Deutsche Bank National Trust Company, Trustee v. Pike
Filing
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ORDER denying 9 Motion to Dismiss for Failure to State a Claim. So Ordered by Judge Joseph A. DiClerico, Jr.(gla)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Deutsche Bank National
Trust Co., as Trustee
for FFMLT Trust 2005-FF2,
Mortgage Pass-Through
Certificates, Series 2005-FF2
v.
Civil No. 15-cv-304-JD
Opinion No. 2015 DNH 196
Jennifer L. Pike
O R D E R
Deutsche Bank is seeking a declaratory judgment that
Jennifer L. Pike is not entitled to a homestead exemption for
certain property on which Deutsche Bank holds the mortgage or,
alternatively, that she is subject to equitable subrogation of
her waiver of the homestead exemption in the first mortgage on
the property.
Pike moves to dismiss the case, arguing that
jurisdiction is lacking and that Deutsche Bank has not stated an
actionable claim for possession of the property because it
failed to plead its compliance with RSA chapter 540.
Deutsche
Bank objects to the motion.
Background
Pike moves to dismiss under Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6).
When considering a motion to
dismiss for lack of subject matter jurisdiction under Rule
12(b)(1), the court considers the facts alleged in the complaint
but may also consider “whatever evidence has been submitted,
such as depositions and exhibits.”
Carroll v. United States,
661 F.3d 87, 94 (1st Cir. 2011) (internal quotation marks
omitted).
The scope of a motion under Rule 12(b)(6) is
narrower.
Generally, the court is limited to the facts alleged
in the complaint, except that the court may consider documents
referred to or incorporated into the complaint and certain other
documents when their authenticity is not disputed.
Watterson v.
Page, 987 F.2d 1, 3-4 (1st Cir. 1993).
Pike states that for purposes of her motion to dismiss she
accepts as true all of the facts stated in Deutsche Bank’s
complaint.
Pike does not challenge any of the fifteen exhibits
Deutsche Bank filed with the complaint.
Therefore, the
background information is summarized from the complaint, and to
the extent necessary, from the exhibits submitted with the
complaint.
The property in question in this case is located at 34
Dogwood Lane, New London, New Hampshire.
Jennifer Pike was
married to William Pike when Margaret H. Jenkins deeded the
property to William in 2001.
In December of 2003, Jennifer and
William granted a mortgage on the property to New Century
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Mortgage Corporation as security for a loan of $225,000, which
is referred to as the First Mortgage.
Jennifer and William
released all rights of homestead as part of the First Mortgage.
In November of 2004, William obtained a loan in the amount
of $269,000, secured by a mortgage on the property, from First
Franklin Financial Corporation.
as the Second Mortgage.
That transaction is referred to
The loan for the Second Mortgage was
used in part to pay off the First Mortgage, which was discharged
on January 25, 2005.
William deeded the property to the Pike Family Trust in
April of 2005.
William and Jennifer, as trustees of the Pike
Family Trust, deeded the property to Jennifer in November of
2006.
Jennifer then deeded the property to William on February
6, 2007.
William filed a voluntary petition in bankruptcy under
Chapter 13 on February 6, 2007.
A year later, the bankruptcy
proceeding was converted to Chapter 7.
The Second Mortgage was assigned to Deutsche Bank in May of
2009.
Additional filings were made at the Merrimack County
Registry of Deeds to clarify the name of the holder of the
Second Mortgage.
William and Jennifer were divorced on July 3, 2013.
Deutsche Bank began foreclosure proceedings on the property on
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July 11, 2013.
As required by the divorce decree, William
transferred the property to Jennifer on July 26, 2013.
The
foreclosure sale was postponed from August 12, 2013, to October
11, 2013, to December 13, 2013.
Jennifer filed a petition in state court to enjoin the
December 13, 2013, foreclosure sale, and the Superior Court
issued an injunction.
Deutsche Bank moved for summary judgment
to remove the injunction, which was granted on August 14, 2014.
Jennifer appealed, and the New Hampshire Supreme Court affirmed.
Pike v. Deutsche Bank Nat’l Tr. Co., as Trustee, --- A.3d ---,
2015 WL 4266759 (N.H. Sup. Ct. May 13, 2015).
In that decision, the New Hampshire Supreme Court ruled
that Pike’s assertion of a homestead exemption did not support
an injunction against foreclosure.
The court agreed with the
Superior Court that Pike could assert a homestead exemption,
pursuant to RSA 480:8-a, even if a foreclosure occurred, with
the result that she could not show that she would be in
immediate danger of irreparable harm if the foreclosure were to
proceed.
The court also noted that a foreclosure would not
automatically cause her removal from the property.
