Where a mortgage states the term of its underlying debt but includes no separate statement of its own term, the two are one-and-the-same, the Massachusetts Supreme Judicial Court (the “SJC”) has decided in an opinion interpreting and upholding the so-called “obsolete mortgage” statute.
In Deutsche Bank National Trust Co. v. Fitchburg Capital, LLC, 471 Mass. 248, 2015 WL 1649160 (2015), the SJC considered G.L. c. 260, § 33, et seq., as amended in 2006 (the “Statute”), which provides that a mortgage where the term or maturity date is stated becomes unenforceable five years after the expiration of the term. The Statute renders a mortgage without a stated term unenforceable thirty-five (35) years after recording. Id. at *1. The Statute allows for extension of the time for enforceability of a mortgage if an extension or a document asserting non-satisfaction of the debt has been recorded within five years’ prior to the end of the above-stated limitations period. Id. at * 2, n.8.
At issue in Deutsche Bank was the validity of a foreclosure sale conducted by Defendant Fitchburg Capital LLC (“Fitchburg”), which was challenged by Deustche Bank National Trust Company, as trustee of Ameriquest Mortgage Securities, Inc., Asset-backed Pass-through Certificates, Series 2004-R11 under the Pooling and Servicing Agreement dated as of December 1, 2004 (“Deutsche Bank”).
Deutsche Bank, which held a mortgage on the subject property recorded in 2004 (subsequent to the two Fitchburg mortgages at issue), sought and won a ruling from the Land Court that the two prior mortgages had become unenforceable before the foreclosure sale. On appeal, Fitchburg argued that each of its mortgage stated only the term or maturity date of the underlying debt, which was not necessarily the term of the mortgage. In Fitchburg’s view, the thirty-five year limitations period for mortgages with no stated term should have been applicable, and the foreclosure sale valid.
The most basic facts of the case are as follows: The first of Fitchburg’s mortgages secured a note dated April 13, 1999 with a maturity date one year later, on May 1, 2000. Id. at *2. The second mortgage at issue secured a note dated December 16, 2002 with a maturity date of December 21, 2003. Id. Fitchburg conducted its foreclosure sale on or about April 30, 2012 – more than five years after the expiration of both of the maturity dates applicable, respectively, to the two notes. Id. at *1.
That 1999 mortgage stated that it was granted to “‘secure the payment of $9,722.00 . . . in one year with twenty percent interest per annum, payable in one year . . . as provided in the promissory note of even date.'” Id. at *5. The 2002 mortgage stated: “‘Mortgagor has promised to pay the debt under this note in full not later than December 31, 2003.'” Id.
Fitchburg argued that the date of maturity of the underlying debt as set forth in each of the mortgages was not the date of the mortgage term for purposes of the Statute (and, thus, the 35-year limitations period should apply). The Land Court rejected Fitchburg’s view, and held that the maturity dates of the underlying debt set forth in the mortgages were the dates of the terms of the mortgages themselves. Id. at *3.
The SJC agreed with the Land Court. Id. In so doing, the SJC remarked, “the common meaning of the ‘maturity date of the mortgage’ is the date on which the underlying debt is due because a mortgage derives its vitality from the debt that it secures.” Id. at *3.
Moreover, although a mortgage and note are separate interests that can be split in Massachusetts, “[b]y its nature, a mortgage does not mature distinctly from the debts or obligations that it secures. . . . Accordingly, a mortgage is a device for providing security for a loan, but it does not generally have a binding effect that survives its underlying obligation.” Id. at *3.
In addition to creating two separate statutes of limitations for mortgages with stated terms and those without, the 2006 amendment to the Statute also shortened the limitations period as to both. Originally, the Statute provided that mortgages became unenforceable fifty years after recording, unless a document extending the time for enforceability was recorded in the last ten years of the fifty-year period. See id. at * 2. In upholding the as-amended Statute in Deutsche Bank, the SJC ruled that its retroactive application was constitutional because a five and one-half month delay between the amendment’s enactment and effective date was a reasonable time within which mortgagees could have enforced their rights by recording an appropriate document. See id. at *7.