Cornell v. Envoy Mortgage, Ltd.

Filing 30

///ORDER Affirming the bankruptcy court's decision in all respects; denying the 5 Trustee's Motion to Certify to the New Hampshire Supreme Court. So Ordered by Judge Steven J. McAuliffe.(lat) Modified on 3/20/2017 to add further description of order to docket text. (jbw).

UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE

Olga L. Gordon, Trustee for the
Chapter 7 Estate of Licka Hosch,
Appellant and Cross-Appellee
v.

Case No. 16-cv-307-SM
Opinion No. 2017 DNH 050

Envoy Mortgage, Ltd.,
Appellee and Cross-Appellant

O R D E R

This is a consolidated appeal and cross-appeal from a
decision by the United States Bankruptcy Court for the District
of New Hampshire granting the motion of Appellee and CrossAppellant, Envoy Mortgage Ltd. (“Envoy”), to dismiss the
complaint filed by the Chapter 7 Trustee for the Estate of Licka
Hosch.

For the reasons discussed, the bankruptcy court’s

decision is affirmed in all respects.

The Trustee’s motion to

certify a question of law to the New Hampshire Supreme Court is
denied.

Standard of Review
The parties agree that this is a “core” proceeding under
28 U.S.C. § 157(b)(2).

Accordingly, this court reviews the

bankruptcy court’s conclusions of law de novo.

Its factual

findings are, however, entitled to deference and are reviewed
for clear error.

See Sheridan v. Michels (In re Sheridan), 362

F.3d 96, 100 (1st Cir. 2004); White v. Gordon, 558 B.R. 15, 18
(D.N.H. 2016); Bates v. CitiMortgage, Inc., 550 B.R. 12, 16
(D.N.H.), aff'd, 844 F.3d 300 (1st Cir. 2016).

Background
The Bankruptcy Court’s factual findings are not in dispute.
In November of 2013, in connection with the purchase of real
estate in Hudson, New Hampshire (the “Property”), Licka Hosch
executed a promissory note to Envoy, secured by a mortgage deed
to the Property.

Hosch defaulted on her obligations under the

note and, on July 30, 2015, Envoy conducted a foreclosure sale,
at which it was the high bidder.

On August 27, 2015 - before Envoy recorded a foreclosure
deed - Hosch sought bankruptcy protection by filing a Chapter 13
petition.

Under precedent of the bankruptcy court for this

district, Envoy was required to obtain relief from the automatic
stay before recording the foreclosure deed.
235 B.R. 519, 526 (Bankr. D.N.H. 1999).

See In re Beeman,

Accordingly, on

September 22, 2015, Envoy filed a motion seeking relief from the
automatic stay.

2 

On October 6, 2015, before the bankruptcy court ruled on
the motion for relief from the stay, Hosch moved the bankruptcy
court to convert her case to a Chapter 7 proceeding.
motion was granted and the Trustee was appointed.

That

The following

day, the Trustee recorded in the registry of deeds a notice
asserting her rights as a lien creditor against the Property
under the provisions of 11 U.S.C. § 544.1

On October 14, 2015, in the absence of any objection, the
bankruptcy court granted Envoy’s motion for relief from stay in
a form order.

But, pursuant to Federal Bankruptcy Rule of

Procedure 4001(a)(3), it stayed the effect of that order for
another 14 days.

Finally, on November 3, 2015 - 96 days after

the foreclosure sale, 28 days after the case was converted to a
Chapter 7 proceeding, and six days after the expiration of the
stay imposed by Rule 4001(a)(3) - Envoy recorded the foreclosure
deed in the registry of deeds.

In December of 2015, the Trustee commenced an adversary
proceeding, in which she advanced three claims against Envoy:

1

By order dated September 29, 2016, the court granted the
parties’ assented-to motion to amend the caption in this case,
in recognition of the fact that the original Trustee, Mark P.
Connell, had been replaced by a new Trustee, Olga L. Gordon.
For ease of reading, the court will use feminine pronouns
throughout this order when referring to the Trustee.

