Housman v. Lbm Financial Llc.

• Decision Date: 25 August 2011
• Docket Number: No. 10–P–611.,10–P–611.
• Citation: 80 Mass.App.Ct. 213,952 N.E.2d 418
• Parties: Charles J. HOUSMAN,1 trustee,2v.LBM FINANCIAL, LLC.
• Court: Appeals Court of Massachusetts

80 Mass.App.Ct. 213

952 N.E.2d 418

Charles J. HOUSMAN,1 trustee,2

v.LBM FINANCIAL, LLC.

No. 10–P–611.

Appeals Court of Massachusetts, Norfolk.

Argued Jan. 18, 2011.Decided Aug. 25, 2011.

Arnold E. Cohen, Boston, for the plaintiff.Floyd H. Anderson for the defendant.Present: LENK, GRAHAM, & FECTEAU, JJ.³GRAHAM, J.

The plaintiff, Charles J. Housman, trustee of Pine Banks Nominee Trust (Pine Banks), brought an action in Superior Court seeking a declaratory judgment that a mortgage held by the defendant, LBM Financial, LLC (LBM), on a property that Pine Banks had acquired in a foreclosure sale was discharged pursuant to G.L. c. 260, § 33, the “Obsolete Mortgages” statute, and that the defendant's foreclosure sale of the property was therefore void. A judge of the Superior Court concluded that the defendant's mortgage remained valid, the statutory requirements notwithstanding, because the plaintiff had knowledge of the extension, and granted the defendant's motion to dismiss, later entering a judgment dismissing the plaintiff's claim.

On appeal, the plaintiff argues that the motion judge erred as matter of law in concluding that the statute did not discharge the mortgage, that the judge improperly concluded that the plaintiff had knowledge of the extension, and that the plaintiff's complaint survives the remaining arguments advanced in the defendant's motion to dismiss. We agree that the judge erred in the application of the statute and, accordingly, reverse.

Background. We summarize the relevant facts, which are undisputed. On May 9, 2003, Bernard Laverty, owner of 1736 Liberty Street, Unit F, in Braintree (property), granted a mortgage (LBM mortgage) to LBM on the property to secure his personal guaranty of a loan granted by LBM to a corporation in which Laverty was a shareholder.⁴ The LBM mortgage stated that it had a term of four months and was recorded in the Norfolk County registry of deeds. ⁵

On September 9, 2003, the parties to the note, LBM and several of the loan guarantors, executed an allonge, a loan modification agreement, and an amendment to the mortgage. The latter two documents each purported to extend the maturity date of the LBM mortgage to April 9, 2004. None of these documents was recorded.

On June 27, 2004, Laverty granted a mortgage on the same property to Pine Banks (Pine Banks mortgage) to secure a $225,000 personal loan. Laverty defaulted on the loan, and Pine Banks foreclosed on the property and took title, subject to the LBM mortgage, on August 17, 2007.⁶

On April 15, 2008, LBM commenced an action to begin the process of foreclosing on the property.⁷ Pine Banks filed a complaint in Superior Court, alleging that the LBM mortgage was void on several grounds. Pine Banks also filed an ex parte motion for a temporary restraining order, granted July 8, 2008, to enjoin LBM's foreclosure of the property pending further hearing. After a hearing on August 5, 2008, Pine Banks' request for a preliminary injunction was denied. LBM subsequently held a foreclosure sale on the property on September 16, 2008.

Pine Banks filed an amended complaint on March 19, 2009, seeking, in addition to its existing claims, a declaratory judgment that the LBM mortgage was discharged pursuant to G.L. c. 260, § 33, and the foreclosure sale a nullity (count I). LBM filed a motion to dismiss, alleging five grounds in support of the continued validity of the LBM mortgage.⁸

On June 8, 2009, LBM's motion to dismiss was allowed “for the reasons set forth in defendant's [memorandum.] The plaintiff's ‘argument’ that the ‘loan modification [amendment]’ not being recorded precludes the defendant from foreclosing is without merit. A [recording] provision is to put the world on notice. Here, plaintiff had notice.” Pine Banks subsequently filed a stipulation to dismiss counts II through VII of its amended complaint. A judgment issued on December 17, 2009, dismissing count I pursuant to the order allowing LBM's motion to dismiss. This appeal followed.

