Jones v. Nationstar Mortgage, LLC (In re Jones)Jones v. Nationstar Mortgage, LLC (In re Jones)
MEMORANDUM OF DECISION
Granting in Part Each of the Cross Motions for Summary Judgment and Determining Amount and Classification of the Defendant’s Claim
Douglas and Sandy Jones, as husband and wife, own real property in Sharon, Vermont, which they occupy as their homestead. That homestead property is subject to a mortgage held by Nationstar Mortgage, LLC. Mr. and Mrs. Jones commenced this proceeding to obtain a declaration that the Nationstar mortgage is unenforceable. The parties have stipulated the mortgage does not satisfy the statutory requirements of Vermont law. However, Nationstar asserts that, notwithstanding the legal defect in its mortgage, the equities weigh in its favor and the mortgage should be declared valid on equitable grounds. Each party has filed a motion for summary judgment asserting there are no material facts in dispute and they are entitled to judgment, based upon the controlling law and applicable equitable principles.
For the reasons set forth below, the Court finds there are no material facts in dispute, summary judgment is proper and, based upon the equities presented, the record warrants entry of judgment that (i) subrogates Nationstar to the extent of the amount of the mortgage and property taxes Nationstar paid on behalf of Mr. and Mrs. Jones, (ii) allows that portion of Na-tionstar’s claim as secured, (iii) grants Na-tionstar an equitable lien for a portion of its remaining claim, (iv) allows that portion of Nationstar’s claim as secured, and (v) allows the balance of Nationstar’s claim as a general unsecured claim.
Jurisdiction
This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334, and the Amended Order of Reference entered in this District on June 22, 2012. The Court declares the claims presented by these cross motions for summary judgment are core matters under 28 U.S.C. §§ 157(b)(2)(B) and (K), over which this Court has constitutional authority to enter a final judgment.
On October 21, 2013, Douglas and Sandy Jones (the “Plaintiffs”) filed a petition for relief under Chapter 13 of the Bankruptcy Code (doc. # 1 in main case # 13-10734). The Plaintiffs commenced this adversary proceeding with the filing of a complaint on December 9, 2013 (the “Complaint”) (doc. # 1 in adversary proceeding # 13-1019)
Thereafter, pursuant to the Court’s directive to file supplemental memoranda to clarify the parties’ positions on the applicability of the state and federal equitable doctrines of unjust enrichment, the Defendant filed a supplement to its MSJ (doc. # 26), the Plaintiffs filed a response to that supplement (doc. # 28) and the Defendant filed a reply (doc. #29). The cross motions for summary judgment are fully submitted.
Issues Presented
The cross motions for summary judgment raise two issues. The first issue is whether the facts and circumstances warrant granting the Defendant relief based upon the doctrine of equitable subrogation, and if so, the amount of the Defendant’s subrogated claim. The second issue is whether the pertinent facts and circumstances weigh in favor of granting the Defendant additional relief based upon the equitable doctrine of unjust enrichment. Resolution of these issues will enable the Court to classify and fix the amount of the Defendant’s allowed claim in the Plaintiffs’ bankruptcy case.
