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Deutsche Bank National Trust Co. v. Pike

United States Court of Appeals, First Circuit

February 19, 2019

DEUTSCHE BANK NATIONAL TRUST COMPANY, Trustee for FFMLT Trust 2005-FF2, Mortgage Pass-Through Certificates, Series 2005-FF2, Plaintiff, Appellant/Cross-Appellee,
v.
JENNIFER L. PIKE, Defendant, Appellee/Cross-Appellant.

          APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE [Hon. Joseph A. DiClerico, Jr., U.S. District Judge]

          Kevin P. Polansky, with whom Christine M. Kingston and Nelson Mullins Riley Scarborough LLP were on brief, for appellant.

          Stephen T. Martin, with whom The Law Offices of Martin & Hipple, PLLC was on brief, for appellee.

          Before Torruella, Lipez, and Thompson, Circuit Judges.

          LIPEZ, CIRCUIT JUDGE.

         In this diversity case, Deutsche Bank National Trust Company contends that the district court erred in concluding that its mortgage interest in a property in New London, New Hampshire, is subject to a homestead right of the property's resident, Jennifer Pike. In a cross-appeal, Pike contends that the district court erred in denying her post-judgment motion for attorney's fees. After careful review, we affirm both the rejection of Deutsche Bank's claims and the denial of Pike's request for attorney's fees.

         I.

         A. Factual Background

         William and Jennifer Pike were married in 2000.[1] In 2001, William bought the property at 34 Dogwood Lane in New London ("the Property"). Only William was listed on the deed, but Jennifer continuously resided at the address from the time of purchase through the filing of the present suit. In 2003, William obtained a loan from New Century Mortgage Corporation secured by a mortgage on the Property. Both William's and Jennifer's signatures were on this mortgage, which included a provision stating that "[b]orrower[] and [b]orrower's spouse . . . release all rights of homestead in the Property." Jennifer disputes that she signed the New Century mortgage and asserts that she only later became aware of its existence.

         In late 2004, William obtained another loan, secured by the Property, from First Franklin Financial Corporation, pursuant to which he again waived his homestead right. The parties agree that William did not obtain the First Franklin loan through fraud or other egregious misconduct. Jennifer did not sign the note or mortgage.[2] A few months later, the New Century loan balance was paid off and that mortgage was discharged.

         The Pikes subsequently executed several transfers of the Property between William, Jennifer, and a family trust. The Property was deeded back to William in 2007.[3] The First Franklin mortgage was assigned to Deutsche Bank in 2009.[4]

         The Pikes were divorced by decree on July 3, 2013. The decree included the following provision regarding the Property (strikethroughs in original; initialed, handwritten addition in italics):

         14. Marital Homestead:

A. Jennifer Pike is awarded the exclusive use and possession of the marital homestead located at 34 Dogwood Lane, New London, New Hampshire free and clear of any interest of William Pike.
B. Jennifer may remain in the home until it goes into foreclosure, or [their son] graduates high school.
C. If the house does not go [into] foreclosure and the parties can sell the home, the parties shall list the house for sale once [their son] graduates high school. The Parties will share equally any equity in the home.
D. The Parties will share equally the cost of any necessary home repairs over $500. If a repair is necessary, Jennifer will inform William of the repair via email and provide him an explanation of the repair needed and include a quote for the work, if possible. William will forward his share of the repair cost to the contractor directly if possible. If that is not possible, he will give his share of the repair cost to Jennifer within 30 days of the repair. [With respect to repairs necessary to preserve the habitability of the house, Jennifer will give notice to Bill of the need, and upon Bill's review, and inspection, and agreement that the repair is necessary, Bill shall share up to 50% of the cost of the Repair.]

         The decree also provides, "[e]xcept as otherwise provide[d] herein, each party shall sign and deliver to the other party any document that is needed to fulfill or accomplish the terms of this Decree within thirty (30) days of the request to do so."

         Deutsche Bank began foreclosure proceedings on the Property on July 11, 2013. About two weeks later -- on July 26 -- William deeded the Property to Jennifer, and the deed was recorded shortly thereafter. The deed states, "[t]his conveyance is in conformance with [the] divorce decree in the Matter of Jennifer Pike and William T. Pike, Jr."

         Jennifer subsequently filed a complaint in state court asserting a homestead right in the Property and seeking to enjoin Deutsche Bank from foreclosing. The state court entered summary judgment in Deutsche Bank's favor after determining that the Bank had standing to foreclose, and that Jennifer's assertion of a homestead right was premature. The New Hampshire Supreme Court affirmed. See Pike v. Deutsche Bank Nat'l Tr. Co., 121 A.3d 279 (N.H. 2015).

         B. Procedural Background

         Shortly after the conclusion of the litigation in state court, Deutsche Bank filed this suit in federal court seeking a declaratory judgment either that its interest in the Property is not subject to Jennifer's homestead right (Count I), or that it is entitled to equitable subrogation "as to the amount it paid to discharge the prior mortgage" (Count II). In support of its equitable subrogation claim, Deutsche Bank contends that, as successor to First Franklin, it is entitled to step into the shoes of New Century -- the 2003 lender -- and benefit from Jennifer's waiver of her homestead right in the New Century mortgage because funds from the First Franklin loan -- obtained in 2004 -- were used to pay off the New Century loan. Jennifer pleaded counterclaims asserting the priority of her homestead right over Deutsche Bank's interest.[5] The parties eventually cross-moved for summary judgment.

         Jennifer argued that she had a homestead right in the Property from the date of its purchase by virtue of her marriage to William and that the divorce decree did not automatically terminate her right. She also argued that Deutsche Bank could not demonstrate the presence of every element required for equitable subrogation under New Hampshire law. In particular, Jennifer asserted that there was a material factual dispute concerning whether the First Franklin loan funds were used to pay off the New Century loan. She further argued that it would be unjust for Deutsche Bank to rely on the homestead waiver in the New Century mortgage given her contention that she had not in fact signed that mortgage.

         For its part, Deutsche Bank argued that Jennifer's homestead right in the Property was extinguished or waived by the transfers after its purchase -- that is, the transfers of the Property between William, Jennifer, and a family trust before it was deeded back to William in 2007 -- or by the divorce decree. As to equitable subrogation, Deutsche Bank contended that all necessary elements were satisfied, and that Jennifer could not contest her signature on the New Century mortgage because she had not done so in the prior state litigation.

         The district court concluded that factual disputes remained concerning the effect of the divorce decree, and it therefore denied the parties' cross-motions for summary judgment and scheduled a bench trial. In her pretrial briefing, Jennifer argued for the first time that Deutsche Bank could not invoke equitable subrogation because it had not shown that William obtained the First Franklin loan by fraud or other egregious misconduct. In response, Deutsche Bank argued that fraud is not a precondition to equitable subrogation under New Hampshire law.

         In a pretrial order issued without prior notice to the parties, the district court explained that it viewed the applicability of equitable subrogation as "an issue of law that can be resolved without further factual development." Accordingly, the court ruled that, "as a matter of [New Hampshire] law, the circumstances in this case do not meet the threshold requirement of fraud or misconduct that would ...


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