KAREN MERRITT and JAMES CRONAN v. PENSCO TRUST COMPANY Custodian FBO JAMES P. TIERNAN IRA and PENSCO TRUST COMPANY Custodian FBO RICHARD J. FAGAN IRA.

Introduction

At issue in this case is the current validity of two private mortgages, one encumbering plaintiff Karen Merritt's former residence at 91 Oak Street in Norton [Note 1] and the other the property at 7 Brayton Woods Drive in Rehoboth which Ms. Merritt rents to tenants. Ms. Merritt is the record owner and mortgagor of both, and she and plaintiff James Cronan (to whom she was then-married) co-signed the underlying promissory notes. The mortgages are held by defendants Pensco Trust Company as Custodian FBO [for the benefit of] the James P. Tiernan IRA (Mr. Tiernan's retirement fund) and Pensco Trust Company as Custodian FBO the Richard J. Fagan IRA (Mr. Fagan's retirement fund), and were granted to secure a $311,500 loan from the defendants to the plaintiffs, the proceeds of which were used by the plaintiffs to pay off their previous mortgages on these properties, long in default, which were only one week away from foreclosure auction.

Both the notes and the mortgages are dated September 17, 2010, which is when the loan was made. The mortgages were recorded at the Bristol (North) Registry of Deeds on September 23, 2010. The notes were not recorded.

The notes have a one year term for repayment measured from the date the note was executed and, if full payment had not been made by that time, provision for an additional charge and a final due date of March 31, 2012. The mortgages themselves have no term or maturity date on their face. Instead, they simply state that they secure the payment of the notes (without reciting any of notes' provisions or details), and also "the performance of all agreements herein contained [in the mortgage]" (none of which recite a term or maturity date).

The plaintiffs have never paid anything on the notes — principal, interest, or charges of any kind. Their due date has long-since passed [Note 2] and, by now, so has the statute of limitations for the plaintiffs' personal liability for that indebtedness. [Note 3] Through this lawsuit, the plaintiffs now seek to avoid foreclosure of the mortgages, contending they are no longer valid. [Note 4]

Two arguments are made in support of that contention. The first is based on the obsolete mortgage statute, G.L. c. 260, § 33, and the second on an assertion that the expiration of the statute of limitations on the notes also makes the mortgages unenforceable. For the reasons set forth below, I disagree with both of these arguments, and rule that the mortgages are still valid and enforceable. The plaintiffs' motion for summary judgment is thus DENIED and the defendants' cross-motion is ALLOWED.

Facts

The following facts are either undisputed or taken in the light most favorable to the plaintiffs — the parties against whom summary judgment is being entered.

On September 17, 2010, in return for a loan of $311,500, Ms. Merritt and her now ex-husband Mr. Cronan executed two promissory notes, one to the Tiernan IRA in the principal amount of $146,500, and the other to the Fagan IRA in the principal amount of $165,000. As previously noted, both promissory notes stated a one-year term and, if full payment had not been made by that date, provided for an additional charge and a final due date of March 31, 2012.

Simultaneously, also on September 17, 2010, to secure the payment of the promissory notes "and also to secure the performance of all agreements herein contained [in the mortgage deeds themselves]," Ms. Merritt granted two mortgages to the defendants, one on 91 Oak Street in Norton (which she owned individually, and where she and Mr. Cronan resided at the time) and the other on 7 Brayton Woods Drive in Rehoboth (a rental property which she also owned individually). Both mortgages were recorded on September 23, 2010. Neither facially states a date of maturity or amount owed, instead merely referencing the notes (which were not recorded) without giving any of their details. Neither mortgage was executed under seal. No payments have been made on the notes, ever, and they have long been in default. Ms. Merritt also long since ceased paying property taxes, at least on the Rehoboth property, and it was saved from tax lien foreclosure only because the defendants paid them – at this point, over $94,225.62 – to protect their mortgage interests which would otherwise be wiped out. See G.L. c. 60, § 64.