Undisputed Material Facts
The parties have stipulated to the following facts, which the Court finds to be material and undisputed:
1. Debtor, Douglas Jones, in his sole name, acquired real property located at 3600 Faybrook Road in Sharon, Vermont (hereafter the “Property”) by quitclaim deed from Everett Jones, Jr. and Scott Jones that was dated February 13, 1996, and properly recorded on February 22, 1996. (¶ 1, SUMF)
2. Judy Jones, Douglas Jones’ former spouse, executed a quitclaim deed to the Property in favor of Douglas Jones that was dated February 27, 1998, and properly recorded on March 19,1998. (¶ 2, SUMF)
3. Douglas Jones and Sandy Jones were married on July 21,1999. (¶ 3, SUMF)
4. Since 1999, the Plaintiffs have occupied the Property as their principal
5. On April 16, 2007, as part of a refinance, Douglas Jones executed a promissory note in the original principal amount of $149,607.50 in favor of the Defendant (the “Promissory Note”). (¶ 9, SUMF)
6. On April 16, 2007, Douglas Jones executed a mortgage deed in favor of the Defendant to secure the Promissory Note (the “Mortgage”). (¶ 10, SUMF)
7. At closing the proceeds of the refinance were distributed as follows:
a. $74,788.31 was used to satisfy a first' mortgage interest in the Property in favor of Select Portfolio Servicing (“SPS”);
b. $2,769.95 was used to pay all delinquent property taxes owed to the Town of Sharon;
c. $18,343.00 was used to satisfy a VW Credit secured debt, incurred to purchase (and secured by) a John Deere tractor;
d. $9,711.00 was used to satisfy a Citifinancial secured debt, incurred to purchase (and secured by) a 2004 Ford Explorer;
e. $14,825.00 was used to satisfy a Green Tree Servicing secured debt, incurred to purchase (and secured by) a mobile home;
f. $14,762.67 was used to satisfy various unsecured debts, including credit card obligations; and
g. the balance of $14,407.57 was retained by the Plaintiffs. (¶ 13, SUMF)
8. When Douglas Jones applied for the instant mortgage loan, he indicated on the application both that he would hold title to the Property as “single” and that he was currently married. (¶ 18, SUMF)
9. That loan application also indicated the purpose of the loan was to refinance the debt encumbering his primary residence. (¶ 19, SUMF)
10. Sandy Jones did not execute the Promissory Note or the Mortgage. (¶¶ 11-12, SUMF)
11. The Property was appraised by a residential appraiser as having a value as of February 25, 2014, of $146,000. (¶ 6, SUMF)
12. The Defendant filed an amended proof of claim on March 19, 2015 (claim # 13 in the main case) asserting a secured claim in the amount of $153,359.70.
Discussion
A. Summary Judgment Standard
Summary judgment is proper if the record shows no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56; Fed. R. Bankr. P. 7056; see also Bronx Household of Faith v. Bd. of Educ. of the City of New York,
B. Vermont Homestead Law
Vermont exemption law defines the homestead exemption as follows:
[t]he homestead of a natural person consisting of a dwelling house, outbuildings and the land used in connection therewith, not exceeding $125,000.00 in value, and owned and used or kept by such person as a homestead together with the rents, issues, profits, and products thereof, shall be exempt from attachment and execution except as hereinafter provided.
27 V.S.A. § 101; see In re Mead,
[a] homestead or an interest therein shall not be conveyed by the owner thereof, if married, except by way of mortgage for the purchase money thereof given at the time of such purchase, unless the wife or husband joins in the execution and acknowledgement of such conveyance. A conveyance thereof, or of an interest therein, not so made and acknowledged, shall be inoperative so far only as relates to the homestead provided for in this chapter.
The Defendant does not contest both spouses’ signatures were required on the mortgage, or that since only one spouse signed it, the mortgage is voidable pursuant to 27 V.S.A. § 141, and the non-signing spouse has invoked her rights under that statute.
C. Relief under the State Law Doctrine of Equitable Subrogation
Under applicable state law, the Defendant has no operable lien securing its interest, and therefore the Defendant’s claim may not be treated as a secured claim in this bankruptcy case unless, as discussed below, application of equitable principles changes that outcome. The Defendant’s first argument as to why its mortgage should be treated as valid, notwithstanding the applicability of 27 V.S.A. § 141, relies principally on the Vermont District Court’s recent decision in GMAC Mortg., LLC v. Orcutt,
i. The Defendant Seeks Equitable Subrogation for Less than All of Its Claim
Before analyzing if and how the doctrine of equitable subrogation applies in this case, it is important to clarify the scope of relief the Defendant seeks. The Defendant advanced the sum of $149,607.50 to the Plaintiffs (V 9, SUMF), and filed a proof of claim in this case in the amount of $153,359.70. However, the Defendant does not seek a determination that its entire claim should be secured. Rather, the Defendant asks that by application of the doctrine of equitable subrogation, $120,437.26 of its claim be secured by a mortgage on the Plaintiffs’ real property, computed as the sum of the following loan proceeds disbursements:
(1) $74,788.31 used to satisfy a first mortgage interest in the Property in favor of SPS;
(2) $2,769.95 used to pay all delinquent property taxes owed to the Town of Sharon;
(3) $18,343.00 used to satisfy the VW Credit secured debt, secured by a John Deere tractor;
(4) $9,711.00 used to satisfy a Citifinan-cial secured debt, secured by a 2004 Ford Explorer; and
(5) $14,825.00 used to satisfy a Green Tree Servicing secured debt, secured by a mobile home.
