2018-0047, Wayne Sabato v. Federal National Mortgage Association

Both Cheryl and the plaintiff have resided at the property since 2001. identified in the record (the origin al mortgage), which the plaintiff did not sign. “married person,” and granted a purchase money mortgage to a party not (the property). She took title by a warranty deed that acknowledged she was a the plaint iff’s wife, Cheryl A. Sabato, acquired the subject property in Pelham The following facts were recited by the trial court in it s order s. In 2001,

his homestead right in the subject property. We affirm. Superior Court (Temple, J.) in this action brought by the plaintiff to establish Federal National Mortgage Association (FNMA), cross - appeals, orders of the HICKS, J. The plaintiff, Wayne Sabato, appeals, and the defendant,

orally), for the defendant. Flagg Law, PLLC, of Portsmouth (Jonathan M. Flagg on the brief and

Spony on the brief, and Mr. Shepard orally), for the plaintiff. Smith - Weiss Shepard, P.C., of Nashua (Robert M. Shepard and Tanya L.

No. 2018 - 0047 Hillsborough - southern judicial district

address of the court’ s home page is: http://www.courts.state.nh.us/supreme. available on the Internet by 9:00 a.m. on the morning of their release. The direct by e - mail at the following address: reporter@courts.state.nh. us. Opinions are corrections may be made before the opinion goes to pre ss. Errors may be reported Doe Drive, Concor d, New Hampshire 03301, of any editorial errors in order that requested to notify the Reporter, Supreme Court of New Hampshire, One Charles formal revision before publication in the New Hampshire Reports. Readers are NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as well as 2

(1985). price at auction is not before us. See Murphy v. Financial Development Corp., 1 p. 2 26 N.H. 536, 541 The issue of whether Situs, as foreclosing mortgagee, exercised due diligence to obtain a fair 1

the second mortgage.” That waiver, the court determined, was “only to the extent necessary to enforce was sufficient to waive his homestead right relative to the second mortgage.” concluded that, “[u]nder settled New Hampshire law, the plaintiff’s signature mortgage, the plaintiff had an unencumbered homestead right.” The court also in part. The court concluded th at “prior to the execution of the second hearing, the trial court denied FNMA’s motion but granted the plaintiff’s motion Based upon the new evidence and concessions by FNMA at the motions

parties moved for reconsideration, supplying additional evidence. record was insufficient to decide the issues before it as a matter of law. Both The court denied both motions, concluding that the summary judgment

second mortgage, he could not now assert any homestead right. FNMA argued that, because the plaintiff waived his homestead interest in the his homestead right because he had not waived that right in the first mortgage. The plaintiff contended that foreclosure of the second mortgage did not affect homestead ri ght in the property. Both parties moved for summary judgment. property. The plaintiff then filed the instant action seeking to establish his In p. 2 2016, FNMA notified the Sabatos that they might be evicted from the

holds title to the property as well as the first mortgage thereon. Situs then sold its interest in the property to FNMA. Accordingly, FNMA now foreclosure auction for $64,87 p. 2 2.01, taking title subject to the first mortgage. 1 In 2014, Situs foreclosed its mortgage, and purchased the property at the

FNMA. Meanwhile, in p. 2 2011, the first mortgage was assigned by CitiMortgage, Inc. to assigned the second mortgage to Situs Investments, LLC (Situs) in 2013. National City Bank was acquired by PNC Bank National Association, which secon d mortgage). Both Cheryl and the plaintiff signed the second mortgage. home equity l ine of credit with a maximum principal amount of $65,000 (the In 2005, Cheryl granted a mortgage to National City Bank to secure a

appeal. All of the foregoing transactions were recorded in the r egistry of d eeds. was discharged approximately four months later and is not at issue in this which was immediately assigned to CitiMortgage, Inc. T he original mortgage Corporation (the first mortgage). The plaintiff did not sign the first mortgage, new mortgage securing the amount of $17 p. 3 3, p. 2 250 to HomeVest Mortgage In January 2002, Cheryl refinanced the original mortgage, execut ing a 3

