Opinion
16-P-579
08-09-2017
OVERLOOK PROPERTIES, LLC v. The BRAINTREE CO-OPERATIVE BANK& another.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff, Overlook Properties, LLC (Overlook), filed a declaratory judgment action in the Land Court seeking to determine the enforceability of two mortgages on property located at 817 Washington Street, Braintree (property). Defendant Brian J. Gotta, president of Ye Olde Garrison, Inc. (Ye Olde Garrison), is the current record owner of the property. The Braintree Co-Operative Bank, also a defendant, is the holder of two junior mortgages on the property. Overlook claimed that its mortgages are valid and enforceable and sought to foreclose on them. The defendants claimed that the mortgages were discharged by law pursuant to the "obsolete mortgage" statute, G. L. c. 260, § 33.
Resolution of this matter turns on whether the mortgages state the "term[s] or maturity date[s] of the mortgage[s]" for purposes of the statute; if so, the limitation period on enforcement through foreclosure was five years after the expiration of such terms or maturity dates. If not, the enforcement period is thirty-five years from the dates of recording of the mortgages. The Land Court judge determined that subsequent amendments to the notes and mortgages operated to add maturity dates to the mortgages as well as to the notes, that the five-year enforcement period applied, and that the two mortgages were therefore discharged by operation of law. For the following reasons, we agree.
Background. We summarize the relevant facts set forth in the verified complaint and its attachments, which are taken as true for purposes of our review of the court's decision. See Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 225 (2011).
The motion judge treated the defendants' motion to dismiss as a motion for judgment on the pleadings and determined the rights of the parties in this declaratory judgment action, rather than simply dismissing the action. See Connery v. Commissioner of Correction, 33 Mass. App. Ct. 253, 254 n.4 (1992).
By quitclaim deed dated December 27, 1984, the property was granted to "Ernest J. Gotta, d/b/a Garrison Realty Company." On or about June 17, 1987, Ernest J. Gotta (Ernest ), individually and on behalf of various entities, executed as maker a note in the amount of $900,000 (first note). On or about March 7, 1989, Ernest, individually and on behalf of various entities, executed a second note in the amount of $55,000 (second note). The maturity date stated on the face of both notes was September 1, 1991, and the named payee on each was the Hudson City Savings Institution (Hudson Savings).
Because Ernest and Brian Gotta share the same last name, we refer to them by their first names for ease of reference.
Ernest executed mortgages corresponding with the first and second notes. A mortgage recorded in the registry of deeds on June 26, 1987, granted to Hudson Savings, secured the first note (first mortgage). A mortgage recorded on March 8, 1999, also granted to Hudson Savings, secured the second note (second mortgage). Although each mortgage referenced and incorporated the respective notes, neither mortgage stated, on its face, a term or maturity date of the mortgage or of the corresponding note.
In 1993, Hudson Savings and Ernest executed a modification agreement, amending the first note and the first mortgage, which was recorded on March 3, 1994. That agreement states, in pertinent part:
"NOW THEREFORE, for valuable consideration the parties hereby agree that the Note, Mortgage, and any and all other agreements, instruments, or documents executed or delivered in connection with the establishment of the loan arrangement (hereinafter the Loan Documents) are hereby amended as follows:
"1. The Note is herewith amended to provide as follows:
"(a) The principal balance and accrued interest shall be due and payable on September 1, 1995 ("Maturity Date") without demand.
"(b) The monthly payment amount will be calculated on a twenty (20) year amortization schedule.
"(c) Payment under the provisions of this modification agreement shall commence on January 1, 1994.
"2. In addition to the events of default provided in the Loan Documents, the failure by the undersigned to comply with all terms and conditions contained herein and/or the determination by the Bank that any representation or warranty made by the undersigned to the Bank in the Loan Documents was not true when given, shall constitute events of default under the Loan Documents pursuant to which the Bank may exercise all of its rights and remedies upon default.
"3. That all of the collateral described in the Loan Documents shall remain in all respects subject to the lien, charge, or encumbrance of the Mortgage and nothing herein contained, and nothing done pursuant hereto, shall affect or be construed to affect the lien, charge of encumbrance of, or warranty of title in, or conveyance effected by said Mortgage, or the priority thereof, over other liens, charges, encumbrances or conveyances....
"6. Except as provided herein, all other terms and conditions of the Note and the Mortgage remain in full force and effect."