Although the injunction was lifted, Deutsche Bank did not
begin foreclosure proceedings.
suit here.
Instead, Deutsche Bank filed
In the complaint, Deutsche Bank is seeking a
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declaratory judgment that its security interest in the property
is not subject to a homestead exemption claimed by Pike, or
alternatively, that it is entitled to equitable subrogation so
that any homestead exemption does not apply to the amount paid
to discharge the First Mortgage.
Deutsche Bank further seeks a
judgment that it may foreclose on the property and evict Pike.
Discussion
Pike moves to dismiss the declaratory judgment action on
the ground that the court lacks jurisdiction because Deutsche
Bank does not have standing to seek a declaratory judgment on
the issue of her homestead exemption or the issue is not ripe.
Pike also contends that this court lacks jurisdiction to evict
her from the property, which would require a possessory action
that cannot be heard in federal court.
Further, Pike asserts
that Deutsche Bank failed to state a claim for a possessory
action to evict her under RSA chapter 540.
In response, Deutsche Bank argues that the issue of Pike’s
right to a homestead exemption and whether equitable subrogation
would extinguish the exemption are justiciable controversies.
Deutsche Bank states that it has not brought a possessory action
or sought a writ of possession but instead is seeking only “that
the Court determine the viability of Pike’s claimed homestead
exemption and its entitlement to equitable subrogation.”
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Obj.
at 10.
Based on Deutsche Bank’s representation in its
objection, Deutsche Bank has abandoned that part of the
declaratory judgment action which seeks a judgment that it may
foreclose and that it may “evict the Defendant” from the
property.
Therefore, as narrowed through Deutsche Bank’s objection to
the motion to dismiss, the two issues presented in the
declaratory judgment action are whether Pike has a right to a
homestead exemption and, alternatively, whether Deutsche Bank is
entitled to equitable subrogation of the release of the
homestead exemption in the First Mortgage.
Pike’s motion
challenges the court’s jurisdiction to hear those claims.
A.
Standard
In considering a motion to dismiss for lack of jurisdiction
under Rule 12(b)(1), the court “construes the Complaint
liberally and treat[s] all well-pleaded facts as true, according
the plaintiff[] the benefit of all reasonable inferences.”
Town
of Barnstable v. O’Connor, 786 F.3d 130, 138 (1st Cir. 2015)
(internal quotation marks omitted).
The plaintiff who invokes
the court’s jurisdiction bears the burden of showing that it
exists.
Aversa v. United States, 99 F.3d 1200, 1209 (1st Cir.
1996).
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B.
Case or Controversy
Under the Declaratory Judgment Act, “[i]n a case of actual
controversy within its jurisdiction,” a federal court “may
declare the rights and other legal relations of any interested
party seeking such declaration . . . .”
28 U.S.C. § 2201.
“[A]
case of actual controversy” under the Act is the same as a case
or controversy that is justiciable under Article III of the
United States Constitution.
549 U.S. 118, 126 (2007).
MedImmune, Inc. v. Genentech, Inc.,
To satisfy the Article III case-or-
controversy requirement, “the dispute [must] be definite and
concrete, touching the legal relations of the parties having
adverse legal interests, and [must] be real and substantial and
admit of specific relief through a decree of a conclusive
character, as distinguished from an opinion advising what the
law would be upon a hypothetical state of facts.”
Id. at 127.
Standing focuses on the plaintiff’s relationship to the
dispute and requires the plaintiff to show “(1) an injury in
fact, (2) a sufficient causal connection between the injury and
the conduct complained of, and (3) a likelihood that the injury
will be redressed by a favorable decision.”
Susan B. Anthony
List v. Driehaus, 134 S. Ct. 2334, 2341 (2014).
Ripeness,
another aspect of the case or controversy analysis, depends on
whether the issues are fit for judicial decision and what
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hardship will ensue if the dispute is not resolved.
Roman
Catholic Bishop of Springfield v. City of Springfield, 724 F.3d
78, 89 (1st Cir. 2013).
The parties have not addressed this plethora of standards
in any detail.
Rather than challenging Deutsche Bank’s standing
to bring its claims, Pike appears to argue that no case or
controversy exits as to the issue of her homestead exemption
because Deutsche Bank has not begun foreclosure proceedings or a
possessory action, and therefore, she has not asserted a
homestead exemption.
Deutsche Bank contends the parties’
litigation in state court demonstrates that a live controversy
about Pike’s homestead exemption exists and is justiciable.
Under New Hampshire law, “[e]very person is entitled to
$100,000 worth of his or her homestead, or of his or her
interest therein, as a homestead.”
RSA 480:1.
