Monday, April 20, 2015

Massachusetts High Court: Mortgages Lacking Stated Maturity Date Are Subject To Five Year Statute Of Limitations Where Recorded Documents Contain Reference To The Term Of Underlying Debt; Court Ruling Renders Mortgages, Foreclosure Null & Void In Recent Case

The following is from an advisory from the law firm Nutter McClennen & Fish LLP:
  • [I]n Deutsche Bank National Trust Co. v. Fitchburg Capital, LLC, No. 11756, slip op. (Mass. April 15, 2015), the SJC considered whether mortgages that do not state a specific maturity date, but reference the term or maturity date of the underlying debt, are subject to the Obsolete Mortgage statute. The SJC held that references in mortgages to the dates and terms of the underlying debt make the mortgages subject to the 5-year, and not the 35-year, statute of limitations set forth in the [Massachusetts] Obsolete Mortgage statute.

    In this case, a lender purported to foreclose in 2012 on two mortgages from 1999 and 2002 for which the underlying debts were due in 2000 and 2003, respectively. Although neither mortgage stated a specific maturity date, each mortgage referenced the term of its underlying debt.

    The SJC held 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.'"

    The SJC also held that a dragnet clause in one of the mortgages (whereby the mortgage also secured "all other debts, covenants and agreements of or by the Mortgagor to or for the benefit of the Mortgagee now existing or hereafter accruing while this mortgage is still undischarged of record") was insufficient in this instance to save the mortgage from becoming obsolete since no additional debts were incurred subsequent to the original loan. The SJC acknowledged, however, that there might be some circumstances in which a dragnet clause could extend the term or maturity date of a mortgage.

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