OVERLOOK PROPERTIES, LLC, v. BRAINTREE CO-OPERATIVE BANK and BRIAN J. GOTTA, PRESIDENT of YE OLDE GARRISON, INC.

Plaintiff Overlook Properties, LLC (Plaintiff) initiated this action on September 24, 2015, seeking a declaratory judgment that its two mortgages secured by the property located at 817 Washington Street in Braintree (Locus) are valid and enforceable. Plaintiff seeks to foreclose on both mortgages, and is being challenged by Defendants Braintree Co-Operative Bank (Braintree Co-Op), holder of two subsequent mortgages on Locus, and Brian J. Gotta, President of Ye Olde Garrison, Inc. (Gotta), current owner of Locus (collectively, Defendants). Defendants allege Overlook’s mortgages were previously discharged by operation of the Obsolete Mortgage Statute, G. L. c. 260, § 33.

I. Motion to Dismiss – Mass. R. Civ. P. 12(b)(6)

In reviewing a motion to dismiss under Mass. R. Civ. P. 12(b)(6) for failure to state a claim, the court accepts as true the factual allegations of the complaint, as well as any favorable inferences which may be reasonably drawn therefrom. Ginther v. Comm’r of Insurance, 427 Mass. 319 , 322 (1998). The court may take into account matters of public record and documents integral to, referred to or explicitly relied on in the complaint, attached or not, without converting the motion to a motion for summary judgment. Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43 , 45 (2004). The factual allegations must plausibly suggest, and not merely be consistent with, an entitlement to relief. Iannocchino v. Ford Motor Co., 451 Mass. 623 , 636 (2008). The court accepts as true the following facts, demonstrated by the Complaint, augmented by the documents referred to therein. In this action, while Defendants moved to dismiss under 12(b)(6), because the Complaint is brought under G. L. c. 231A, this court reaches the declaratory nature of the case, and is treating this motion more as one for a Judgment on the Pleadings.

Facts

As a matter of the record at the Norfolk Registry of Deeds, [Note 1] Plaintiff holds two Commercial Real Estate Mortgages secured by Locus. [Note 2] The first mortgage was recorded on June 26, 1987 (1987 Mortgage) in Book 7636, at Page 65. By its express terms, the 1987 Mortgage is security for payment of a promissory note in the original principal amount of $900,000, executed June 17, 1987 (1987 Note). A subsequent mortgage was recorded on March 8, 1989, in Book 8256, at Page 194 (1989 Mortgage), securing a promissory note in the original principal amount of $55,000, executed March 7, 1989 (1989 Note). Neither the 1987 Mortgage nor the 1989 Mortgage contain a stated term or maturity date of the mortgage itself, but both recite that they are “to secure [A] the payment of a promissory note” with the dates of the execution of the notes and principal amounts thereof. Both mortgages were subsequently modified through a series of modification agreements recorded with the Registry. The modification agreements specifically reference both the 1987 Mortgage and the 1989 Mortgage, with recording information.

1987 Note, Mortgage and Modifications

The 1987 Mortgage was modified twice. Both modifications reference the 1987 Mortgage and other Loan Documents, and both recite “the Note has become due and payable in full.” The first modification was executed December 13, 1993, and recorded on March 3, 1994, in Book 10413, at Page 304 (First 1987 Modification). The First 1987 Modification recited September 1, 1995, as the due date for the 1987 Note, defining that date in the instrument as the “Maturity Date.” A second and final modification, executed by the parties on the Maturity Date set forth in the First 1987 Modification (September 1, 1995), further extended the Maturity Date to September 1, 2000. The Second 1987 Modification was recorded February 8, 1996, in Book 11217, at Page 145 (Second 1987 Modification). It also includes the following language:

“[Now therefore], for valuable consideration the parties hereto 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, 2000 (‘Maturity Date’) without demand . . . .