The Defendant specifically does not seek secured status for its claim with respect to the $14,407.57 retained by the Plaintiffs, the $14,762.67 used to satisfy unsecured obligations, or additional amounts due in connection with its alleged secured claim. In its MSJ, the Defendant acknowledges $32,922.70 of its claim is a general unsecured claim.
Subrogation is a doctrine which revolves around the “substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the [party whose debt was paid]” Black’s Law Dictionary (10th ed. 2014). Therefore, it is important to distinguish the different entities to whose rights the Defendant seeks to subrogate. For purposes of the instant case, the Court separates those entities into two groups: those whose debts were secured by the Plaintiffs’ Property,
Equitable subrogation may be used to remedy a situation in which, as a result of a mistake, a party stands to suffer unfair consequences. The District Court in Orcutt articulated four criteria a party must satisfy to demonstrate a right to the benefits of equitable subrogation under Vermont law:
(1) the subrogee cannot have acted as a volunteer; (2) the subrogee must have paid a debt upon which it was not primarily liable; (3) the subrogee must have paid the entire debt; and (4) subro-gation may not work any injustice to the rights of others.
GMAC Mortg., LLC v. Orcutt,
The Plaintiffs first assert the Defendant acted as a volunteer, and thus cannot demonstrate a right to equitable subrogation. The Plaintiffs posit the instant facts must be distinguished from Or-cutt because here, the Defendant satisfied a mortgage (and other liens) held by other lenders whereas in Orcutt, the lender had satisfied its own prior mortgage. That argument is unavailing. As the Orcutt court stated,
Under Vermont law, GMAC is not a “volunteer” who is precluded from raising an equitable subrogation defense .... This payment protected GMAC’s “interest in the homestead as collateral to secure the debt” and is sufficient to establish that the transaction was not voluntary. See Chase,921 A.2d at 377 (determining that Ameri-quest (second lender) was not a voluntary payer when it paid off a mortgage held by Bankers Trust (first lender) “in order to protect its interest in the homestead as collateral to secure the debt”); Rock River Lumber Corp.,262 N.W.2d at 115, 117-20 (concluding second lender who “advanced money to discharge the existing mortgage of’ the first lender became “subrogated to the rights of the [first lender] and, therefore, to priority as against construction lien claimants who would otherwise have been entitled to priority as against the [second lender’s] mortgage”); see also Mort v. United States,86 F.3d 890 , 894 (9th Cir.1996) (“A person who lends money to pay off an encumbrance on property and secures the loan with a deed of trust on that property is not a volunteer for purposes of equitable subrogation.”); Katsivalis v. Serrano Reconveyance Co.,70 Cal.App.3d 200 ,138 Cal.Rptr. 620 , 625-28 (1977) (concluding lender who granted new mortgage was not a volunteer and was entitled to equitable subrogation, despite that new mortgage’s invalidity under California law).
Id. at 69. The court in Orcutt relied on multiple cases involving lenders who satisfied mortgages of other lenders and were still held not to be volunteers. Therefore, the Court concludes the Defendant is not a volunteer for purposes of eligibility for equitable subrogation, under the standard articulated in Orcutt.
Even if this Court were to distinguish this case from Orcutt and conclude the Defendant acted as a volunteer, the Court is no longer persuaded that the Vermont Supreme Court would find the Defendant’s potential volunteer status an impediment to the application of equitable subrogation, based upon the guidance from Restatement (Third) of Restitution and Unjust Enrichment. Although the Ver
Based on this review of state and federal law in Vermont, as well as the guidance from the Restatement, the Court concludes the Defendant is not ineligible for equitable subrogation based upon the first prong of the applicable test.
The undisputed material facts also demonstrate the Defendant has satisfied the second and third prongs of this test. The Plaintiffs do not dispute the Defendant was not primarily liable on any of the debts paid from the loan proceeds or that each of those debts was paid in full.
