United States District Court, D. New Hampshire
McCafferty United States District Judge
Hersey McCarthy brings suit, alleging claims against WPB
Partners, LLC (“WPB”) that arose from WPB's
foreclosure and sale of McCarthy's mortgaged property.
Following the court's orders on WPB's motion to
dismiss and McCarthy's motion for summary judgment, see
doc. nos. 10 & 27, the only remaining
claims in this case are McCarthy's claims for violation
of the duty of due diligence and violation of the duty of
moves for summary judgment on those claims,  and McCarthy
movant is entitled to summary judgment if it “shows
that there is no genuine dispute as to any material fact and
[that it] is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). In reviewing the record, the
court construes all facts and reasonable inferences in the
light most favorable to the nonmovant. Kelley v. Corr.
Med. Servs., Inc., 707 F.3d 108, 115 (1st Cir. 2013).
a promissory note dated December 21, 2006, McCarthy, whose
name was then Mary Hersey, borrowed $350, 000 from Investment
Realty Funding, Inc. and signed a mortgage the same day to
secure the loan. The mortgaged property was undeveloped land
on Mirror Lake in Tuftonboro, New Hampshire (“the
property”). WPB acquired the note and mortgage in
August 2009 after Investment Realty filed for bankruptcy
protection. When the note matured on December 21, 2009, WPB
demanded payment. McCarthy failed to pay, and WPB began
foreclosure proceedings, scheduling a foreclosure sale for
October 22, 2010.
Previous Litigation Regarding the Foreclosure
October 4, 2010, McCarthy filed an action in state court
seeking a temporary restraining order to halt the foreclosure
sale. The state court did not grant McCarthy's request
for a temporary restraining order but did grant a preliminary
injunction following a hearing. The state court then granted
leave to McCarthy to amend her complaint to add new claims
and leave to WPB to assert a counterclaim for breach of
contract based on the note. WPB then removed the case to this
court. See Hersey v. WPB Partners, LLC, 11-cv-207-SM (D.N.H.
federal court, McCarthy amended her complaint again, adding
several claims. WPB then moved to dismiss the complaint.
While that motion was pending, McCarthy notified the court
that she had filed for bankruptcy relief under Chapter 13 in
the bankruptcy court for the District of New Hampshire. See
McCarthy I, doc. nos. 27 & 28; In re
Mary Hersey McCarthy, 11-13342-JMD (Bankr. N.H. Apr. 6,
2012). Although WPB's counterclaim was initially stayed
under 11 U.S.C. § 362, the bankruptcy court
lifted that stay to the extent necessary to resolve the
issues in McCarthy I, including determining the validity of
WPB's mortgage. In re McCarthy, doc. no. 93 at 1. The
court in McCarthy I also permitted McCarthy to continue
prosecuting her claims against WPB after the bankruptcy
trustee abandoned those claims on behalf of the bankruptcy
estate. See McCarthy I, endorsed order, Jan. 4, 2013.
January 2013, WPB moved to dismiss all of McCarthy's
claims, and McCarthy objected. The court granted WPB's
motion to dismiss, in part, paring the claims remaining in
the case to McCarthy's usury claim and WPB's breach
of contract claim on the note.
then filed separate motions for summary judgment on each of
the remaining claims. On February 11, 2014, the court issued
an order granting both motions. With respect to the damages
due on WPB's counterclaim, the court explained that
“[f]ollowing a discussion with respect to the existence
of any material dispute related to calculating the liquidated
damages amount, the parties agreed that the amount of $443,
443.03, as of September 6, 2011 (a date contemporaneous with
the filing of the bankruptcy petition) would be
appropriate.” Doc. no. 64 at 4.The court then
entered judgment in favor of WPB on its counterclaim for
breach of contract and liquidated damages. McCarthy I, doc.
no. 65. McCarthy appealed, and the First Circuit
Court of Appeals affirmed the judgment on February 12, 2015.
Permission to Foreclose
filed the summary judgment order in the bankruptcy court,
forwarding a copy of the filing to McCarthy's counsel.
See In re McCarthy, doc. no. 177. WPB then moved in the
bankruptcy court for relief from 11 U.S.C. §
362(d)'s automatic stay to allow it to foreclose on the
property. In support, WPB asserted that McCarthy owed it
$576, 664.46 under the note, an amount which included the
judgment in McCarthy I and the interest and costs that had
accrued since September 6, 2011. In response, McCarthy argued
that foreclosure was inappropriate because she had enough
equity in the property to adequately protect WPB's
bankruptcy court held a hearing on WPB's motion to
foreclose. During that hearing, the parties presented
evidence concerning the value of WPB's claim and the
value of the property. In re McCarthy, doc. no. 244, at 3.
WPB presented evidence showing that its secured claim now
totaled $672, 079.24, including interest, attorneys'
fees, and costs. Id. McCarthy did not present any
evidence contesting these claims. Id. As for the
value of the property, each side elicited expert testimony
from an appraiser. Id. WPB's appraiser
testified, consistent with his appraisal, that the fair
market value of the property was $535, 000. Id. at
4. On the other hand, McCarthy's appraiser testified,
consistent with her appraisal, that the value of the property
was $900, 000. Id. at 5.
bankruptcy court granted WPB's motion for relief from the
automatic stay, concluding that McCarthy had a less than 5%
equity cushion in the property and that, as a result,
WPB's secured claim against McCarthy was not adequately
protected. Id. at 8. In doing so, the court
concluded that WPB possessed a claim on McCarthy's estate
for $672, 079.24, a figure which included the judgment in
McCarthy I plus other interest, attorneys' fees, and
costs. Id. at 3. The court accepted WPB's
testimony concerning the claim because “[t]he debtor
presented no evidence to the contrary.” Id.
court also concluded that the fair market value of the
property was $705, 000. Id. at 8. The court's
analysis into fair market value evaluated both appraisals,
taking into consideration their respective strengths and
weaknesses, as revealed by the direct and cross examination
of the parties. Id. at 6-8. Based on the bankruptcy
court's order, WPB initiated foreclosure proceedings on
scheduled the foreclosure sale for March 20, 2016. It hired
James R. St. Jean, a licensed auctioneer to conduct the
auction. To market the auction, WPB published the legal
notice of the sale in the New Hampshire Union Leader for
three consecutive weeks. See R.S.A. 479:25, I. In addition to
publishing the notice, WPB (or its agents) placed ads in the
Boston Herald, the Manchester Union Leader, the New Hampshire
Sunday News, the Laconia Citizen, and the Concord Monitor.
Further, the sale was advertised on St. Jean's website
and details of the sale were emailed “to over 7, 500
individuals on [St. ...