3 

In Counts I and II, the Trustee seeks a declaratory
judgment pursuant to 11 U.S.C. § 544(a)(1) and/or
(a)(2) that the Trustee has a first position lien on
the Property that is superior to Envoy’s ownership
interest by virtue of [her] intervening lien and
Envoy’s untimely recordation of the foreclosure deed
and affidavit. . . . [I]n Count III, which is framed
in terms of disallowance of a secured claim pursuant
to 11 U.S.C. § 506(a)(1), the Trustee essentially
requests a declaration that “Envoy’s status as the
mortgage holder merged, under the Common Law Doctrine
of Merger, with [its] ownership interest in the
property” such that the estate’s interest in the
Property has priority over Envoy’s ownership interest.

Bankruptcy Order at 9 (document no. 2 at 83).

Envoy moved to

dismiss all three of the Trustee’s claims, asserting that it
timely recorded the foreclosure deed and, therefore, took title
to the Property free and clear of all encumbrances which did not
have priority over its mortgage, including the Trustee’s lien.
Alternatively, Envoy asserted that even if it recorded the
foreclosure deed late, the effect of an untimely recording would
merely render the foreclosure sale void as to the Trustee.

But,

said Envoy, its mortgage would remain in place, with priority
over the subsequently-recorded Trustee’s lien.

The Bankruptcy court held that: (1) Envoy failed to record
the foreclosure deed in a timely manner, but (2) “Envoy’s
mortgage was not extinguished by the recording of the
foreclosure deed under the doctrine of merger.”

4 

Bankruptcy

Order at 19.

Accordingly, the bankruptcy court concluded that,

“Envoy’s mortgage remains unforeclosed and senior in priority to
the Trustee’s asserted lien rights.”

Id.

The bankruptcy court

then held that the Trustee’s complaint failed to state any
viable claims and it granted Envoy’s motion to dismiss.

On appeal, the parties advance two arguments.

The Trustee

asserts that the foreclosure sale and subsequent (though
untimely) recording of the foreclosure deed were effective to
transfer title to the Property to Envoy, but subject to the
Trustee’s rights as a priority lien creditor.

According to the

Trustee, when Envoy eventually recorded its foreclosure deed, it
took title to the property and its mortgage “merged” with its
fee interest.

And, because Envoy recorded that foreclosure deed

beyond the statutorily prescribed time (i.e., “late”), New
Hampshire’s foreclosure statute provides that the Trustee’s
intervening lien was not extinguished.

So, says the Trustee,

the bankruptcy court erred in concluding that Envoy’s mortgage
remains a valid encumbrance on the Property, superior to her
lien.

Envoy, on the other hand, does not take issue with the
bankruptcy court’s conclusion that its mortgage is superior to
the Trustee’s lien, but it does assert that the bankruptcy court

5 

erred in concluding that it failed to record its foreclosure
deed in a timely manner (and, therefore, must conduct a new
foreclosure sale to extinguish the Trustee’s lien and take clear
title to the Property).

Discussion
I.

Governing Law.
Under New Hampshire law, a mortgagee that has exercised the

statutory power of sale must record a foreclosure deed (along
with a copy of the notice of sale and a foreclosure affidavit)
in the appropriate registry of deeds within 60 days of the
foreclosure sale.

N.H. Rev. Stat. Ann. (“RSA”) 479:26, I.

There is, however, a “safe harbor” provision which provides
that, “If such recording is prevented by order or stay of any
court or law or any provision of the United States Bankruptcy
Code, the time for such recording shall be extended until 10
days after the expiration or removal of such order or stay.”
Id.

Upon recording the foreclosure deed, the statute provides

that “title to the premises shall pass to the purchaser free and
clear of all interests and encumbrances which do not have
priority over such mortgage.”

RSA 479:26, III.

6 

Finally, the statute addresses (or attempts to address) the
situation in which a foreclosure deed is not timely recorded,
providing:

Failure to record said deed and affidavit within 60
days after the sale shall render the sale void and of
no effect only as to liens or other encumbrances of
record with the register of deeds for said county
intervening between the day of the sale and the time
of the recording of said deed and affidavit.

