593 B.R. 92
Bankr. D.N.H.2018Background
- Debtor owned real property at 2 Grace Drive, Nashua, NH subject to a mortgage held by U.S. Bank; a nonjudicial foreclosure auction occurred on January 11, 2017 but no foreclosure deed was recorded before the debtor filed the Current Chapter 13 case.
- Debtor filed an earlier Chapter 13 (May 2017) that was dismissed in March 2018; she filed the Current Chapter 13 case on April 26, 2018.
- U.S. Bank moved for relief from the automatic stay seeking to evict the debtor, arguing the prepetition auction divested the debtor of all legal and equitable interest.
- Debtor proposed a Chapter 13 plan that would cure prepetition mortgage defaults and maintain payments to U.S. Bank under 11 U.S.C. § 1322(c)(1).
- Creditor Deming (an interested party) argued the chapter 13 trustee may have superior rights under § 544(a)(3), but no trustee avoidance action was pled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether debtor retained a sufficient property interest to cure a mortgage under § 1322(c)(1) after a prepetition foreclosure auction but before recording of the foreclosure deed | Debtor: because U.S. Bank had not recorded the foreclosure deed, the foreclosure sale was not complete and debtor retains cure rights under § 1322(c)(1) | U.S. Bank: the auction (gavel fall) completed the foreclosure; debtor was divested of interest prepetition so property was not estate property and cure is unavailable | Court held debtor retained sufficient interest to invoke § 1322(c)(1); foreclosure was not complete until deed recording, so motion for relief was denied |
| Whether LaPointe (First Cir. BAP) requiring the gavel rule controls over Beeman (Bankr. D.N.H.) | Creditor Deming suggested trustee avoidance arguments could affect priorities but did not press cure issue | U.S. Bank relied on LaPointe to argue auction completed the sale | Court declined to follow LaPointe, finding Beeman more persuasive on statutory text; did not reach § 544(a)(3) avoidance issue because it was unpled |
Key Cases Cited
- Cornell v. Envoy Mortg., Ltd. (In re Hosch), 551 B.R. 696 (Bankr. D.N.H. 2016) (summarizes New Hampshire foreclosure recording rules and prior local authority)
- Gordon v. Envoy Mortg., Ltd., 569 B.R. 1 (D.N.H. 2017) (district court opinion affirming aspects of Hosch)
- In re Hazleton, 137 B.R. 560 (Bankr. D.N.H. 1992) (held debtor lacked estate interest after auction; recording of deed not required to defeat estate interest outside Chapter 13)
- In re Beeman, 235 B.R. 519 (Bankr. D.N.H. 1999) (held § 1322(c)(1) gives Chapter 13 debtors federal right to cure until foreclosure sale is completed, including recording of deed)
- TD Bank, N.A. v. LaPointe (In re LaPointe), 505 B.R. 589 (1st Cir. BAP 2014) (adopted gavel rule: auction completion cuts off cure rights)
- Barrows v. Boles, 141 N.H. 382, 687 A.2d 979 (N.H. 1996) (state-court language cited for proposition that mortgagor lacks interest after auction)