On or about December 29, 1995, Hudson Savings and Ernest signed a second modification agreement relating to the first note and first mortgage; it was recorded on February 8, 1996. With minor changes in wording, this agreement included terms that are substantially the same as those quoted above, except that the maturity date of the note was further extended to September 1, 2000, and the payment terms found above in paragraph 1(b) and 1(c) were further modified.
As to the second note and second mortgage, Ernest executed three separate modification agreements, which were also substantially similar to the above-quoted modification, on or about October 11, 1991, December 13, 1993, and September 1, 1995. They were recorded on November 25, 1991, March 3, 1994, and February 8, 1995, respectively. Ultimately, the maturity date of the second note and mortgage also was extended to September 1, 2000. There is nothing in this record indicating that, after 1995, any party recorded further extensions of the maturity date, or any acknowledgment or affidavit that either mortgage was not satisfied or discharged.
Through an assignment document dated May 8, 2000, and recorded the following day, Hudson Savings (by then known as Hudson River Bank & Trust Company) and Hudson City Mortgage Corporation assigned the first and second notes and the first and second mortgages to Overlook.
At some point (presumably around the same time, but the date is not revealed in the record), the notes were indorsed as payable to Overlook.
On or about April 14, 2008, Ernest, doing business as Garrison Realty Company, deeded the property to "Brian J. Gotta, [p]resident of Ye Olde Garrison, Inc." Ye Olde Garrison granted a mortgage on the property to the Braintree Co-Operative Bank in the amount of $500,000, which was recorded on April 14, 2008. On or about December 23, 2009, Ye Olde Garrison granted an additional mortgage on the property to the Braintree Co-Operative Bank in the amount of $95,000, which was recorded on December 24, 2009. Brian executed each of these mortgages as president and treasurer of Ye Olde Garrison.
After attempting to foreclose on the first and second mortgages, Overlook brought this action in Land Court seeking a declaratory judgment. The defendants challenged Overlook's ability to enforce those mortgages, claiming that they were discharged by operation of law five years after the notes matured (i.e., September 1, 2005), in accordance with the five-year period of repose in G. L. c. 260, § 33. The judge agreed and entered judgment for the defendants.
Overlook appeals, challenging the judge's determination that the modification agreements operated to amend the mortgages so as to incorporate the stated note maturity dates. In Overlook's view, notwithstanding any language in the modification agreements, because the mortgages themselves do not state a maturity date or term of the mortgage, they remain enforceable for thirty-five years from the date of recording pursuant to § 33 (i.e., until June 26, 2022, and March 8, 2024, respectively).
Discussion. "We review the allowance of a motion to dismiss de novo, accepting as true all factual allegations in the complaint and favorable inferences drawn therefrom." Lipsitt v. Plaud, 466 Mass. 240, 241 (2013). The obsolete mortgage statute, G. L. c. 260, § 33, was amended by St. 2006, c. 63, § 6. As so amended, it states in pertinent part:
"A power of sale in any mortgage of real estate shall not be exercised and an entry shall not be made nor possession taken nor proceeding begun for foreclosure of any such mortgage after the expiration of, in the case of a mortgage in which no term of the mortgage is stated, 35 years from the recording of the mortgage or, in the case of a mortgage in which the term or maturity date of the mortgage is stated, 5 years from the expiration of the term or from the maturity date, unless an extension of the mortgage, or an acknowledgment or affidavit that the mortgage is not satisfied, is recorded before the expiration of such period. In case an extension of the mortgage or the acknowledgment or affidavit is so recorded, the period shall continue until 5 years shall have elapsed during which there is not recorded any further extension of the mortgage or acknowledgment or affidavit that the mortgage is not satisfied."
In 2015, the Supreme Judicial Court construed the revised statute in a case that bears some similarities to the one now at bar and involves § 33. Deutsche Bank Natl. Trust Co. v. Fitchburg Capital, LLC, 471 Mass. 248, 249 (2015). There, defendant Fitchburg Capital, LLC (Fitchburg), ostensibly the senior mortgagee, foreclosed on the subject property. Plaintiff Deutsche Bank National Trust Co. (Deutsche Bank) held a junior mortgage and sought to set aside Fitchburg's foreclosure on the ground that Fitchburg's two mortgages had been discharged pursuant to § 33 prior to the foreclosure. Id. at 250-251. The mortgages did not state a maturity date expressly pertaining to the mortgages themselves, but each one stated the term or maturity date of the underlying debt. Id. at 249-250, 253.