RSA 479:26, II (emphasis supplied).

Here, the parties disagree

as to the legal consequences that follow when a mortgagee fails
to record a foreclosure deed in a timely manner and, prior to
recordation but after the foreclosure sale, an intervening lien
has attached to the property.

II.

The Foreclosure Deed was Untimely Recorded.
The bankruptcy court reasoned that even if Envoy was

required to seek relief from the automatic stay when the
debtor/mortgagor initially sought Chapter 13 protection, the
“stay terminated on October 6, 2015, upon the conversion of the
case to Chapter 7.”

Bankruptcy Order at 13.2

Accordingly, the

2

A lengthy discussion of the applicable bankruptcy precedent
is not necessary to resolve the pending disputes. Nor,
importantly, has either party asked this court to resolve any
questions about the validity of that precedent. It is
sufficient to note that existing precedent (although subject to
some criticism) seems to require a mortgagee to obtain relief
from the automatic stay before recording a foreclosure deed

7 

bankruptcy court held that Envoy was required to record its
foreclosure deed within ten days of the date on which the case
was converted to Chapter 7 — that is, on or before October 16.
See RSA 479:26, I (the “safe harbor” provision).

And, because

Envoy did not record its foreclosure deed until November 13, the
bankruptcy court concluded that it was untimely under the
statute.

But, says Envoy, if its pending motion for relief had been
rendered moot by virtue of the conversion of the debtor’s case
to a Chapter 7 proceeding, the bankruptcy court would not have
(or should not have) ruled on the merits of the motion.
did.

Yet, it

Consequently, Envoy asserts that it properly waited until

the bankruptcy court ruled on its motion and then timely
recorded the foreclosure deed within ten days of the effective
date of the order, as permitted by RSA 479:26, I.

when, subsequent to the foreclosure sale, the mortgagor has
filed a Chapter 13 petition. See In re Beeman, 235 B.R. 519,
526 (Bankr. D.N.H. 1999). But see TD Bank, N.A. v. LaPointe,
505 B.R. 589 (B.A.P. 1st Cir. 2014) (criticizing the holding in
Beeman). It is, however, plain that in the context of a Chapter
7 bankruptcy, the automatic stay does not apply and, therefore,
the foreclosing mortgagee need not seek relief prior to
recording a foreclosure deed. See In re Hazleton, 137 B.R. 560
(Bankr. D.N.H. 1992).

8 

The bankruptcy court considered, but rejected, that
argument.

In construing the scope and import of its own order

granting Envoy’s motion for relief from the automatic stay, the
bankruptcy court noted that despite the fact that the case had
been converted to a Chapter 7 proceeding, Envoy still needed
relief from the automatic stay to perform some of the acts
referenced in its motion.

Specifically, the court pointed out

that Envoy’s motion for relief sought not only authorization to
record the foreclosure deed, but also permission to commence
eviction proceedings against the debtor.

See Bankruptcy Order

at 14 (noting that Envoy stated that it wished to “avail itself
of other State Law Remedies” including, for example, “pursuing
the eviction of the Debtor”) (quoting Envoy’s Motion for Relief
from the Automatic Stay).

And, regardless of whether the

debtor’s case was proceeding under Chapter 7 or Chapter 13,
Envoy needed relief from the stay to begin eviction proceedings.
Bankruptcy Order at 14.

So, the analysis goes, Envoy’s motion

for relief from the automatic stay did not become entirely moot
by virtue of the conversion to Chapter 7.

The bankruptcy court held that when it granted relief from
the automatic stay, it was merely authorizing Envoy to pursue
whatever state law remedies it might have against the debtor
arising out of the foreclosure process (including eviction

9 

proceedings); it was not addressing Envoy’s ability to record
the foreclosure deed, since that issue had been resolved upon
the conversion to a Chapter 7 proceeding.