applies. amount. Accordingly, we assume without deciding that the $120,000 exemption amount whether the current or former amount is applicable, and both treat $120,000 as the operative statutory amendment in 2015. See Laws 2015, 57:1. Neither party has asked us to determine the exemption itself applies. That amount was increased from $100,000 to $120,00 0 by exemption applies” related to the applicable amount and was not an assumption as to whether The trial court made clear in a footnote that its assu mption “that the $120,000 statutory 2

outstanding homestead right of [the plaintiff].” Mortgage is subject to, and subordinate to, the First Mortgage and the right in the First Mortgage, which remains in full force and effect. The Second eliminate [his] homestead ex emption since [he] did not waive his homestead second mortgage. He argues that the second mortgage “does not reduce or homestead exemption must be reduced by the amount outstanding on the The plaintiff contends that the trial court erred in ruling that his

Bedford, 171 N.H. 89, 9 p. 3 3 (2018). to the facts and its statutory interpretation de novo. Polo nsky v. Town of 225 (quotation omitted). We review both the trial court ’ s application of the law a matter of law, then we will affirm the grant of summary judgment.” Id. at genuine issue of material fact and if the moving party is entitled to judgment a s 25 (2014) (quotation omitted). “If our review of that evidence discloses no matter of law.” M aroun v. Deutsche Bank Nat’ l Trust Co., 167 N.H. 220, 224 exists, we determine whether the moving party is ent itled to judgment as a its capacity as the nonmoving party and, if no genuine issue of material fact judgment, we consider the evidence in the light most favorable to each party in “In reviewing the trial court ’ s rulings on cross - motions for summary

were denied, and both parties now seek appellate review. (Footnotes omitted.) Subsequent motions for reconsideration by both parties

this issue. 2 instead of paying this amount, FNMA may request a hearing on foreclosure sale. In the event FNMA seeks to partition the property the note secured by the second mortgage at the time of the that the plaintiff is entitled to $120,000 less the amount owed on before FNMA owns the property free and clear. . . . The Court finds plaintiff’s homestead exemption still exists and m ust be set - off statutory exemption applies, it appears that some portion of the for the foreclosure deed. Thus, assuming that the $120,000 the foreclosure auction winner paid $64,872.01 as consideration line of credit with a maximum principal balance of $65,000, and In this case, the second mortgage at issue was a home equity

The court then ruled: p. 4 4

of the plaintiff’s waiver of homestead in the second mortgage, as well as his To address th e parties’ arguments on appeal, we must examine the effect

(2013). any, with the formalit ies required for the conveyance of land.” RSA p. 4 480:5 - a purchase money, unless it is executed by the owner and wife or husband, if except a mortgage made at the time of purchase to secure payment of the which provides that “[n] o deed shall convey or encumber the homestead right, to law.” RSA 480:4, III. That paragraph, in turn, implicates RSA 480:5 - a, “[i]n the enforcement of mortgages which are made a charge thereon according 2018). Th e instant case involves paragraph III, which provides an exception . . . cases” listed in paragraphs I through V of that section. RSA 480:4 (Supp. from liability to be encumbered or taken for the payment of debts, except in the from attachment during its continuance from levy or sale on execution, and The homestead statute further provides that “[t]he homestead right is exempt homestead but are not title owners of the property.” Maroun, 167 N.H. at 226. only to the homeowner, but “also extends to spouses who occupy the (Supp. 2018). “The statutory protection of the homestead right” applies not homestead, or of his or her interest therein, as a homestead.” RSA 480:1 2018), provides that “[e] very person is entitled to $120,000 worth of his or her The homestead exemption statute, RSA chapter 480 (2013 & Supp.