This brings the Court’s focus to the fourth prong: whether the subrogation would work an injustice on other parties. In the instant case, there are no subordinate or intervening lien holders who would be harmed by applying subrogation. The Court thus turns its attention to the impact subrogation would have on the Plaintiffs’ unsecured creditors. “Equitable subrogation ... is not simply based on whether a lender paid another’s debt. It contemplates a balancing of the equities between competing claimants.” In re Orcutt,
Finally, the Court must also consider the potential injustice subrogation would work on the Plaintiffs. The Plaintiffs argue the Defendant was negligent in failing to obtain Mrs. Jones’ signature, the Defendant could easily have avoided making this “error,” and its own negligence is the sole cause of the Defendant’s present predicament. This aspect of the Plaintiffs’ argument is not persuasive because negligence alone is not sufficient to defeat equitable subrogation.
The Court finds the Defendant has satisfied all four prongs of the equitable subro-gation test with respect to its request to subrogate up to the amount of the mortgage lien and property tax lien as of the date of its loan transaction with the Plaintiffs, and on that basis is entitled to an allowed secured claim of $77,558.25, secured by the Plaintiffs’ Property.
iii. The Defendant is Not Entitled To Equitable Subrogation as to the Balance of its Claim
The Defendant has not, however, demonstrated a right to equitable subrogation in an amount in excess of the amount of the liens on the Property at the time of its transaction with the Plaintiffs. The secured claim the Defendant seeks against the Property is premised on its having disbursed proceeds in that amount for the satisfaction of secured debts at the loan closing. If this relief were granted, the Defendant would also be secured by the Plaintiffs’ homestead for sums it loaned the Plaintiffs to satisfy the John Deere tractor secured debt in the amount of $18,343, the 2004 Ford Explorer secured debt in the amount of $9,711, and the mobile home secured debt, in the amount of $14,825, resulting in the Defendant having a greater security interest in the homestead property than existed at the time of the subject loan transaction. This exceeds the scope of equitable subrogation relief available.
Subrogation reverses this form of [unjust] enrichment by authorizing the claimant to assert the prior rights of the third-party obligee or lienor vis-á-vis the defendant and the defendant’s property, as those rights existed before the claimant’s assets were applied.
Restatement (Third) of Restitution and Unjust Enrichment § 57 (2011) (emphasis added). The Defendant can exercise only the rights the subrogor possessed.
The equitable doctrine of subrogation places the subrogee in the precise position of the one whose rights are subro-gated; the rights to which the subrogee succeeds are the same as, but no greater than, those of the person for whom he is substituted' — he cannot acquire any claim, security, or remedy that the sub-rogor did not have.
73 Am.Jur.2d Subrogation § 60 (emphasis added); see Chase v. Ameriquest Mortg. Co.,
Under equitable subrogation, the Defendant may only step into the shoes of the previous mortgagee and the taxing authority, and its allowed secured claim is secured by a lien on the real property in the amount of $77,558.26 — the exact amount of the liens against this real property on the date of the loan transaction. As to the three remaining debts that were secured on the date of the loan transaction and
“The amount recoverable by operation of equitable subrogation is limited by the ‘general rule ... that a subrogee is entitled to indemnity to the extent only of the money actually paid by him to discharge the obligation, or the value of the property applied for that purpose.’ ” Chase v. Ameriquest Mortg. Co.,
D. Relief Under the State Law Doctrine of Unjust Enrichment
Although most vigorously pursuing relief under the doctrine of equitable subro-gation, the Defendant also seeks relief under the broader doctrine of unjust enrichment. Having granted the Defendant’s request for a lien secured by the Plaintiffs’ real property, under equitable subrogation, in the amount of $77,558.26, the Court now considers the Defendant’s request that its remaining claim of $42,879 be allowed as a secured claim, under the equitable principle of unjust enrichment. In assessing the Defendant’s rights in this regard, the Court considers guidance from the Vermont courts, Restatement Third, and cases from other jurisdictions which address similar facts.