Discussion. Rule 12(b)(6) of the Massachusetts Rules of Civil Procedure, 365 Mass. 754 (1974), provides for the dismissal of a claim that “fail[s] to state a claim upon which relief can be granted.” We review the grant of a motion to dismiss de novo, and “[w]e accept as true the allegations in the complaint and draw every reasonable inference in favor of the plaintiff.” Curtis v. Herb Chambers I–95, Inc., 458 Mass. 674, 676, 940 N.E.2d 413 (2011). “Factual allegations must be enough to raise a right of relief above the speculative level ... [based] on the assumption that all the allegations in the complaint are true....” Iannacchino v. Ford Motor Co., 451 Mass. 623, 636, 888 N.E.2d 879 (2008), quoting from Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

The motion judge's order on the defendant's motion to dismiss concluded that the LBM mortgage was not discharged by G.L. c. 260, § 33, and referred specifically to the recording requirements of the statute. General Laws c. 260, § 33, as amended by section 6 of chapter 63 of the Acts of 2006, provides that any mortgage containing a stated maturity date expires and is discharged five years after that maturity date unless, before the expiration of such period, an extension of the mortgage is recorded, or an acknowledgment or affidavit that the mortgage is not satisfied is recorded, both of which are subject to the requirements of G.L. c. 260, § 34. Specifically, § 33 provides, 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. The period shall not be extended by reason of ... agreement, extension, acknowledgment, affidavit or other action not meeting the requirements of this section and sections 34 and 35. Upon the expiration of the period provided herein, the mortgage shall be considered discharged for all purposes without the necessity of further action by the owner of the equity of redemption or any other persons having an interest in the mortgaged property....” (Emphasis added.)

The amended statute took effect on October 1, 2006. Section 8 of chapter 63 of the Acts of 2006 provides that the amendment “shall apply to all mortgages, whether recorded before, on or after the effective date hereof, except that, the term of a mortgage which as a result of sections 5 and 6 [G.L. c. 260, § 33,] would expire within 1 year after the effective date of this act shall be extended for a period of 1 year from the effective date of this act [October 1, 2007].”

The motion judge evidently concluded that the recording requirements of § 33 are inapplicable where the party seeking a declaration that the mortgage has been discharged has actual notice of an extension of the maturity date.⁹ When the meaning of a statute is at issue, we look first to the actual language of the statute. See International Fid. Ins. Co. v. Wilson, 387 Mass. 841, 853, 443 N.E.2d 1308 (1983); Martha's Vineyard Land Bank Commn. v. Assessors of West Tisbury, 62 Mass.App.Ct. 25, 27, 814 N.E.2d 1147 (2004). Where the language of a statute is clear and unambiguous, “judicial inquiry into the statute's meaning, in all but the most extraordinary circumstance, is finished.” Beaupre v. Cliff Smith & Assocs., 50 Mass.App.Ct. 480, 491, 738 N.E.2d 753 (2000), quoting from Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 475, 112 S.Ct. 2589, 120 L.Ed.2d 379 (1992). We cannot look beyond the words of the statute in such a case, even if “we ... recognize a potential unfairness within a statute's clear language ... [or] a statute creates a potential anomaly” (footnote omitted). Commonwealth v. Mandell, 61 Mass.App.Ct. 526, 528, 811 N.E.2d 1045 (2004).

We conclude that the meaning of the statute is clear on its face. The language of the statute plainly discharges as matter of law all mortgages five years after the date on which they became due, unless an extension, acknowledgment, or affidavit is recorded within that period of time. The requirements of the statute are clear and must be strictly satisfied.

Our reading of the statute finds support in Federal court decisions interpreting the same language. Rejecting the argument that § 33 applies only to defunct or inactive mortgages, the United States Bankruptcy Court concluded, “[t]he language of the Obsolete Mortgages [s]tatute is unambiguous and contains no exceptions. A mortgagee's actions, short of timely recording an appropriate document, are ineffective to extend an expired mortgage. Had the legislature intended the Obsolete Mortgages [s]tatute to have a more narrow application, ... it was certainly capable of drafting the statute accordingly.” In re 201 Forest St., LLC, 404 B.R. 6, 10 (Bankr.D.Mass.2009). Reversing on other grounds, the reviewing court agreed that “[t]he effect of the Obsolete Mortgages [s]tatute is to extinguish the mortgagee's rights as mortgagee.” LBM Fin., LLC v. 201 Forest St., LLC, 422 B.R. 888, 893 n. 7 (1st Cir. BAP 2010). The Bankruptcy Court also considered LBM's attempted foreclosure of another property owned, for a period, by Pine Banks, subject to LBM's mortgage on...