Id. at 15 (holding

that its order granting Envoy’s motion for relief did “no more
than lift the stay to the extent the stay actually applied on
October 14, 2015.

To the extent that the stay did not apply to

certain acts identified in the Motion for Relief, the court was
not required to render an advisory verdict”).

The bankruptcy

court’s interpretation of the intent and effect of its own order
cannot be said to constitute an error of law.

Finally, Envoy seems to suggest that despite the conversion
of the debtor’s case to a Chapter 7 proceeding, it still needed
relief from the automatic stay before recording the foreclosure
deed, because the Trustee had recorded a lien against the
Property - a lien that would have been extinguished had Envoy
timely recorded the foreclosure deed.

According to Envoy:

[T]he Trustee’s Asserted § 544 Lien itself became
property of the estate protected by the automatic
stay. See 11 U.S.C. § 541(a)(7) (including within the
definition of property of the estate “any interest in
property that the estate acquires after the
commencement of the case.”). Accordingly, were Envoy
to record its foreclosure deed and thereby extinguish
the Trustee’s Asserted § 544 Lien absent stay relief,
it would have “exercise[d] control over property of
the estate” in violation of the automatic stay. 11
U.S.C. § 362(a)(3).

10 

Envoy’s Reply Brief (document no. 29) at 3.
interesting point.
it.

Envoy raises an

There are, however, several problems with

First, it does not appear that Envoy presented that

argument to the bankruptcy court and, therefore, it seems not to
have been properly preserved on appeal.
Dismiss at 6 (document no. 2 at 26).

See Envoy’s Motion to

Additionally, even if that

issue had been properly preserved, Envoy’s argument is not
developed or adequately briefed.

Among other things, Envoy

invokes no legal precedent (whether binding or merely
persuasive) to support its position.

See Envoy’s Appellate

Brief (document no. 23) at 22; Envoy’s Reply Brief (document no.
29) at 3.

Nor does Envoy discuss why the issue is not governed

by the holding in Hazelton (in which the bankruptcy court held
that a foreclosing mortgagee need not seek relief from the
automatic stay in order to record its foreclosure deed).

Given

these circumstances, the court declines to address Envoy’s
argument and deems it forfeited.

See, e.g., Hannon v. ABCD

Holdings, LLC (In re Hannon), 839 F.3d 63, 70 (1st Cir. 2016);
Noonan v. Rauh (In re Rauh), 119 F.3d 46, 50–51 (1st Cir. 1997).

The bankruptcy court’s conclusion that Envoy’s foreclosure
deed was not timely recorded under New Hampshire’s foreclosure
statute is affirmed.

11 

III. RSA 479:26 and The Merger Doctrine.
A.

The Trustee Properly Preserved Her Issues for Appeal.

As a preliminary matter, Envoy asserts that the Trustee
failed to properly raise/preserve the argument she now urges in
her appeal - that is, whether New Hampshire law permits Envoy to
“re-foreclose” on the Property, having already foreclosed its
mortgage and then recorded a foreclosure deed, albeit in an
untimely manner.

The court disagrees.

The Trustee frames the issue in a somewhat odd manner,
since the bankruptcy court addressed it as a question of lien
priority, and did not specifically discuss Envoy’s ability to
re-foreclose its mortgage.

Nevertheless, it is plain that the

Trustee did present her “re-foreclosure” argument to the
bankruptcy court.

See, e.g., Bankruptcy Order at 12 (“[T]he

Trustee asserts that the effect of Envoy’s recording of the
foreclosure deed was . . . to merge its mortgage interest and
ownership interest into a unified title. . . . [The Trustee
argues that] Envoy’s mortgage was extinguished and now cannot be
re-foreclosed as to the Trustee’s intervening lien rights.”)
(emphasis supplied).

The issue has, therefore, been properly

preserved for appeal.

12 

B.

The Trustee’s Arguments on Appeal.

The Trustee asserts that when Envoy recorded its
foreclosure deed, RSA 479:26, II, dictated that Envoy took title
to the Property, subject to the Trustee’s intervening § 544
Lien.