/. Vermont Law on the Issue of Equitable Liens
The Defendant argues it is entitled to a secured claim under the “broader category” of unjust enrichment under the facts of this case, in reliance upon Kellogg v. Shushereba,
The Vermont Supreme Court has not determined whether an equitable lien may be imposed in circumstances similar to the case at bar. The Vermont Supreme Court has issued a number of decisions addressing the right to an equitable lien on homestead properties, but those cases are generally inapposite, either because they involve different facts or a different
Significantly, in refusing to permit the creditor in Ripton an equitable lien, the Vermont Supreme Court stated “[i]f the orator was ignorant of the rights of the [husband and wife], it arose from its neglect in not examining the land records in its own office.” Id. at 76,
ii. Pertinent Guidance from Restatement Third on the Issue of Equitable Liens
In the absence of a definitive statement by the Vermont Supreme Court, this Court once again turns to the Restatement. “One of the most characteristic uses of equitable lien is to readjust transactions that have miscarried — because of mistake, inattention, or wrongful interference — depriving the claimant of an intended element of security.” Restatement (Third) of Restitution and Unjust Enrichment § 56 (2011). “Employed in this way, an equitable lien takes the place of the consensual lien that the claimant would have obtained if the transaction had gone as originally planned.” Id. However,
Id. (emphasis added). The Restatement gives no clear answer to the question presented, but clearly recognizes the delicacy of balancing one party’s right to relief under general notions of equity or fairness against the broader need to preserve the import of a statute, encouraging careful scrutiny and a nuanced analysis.
m. Law of Other Jurisdictions on The Issue of Equitable Liens
Courts in other jurisdictions have considered scenarios similar to the instant one, and they vary considerably in both their methodologies and results. They are divided roughly evenly on whether the facts at bar warrant imposition of an equitable lien. For example, in South Carolina, “[f]or an equitable lien to arise, there must be a debt, specific property to which the debt attaches, and an expressed or implied intent that the property serve as security for payment of the debt.” Chase Home Fin., LLC v. Risher,
Other courts have permitted the imposition of an equitable lien, but only in circumstances based upon fraud or other malicious conduct on the part of a debtor, reasoning that to do otherwise would permit a debtor to transform the homestead
Some courts limit the relief available under the remedy of an equitable lien to the same extent as relief under equitable subrogation would be limited. See Fishbein,
The final approach mirrors the predominant perspective of the Restatement and emphasizes the importance of staying true to the purpose of the underlying statute. For example, in Red River State Bank v. Reierson,
rv. The Three Primary Considerations For an Equitable Lien on Homestead Property
The foregoing survey of pertinent jurisprudence persuades this Court there are three primary- considerations which must guide the analysis of the Defendant’s right to an equitable lien. First, how much benefit, if any, has the non-signing spouse derived from the funds advanced by the Defendant? Second, how easily could the Defendant have avoided the mistake which gave rise to the request for an equitable lien? Third, to what extent would the granting of an equitable lien under
With respect to the first consideration, the record is clear that Mrs. Jones derived a substantial benefit from the Defendant’s advance of funds for the three loans which are the subject of the Defendant’s equitable lien request. The $42,879 in question was used to satisfy liens on marital property, enhancing the value of those assets to both Plaintiffs. The Defendant asserts the denial of an equitable lien would result in dramatically unjustly enriching the Plaintiffs. Indeed, it is true that denying the Defendant’s request for an equitable lien to secure this advance of funds, and relegating this portion of the Defendant’s claim to the status of a general unsecured claim, would result in a substantial windfall for the Plaintiffs at the Defendant’s expense.
As to the second consideration, the record is clear that, unlike some other equitable lien cases involving fraud or misconduct, the defect which led to the Defendant’s precarious situation is a product of the Defendant’s unilateral mistake — one which the Defendant could have avoided through the exercise of reasonable diligence. The Defendant, as a sophisticated commercial entity that engaged in residential lending in Vermont, had a duty to be aware of, and comply with, the requirements of the Vermont homestead statute. Additionally, the Defendant received a title commitment prior to advancing the funds which unambiguously required a proper mortgage from “Douglas R. Jones and spouse, if any, to [Defendant].” Doc. # 22-2 (emphasis added). The Defendant also had information conspicuously before it in the loan application that Mr. Jones was married. Moreover, all loan documents in the record are devoid of a signature line for Mrs. Jones and there is no evidence in the record that the Defendant made any attempt to procure Mrs. Jones’ signature. See claim # 13-2 in main case 13-10734. Based upon these facts, the Court finds the Defendant had ample opportunity to comply with the pertinent statute, and failed to do so. The Court concludes this consideration therefore weighs against the granting of the Defendant’s request for an equitable lien.
