LBM Financial, LLC v. Shamus Holdings, LLC, No. 10-2216 (1st Cir. 2011)Annotate this Case
In 2003 the owner executed a second mortgage with a stated term of four months, in favor of defendant to secure performance of a guaranty. The owner later executed a separate mortgage and defaulted. The lender foreclosed and took possession subject to senior mortgages. In 2007 defendant published notice of foreclosure. The then-owner filed bankruptcy under 11 U.S.C. 362(a), triggering a stay before the deadline under the Massachusetts Obsolete Mortgages Statute, which requires the holder of a mortgage to take action to enforce it within five years after the end of its stated term (September 9, 2008). The bankruptcy court held that defendant's failure to record an extension rendered the mortgage void. The district court reversed. The First Circuit affirmed, holding that the bankruptcy statute tolls the limitations period of the state law. Defendant was not required to choose between filing an extension and foreclosure and still had the right to foreclose at the time the stay became effective.