And, says the Trustee, Envoy cannot extinguish that lien

by “re-foreclosing” its mortgage.

In support of her position,

the Trustee advances two arguments.

First, she asserts that

upon unification of Envoy’s equitable interest in the property
(its mortgage) with legal title to the property (via recordation
of the foreclosure deed), the equitable interest merged into the
legal interest and the mortgage was extinguished.

Consequently,

says the Trustee, that mortgage cannot be “re-foreclosed.”
Next, the Trustee relies upon what she claims is the proper
interpretation of RSA 479:26, II, which, she says, operates to
“punish” purchasers at foreclosure sales should the mortgagee
record the foreclosure deed beyond the time provided by statute.
According to the Trustee, that “punishment” takes the form of
forcing the purchaser at the foreclosure sale to take title to
the property subject to any intervening liens.

The Trustee’s latter argument is based upon a 1992
amendment to RSA 479:26, II, which altered three words in the
statute.

Prior to the amendment, the statute provided:

13 

Failure to record said deed and affidavit within the
statutory period shall render the sale void and of no
effect if there are liens or other encumbrances of
record with the register of deeds for said county
intervening between the day of the sale and the time
of recording of said deed and affidavit.

RSA 479:26, II (1971) (emphasis supplied).

As amended in 1992,

the statute currently provides:

Failure to record said deed and affidavit within 60
days after the sale shall render the sale void and of
no effect only as to liens or other encumbrances of
record with the register of deeds for said county
intervening between the day of the sale and the time
of recording of said deed and affidavit.

RSA 479:26, II (1992).

The Trustee argues that the amendment

not only changed more than 150 years of established common law
related to the doctrine of merger, but it also imposed a new
“penalty” upon all purchasers at foreclosure sales whenever the
mortgagee fails to record the foreclosure deed in a timely
manner under the statute.

The bankruptcy court properly

rejected those arguments.

As the bankruptcy court observed when addressing the
Trustee’s views about merger and the proper interpretation of
RSA 479:26, it was not “writ[ing] on a blank slate.”
Order at 16.

Bankruptcy

More than twenty years ago, this court (DiClerico,

J.) considered, and resolved, precisely those questions.

14 

See

FDIC v. Holden, No. 92-cv-455-JD, 1994 WL 263691 (D.N.H. Jan.
26, 1994).

But, counters the Trustee, Holden was wrongly

decided, and the bankruptcy court erred in relying upon it.

The

court disagrees.

In Holden, the FDIC foreclosed its mortgage but, before it
recorded the foreclosure deed, a third party - Holden - recorded
an encumbrance against the property, in the form of a mortgage.
When the FDIC failed to record its foreclosure deed in a
statutorily timely manner, Holden began foreclosure proceedings
on her mortgage.

The FDIC obtained a preliminary injunction,

enjoining the foreclosure.

The parties then moved for summary

judgment, each invoking RSA 479:26 and arguing that its lien had
priority over the other’s.

Alternatively, argued Holden, the

FDIC’s mortgage was extinguished by the doctrine of merger.

The

court disagreed with both of Holden’s arguments and held “as a
matter of law that the mortgage of the FDIC is senior in
interest to [Holden’s] mortgage pursuant to RSA 479:26, II.”
Id. at *6.

Judge DiClerico’s opinion in Holden is thoughtful,
thorough, and persuasive.

It need not be recounted in detail.

It is sufficient to note a few things.

15 

First, by way of

background, the court observed that before the 1992 amendments
to RSA 479:26,

if there were intervening interests on record, a sale
of property would be void ab initio if the foreclosure
deed was recorded after the statutory period. For
title to pass under these circumstances, the seller
was required to foreclose the mortgage again so that
formal notice would be issued to those with
intervening interests.

Holden, 1994 WL 263691 at *2 (emphasis supplied).

