortgage extinguished by merger); mortgagee cannot re-foreclose. | Even if recording was late as to intervening liens, the mortgage does not merge into the fee where an intervening lien exists; purchaser’s title subject to intervening liens but mortgage remains un-foreclosed and senior to intervening lien. | Held for Envoy’s position: merger does not extinguish the mortgage where an intervening interest exists; the statute voids the sale only as to intervening liens but does not abrogate merger exceptions or bar re-foreclosure. |
| Was the trustee’s re-foreclosure / anti-re-foreclosure argument preserved for appeal? | Trustee contends she preserved the argument below; asked the court to treat Envoy’s ability to re-foreclose as litigated. | Envoy argued some points were not raised below. | Court found the trustee sufficiently raised the issue below; preserved for appeal. |
| Should the district court certify the question re: re-foreclosure under RSA 479:26 to the N.H. Supreme Court? | Trustee asked certification because the N.H. Supreme Court has not addressed the 1992 amendment’s import. | Envoy opposed certification; urged that state law is reasonably clear. | Denied: district court found Holden and established common-law principles make the state-law outcome reasonably clear; certification unnecessary. |
Key Cases Cited
- Sheridan v. Michels, 362 F.3d 96 (1st Cir. 2004) (standard of review for bankruptcy core proceedings)
- Hannon v. ABCD Holdings, LLC, 889 F.3d 63 (1st Cir.) (argument preservation/forfeiture principles)
- Noonan v. Rauh (In re Rauh), 119 F.3d 46 (1st Cir. 1997) (appellate forfeiture doctrine)
- Factors' & Traders' Ins. Co. v. Murphy, 111 U.S. 738 (U.S. 1884) (limitations on merger doctrine in foreclosure contexts)
- Stantons v. Thompson, 49 N.H. 272 (N.H. 1870) (New Hampshire precedent explaining that an intervening estate precludes merger)