Rhode Island court holds mortgage extension agreement ineffective to extend duration of mortgage where maturity date not included in recorded extension

In Bayview Loan Servicing, LLC v. Providence Bus. Loan Fund, Inc., No. 2018-18-APPEAL (R.I. Jan. 29, 2019) the Rhode Island Supreme Court holds that a recorded amendment to a mortgage which did not state the duration of the extension of the mortgage was ineffective to extend the validity of the mortgage to thirty-five years.

On June 2, 1992, the owner of certain property in Providence Rhode Island granted a mortgage to the defendant as security for a loan. The 1992 mortgage was properly recorded and stated a term of ten years, but it did not specify a maturity date. In 1997 the owner entered into an agreement to modify the 1992 mortgage to reduce the principle which was to be repaid over a period of 108 months. The modification agreement was not recorded, however. On the same day, the parties also executed an amendment to the 1992 mortgage which they did record. The 1997 amendment stated the new principle amount but neglected to reflect the 108-month repayment or any other term or maturity date.

The owner later conveyed the property and the new owner eventually took out a mortgage with the plaintiff which was properly recorded. The new owner later conveyed the property to someone else and plaintiff’s loan fell into default. Plaintiff gave notice to the new owner of its commencement of foreclosure and filed an action seeking a declaration that the defendant’s mortgage was discharged by operation of a state statute (G.L. 1956 § 34-26-7) which provides for the expiration of certain mortgages after a stated number of years. In response, defendant argued that because the 1992 mortgage did not state a maturity date on its face, a thirty-five-year lien was created under the statute. Alternatively, it argued that the 1997 amendment was valid because it was recorded and, because the 1997 amendment failed to state a term or maturity date, the mortgage was valid for thirty-five years from the date of the 1997 amendment.

The lower court sided with the plaintiff and its ruling was upheld on appeal. The supreme court agreed with the lower court that the 1992 mortgage was not valid for more than ten years.

Section 34-26-7 states that foreclosure proceedings may not be brought “after the expiration of a period which shall be thirty-five (35) years from the date of recording of the mortgage, or in the case of a mortgage in which the term or maturity date is stated, five (5) years from the expiration of the term or maturity date * * *.” The plain language of the statute required that either a term or maturity date be stated in order to avoid the thirty-five-year validity period, not both. The 1992 mortgage stated a term of ten years, with no maturity date. Based on a reading of the plain language of § 34-26-7, the period of validity for the 1992 mortgage ran for the ten-year term, plus five years following expiration of that term—that is, fifteen years from June 3, 1992.

The reviewing court also agreed that the 1997 amendment was ineffective to extend the validity of the mortgage to thirty-five years. To be effective the statute required that all extensions or modifications be recorded and, here, the modification agreement was not recorded. Nor did the 1997 amendment extend the maturity date because it did not contain a term of years or maturity date. The court reasoned that that argument would have merit if the parties had discharged the 1992 mortgage and recorded a new mortgage in 1997. But the parties did not execute a new mortgage; rather, they recorded an amendment to the 1992 mortgage, which was, again, was ineffective to extend the maturity date.

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