objective.” Id. are universally held to be liberally construed to achieve their public policy Maroun, 167 N.H. at 225 (citations omitted). “Statutory homestead protections

overall statutory scheme. in isolation; instead, we attempt to do so in harmony with the ordinary meaning to the word s used. We do not construe statutes examining the language of a statute, we ascribe the plain and expressed in the words of the statute considered as a whole. When interpretation, we are the final arbiter s of the legislature’s intent as law, which we review de novo. In matters of statutory The interpretation and application of statutes present questions of

homestead exemption. In order to resolve the issues on appeal, we must construe the statutory

between $120,00 0 and the amount due on the second mortgage. and clear of the plaintiff’s homestead right, FNMA must pay him the difference therefore, contends that the trial court erred in ruling that t o obtain title free appeal and the other mor tgage has noth ing to do with this matter.” FNMA, homestead was completely waived in the mortgage which is the subject of this direction. It asserts that “the homestead exemption is $0.00 because the FNMA also contends that the trial court erred, but in the opposite p. 5 5

the homestead exemption is . . . reserved from the sale proceeds for the Foret, 602 So. 2d 1097, 1098 (La. Ct. App. 1992) (noting that “the amount of as previously noted, had priority over the first mortgage. See Acadian Bank v. first mortgagee, had access to the value of the homestead right, and that right, stepped into first position up to a maximum of $120,000 because it, unlike the which was then] $1000”). W hen Situs foreclosed its second mortgage, it that the latter had priori ty over the first to the extent of [the homestead right, sufficient waiver or release of the right of homestead, and the other two did, three mortgages upon the homestead premises, the first of which contained no pr ior case the court held that “where the owner of a homestead had executed Browning et al. v. Harris et al., 99 Ill. 4 p. 5 56, 460, 462 (1881) (noting that in a mortgage up to the value of the plaintiff’s homestead right ($120,000). See Accordingly, the waiver gave Situs’s second mortgage priority over the first value of” the homestead right, over which its claim was “paramount”). property they jointly owned foreclosed and satisfied its mortgage from “the full 407, 408, 409 (1964) (holder of mortgage given by both husband and wife on plaintiff’s indebtedness to it. See Walpole Savings Bank v. French, 105 N.H. available to Situs, by “levy or sale on execution,” RSA 480:4, to satisfy the 480:4, III, :5 - a. Th at waiver made the value of the plaintiff’s homestead right against pu blic policy or some constitutional or statutory restriction”); RSA rights, may be waived by the holder of the right, unless such a waiver would be Maroun, 167 N.H. at 228 (holding that “homestead rights, like other statutory affirm, that he waived his homestead right as to the second mortgage. See “‘husband of Cheryl A. Sabato.’” Accordingly, the trial court r uled, and we The plaintiff concedes, however, that he signed the second mortgage as

foreclosure proceeds “less the value of his homestead right”). attaching creditors,” attaching creditors would be entitled to their share of 238 (19 p. 5 59) (because debtor’s “homestead right [was] exempt as against the mortgage. See Manchester Sav. &c. Ass’n v. Emery - Waterhouse, 102 N.H. 233, u pon foreclosure, the plaintiff’s homestead right had p riority over the first homestead interest in the property. See Maroun, 167 N.H. at 226 - 27. Thus, c omply with RSA 480:5 - a, and, therefore, did not c onvey or encumber his mortgage, which was not made at the time of purchase, that mortgage did not and assigned to Situs. Here, because the plaintiff did not sign the first complete priority over the later second mortgage given to National City Bank HomeVest Mortgage Corporation and now held by FNMA would have had (197 1)) (citation omitted). Thus, ordinarily, the first mortgage given to N. H., 132 N.H. 547, 549 (1989) (quoting 55 Am. Jur. 2d Mortgages § 323 priority over subsequent mortgages on the same property.” Leroux v. Bank of jure (first in time, superior in right).’ That is, a mortgage acquired first takes absence of a statutory provision to the contrary, is ‘ prior in tempore, potior in “The general rule regarding priority among competing mortgages, in the

other jurisdictions to the extent they do not conflict with New Hampshire law. lack of waiver in the first. We rely upon our own case law and cite cases from p. 6 6

