Gelfgatt v. USB

District Court Holds That Acceleration Of The Maturity Date Of A Promissory Note Secured By A Mortgage Does Not Affect The Maturity Date Of Said Mortgage for the purposes of the Massachusetts obsolete mortgage statute.  Gelfgatt v. U.S. Bank National Association, 2018 WL 3614139 (D. Mass., July 27, 2018)

             In February 2005, Leon Gelfgatt (the “Debtor”) executed a promissory note in the aggregate principal amount of $343,500 (the “Promissory Note”) in favor of Homevest Mortgage Corporation (the “Creditor”) and secured by a mortgage over real property (the “Mortgage”) in favor of Mortgage Electronic Registration System (the “Original Mortgagee”), as nominee for the Original Creditor.  The Mortgage had a stated maturity date of April 2025.  In July 2010, the Original Mortgagee assigned the Mortgage to U.S. Bank (the “New Mortgagee”), after the Debtor had defaulted under the Promissory Note in March of that same year.  Debtor filed for bankruptcy protection and received a discharge of his unsecured claims in May 2012. 

             Debtor claimed that his discharge in bankruptcy, in May 2012, altered the stated maturity date of the Mortgage, i.e., that the Mortgage’s maturity date was accelerated to May 2012.  Debtor claimed that because the New Mortgagee failed to foreclose on the Mortgage within the requisite time period required by the Massachusetts Obsolete Mortgage Statute, M.G.L. c. 260, § 33, the New Mortgagee forfeited its interest in the real property.  The Massachusetts Obsolete Mortgage Statute reads, “[no] proceeding [shall begin] for foreclosure of any such mortgage after the expiration of . . . 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 . . . is recorded before the expiration of such period.”

             The court disagreed with Debtor’s argument.  The court held that the Massachusetts Obsolete Mortgage Statute “contains no language supporting [Debtor’s] interpretation that the acceleration of the maturity date of a note affects the maturity date of the related mortgage.”  Because the Mortgage had a stated maturity date of April 2025, the Massachusetts Obsolete Mortgage Statute would render the Mortgage null and void April 2030, not May 2017 (5 years after the discharge in bankruptcy), as the Debtor asserted.  Furthermore, the Debtor erroneously relied on Massachusetts case law that made no mention of the notion that acceleration of a promissory note affects the expiration of a corresponding mortgage.  Therefore, the court dismissed Debtor’s claims as without merit.  The court also dismissed Debtor’s secondary argument that the New Mortgagee lacked chain of title, stating that the allegations were barred by the doctrine of claim preclusion and that the elements of claim preclusion (that (i) the parties to the prior and present actions be identical or in privity; (2) the causes of action arise out of the same nucleus of operative fact; and (3) the prior action has produced a final judgment on the merits) were satisfied.