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 . . . .” [Note 3]

1989 Note and Mortgage and Modifications

The 1989 Mortgage was modified three times. The first modification was recorded November 25, 1991, in Book 9113, at Page 529 (First 1989 Modification). The second modification was executed December 13, 1993, and recorded March 4, 1994, in Book 10413, at Page 308 (Second 1989 Modification). A third and final modification was recorded February 8, 1996, in Book 11217, at Page 151 (Third 1989 Modification). All three modifications state “the Note has become due and payable in full.” The Third 1989 Modification also includes the identical language to that in the Second 1987 Modification set forth above. [Note 4]

Both the Second 1987 Modification and the Third 1989 Modification – or the final modifications of each respective mortgage – further state: “[n]othing herein contained, and nothing done pursuant hereto, shall affect or be construed to affect the lien, charge of encumbrance of, or warrant of title in, or conveyance effected by said Mortgage . . . .” Plaintiff acquired both the 1987 Mortgage and 1989 Mortgages by assignment, recorded with the Registry on May 9, 2000, in Book 14148, at Page 104, before the Maturity Date, as set by the final modification agreements.

II. The Modification Agreements Establish a Final Mortgage Maturity Date of September 1, 2000, and Therefore Render the 1987 Mortgage and the 1989 Mortgage Obsolete Five Years from September 1, 2000 Under G. L. c. 260, § 33 (Obsolete Mortgage Statute)

At issue in this case is whether the Mortgages contain a stated term or maturity date, subjecting them to the five-year statute of repose provisions of the Obsolete Mortgage Statute, which states, in relevant 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. G. L. c. 260, § 33. (Emphasis added.)

Plaintiff asserts that the mortgages do not contain a maturity date and, as a result, are subject to the 35-year statute of repose under the Obsolete Mortgage Statute. Defendants allege that the final recorded modification agreements for both the 1987 Mortgage and the 1989 Mortgage set a Maturity Date of September 1, 2000, to the notes and mortgages and therefore, deem the mortgages discharged as of September 1, 2005.

In support of its argument, Plaintiff specifically points to the language contained in the modifications stating “[t]he Note is herewith amended to provide [that]. . . [t]he principal balance and accrued interest shall be due and payable on September 1, 2000 (‘Maturity Date’) without demand.” See Compl. Exs. F, K (italics added). Plaintiff alleges this language served only to modify the maturity dates of the 1987 and 1989 Notes, and not the Mortgages. Had the parties intended to modify the mortgages or any other Loan Documents, Plaintiff argues they would have specifically included the word “Mortgage” in the above provision.

This court is unconvinced that terms and maturity dates can be so easily distinguished for purposes of the Obsolete Mortgage Statute, in light of the Supreme Judicial Court’s decision in Deutsche Bank Nat’l Trust Co. v. Fitchburg Capital, LLC, 471 Mass. 248 (2015). In Deutsche Bank, the Court addressed whether mortgages that fail to state a specific maturity date, but reference the term of maturity date of the underlying debt, state a term that is subject to the five- year period under the Obsolete Mortgage statute. In that case, a lender attempted to foreclose in 2012 on two mortgages executed in 1999 and 2002, for which underlying debts had become due in 2000 and 2003, respectively. Neither mortgage stated a specific maturity date, but referenced the term of its underlying debt. The Court held that the references in the mortgages to the dates and terms of the underlying debt subjected the mortgages to self-executing obsolescence after five years.

The maturity date of a mortgage is the date on which the underlying debt is due, because a mortgage derives its vitality from the debt that it secures. Deutsche Bank, 471 Mass. at 254. Although a mortgage and a note are separate instruments, “a mortgage ultimately depends on the underlying debt for its enforceability.” Deutsche Bank, 471 Mass. at 254, citing Eaton v. Fed. Nat’l Mortg. Ass’n, 462 Mass. 569 , 576, 578 n.11 (2012) (citations omitted). At oral argument, Plaintiff argued that the modifications recorded in this case do not fall under the definition of “mortgage” provided in G. L. c. 260, § 35, which includes for purposes of the Obsolete Mortgage Statute “any deed of trust or other conveyance made for the purpose of securing performance of a debt or obligation.” This argument is unavailing. The definition is inclusive, not limiting, and sets forth the types of security applicable to the statute, rather than defining the particularities of a mortgage’s provisions. Deutsche Bank, 471 Mass. at 255. The purpose of the statute is to give notice to the world of the maturity date of mortgages that affect title to real property and to rid titles of old mortgages which should have been discharged, but remain undischarged on the record. On the facts presented, an examination of the title to the mortgages in question would have led an examiner to the modifications of the Loan Documents and the changes to the due date of the notes, which set the Maturity Dates of the mortgages, as Deutsche Bank instructs.