and wife operates to release the homestead right on ly to the extent necessary to proposition that “the execution of a mortgage upon the homestead by husband Gordon v. Deavitt, 78 A. 113, 115 - 1 p. 6 6 (Vt. 1910) (citing Michigan case for her homestead estate therein, to the extent of the lien s created thereby”); executing nine mortgages on the subject property, “she thereby released . . . (App. Ct. 1900) (noting that when the appellant joined her husband in commencement of her bankruptcy case”); Virgin v. Virgin, 91 Ill. App. 188, 204 the amount of the mortgages encumbering the Residence at the law, waived her entitlement to claim her homestead exemption to the extent of (Bankr. E.D. Tenn. 2001) (noting that “the Debtor, as permitted by Tennessee employed by courts in other juri sdictions. See In re Butler, 271 B.R. 807, 810 enforce the second mortgage.” That ruling is consistent with language that “the plaintiff waived his homestead right only to the extent necessary to The trial court concluded, in a ruling challenged by FNMA on appeal,

mortgage encumbered that rig ht. The preliminary issue we must determine, then, is to what extent the second allowed the second mortgage to encumber that right and take priority over it. to it. With respect to the second mortgage, the plaintiff’s waiver of homestead mortgage was not extinguished by the foreclosure, and Situs took title subject between the first and second mortgage, the first had priority; thus, the first which do not have priority over such mortgage.” RSA 479:2 p. 6 6, I, III (2013). As . . . pass [ed] to the purchaser free and clear of all interests and encumbrances affidavit in compliance with paragraph I of that section, “title to the premises Pursuant to RSA 479:26, upon t he recording of t he foreclosure deed and

interest in the property or was extinguished by the foreclosure sale. whether the balance of the plaintiff’s homestead exemption remained as an Here, however, there was no surplus, and we must, therefore, determine Shaver v. Williams, 87 Ill. 4 p. 6 69, 473 (1877); Acadian Bank, 602 So. 2d at 1098. before FNMA, as holder of the first mortgage, received any proceeds. See id.; would have been exempt from the first mortgage and payable to the plaintiff proceeds up to the remaining balance of the p laintiff’s homestead exemption more than the indebtedness under the second mortgage note, the surplus of [the homestead] right.” French, 105 N.H. at 409. Had the property sold for Thus, as in French, “the mortgage was satisfied without resort to the full value of $64,872.01 satisfied the indebtedness under the second mortgage note. amount it was owed, we will assume, for purposes of analysis only, that its bid Because it is reasonable to assume that Situs did not bid more than the

upon sheriff’s sale). the mortgage, “the mortgage simply [took] the place of the homestead interest” creditor levied upon the subject property, but debtor had waived homestead in 4 p. 7 7 0 - 7 1 (Neb. 1923) (where debtor gave mortgage to bank after judgment contains a waiver of the homestead exemption”); Hess v. Eselin, 194 N.W. 4 p. 6 69, homeowner, or in his stead, the highest ranking mortgag [ee] whose mortgage 7

In fact, given our holding here, it would weaken its position. 3

mortgage, has no grounds to c omplain that the second mortgagee has availed Final ly, the plaintiff, having waived his homestead right in the second

part. See id. exemption is claimed by the plaintiff, the second mortgagee, or both of them in exemption, and it should make no difference whether the value of the grounds for complaint; its mortgage was always subject to the homestead mortgage as it would not improve its position. The first mortgagee has no 3 analysis. Situs had no reason to seek to remedy the lack of waiver in the first kn o w ledge o f the first mortgage’s lack of homestead waiver does not change our [Situs] is subject to the [entire] outstanding homestead right.” Situs ’s of a homestead waiver in t he first mortgage, “the conveyance of the home by T he plaintiff also contends that because Situs took with notice of the lack

