2019 Mass. App. Div. 71

November 9, 2018 - April 29, 2019

Appellate Division Northern District

Court Below: District Court, Malden Division

Present: Coven, P.J., Crane & Nestor, JJ.

Effie Gikas Tchobanian for the plaintiff.

Lucas B. McArdle for the defendant.

CRANE, J. This is an appeal from a dismissal of a summary process action seeking possession following a foreclosure on a condominium unit. This appeal presents the issue of whether a mortgage is extinguished because the statute of limitations for collection of the underlying note has expired. We decide that it does not and reverse the order of dismissal. [Note 2]

1. Factual and procedural background. The defendant, Farhan Khursheed ("Borrower"), moved to dismiss pursuant to Mass. R. Civ. P. 12(b)(6). The Borrower submitted various documents in support of his motion to dismiss. The plaintiff, Wells Fargo Bank, National Association, as trustee for ABFC 2006-OPT3 Trust, Asset Backed Funding Corporation Asset-Backed Certificates, Series 2006-OPT3 ("Wells Fargo"), opposed the motion but did not specifically object to the court considering these documents. The court never announced that the motion was converted to a motion for summary judgment because of the consideration of materials outside of the motion to dismiss and the complaint. After the court allowed the motion to dismiss without stating a reason, Wells Fargo filed a motion for reconsideration and submitted other documents. Neither party contested the authenticity of the various documents or submitted any affidavits. The same judge denied the motion for reconsideration without a hearing, stating, "The plaintiff has not articulated any reasonable grounds why the current legal arguments were not presented at the first hearing. This court does not find that there was mistake, inadvertence, surprise or neglect. As such, the motion is Denied. So ordered" (emphasis in original).

Based upon the documents the parties submitted to the motion judge, the undisputed facts are that Borrower signed and delivered a note and mortgage secured by Unit 9, 27 Alpine Street, Malden, Massachusetts ("Condominium Unit") to Mt. Washington Cooperative Bank on July 28, 2006. Both the note and the mortgage included the identical maturity date of August 1, 2036. By October 19, 2010, both the

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note and mortgage had been assigned to Wells Fargo. On October 19, 2010, Wells Fargo's duly authorized agent mailed a letter to the Borrower that included a notice of default, right to cure, and statement that acceleration of the note would occur on March 18, 2011. On April 12, 2011, Wells Fargo filed a mortgagee's affidavit with the Land Court that attached the combined notice of default and acceleration letter, which purported to comply with G.L. c. 244, § 35A. There is no evidence or allegation that any extension of the mortgage or any acknowledgment or affidavit that the mortgage was not satisfied was ever recorded. On September 1, 2017, Wells Fargo purported to conduct a foreclosure upon the Condominium Unit by entry and power of sale. For purposes of the motion, there was no dispute that Wells Fargo was the holder of the note at all times pertinent to the foreclosure.

2. Discussion. "Although the judge did not purport to convert the rule 12(b)(6) motion to dismiss into a motion for summary judgment, 'because the judge relied on these supplemental extra-complaint filings in entering dismissal, the ultimate dismissal was, in law, a summary judgment.' Casavant v. Norwegian Cruise Line, Ltd., 63 Mass. App. Ct. 785, 791 (2005), cert. denied, 546 U.S. 1173 (2006). See Doe v. XYZ Co., 75 Mass. App. Ct. 311, 312 (2009)." Go-Best Assets Ltd. v. Citizens Bank of Mass., 79 Mass. App. Ct. 473, 477 (2011). This is the standard for review of the original ruling on the motion to dismiss, notwithstanding any motion for reconsideration or documents submitted by Wells Fargo with it. "We therefore review the ruling de novo under the familiar summary judgment standard. Gray v. Giroux, 49 Mass. App. Ct. 436, 438 (2000)." Id. We may uphold the court's order in favor of the Borrower only if the evidence before the motion judge, viewed in the light most favorable to the nonmoving party, establishes that there are no genuine issues of material fact and demonstrates Borrower's entitlement to judgment as a matter of law. Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991), citing Mass. R. Civ. P. 56(c). "The moving party has the burden of demonstrating affirmatively the absence of a genuine issue of material fact on every relevant issue, regardless of who would have the burden on that issue at trial." Arcidi v. National Ass'n of Gov't Employees, Inc., 447 Mass. 616, 619 (2006).

Wells Fargo asserts that the statute of limitations for negotiable instruments, G.L. c. 106, § 3-118, does not extinguish its mortgage, citing Duplessis v. Wells Fargo Bank, N.A., No. 16-P-1040 (Mass. App. Ct. May 30, 2017) (unpublished Rule 1:28 decision), although the foreclosure was conducted more than six years after acceleration of the note. The Borrower responds that the expiration of the applicable statute of limitations for collection of the note secured by the mortgage extinguishes the mortgage, citing JPMorgan Chase & Co. v. Casarano, 81 Mass. App. Ct. 353 (2012). Additionally, the Borrower claims that the provisions of the so-called obsolete mortgage statute, G.L. c. 260, § 33, extinguish the mortgage because Wells Fargo did not conduct the foreclosure within five years of the date of acceleration of the note.