Pike asserted
the homestead exemption and successfully enjoined the previous
foreclosure proceeding, until summary judgment was affirmed in
Deutsche Bank’s favor.
Although the New Hampshire Supreme Court
held that Pike’s claim of a homestead exemption was premature
because it could be raised even after foreclosure, that ruling
does not preclude jurisdiction here.
See Verizon New England,
Inc. v. Int’l Bhd. of Elec. Workers, Local No. 2322, 651 F.3d
176, 189-90 (1st Cir. 2011) (holding that denial of an
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injunction does not preclude a declaration of disputed rights
when the court is asked to determine the legal significance of
past events).
Deutsche Bank’s claims for declaratory judgment are not
contingent on facts that might be developed in the course of a
future foreclosure proceeding or a possessory action.
Instead,
Deutsche Bank relies on existing documents and past events to
allege that Pike is not entitled to a homestead exemption.
Specifically, Deutsche Bank alleges that Pike released her
homestead exemption by transferring the property to William in
February of 2007, that the exemption was extinguished by the
divorce decree in July of 2013 while the property was owned by
William, and that Pike waived or subordinated her exemption
under the terms of the divorce decree.
Alternatively, Deutsche
Bank claims that it is entitled, by equitable subrogation, to
the protection of the homestead exemption waiver in the First
Mortgage.
As such, the claims are real and substantial, not
hypothetical.
See MedImmune, 549 U.S. at 127.
Further, Deutsche Bank argues that a declaratory judgment
on the issue of the homestead exemption addresses its risk of
loss in a foreclosure action.
In particular, a judgment denying
the claims would allow Deutsche Bank to avoid the expense of a
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foreclosure proceeding and a possessory action if its recovery
would be significantly reduced by the homestead exemption.
In sum, the circumstances presented here show that a live
case or controversy exists about whether Pike is entitled to a
homestead exemption.
A declaratory judgment on the claims
Deutsche Bank presents would provide specific relief, not an
advisory opinion based on hypothetical facts.
Deutsche Bank has
standing to pursue its declaratory judgment action.
Therefore,
the court is satisfied that jurisdiction exists to hear the
declaratory judgment claims in this case.
C.
Declaratory Judgment Act
Although not raised by the parties, the Declaratory
Judgment Act only “confers a discretion on the courts rather
than an absolute right upon the litigant” to have claims
decided.
Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995);
accord MedImmune, 549 U.S. at 136.
For that reason, even when
subject matter jurisdiction exists, a court may decline to enter
a declaratory judgment if it determines “that a declaratory
judgment will serve no useful purpose,” meaning that
“considerations of practicality and wise judicial
administration” counsel against adjudicating the claims.
Id. at
288; see also Denovellis v. Shalala, 124 F.3d 298, 314 (1st Cir.
1997) (concluding that declaratory judgment claim to address
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employer’s discriminatory intent with no opportunity for relief
would be “a fruitless endeavor”).
A declaratory judgment is
appropriate, however, when the judgment would relieve the
parties of uncertainty as to their legal rights.
See, e.g.,
Sophos, Inc. v. RPost Holdings, Inc., 2014 WL 7409588, at *2 (D.
Mass. Dec. 30, 2014) (deciding to hear declaratory judgment
action to “relieve [plaintiff] of uncertainty as to any
infringement of the Defendants’ patents”).
In this case, no parallel state court proceeding is pending
and the case was not removed from state court.
In the absence
of a competing state forum or proceeding, issues that often
inform the decision of whether to exercise discretion to hear a
declaratory judgment action do not pertain here.
Cf. Kiely v.
Canty, --- F. Supp. 3d ---, 2015 WL 1959198, at *4 (D. Mass.
Apr. 30, 2015) (listing factors to consider when case was
removed or state court proceeding is pending); Seaton Ins. Co.
v. Clearwater Ins. Co., 736 F. Supp. 2d 472, 474-75 (D.R.I.
2010).
Although Deutsche Bank’s requests for a declaratory
judgment are based on state law, in the absence of a parallel
state proceeding, considerations of practicality and wise
judicial administration do not necessarily weigh in favor of
dismissing the declaratory judgment action.
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Pike has not argued
that the court should decline to exercise its discretion in this
case.
Further, as is noted above, a declaratory judgment on the
issues raised by Deutsche Bank will serve a useful purpose by
establishing whether Pike is entitled to a homestead exemption.
Therefore, the court, in its discretion, will not dismiss
the case.
Conclusion
For the foregoing reasons, the defendant’s motion to
dismiss (document no. 9) is denied.
SO ORDERED.
__________________________
Joseph DiClerico, Jr.
United States District Judge
October 13, 2015
cc:
Michael P. Robinson, Esq.
Stephen T. Martin, Esq.
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