United States District Court, D. New Hampshire
Bette Jane Pfenning, et al.
Jon Brewer, et al. Opinion No. 2016 DNH 078
MEMORANDUM AND ORDER
Paul Barbadoro United States District Judge
Bette Jane Pfenning and Lawrence Sumski, the Chapter 13 trustee of Pfenning’s estate, brought an adversary action against Jon Brewer and the Lord Family Trust in the United States Bankruptcy Court for the District of New Hampshire. There, plaintiffs alleged that Brewer breached the warranty of title and violated the New Hampshire Consumer Protection Act (“CPA”) by selling real property to Pfenning without first obtaining the mortgagee’s consent to convey the property subject to an outstanding mortgage. The Bankruptcy Court determined that plaintiffs’ CPA claim was barred by the applicable three-year statute of limitations, and that their warranty of title claim failed on the merits. Here, plaintiffs appeal the Bankruptcy Court’s ruling on their warranty of title claim.
In 2006, Brewer purchased property located at 2 Highland View Road in Claremont, New Hampshire (“the Property”). Brewer, who acquired the Property as Trustee of the Lord Family Trust, took title subject to an outstanding first mortgage held by National City Mortgage Company, now known as PNC Mortgage. That mortgage contained a due-on-sale clause, which provided in relevant part,
If all or any part of the Property or any Interest in the Property is sold or transferred . . . without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by [the National City Mortgage].
Doc. No. 6-2 at 2 (the due-on-sale clause).
In June 2009, Brewer, in his capacity as Trustee, and Pfenning, as buyer, executed a purchase and sale agreement for the Property. Although the parties agreed that Brewer would finance Pfenning’s purchase, the purchase and sale agreement did not indicate that the sale would be subject to the existing National City Mortgage. At the July 2009 closing, however, before signing the closing documents, Pfenning learned that her financing consisted of a “wrap around” note and mortgage, and that the sale would be subject to the National City Mortgage in addition to the mortgage she would grant Brewer. Doc. No. 1 at 9. Pfenning was upset with that arrangement, but nonetheless executed the “All Inclusive (Wrap Around) Promissory Note Secured by Deed of Trust” (the “Note”) and mortgage (the “Brewer Mortgage”) that same day. Id.
The Note reflected a loan of $144, 600.00, accruing interest at an annual rate of 4%, payable in $1, 100 monthly installments for three years, with a balloon payment for the entire outstanding balance due on July 20, 2012. Id. at 3. The Note provided that “the balance . . . includes the unpaid balance of an underlying note and mortgage, ” and identified the National City Mortgage and the note it secured. See Doc. No. 5-8 at 3 (the Note). In addition, both the Warranty Deed and the Brewer Mortgage provided: “[t]he within conveyance is made subject to an outstanding mortgage from Jeffrey A. Lord to National City Mortgage Co. by mortgage deed dated September 24, 2004, recorded in Volume 1475, Page 833 of the Sullivan County Registry of Deeds.” Doc. Nos. 5-9 at 4 (Warranty Deed); 5-10 at 13 (Brewer Mortgage). Despite the National City Mortgage’s due-on-sale provision, however, Brewer did not inform PNC Mortgage of his sale to Pfenning, or ask the company to waive the clause.
After the closing, Pfenning contacted a mortgage broker, her bank, the New Hampshire Banking Commission, and an attorney, but was unable to change the terms of her financing. Then, for three years, she made all monthly payments due under the Note to Brewer (totaling about $39, 000), but did not pay the balloon payment due in July 2012, or seek to refinance the obligation. And, when Pfenning stopped paying Brewer, Brewer stopped making payments on the National City Mortgage to PNC Mortgage. In October 2012, PNC Mortgage instituted foreclosure proceedings. Pfenning filed a Chapter 13 petition on October 26, 2012.
B. Bankruptcy Proceedings and Appeal
On October 15, 2014, Pfenning brought an adversary action in the Bankruptcy Court against Brewer and the Lord Family Trust. Pfenning alleged that Brewer had breached the warranty of title by failing to obtain PNC Mortgage’s consent to sell the Property to Pfenning, as contemplated by the National City Mortgage’s due-on-sale provision. Pfenning further alleged that Brewer’s actions violated the New Hampshire Consumer Protection Act (“CPA”). Pfenning sought, among other relief, reimbursement for her previous payments to Brewer, and an order directing the defendants to “pay the balance of the National City Mortgage” note. See Doc. No. 2 at 14-15.
The Bankruptcy Court conducted a trial in September 2015. At the close of Pfenning’s case, defendants moved for judgment on both Pfenning’s warranty of title and CPA claims pursuant to Federal Rule of Civil Procedure 52(c). In a subsequent written order, the Bankruptcy Court granted the defendants’ motion, concluding that (1) Pfenning’s CPA claim was barred by the applicable three-year statute of limitations, and (2) Pfenning’s warranty of title claim failed on the merits. Doc. No. 1 at 11-13. Accordingly, the court dismissed both of Pfenning’s claims. Id. at 14. Pfenning then filed this appeal, ...