In other

words, before the 1992 amendments, the untimely recording of a
foreclosure deed rendered the sale void as to all lien holders
(if any liens had been recorded after the sale); title did not
pass to the high bidder upon the untimely recordation of the
foreclosure deed; and to properly exercise the statutory power
of sale, the mortgagee had to re-initiate the entire foreclosure
process.

Thus, the statute plainly contemplated that the

mortgagee would “re-foreclose” the mortgage.

Under the statute

as presently written, however, title to the underlying property
does pass upon the untimely recording of the foreclosure deed,
but the foreclosure sale is “void and of no effect” with respect
to intervening liens attaching to the property after the sale,
but before the foreclosure deed is recorded.

As was the case in

Holden, the question presented here is: What does that mean?

16 

The Holden court reasoned that because the foreclosure sale
was void as to Holden’s intervening mortgage, “it is reasonable
to conclude from the plain meaning of the statutory language
that the status quo existing just prior to the foreclosure sale
remains, namely, that the FDIC has a mortgage interest that is
unforeclosed as to Holden’s intervening mortgage and it is
senior to Holden’s mortgage because it was recorded prior
thereto.”

Id. at 3.

The court went on to note:

The foreclosure sale was “void and of no effect” as to
the Holden mortgage. Therefore, the recording of the
foreclosure deed did not extinguish the FDIC’s
mortgage because that mortgage was unforeclosed as to
the Holden mortgage. Stated another way, the
foreclosure deed could not have its usual legal effect
(i.e., extinguishing a mortgage) when the statute
declares a condition precedent to that effect (i.e.,
the foreclosure sale) to be “void and of no effect.”
Furthermore, the recording of the foreclosure deed did
not alter the position of the FDIC’s mortgage as
senior to Holden’s mortgage, a fact established by
their recording dates.

Id.
The court then discussed, in detail, Holden’s contention
that when the FDIC recorded the foreclosure deed, its equitable
interest in the property (the mortgage) merged into its legal
interest in the property (fee title) and, therefore, the
mortgage was extinguished and could not be “re-foreclosed.”
Parenthetically, and by way of background, it should be noted

17 

that the common law merger doctrine, in its most general terms,
provides that:

[W]hen two consecutive estates in land are held by the
same person, the estates coalesce into one unless the
owner intends to keep them separate. Even though this
centuries-old principle developed initially as a title
simplification device, it took root in the law of
mortgages as well. As applied in the mortgage
setting, the theory holds that when a mortgagee’s
interest and a fee title become owned by the same
person, the lesser estate, the mortgage, merges into
the greater, the fee, and is extinguished unless the
holder intends a contrary result.

Restatement (Third) of Property (Mortgages) § 8.5, comment a
(1997) (emphasis supplied).

In rejecting Holden’s merger argument, the Holden court
first observed that the “statute does not explicitly provide
whether the power of sale mortgage is extinguished or remains in
effect as to intervening interests.”

Id. at *2.

It then

concluded that long-standing and well-recognized exceptions to
the common law merger doctrine prevented the FDIC’s mortgage
from merging into its legal title.

Id. at *4-6 (citing Factors’

& Traders’ Ins. Co. v. Murphy, 111 U.S. 738, 744 (1884) and
Stantons v. Thompson, 49 N.H. 272, 279 (1870)).

That is, in the

context of a foreclosure sale, a merger of interests does not
occur when (as is the case here) it is contrary to the intention
of the mortgagee, or when an intervening lien prevents the

18 

entire legal and equitable interests from uniting in a single
entity.

Indeed, as the New Hampshire Supreme Court has

observed:

[W]hen the estates of the mortgagee and mortgagor are
united in the former, he has in equity an election to
keep the mortgage title on foot, and that wherever it
is for his interest by reason of some intervening
title or other cause, that the mortgage should be
upheld as a source of title, it will not at law be
regarded as merged.
* * *
Indeed it may properly be said that when there is an
intervening estate, there can be no merger from the
mere union of the equitable and legal estates. . . .
In fact, the doctrine of merger, springs from the fact
that when the entire equitable and legal estates are
united in the same person, there can be no occasion to
keep them distinct, for ordinarily it could be of no
use to the owner to keep up a charge upon an estate of
which he was seized in fee simple, but if there is an
outstanding, intervening title, the foundation for the
merger does not exist, and as matter of law, it is so
declared.