Plaintiff also argues that a key element of the Deutsche Bank analysis requires a review of the “four corners” of the mortgage documents themselves. Plaintiff alleges this review demonstrates an intent by its predecessors-in-interest to modify solely the underlying notes and not the mortgages. It is true that “[d]etermining that the term or maturity date of an underlying obligation, when stated on the face of the mortgage, can become the term or maturity date of the mortgage does not end [the] inquiry.” Deutsche Bank, 471 Mass. at 258. A review of the actual language used in the final modifications to the 1987 and 1989 Mortgages, however, shows they do not substantially differ from the comparable language in Deutsche Bank. For example, the language of one of the two mortgages at issue in Deutsche Bank stated the “[m]ortgagor has promised to pay the debt under this note in full not later than December 31, 2003.” Id. Here, the modifications provide “[t]he principal balance and accrued interest shall be due and payable on September 1, 2000[.]” The court reads this language as stating the term or maturity date of both mortgages, subjecting each to the provisions of the Obsolete Mortgage Statute. The fact that the Maturity Date is set forth in instruments that are not technically mortgages elevates form over substance.

III. The Dragnet Clause Contained in Both Modification Agreements Did Not Extend the Terms of Either the 1987 Mortgage or the 1989 Mortgage

Plaintiff further argues that the inclusion of a so-called “dragnet clause” prevents the mortgages from being discharged under the Obsolete Mortgage Statute. Both the 1987 Mortgage and 1989 Mortgage contain clauses stating they secure “the payment and performance of any and all charges, claims, debts, agreements, liabilities and obligations of the Mortgagor or if more than one any of them to the Mortgagee, all whether now existing or hereafter arising and whether arising out of this present financial transaction or separate and unrelated thereto absolute or contingent direct or indirect and whether as maker, endorser, guarantor, or otherwise (all hereinafter in the aggregate called ‘the Obligation’).” See Compl. Exs. D, H. However, a dragnet clause does not automatically prevent the discharge of a mortgage for obsolescence under the statute. A dragnet clause provides security for a new debt incurred before the presence of an intervening lien. Deutsche Bank, 471 Mass. at 255, n.14, citing Debral Realty, Inc. v. Marlborough Coop. Bank, 48 Mass. App. Ct. 92 , 94 (1999). [Note 5] Plaintiff has not alleged there are other debts incurred after the dates of the original mortgages that would have been secured under the dragnet clauses. While there may be circumstances in which a dragnet clause could extend the term or maturity date of a mortgage, the instant case does present them.

IV. Conclusion

Both the 1987 Mortgage and 1989 Mortgage reference the Maturity Date of September 1, 2000, through the language contained in the recorded modification agreements, which specifically change the Maturity Dates of the debts secured by the mortgages. No extension of the mortgages, nor acknowledgments or affidavits that the mortgages have not been satisfied, was filed before the expiration of five years from the final Maturity Date – in this case, September 1, 2005, as required under G. L. c. 260, § 33. The Obsolete Mortgage Statute is “self- executing so that any mortgage rendered obsolete [thereunder] is discharged without further legal action.” Deutsche Bank, 471 Mass. at 252. Thus, the mortgages were discharged by operation of law on September 1, 2005, and Plaintiff’s complaint through which it seeks a declaration that the mortgages are valid and enforceable cannot stand.

Judgment to enter accordingly.