Firm brings challenge regarding Obsolete Mortgage Statute to SJC

We have previously blogged about this case, which involves a borrower's claim under G.L. c. 260, sec. 33 [Obsolete Mortage Statute ("OMS").

On Wednesday, May 13, 2020, we filed our Petition for Further Appellate Review to the Supreme Judicial Court to request a review of the March 03, 2020 Appeals Court ruling that denied our Appeal

see our FAR Petition that was filed on May 13, 2020 here

This case involves the question of whether a "lender's" acceleration of the Note, advances the "maturity date" of the mortgage.

Cases have held (including the panel in this matter) that the acceleration of the note is not mentioned in the language of the statute.

However, the SJC in Deutsche Bank v Fitchburg Capital 471 Mass. 248 (SJC 2015) stated that the 5-year repose period (statute of limitations) begins for mortgages that reference the maturity date of the note on the face of the mortgage), at the time the debt becomes "overdue"

We read the SJC examination of the term "maturity date" in Fitchburg to mean that once the Note is accelerated, the mortgage no longer maintains its original maturity date because the "lender" exercised its "acceleration remedy" under paragraph 22 of the mortgage which voids the original terms of the loan (including the original "maturity date stated on the face of the mortgage referencing the Note). The truth of the statement is supported by the fact that after acceleration, there are no further scheduled payments on the loan. When a mortgage is accelerated a borrower receives a notice that all remaining payments are due immediately (not in 30 years). Thus, the note becomes "due" at acceleration, and any time that goes by after that is the period when it is "overdue".

"Under the amendment, the statute requires the holder of a mortgage to foreclose on the mortgage, record a document asserting nonsatisfaction, or record an extension before the mortgage has been on record for thirty-five years or before the secured debt is overdue by five years (and the due date is stated on the face of the mortgage). See St. 2006, c. 63, § 6. The statute has never been interpreted to require satisfaction of a mortgage's underlying obligations before the mortgage becomes unenforceable." Fitchburg at 257.

The United States Court of Appeals for The Fourth Circuit. addressed the "acceleration issue"in Delebreau v. Bayview Loan Servicing, LLC, 680 F.3d 412 (4th Cir. 2012). While the Panel in Nims stated that our citation to Delebreeau did not examine "our obsolete mortgage statute, the Delebreau panel did examine the absurdity of finding that the note would be immediately due and payable upon acceleration, but the mortgage could stay on record for decades. This would defeat the entire purpose of the legislative intent of the 2006 Amendment to G.L. c. 260 Section 33

The original maturity date stated on the face of the Nims mortgage was clearly breached under the acceleration clause in the mortgage (generally found at paragraph 22.]. Thus after acceleration, there are no further payments due under the original schedule of payments, as the note was called payable in its entirety,:

The Fourth Circuit in Delebreau states as follows:

"We review de novo the district court's award of summary judgment involving this two-part legal question of statutory and contract interpretation. See Seabulk Offshore, Ltd. v. Am. Home Assur. Co ., 377 F.3d 408, 418 (4th Cir.2004); Singer v. Dungan, 45 F.3d 823, 827 (4th Cir.1995). We first observe that the ultimate purpose of a statute of limitations is to ensure that causes of action be brought within a reasonable period of time. Perdue v. Hess, 199 W.Va. 299, 484 S.E.2d 182, 186 (W.Va.1997). Like other such provisions, the statute of limitations before us reflects legislative purposes of encouraging promptness in the initiation of claims, and of avoiding stale claims, inconvenience, and fraud that may result from the untimely assertion of such claims. See Davey v. Estate of Haggerty, 219 W.Va. 453, 637 S.E.2d 350, 355 (W.Va.2006) (citing Morgan v. Grace Hosp., Inc., 149 W.Va. 783, 144 S.E.2d 156, 161 (W.Va.1965)).

The task of determining the meaning of the statutory phrase, “the due date of the last scheduled payment of the agreement,” begins with consideration of the question whether that statutory language is unambiguous. A statute is unambiguous when its plain meaning answers an interpretive question. Harper v. Jackson Hewitt, Inc., 227 W.Va. 142, 706 S.E.2d 63, 72 (W.Va.2010). In such cases, the statutory language is dispositive and further inquiry is foreclosed. Id. Thus, when the language of a statute is unambiguous, we must apply the plain meaning of the words that the legislature has employed. State v. Elder, 152 W.Va. 571, 165 S.E.2d 108, 111 (W.Va.1968).

