The Massachusetts Supreme Judicial Court (“SJC”) has held that the provisions of the “Obsolete Mortgage” statute, Mass. Gen. L. c. 260, § 33, as amended in 2006, comport with the Massachusetts and United States Constitutions. Deutsche Bank National Trust Co. v. Fitchburg Capital, LLC, et al., No. SJC-11756, 2015 WL 1649160 (Mass. Apr. 15, 2015). Further, the SJC held that for purposes of the statute, a reference to the maturity date of the underlying debt secured by the mortgage is sufficient to state the “term of maturity date of the mortgage,” and thereby trigger a loss of enforceability of the mortgage. Id.
Under the statute, the power of sale in any mortgage lapses and becomes unenforceable upon one of two occurrences: (1) Thirty-five years from recording of a mortgage in which “no term of the mortgage is stated,” or (2) Five years from the expiration of the term of from the maturity date “in the case of a mortgage in which the term or maturity date of the mortgage is stated.” In the event of an expiring mortgage, the mortgagee can extend that period by five years through recording an extension, acknowledgement, or affidavit that the mortgage is not satisfied. The period can continue to be extended through filing of further extensions, acknowledgements, or affidavits. The 2006 amendment to the statue applied retroactively to all mortgages, but included a five and one-half months grace period to allow mortgagees at risk of losing their security interests to file the appropriate extension documents.
The two mortgages at issue in the case were held by Fitchburg Capital, LLC (“Fitchburg”) and secured notes with maturity dates of May 1, 2000 and December 31, 2003. Deutsche Bank National Trust Company (“Deutsche Bank”) held a mortgage on the property dated September 10, 2004, that had not yet matured. After the property owner filed for bankruptcy in 2011, Fitchburg foreclosed on the property, was the high bidder at the auction, and recorded a foreclosure deed to itself. Deutsche Bank sued and filed a motion for partial summary judgment seeking a declaration that Fitchburg’s (i) two prior mortgages were null and void under the statute, having maturity dates more than five years prior to the foreclosure, and (ii) subsequent foreclosure sale was invalid. Fitchburg argued that the dates in the underlying notes were not sufficient to satisfy the “term or maturity date of the mortgage” language in the statute. Fitchburg further asserted that retroactive application of the amended statute would violate due process and contract clause rights under the Massachusetts and United States Constitutions.
The SJC, agreeing with Judge Robert B. Foster of the Massachusetts Land Court, rejected Fitchburg’s arguments. With respect to the term of the mortgage, the SJC ruled that “because the scope of a mortgage is necessarily tied to the reach of the underlying obligation, considering the term or maturity date of the underlying obligation to be the term or maturity date of the mortgage comports with the common-law understanding of the words ‘mortgage’ and ‘note.'” Id. The SJC noted that its own precedent stated, “a mortgage ultimately depends on the underlying debt for its enforceability.” Eaton v. Federal Nat’l Mtge. Ass’n, 462 Mass 569, 578 n. 11 (2012). “The basic nature of a mortgage [is] security for an underlying mortgage note.” Id. at 577-578. Where the underlying debts had matured more than five years prior, and no document was recorded extending the mortgage, the enforceability of the mortgage had lapsed.
Fitchburg’s constitutional arguments fared no better. The SJC held that the amendment’s retroactivity satisfied the test of reasonableness, in that it allowed five and one-half months for “mortgagees to enforce their rights under mortgages that would be deemed obsolete under the revised statue or to record one of the other documents permitted by statute to preserve the mortgagee’s rights.” Deutsche Bank National Trust Co. v. Fitchburg Capital, LLC, et al., No. SJC-11756, 2015 WL 1649160 (Mass. Apr. 15, 2015).
The Supreme Judicial Court has now affirmed the constitutionality of the “Obsolete Mortgage” statute, and clarified that the maturity date of the underlying note can satisfy the “term or maturity date of the mortgage” language in the statute, triggering the five-year period in which to record an extension or foreclose.