A. Obsolete mortgage statute. Unless a mortgage holder records an affidavit of extension or failure to satisfy a mortgage, it is extinguished five years after its stated maturity date or thirty-five years after its recording if there is no maturity date stated. G.L. c. 260, § 33. Notwithstanding that the mortgage and note both contain the same maturity date, August 1, 2036, the Borrower claims that the acceleration date, March 18, 2011, became the maturity date for purposes of § 33. He then argues that the provisions of G.L. c. 260, § 33 applied and extinguished the mortgage when it

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was not foreclosed or extended within five years of the new maturity date. He cites Deutsche Bank Nat'l Trust Co. v. Fitchburg Capital, LLC, 471 Mass. 248 (2015) in support of this position.

We reject this argument because G.L. c. 260, § 33 makes no mention of acceleration of the note or mortgage or any consequences for failing to act within any period of time after an acceleration. Instead, G.L. c. 260, § 33 discharges mortgages either within five years of the maturity date stated in the mortgage or thirty-five years from the date of recording. It does not make any reference to the date of any acceleration of a mortgage or the underlying note. The current mortgage and note both state the same maturity date of August 1, 2036, which has not been reached. The provisions of G.L. c. 260, § 33 do not apply to a mortgage or any underlying note that may have been accelerated but has not reached any stated maturity date. The decision in Deutsche Bank Nat'l Trust Co. v. Fitchburg Capital, LLC holds that mortgages that do not contain a maturity date will be treated as having the maturity date stated in the notes they secure for purposes of G.L. c. 260, § 33. Id. at 254. It does not address or consider whether any date of acceleration of a note becomes the maturity date of the mortgage.

B. Statute of limitations. "A real estate mortgage in Massachusetts has two distinct but related aspects: it is a transfer of legal title to the mortgage property, and it serves as security for an underlying note or other obligation -- that is, the transfer of title is made in order to secure a debt, and the title itself is defeasible when the debt is paid." Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569, 575 (2012). The statute of limitations for enforcement of negotiable instruments is six years. G.L. c. 106, § 3-118; Premier Capital, LLC v. KMZ, Inc., 464 Mass. 467, 473 (2013). The Borrower urges that a mortgage is extinguished and discharged when the statute of limitations for enforcement of the underlying note expires. In this case, the foreclosure was conducted on September 1, 2017, more than six years after the acceleration of the note on March 18, 2011. However, a mortgage continues to be enforceable as a proceeding in rem against the security, and not the person based upon the note. Duplessis, supra. Foreclosure of the mortgage is an alternative remedy to collection on the note. Pearson v. Mulloney, 289 Mass. 508, 515 (1935); Jeffrey v. Rosenfeld, 179 Mass. 506, 509-510 (1901); Thayer v. Mann, 36 Mass. 535, 537 (1837). This is the same principle that was followed in Christakis v. Jeanne D'Arc Credit Union, 471 Mass. 365, 367 (2015), in ruling that judicial liens upon property remain enforceable after the debtor has been discharged in bankruptcy. The mortgage remains enforceable because the note has never been paid or satisfied.

This is consistent with Eaton, supra, as quoted above. However, the Borrower may not be liable for any deficiency because of the statute of limitations. The Court in Casarano, supra, did not consider whether the mortgage document was a valid enforceable contract itself because the terms of the mortgage alone were insufficient and the note was lost. By contrast, here, the note was not lost, and the terms of the note and the mortgage were sufficient and wholly consistent.

At oral argument, for the first time, the defendant objected that the plaintiff's notice of appeal challenged only the motion judge's decision on the motion for reconsideration and contended that this precluded review of the ruling on the original motion to dismiss. "The Appellate Division need not pass upon questions or issues not argued in the brief." Dist./Mun. Cts. R. A. D. A. 16(a)(4). See Foley v. Lowell Sun Publ. Co., 404 Mass. 9, 11 (1989). Consequently, we do not reach this issue.

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We return this matter to the trial court. We return this case for further proceedings on the basis that there remains a right to contest other issues in the summary process proceeding, including the issue of superior title. Bank of N.Y. v. Bailey, 460 Mass. 327, 333 (2011).

The trial court's order of dismissal is reversed, and the matter is returned for further proceedings.


[Note 1] As Trustee of ABFC 2006-OPT3 Trust, Asset Backed Funding Corporation Asset-Backed Certificates, Series 2006-OPT3.

[Note 2] While no judgment of dismissal appears to have been entered, the parties have treated the judge's order as being final. We shall address the merits. See GTE Prod. Corp. v. Stewart, 421 Mass. 22, 24 n.3 (1995); Tech Plus, Inc. v. Ansel, 59 Mass. App. Ct. 12, 14 n.5 (2003).