As to the third and final consideration, safeguarding the rights envisioned by the underlying statute, the Vermont Supreme Court has described the purpose of the Vermont homestead exemption, and homestead statutes in general, is “to protect homeownership from loss to creditors,” and “conserv[e] family homes.” Mercier v. Partlow,
v. Tailoring the Remedy to the Circumstances Presented
Under both federal and Vermont law, the Court has discretion to tailor an equitable remedy to the nature of the circumstances before it. See Cadle Co. v. Mangan (In re Flanagan),
“The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it. The qualities of mercy and practicality have made equity the instrument for nice adjustment and reconciliation between the public interest and private needs as well as between competing private claims.”
Electronic Specialty Co. v. International Controls Corp.,
In light of the Court’s analysis of the three considerations it deems most influential when considering whether to impose an equitable lien on homestead property, it finds it would be inequitable for the Court to grant the Defendant an equitable lien for the entirety of the sums it loaned to the Plaintiffs to satisfy debts secured by the Plaintiffs’ personal property, since that relief would excuse the Defendant’s negligence and significantly risk undermining the purpose of the homestead statute. It also finds it would be inequitable to deny the Defendant its request for an equitable hen entirely, since that would ignore the real and substantial benefit the Plaintiffs enjoyed from the Defendant’s loan of these monies. Since two of the three primary considerations described weigh in favor of the Plaintiffs and one weighs in favor of the Defendant, the Court determines it is fairest to fix the amount of the Defendant’s equitable lien at one-third of the sum it seeks.
The Court recognizes the question of whether and how much of an equitable lien to grant is not one that lends itself to a mathematically precise computation. It is more an art than a science. After careful scrutiny of all relevant factors, the nuances of this particular case, and the pertinent authority and related case law, the Court concludes this one-third / two-thirds allocation of rights between the parties is fair. It penalizes the Defendant for its failure to exercise reasonable due diligence and com
The Court will impose an equitable lien in favor of the Defendant in an amount equaling one-third of the amount the Defendant seeks, or $14,293, and add this to the previously allowed sum, as a secured claim against the Plaintiffs’ homestead property.
Conclusion
For the reasons set forth above, the Court concludes there are no material facts in dispute, summary judgment is proper, and each of the parties is entitled to partial relief as a matter of law. The Defendant’s claim in the amount of $153,359.70 is allowed as follows:
1. the Defendant is subrogated to the mortgage and property tax liens it satisfied at closing, for a secured claim in the amount of $77,558.26, secured by the Plaintiffs’ homestead property;
2. the Defendant does not seek secured status for the funds the Plaintiffs retained in cash from the closing in the amount of $14,408, or for an additional $18,514.70 of its claim, so those amounts are allowed as general unsecured claims;
3. the Defendant is granted an equitable lien in the amount of $14,293, and that amount is allowed as a secured claim, secured by the Plaintiffs’ homestead property; and
4. the balance of the Defendant’s claim, $28,586, is disallowed as a secured claim and allowed as a general unsecured claim.
Accordingly, the Defendant’s claim is allowed as a secured claim in the amount of $91,851.26, secured by the Plaintiffs’ homestead property, and allowed as a general unsecured claim in the amount of $61,508.44.
This memorandum constitutes the Court’s findings of fact and conclusions of law.
ORDER
Granting in Part Each of the Cross Motions for Summary Judgment and Determining Amount and Classification of the Defendant’s Claim
For the reasons set forth in the memorandum of decision of even date, IT IS HEREBY ORDERED that each of the cross motions for summary judgment is granted in part and denied in part.
IT IS FURTHER ORDERED that the Defendant’s claim in the amount of $153,359.70 is allowed as a secured claim in the amount of $91,851.26, secured by the Plaintiffs’ homestead property, and as a general unsecured claim in the amount of $61,508.44.
SO ORDERED.
Notes
. All citations to the docket refer to the instant adversary proceeding (# 13-1019) unless otherwise indicated.
. The Defendant did not file an opposition to the Plaintiffs' MSJ. Vermont Local Bankruptcy Rule 7056-l(a)(2) requires a party opposing summary judgment to file a written opposition no more than 21 days after the motion is served. However, in light of the Defendant’s contemporaneously filed MSJ, and the parties' stipulation concerning cross motions for summary judgment filed October 8, 2014 (doc. # 17), the Court treats the Defendant’s MSJ as written opposition to the Plaintiffs' MSJ, sufficient to satisfy Vt. LBR 7056-1(a)(2).
