Shamus Holdings, LLC v. LBM Financial, LLC (In re Shamus Holdings, LLC)
- Summarized by Bruce Harwood , US Bankruptcy Court - District of New Hampshire
- 13 years 7 months ago
- Citation:
- No. 10-2216 (1st Cir. June 9, 2011)
- Tag(s):
-
- Ruling:
- Section 108(c) tolls the period in which a mortgagee may enforce a mortgage where the period had not expired at the time the bankruptcy case commenced, and where—but for the automatic stay—the mortgagee would otherwise have needed to either commence a judicial foreclosure or file a notice of extension under Massachusetts’ Obsolete Mortgages Statute to prevent the enforcement period from expiring within the term stated in the mortgage. The First Circuit rejected as “beside the point” and “immaterial” the debtor’s argument that Section 362(b)(3)’s stay exception for acts “to maintain or continue the perfection of in interest in property” would have permitted the mortgagee to file the extension notice notwithstanding the stay, ruling that “neither the case law nor the language of Section 362(b)(3) itself suggests that the action it contemplates is mandatory, rather than permissive. It clearly is not.” The court further rejected the argument that the filing provisions of the Obsolete Mortgage Act controlled over Section 108(c)'s tolling provisions. Even though the mortgagee's substantive rights under the mortgage are derived from state law, "when federal bankruptcy law supplies a rule that speaks directly to the right at issue, that rule controls."
- Procedural context:
- Debtor commenced adversary proceeding to discharge mortgage as time barred for mortgagee's failure to record with applicable registry of deeds a notice extending the time it could enforce its mortgage, which debtor alleged had expired post-petition. Bankruptcy court held that mortgagee's failure to file state law notice of extension and subsequent delay in commencing foreclosure rendered mortgage null and void. District court reversed, holding that mortgagee's enforcement rights were preserved during the pendency of the automatic stay. Debtor appealed to First Circuit.
- Facts:
- LBM Financial held a guaranty from a real estate trust, secured by a second mortgage on the trust's property. LBM timely noticed a public foreclosure sale. Several days before the scheduled sale, the trustee of real estate trust transferred the property (subject to LBM's mortgage) to the newly formed Shamus Holdings LLC, which promptly commenced a chapter 11 case to stop LBM's foreclosure.
- Judge(s):
- Selya; Thompson; Howard
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