Here, the statute of limitations governing the Delebreaus' claims provides, in relevant part:

With respect to violations arising from other consumer credit sales or consumer loans, no action pursuant to this subsection may be brought more than one year after the due date of the last scheduled payment of the agreement.

W. Va.Code § 46A–5–101(1) (emphasis added). We conclude that the language of this statute is unambiguous because the phrase at issue, “the due date of the last scheduled payment of the agreement,” plainly refers to the last date under the parties' agreement providing for payment of a specified loan amount.

In the present case, this date was June 5, 2007, the date set by Bayview in exercising its right of acceleration under the terms of the deed of trust. As stated above, the deed of trust provided that, upon acceleration, “all sums secured by this Security Instrument and accrued interest thereon shall at once become due and payable.” (Emphases added.) Because no additional payments were scheduled thereafter, the acceleration date became “the due date of the last scheduled payment of the agreement,” within the intendment of the statute of limitations. Therefore, the original schedule of payments, which would have ended on June 1, 2030, no longer had any effect under the terms of the deed of trust.²

The contrary position suggested by the Delebreaus, that the statute of limitations would begin to run only upon the loan maturity date, fails because it impermissibly ignores the terms of the deed of trust providing for loan acceleration. As the district court recognized, the limitations period under the Consumer Credit Act runs from “the due date of the last scheduled payment of the agreement,” which encompasses not only the original payment schedule but the parties' entire agreement, including the acceleration clause. See W. Va.Code § 46A–1–102(2). Under the language of the parties' agreement, the event of acceleration materially altered the parties' original schedule of payments, allowing the lender to demand full payment of the loan amount upon the borrower's default. When Bayview exercised this right demanding full payment effective June 5, 2007, the entire loan amount was due irrespective of the original schedule of payments. As a result, the loan maturity date of June 1, 2030, was nullified for the duration of the Delebreaus' default.

We observe that this application of the statute of limitations also is consistent with the general legislative purposes underlying such statutes, namely, those of encouraging prompt initiation of claims and of avoiding the inconvenience and fraud that may result from the assertion of stale claims. See Davey, 637 S.E.2d at 355. Indeed, “the object of a statute of limitation” is to “keep[ ] stale litigation out of the courts.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 415, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998) (internal quotation marks omitted); see also Tidewater Fin. Co. v. Williams, 498 F.3d 249, 261 (4th Cir.2007) (elimination of stale claims is the very purpose of statutes of limitations). By contrast, the Delebreaus' suggested interpretation implausibly would result in the claims expiring on June 1, 2031, more than two decades after the Delebreaus' default. And the fact that the Delebreaus initiated their claims years earlier does not strengthen their legal position, because that position relies on the loan maturity date, plus the one-year period afforded under the statute of limitations, as the claims' expiration date irrespective whether the claims were filed years earlier.^3" Delebreau v. Bayview Loan Servicing

"the act of acceleration advances the maturity of the debt; the debt becomes immediately due and payable. Matter of LHD Realty Corp., 726 F.2d 327, 330 (7th Cir. 1984). Tan v. California Fed. Sav. & Loan Assn., 140 Cal.App. 3d 800, 809 (1983). Slevin Container Corp. v. Provident Fed. Sav. & Loan Assn., 98 Ill. App. 3d 646, 648 (1981). Kilpatrick v. Germania Life Ins. Co., 183 N.Y. 163, 168 (1905). George H. Nutman, Inc. v. Aetna Bus. Credit, Inc., 115 Misc. 2d 168, 169 (N.Y. Sup. Ct. 1982). Compare Pacific Trust Co. v. Fidelity Fed. Sav.

Page 331

& Loan Assn., 184 Cal. App. 3d 817, 824 (1986), in which, however, the prepayment provision, by its terms, provided, "whether said prepayment is voluntary or involuntary, including any prepayment effected by the holder's exercise of the Acceleration Clause."

We will keep you updated as to future "haps"

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