. The Defendant’s MSJ is silent on this issue, which the Court interprets as the Defendant’s acknowledgement of the ordinary operation of 27 V.S.A. § 141. Alternatively, the Court finds the Defendant has waived any argument on this issue.
. Although the Defendant invokes language from the Orcutt decision pertaining to this Court’s broad equitable powers, see Defendant's MSJ, p. 6, the Defendant’s requests for relief are limited to the state law doctrines of equitable subrogation, discussed here, and unjust enrichment, discussed separately below.
. In contrast to its proof of claim, in this adversary proceeding the Defendant seeks to designate less than all of its claim as secured.
. This group is comprised of the $74,788.31 first mortgage debt to SPS and the $2,769.95 debt owed to the Town of Sharon, both secured by the Plaintiffs' Property.
. This group is' comprised of the $18,343.00 VW Credit secured debt, secured by a John
. The four part test set forth in Orcutt is the product of widely accepted law from other jurisdictions.
. The plan confirmed February 13, 2014 treats the Defendant's claim as fully unsecured and does not provide for any payment to the Defendant on account of a secured claim. Consistent with that approach, the Plaintiffs have not included any mortgage expense on Schedule I (most recently amended on December 13, 2013). The confirmed plan proposes payments of $400 per month for 60 months, for a total distribution to holders of unsecured claims in the amount of approximately $5,800, amounting to a 3.4% dividend on unsecured claims. Of the $171,000 in unsecured claims, approximately $154,000 is the Defendant's claim (leaving only about $17,000 in other general unsecured claims). If, contrary to the Plaintiffs’ plan, the Defendant’s claim were allowed as secured in the amount the Defendant seeks, the pool of general unsecured claims would diminish to $50,000. If plan payments nonetheless remained at $400 per month, this would increase the dividend from 3.4% to approximately 11%. However, the amount of the monthly plan payment is dependent upon the amount of the Plaintiffs' monthly net income, and if the Defendant's claim were allowed as secured, then the Plaintiffs would need to include a mortgage payment in their regular monthly expenses, causing a dollar for dollar reduction in their monthly net income. The parties have not addressed this question or provided a computation of the financial impact subrogation would have on the treatment of unsecured creditors in this case. Assuming arguendo that the monthly mortgage payment to the Defendant would be roughly equivalent to the monthly payment due under the note of the prior mortgagor, this would add a monthly expense of approximately $1,250 and result in the Plaintiffs having negative net income of over $800. Presumably, this would place the Plaintiffs in a position where they would need to modify their mortgage substantially, surrender their home, or convert their case to a case under Chapter 7. In any of these events, the dividend to general unsecured creditors would be eliminated. Thus, for the class of general unsecured creditors, it appears denying subrogation may yield the best result for them, namely a 3.4% dividend.
. The Plaintiffs rely on an unpublished Vermont Superior Court case for the proposition that a lender's negligence is sufficient to prevent application of equitable subrogation. See Slaving v. Cendant Mortgage Corp., Superior Court of Vermont, Bennington, Docket Nos. 13-1-04, Bncv (2005). For the reasons set forth below, the Court finds the rationale of other cases more persuasive, and therefore chooses not to rely on the Slaving decision, particularly in light of the District Court’s admonition in Orcutt (which post-dates Slaving) that a party's negligence alone cannot constitute the sole basis for denying equitable subrogation. See Orcutt,
. With respect to collateral other than the real property, there is no dispute the 2004 Ford Explorer was destroyed in an accident, but the record contains insufficient information for the Court to determine the status of the collateral securing the other two debts (neither the tractor nor the mobile home described in the parties’ papers are listed on the Plaintiffs’ bankruptcy schedules).
. The Plaintiffs filed a copy of a very recent Vermont Supreme Court case, Birchwood Land Co. v. Krizan,
. This windfall would be particularly substantial with regard to Mr. Jones, as the record contains ample evidence that at least Mr. Jones and the Defendant bargained for, and intended, the Property to serve as collateral for the full amount of the loan from the Defendant.