Stantons v. Thompson, 49 N.H. 272, 279 (1870) (emphasis
supplied) (citations omitted).

When, as here, an intervening

lien arises between the mortgagee’s equitable interest and its
legal interest, there cannot be any merger of those interests.

The holding in Holden is entirely consistent with Stantons
and long-standing, firmly-established principles of New
Hampshire’s common law.

It is also consistent with the

19 

Restatement, which provides, quite unequivocally, that “the
doctrine of merger does not apply to mortgages or affect the
enforceability of a mortgage obligation.”
of Property (Mortgages) § 8.5.

Restatement (Third)

And, finally, it is entirely

consistent with the language of RSA 479:26, II.

The bankruptcy

court did not err in relying upon Holden in resolving the issues
before it.

But, the Trustee argues, there is a point that the Holden
court did not consider.

Even if Envoy’s mortgage still exists,

the amendment to RSA 479:26, II, and the legislative history of
that amendment, evidence the legislature’s intent to preclude a
mortgagee in Envoy’s position from “re-foreclosing” its
mortgage.

Referring to the sparse legislative history of that

amendment (which was, itself, only a small part of more
substantive amendments to the foreclosure statute), the Trustee
asserts that the New Hampshire legislature intended the threeword change to “clarif[y] the ramifications of failing to record
the deed and affidavit within 60 days after the foreclosure sale
with regard to intervening creditors.”

Amended Analysis of

Senate Bill No. 150, 1991 Session (document no. 2 at 63)
(emphasis supplied).

In the Trustee’s view, the word

“ramifications” should be construed to mean “penalties” (rather
than, say, “effects” or “consequences” or “results”).

20 

See

Trustee’s Appellate Brief at 11 (asserting that the “amendment
to RSA 479:26, II sets forth the intent of the Legislature to
penalize (‘ramifications’) any lender who fails to comply with
the mandate.”).

Thus, says the Trustee, because the legislature

amended the statute to “clarify the ramifications” of a latefiled foreclosure deed, it must necessarily have intended to
abrogate the common law and preclude the mortgagee from
exercising its rights under the mortgage (including the
statutory power of sale) against intervening lien holders.
Again, the court disagrees.

One might think that had the legislature intended such a
drastic departure from more than 150 years of well-established
common law, it would have done more than merely amend three
words in RSA 479:26, II.

If, as the Trustee suggests, the

legislature intended to impose a novel “punishment” on
purchasers at foreclosure sales when the mortgagee records the
foreclosure deed in an untimely manner, it likely would have
included something beyond a vague statement in the legislative
history about intending to “clarify the ramifications” of a
late-filed foreclosure deed.

Because the mortgagee in this case (Envoy) was the high
bidder at the foreclosure sale, it is easy to lose sight of the

21 

fact that often such purchasers are innocent third parties who
have little or no ability to ensure that the foreclosure deed is
recorded in a timely manner.

The Trustee’s proposed

interpretation of the statute would not only prejudice such
third parties in a decidedly unfair and potentially confiscatory
manner, but it would afford intervening lienholders (like the
Trustee) an unjustified and unwarranted windfall.

Despite

having recorded a lien that they knew (or are charged with
knowing) was subordinate to the mortgage (subject to being
extinguished by the timely recording of the foreclosure deed),
that lien would nevertheless remain an encumbrance on the
property in the hands of any purchaser at foreclosure something that a purchaser might well have had neither reason to
expect nor the ability to prevent.

As the Holden court

observed, “a mortgagee’s right to foreclose a mortgage is a
right to equitable relief . . . . [Consequently,] the element of
fairness must pervade the entire process.”

Id. at *6.

The

windfall to which the Trustee suggests intervening lienholders
are entitled - particularly when such a windfall could be at the
expense of an innocent purchaser at foreclosure - is neither
fair nor equitable.