value of the homestead exemption. See Hess, 194 N.W. at 4 p. 7 71. the plaintiff’s shoes with respect to his priority over the first mortgage up to the the second mortgage merely gave th e second mortgagee the right to step into mortgage did not impute a waiver into the first mortgage; rather, the waiver in conflict. The waiver of the plaintiff’s homestead exemption in the second other conveyance or encumbrance.” Maroun, 167 N.H. at 227. We find no homestead waiver in one mortgage “cannot be interpreted to act upon any amount due on the second mortgage note contra venes our precedent that a The plaintiff contends, however, that reducin g his homestead right by the

amount owed on the second mortgage note at the time of the foreclosure sale. retains as a homestead interest the difference between $120,00 0 and the plaintiff’s present homestead interest and agree with the trial court that he holding, we necessarily reject both parties’ positions as to the value of the subordinate to the mortgage and is not extinguished by the foreclosure. In so surplus, French, 105 N.H. at 4 09, or, we now hold, in the property, is not left after satisfying the second mortgage, which continues to exist in either the such mortgage.” RSA 4 p. 7 79:26, III. In other words, any portion of the exemption considered an “interest[or] encumbrance[] which do[es] not have priority over enforce the second mortgage, the plaintiff’s homestead right could be Conversely, we cannot conclude that, except to the extent necessary to

second mortgage. plai ntiff’s homestead waiver extended only so far as necessary to enforce the French, 105 N.H. at 409. Accordingly we affirm the trial court’s ruling that the debtor and his wife “each retained a homestead right” in surplus proceeds. the mortgage “without resort to the full value of” the homestead exemption, the consistent with French ’s holding that following a foreclosure sale t hat satisfied agreement to carry an increased liability”). More over, the ruling is logically satisfy the mortgage, and that the law will not construe the mortgage into an p. 8 8

New Hampshire because they would not be able to liquidate at a foreclosure Nevertheless, FNMA contends that if we affirm, “no one would lend in

dissimilar. obtain clear title. The plaintiff’s remainder homestead interest is not purchaser at auction would have had to pay off and discharge in order to was expressl y subject to the first mortgage on the property, which any which time the homestead right may be accommodated”). The foreclosure here and preclude [a judgment creditor of her husband] from seeking partition, at (noting that “RSA 4 p. 8 80:3 - a does not entitle the [wife] to occupy the . . . premises property. Cf. Boissonnault v. Savage, 137 N.H. 229, 230, 232 - 33 (1993) either, as the trial co urt ruled, pay the plaintiff its value or partition the property and that in order to clear that interest from its title, FNMA must the remainder of the plaintiff’s homestead interest continues to exist in the this case. Our decision here, however, does nothing more than recognize that total debt of the mortgage foreclosed on,” and there is no such excess bid in and compensate them for their interest, unless there is a bid in excess of the meet with the former owners, or anyone having an y interest in the property, Hampshire court has ever “required the successful bi dder at auction to then In its challenge to the trial court’s orders, FNMA argues that no New

trial court’s decision. Id. at 1099. For the foregoing reasons, we reject the plaintiff’s challenge to the

has no merit. ranking creditor which has no homestead waiver. This argument with the homestead exemption waiver ranks below a higher the waiver of the homestead exemption simply because the creditor There is no provision in the law to allow the debtor to defeat

goes to sati sfy that claim. therefore the entire amount of the homestead exemption, $15,000, is a waiver of the entire exemption in favor of [the mortgagee], In the case sub judice, the claim against the homestead exemption

argument: judgment creditor’s claim] is satisfied.” Id. at 10 p. 9 9 p. 8 8. The court rejected the should be deducted from the sale proceeds and given to them before [the foreclosing mortgagee, “the homestead exemption in the amount of $15,000 debtors argued that, because the judgment creditor ranked above the Acadian Bank, 602 So. 2d at 1047. Following foreclosure of the mortgage, the second was a mortgage in which they waived their homestead exemption. here. There, the first lien on the debtors’ property was a judgment lien and the of Appeal in Acadian Bank addressed a contention si milar to the plaintiff’s entire homestead exemption against the first mortgagee. The Louisiana C ourt itself of the homestead to satisfy its mortgage and left him unable to assert his 9

LYNN, C.J.