Ms. Merritt filed for Chapter 13 bankruptcy (reorganization) on May 16, 2018. In re Karen R. Merritt, Bankr. D. Mass., Case No. 18-11840. In response, on July 15, 2018, the defendants filed a motion for relief from the automatic stay applicable to Ms. Merritt and whatever co-debtor stay applied to Mr. Cronan so that they could proceed with foreclosure of their mortgages, and the bankruptcy court scheduled the motion for hearing on August 7, 2018. The day before that hearing, August 6, 2018, Ms. Merritt filed a motion to dismiss her bankruptcy petition. The court scheduled Ms. Merritt's motion for hearing on August 7, 2018, to occur immediately after the hearing of the defendants' motion for relief from stay.

By written Order dated August 8, 2018, the bankruptcy court allowed the defendants' motion for relief from stay, ruling that the defendants could "proceed to foreclose or accept a deed in lieu of foreclosure" despite the pendency of the bankruptcy action. [Note 5] Immediately thereafter, the court allowed Ms. Merritt's motion to dismiss her bankruptcy petition.

Further relevant facts are set forth in the Analysis section below.

Analysis

The Summary Judgment Standard

The case is before me on cross-motions for summary judgment. Summary judgment, governed by Mass. R. Civ. P. 56, is appropriately granted when "viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to judgment as a matter of law." Lev v. Beverly Enterprises-Massachusetts, Inc., 457 Mass. 234 , 307 (2010) (internal quotation and citations omitted). [Note 6] The twin burden of proving both the absence of a genuinely contested issue of material fact and entitlement to judgment as a matter of law is on the party seeking summary judgment. Pederson v. Time, Inc., 404 Mass. 14 , 16-17 (1989). This burden may also be met by demonstrating that the opposing party has no reasonable expectation of proving an essential element of its case at trial. See Flesner v. Technical Commc'n Corp., 410 Mass. 805 , 809 (1991); Kourouvacilis v. General Motors Corp., 410 Mass. 706 , 714 (1991).

Summary judgment may be granted to either party so long as the standard has been met. See Mass. R. Civ. P. 56(c). Here, the defendants have met the summary judgment standard and are entitled to the declaration they seek.

The Mortgages Are Currently Valid Under the Obsolete Mortgage Statute

The plaintiffs' initial argument, addressed by the court in its January 16, 2019 Docket Entry and subsequently withdrawn by the plaintiffs, was that the obsolete mortgage statute, G.L. c. 260, § 33, bars the current enforcement of the mortgages. For the reasons set forth in the Docket Entry and repeated here for the sake of completeness, I disagree.

Based on my reading of (1) the language of G.L. 260, § 33, (2) the trial court's Order in Deutsche Bank Nat'l Trust Co. v. Fitchburg Capital LLC, 21 LCR 559 (Oct. 11, 2013), aff'd Deutsche Bank Nat'l Trust Co. v. Fitchburg Capital LLC, 471 Mass. 248 (2015) (which found that Order "well-reasoned"), and (3) the Supreme Judicial Court's opinion in Deutsche Bank Nat'l Trust Co. v. Fitchburg Capital LLC, 471 Mass. 248 (2015), I find and rule that the obsolete mortgage statute is not a bar to enforcement of these mortgages. That statute provides that a mortgage in which the term or maturity date is stated become unenforceable five years after expiration of the term, and a mortgage in which the term or maturity date is not stated becomes unenforceable thirty-five years after recording.

As the Deutsche Bank case holds, for the five year period to apply, it is sufficient if the mortgage document states the maturity date of the note. But, as was the case in Deutsche Bank, that maturity date must be stated on the face of the mortgage. If it is not so stated, the applicable period is thirty-five years after recording of the mortgage.

The legislative reasoning behind this bright-line rule was well explained in the trial court's Order:

The Obsolete Mortgage Statute reflects a policy of the Legislature in favor of expediting the discharge of obsolete mortgages. This intent is best carried out when term and maturity date are read as the duration set forth in the mortgage instrument. A mortgage is recorded in the registry of deeds. The note that the mortgage secures is not. Thus, the note may be satisfied, lost, or changed without notice to the public, unlike the notice to the public that the mortgage provides through its recording. [citation omitted]. By basing the discharge date on the term or maturity date included in the mortgage instrument, the Legislature has ensured that the enforcement period of a mortgage is clear from the record, allowing for more efficient discharge of obsolete mortgages. Further, basing the enforcement period on the term or maturity date as set forth in the mortgage instrument has created a greater level of certainty and consistency for members of the public. Given that mortgages can be and often are separated from the note, [citation omitted], the public cannot reasonably rely on the holder of the note to disclose the terms of the note to the public or remember to discharge the mortgage upon performance of the note. Using the term or maturity date set forth in the mortgage instrument ensures that the enforcement period is clear from the record, affording the discharge process greater efficiency. The plain and ordinary meanings of term and maturity date are therefore in keeping with the broad policy considerations and objectives underlying the 2006 amendment.