Such an extraordinary consequence to the late filing of a
foreclosure deed would not only turn a century of New

22 

Hampshire’s common law of property on its head, but it would
also add an element of extraordinary uncertainty and
unpredictability to the foreclosure process.

Purchasers at

foreclosure sales could never be certain they were acquiring
clear title to the property, that is, title that is “free and
clear of all interests and encumbrances which do not have
priority over [the foreclosed] mortgage.”

RSA 479:26, I.

Undoubtedly, that would adversely affect bids at foreclosure
sales and depress the selling prices, to the detriment of
homeowners and priority mortgagees alike.

That, in turn, could

impact lending institutions’ willingness to make mortgage loans,
to the detriment of the economy as a whole.

The bankruptcy

court was correct in rejecting the Trustee’s faulty construction
of RSA 479:26.

IV.

The Trustee’s Motion to Certify.
Finally, the court turns to the Trustee’s Motion to

Certify, by which the Trustee moves this court to certify to the
New Hampshire Supreme Court the following question of state law:

whether N.H. RSA 479:26 permits a foreclosing
mortgagee to reforeclose, if the foreclosing mortgagee
does not record its foreclosure deed within sixty days
and there is an intervening lien, prior to the date of
recording, as set forth in RSA 479:26, II.

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Motion to Certify (document no. 5) at 1.

The Trustee asserts

that certification is warranted because the New Hampshire
Supreme Court has yet to address the import of the 1992
legislative amendments to RSA 479:26, II.

Certification to the New Hampshire Supreme Court may be
appropriate when the question presented is novel and the
governing state law on the issue is unsettled.
v. Jones, 988 F. Supp. 22, 25 (D.N.H. 1997).
Sup. Ct. R. 34.

See Hungerford

See generally N.H.

Whether it is appropriate to certify a question

to the state’s highest court is left to this court’s discretion.
See, e.g., Nieves v. Univ. of Puerto Rico, 7 F.3d 270, 275 (1st
Cir. 1993).

But, before exercising that discretion, this court

“must first undertake [its] own prediction of state law for [it]
may conclude that the course the state court would take is
reasonably clear.”
omitted).

Id. (citations and internal punctuation

See also Moores v. Greenberg, 834 F.2d 1105, 1107 n.3

(1st Cir. 1987) (noting that even when the state law “signposts
are blurred, a federal court may assume that the state courts
would adopt the rule which, in its view, is supported by the
thrust of logic and authority”).

Here, the Holden court’s construction of RSA 479:26, II,
and the legal significance of the 1992 amendments to that

24 

statute, is entirely consistent with logic and a long history of
New Hampshire precedent.
follow its rationale.

The bankruptcy court was correct to

On the other hand, the Trustee’s radical

proposed construction of the statute is unsupported by reason or
logic, and hinges on the interpretation of an ambiguous word in
the statute’s exceedingly sparse legislative history (i.e.,
“ramifications”).

If embraced, that interpretation of the

statute would not only afford some intervening lien holders an
enormous windfall, but it would also seriously prejudice
purchasers at foreclosure sales and priority secured creditors,
as well as undermine confidence in the foreclosure process
itself.

It is, in the court’s view, highly unlikely that the

New Hampshire Supreme Court would adopt the strained
interpretation of the statute urged by the Trustee.
Consequently, certification of the proposed question to the New
Hampshire Supreme Court would not be appropriate.

Conclusion
For the reasons discussed, the bankruptcy court’s order of
June 28, 2016, is affirmed in all respects.

The Trustee’s

Motion to Certify to the New Hampshire Supreme Court (document
no. 5) is denied.

The Clerk of Court shall enter judgment in

accordance with this order and close the case.

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SO ORDERED.

____________________________
Steven J. McAuliffe
United States District Judge
March 20, 2017
cc:

Daniel C. Proctor, Esq.
Lawrence M. Edelman, Esq.
Michele E. Kenney, Esq.
Geraldine L. Karonis, Esq.

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