The Supreme Judicial Court agreed with a judge of the Land Court that the foreclosure was void and that the mortgages had been discharged because the references to the maturity dates of the debts sufficed to supply the "term or maturity date of the mortgage" for purposes of the statute. Id. at 253. The court found unavailing Fitchburg's argument that "the maturity date of the note may not be exported to the mortgage because a mortgage and a note each have separate legal significance in Massachusetts." Id. at 255. The court stated:
The court also upheld as constitutional the retroactive application of the revised statute to mortgages recorded before its effective date of October 1, 2006. 471 Mass. at 260.
Notably, a separate statute pertains to the enforceability of promissory notes in Massachusetts. See G. L. c. 106, § 3-118.
"The flaw in Fitchburg's argument is the misconception that considering the maturity date of the note to be the maturity date of the mortgage requires the note and the mortgage to lose any independent properties. The question, rather, is whether the term or maturity date of the underlying obligation is commonly understood as the term or maturity date of the mortgage when that date is stated on the face of the mortgage."
Ibid.
A "maturity date" as referenced in a note or mortgage "means ‘[t]he date when a debt falls due, such as a debt on a promissory note or bond,’ and ‘mortgage’ means ‘[a] conveyance of title to property that is given as security for the payment of a debt or performance of a duty and that will become void upon payment or performance according to the stipulated terms.’ Thus, 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 254, quoting from Black's Law Dictionary 478, 1163 (10th ed. 2014).
"Although a mortgage and a note are separate entities in Massachusetts that can be split, it has long been recognized that ‘a mortgage ultimately depends on the underlying debt for its enforceability.’ " 471 Mass. at 254, quoting from Eaton v. Federal Natl. Mort. Assn., 462 Mass 569, 576, 578 n.11 (2012). See Barnes v. Lee Sav. Bank, 340 Mass. 87, 90 (1959) ("The debt having been extinguished, a bond or mortgage given as security for the debt is necessarily discharged"). In other words, because the language of "an existing note and mortgage are to be read together," a maturity date stated in the note applies equally to the corresponding mortgage securing that debt. JPMorgan Chase & Co. v. Casarano, 81 Mass. App. Ct. 353, 356 (2012).
It is undisputed that, as originally executed, neither of the mortgages at issue in the present case stated a term or maturity date of either the mortgage or the underlying note. Both mortgages did, however, clearly reference the underlying debt being secured ($900,000 and $55,000, respectively), and, notably, the validity of the notes is not challenged here.
However, unlike in Deutsche Bank, the parties in the present case executed and later recorded multiple modification agreements amending the first and second notes, and, by explicit reference, the first and second mortgages. In each of those agreements (two modifications to the first mortgage and note, and three modifications to the second mortgage and note), the language expressly amended the note and mortgage and specifically extended the maturity date of the debt. Though the mortgages as originally executed did not state the maturity dates of the notes they secured, the mortgages as amended by the modification agreements expressly incorporated the maturity dates of the notes. "[B]ecause 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.’ " Deutsche Bank, supra at 255. Also, here, proper recording of each amendment provided effective constructive notice of the existence of the modification agreements "to anyone beyond the parties to the mortgage transaction and those with actual knowledge of it" that the terms of the first and second mortgages were subsequently amended, including the maturity dates of the notes they secured. Bank of America, N.A. v. Casey, 474 Mass. 556, 560-561 (2016).
The agreements state that the "Note, Mortgage and any and all other agreements, instruments, or documents executed or delivered in connection with the establishment of the loan arrangement (hereinafter the Loan Documents) are hereby amended." The agreements also contain language identifying additional circumstances triggering a default on the loan, and provide that neither the collateral used to secure the debt, nor the priority of the corresponding mortgage, shall be affected by the modification.
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Based on this reasoning, we read the first and second mortgages, as amended by the language in the modification agreements, to state the term or maturity date of both the first and second notes, and the corresponding first and second mortgages, as September 1, 2000, thereby making each mortgage subject to the five-year period of repose set forth in G. L. c. 260, § 33. Not only did the debtor fail to satisfy the loan on or before September 1, 2000, but Overlook failed to preserve its rights under the mortgages by recording an acknowledgment or an affidavit asserting nonsatisfaction or extension of the term. As a result, the limitation periods were triggered on September 1, 2000, and the corresponding mortgages were subsequently discharged by operation of the obsolete mortgage statute.
Judgment affirmed.