Deutsche Bank, 21 LCR at 562-563 (emphasis in original). Here, no term or maturity date was stated on the face of the mortgage instrument, only a general reference to "the payment of that certain Promissory Note of even date" without stating the term or maturity date of the note. Thus, as discussed more fully below, the thirty-five year period applies, and that period had not yet run.

The Passing of the Statute of Limitations on the Underlying Notes Does Not Invalidate the Mortgages or Make Them Currently Unenforceable

Under G.L. c. 106, § 3-118(a), an action on a promissory note must be brought "within six years after the due date or dates stated in the note." That limitations period — six years from the notes' March 31, 2012 outside due date — ended on March 31, 2018. Accordingly, neither Ms. Merritt nor Mr. Cronan currently has any personal liability for any part of the loan they received from the defendants.

The question thus presented is whether the passing of the statute of limitations on the notes also makes the mortgages that were granted to secure them unenforceable. I find and rule that it does not.

In Massachusetts, a mortgage is a transfer of title. Faneuil Investors Group Ltd. P'ship v. Board of Selectmen of Dennis, 458 Mass. 1 , 6 (2010); see also U.S. Bank N.A. v. Ibanez, 458 Mass. 637 , 649 (2011). When a property is mortgaged and thus conveyed to the mortgagee, "legal 'title' to the mortgaged real estate remains in the mortgagee until the mortgage is satisfied or foreclosed." Faneuil Investors, 458 Mass. at 6 (emphasis added). The mortgagor — here, Ms. Merritt — is able to "defease" that title only "upon the payment of money or the performance of some other condition." Id. at 6 (internal citations and quotations omitted). Put simply, the mortgage provides an independent remedy for collection of the debt, separate and apart from the remedy of collection on the notes.

"[T]he nature of a mortgage [is] tied to the life of its underlying obligations," to be sure. See Deutsche Bank, 471 Mass. at 258. But this is so only in the sense that there needs to be a valid debt to start with, [Note 7] that the debt has not been satisfied by "payment of money or the performance of some other condition," [Note 8] and that the statute of limitations on the mortgage which secures that debt has not run. [Note 9] A statute of limitations on a remedy ends the ability to use that remedy but, unless it is a statute of repose, it does not terminate the underlying obligation, which remains enforceable if another remedy exists. See, e.g., Lewis v Crowell, 205 Mass. 497 , 500 (1910) ("A statute of limitations does not take away any substantive rights secured by the contract, but only affects the remedy."). Here, the remedy of enforcement of the note has expired, but if the limitations period has not run on the mortgage, foreclosure of the mortgage (an in rem proceeding) remains a valid and enforceable remedy to collect the underlying debt.

The recent case of Fortin v. Fed. Nat'l Mortgage Ass'n, Nationstar Mortgage, LLC, Bankr. D. Mass., 2019 WL 1087871 (Mar. 5, 2019) holds squarely that the remedy of foreclosure on the mortgage remains even after the statute of limitations has run on personal liability for the underlying debt. As Fortin notes:

The SJC has repeatedly held over the last 180 years that, at both law and equity, the inability to recover directly on a note due to the expiration of a statute of limitations is no bar to recovery under a mortgage, so long as the underlying debt remains unpaid. See Pearson v. Mulloney, 289 Mass. 508 , 515, 194 N.E. 458 (1935) ("A valid mortgage may exist although personal liability on the mortgage note never attached or has been barred by bankruptcy or the statute of limitations.") (citations omitted); Jeffrey v. Rosenfeld, 179 Mass. 506 , 509, 61 N.E. 49 (1901) ("At law and in equity the holder can enforce his remedy upon the mortgage independently of or concurrently with that on the note and, in some cases, at least, where he has lost his remedy upon the note."); Thayer v. Mann, 36 Mass. 535 , 538 (1837) ("The creditor has a double remedy, one upon his deed, to recover the land, another upon the note, to recover a judgment and execution for the debt, and it does not follow that he cannot recover on one, although there may be some technical objection or difficulty to his recovery upon the other."). These pronouncements from the SJC are unambiguous — the mere inability to collect on a note due to the expiration of a statute of limitations does not affect the enforceability of a mortgage so long as the debt remains unpaid. The Court cannot discern (nor has the Debtor cited) any subsequent ruling from the SJC indicating an abandonment of this straightforward principle.

2019 WL 1087871 at *2

I agree with the reasoning and holding of Fortin. That Deutsche Bank did not change this "straightforward principle" is clear not only from Deutsche Bank itself — holding that the statute of limitations applicable to mortgages is the one set forth in the obsolete mortgage statute, Deutsche Bank, 471 Mass. at 257 ("The obsolete mortgage statute created a limitations period for bringing foreclosure actions against mortgages") — but also from the Supreme Judicial Court's decision in Christakis v. Jeanne D'Arc Credit Union, 471 Mass. 365 (2015), handed down just a few weeks after Deutsche Bank, which reaffirmed the ability to foreclose on a mortgage even after there was no longer any personal liability on the debt, in that case due to its discharge in bankruptcy.

JPMorgan Chase & Co., Inc. v. Casarano, 81 Mass. App. Ct. 353 (2012), on which the plaintiffs also rely, does not hold otherwise. It neither addresses nor holds anything regarding the foreclosure of a mortgage after the statute of limitations on the note has expired but the statute of limitations on the mortgage has not. Instead, it addresses a far different point — the plaintiff's failure to prove the terms of the note to show that it was in default and the amount, if anything, that was owed. As the Casarano court noted, "[u]nder Massachusetts law, a mortgage is a conveyance made for the purpose of securing performance of a debt or obligation." Id. at 355 (internal citations and emphasis omitted). In Casarano, the mortgage was unenforceable not because the statute of limitations on the note had run, but because the underlying promissory note was lost and "there was no evidence of any terms that would reveal whether the debt was in default." Id. at 356 (emphasis added). The evidence was thus "insufficient as a matter of law to demonstrate the existence, much less the amount, of a current debt." Id. Here, it is undisputed that the defendants hold the notes, and that their terms are stated on their face. The amount owed is easily calculated from those terms. It is undisputed that nothing has ever been paid on the notes. And it is undisputed that they have long been in default.

The question then becomes whether the statute of limitations on the mortgage has passed, and here it has not. The plaintiffs claim that the applicable limitations statute is G.L. c. 260, § 2, the general provision for contracts. I disagree. "[W]here statutes deal with the same subject, the more specific statute controls the more general one, so long as the Legislature did not draft the more general statute to provide comprehensive coverage of the subject area." Wing v. Comm'r of Probation, 473 Mass. 368 , 373-374 (2015). Here, G.L. c. 260, §33, the obsolete mortgage statute, sets out a specific limitation for the foreclosure of mortgages that do not have a term or maturity date stated on their face — thirty-five years from the recording of the mortgage [Note 10] — and that is the applicable period. See Deutsche Bank, 471 Mass. at 257 ("[t]he obsolete mortgage statute created a limitations period for bringing foreclosure actions against mortgages"). [Note 11] These mortgages were both recorded on September 23, 2010. Thirty-five years from that date is September 22, 2045. That date has not yet passed. The mortgages are thus currently valid and enforceable.

Conclusion

For the foregoing reasons, the plaintiffs' motion to summary judgment is DENIED and the defendants' cross-motion is ALLOWED. It is ORDERED, ADJUDGED and DECREED that the defendants' mortgages are not invalidated or rendered unenforceable by the expiration of the statute of limitations on the underlying promissory notes, and that the statute of limitations on the mortgages is thirty-five years from the date the mortgages were recorded.

Judgment shall enter accordingly.

SO ORDERED.