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JB Mortgage Co., LLC v. Ring

Appeals Court of Massachusetts, Middlesex

August 26, 2016

JB MORTGAGE CO., LLC
v.
JORDAN L. RING, THIRD, & another[1]

          Heard: May 18, 2016.

         Civil action commenced in the Superior Court Department on March 4, 2014.

         The case was heard by Peter B. Krupp, J.

          Michael P. Utke (Steven F. Smoot with him) for the plaintiff.

          Luke Rosseel for Jordan L. Ring, III.

          Present: Katzmann, Carhart, & Sullivan, JJ.

          KATZMANN, J.

         The plaintiff, JB Mortgage Co., LLC, appeals from a judgment of the Superior Court dismissing its action to enforce defendant Jordan L. Ring, Ill's guaranty of a promissory note secured by a mortgage on real property. The trial judge found that the plaintiff's suit was barred by the applicable statute of limitations because it was filed more than twenty years after a default existed on the underlying note. The central issue before us is when the cause of action on the guaranty of the note accrued. We affirm.

         Background.

         On July 21, 1988, Edward C. Simonian, as trustee of the DX Trust (trust), executed a promissory note in favor of Bank Five for Savings (bank) in the face amount of $400, 000. Under the note, the trust was required to make monthly payments of principal and interest, with all remaining unpaid balances due two years from the date of execution. In addition to other penalties for failure to make timely payments, the note provided that, "If default be made in the payment of any installment under this note, or if there is a failure to carry out the terms and conditions of the mortgage or any other instrument given as security for this note, . . . the entire principal sum and accrued interest shall at once become due and payable without notice at the option of the holder of this note."[2] The note was secured by a first mortgage on commercial property in Hull.

         The note was also backed by a guaranty executed by Simonian and Ring under seal the same day, July 21, 1988. In pertinent part, the guaranty stated:

"[T]he undersigned hereby guarantees to the [b]ank the prompt payment and the faithful performance and observance of every liability, obligation, covenant and condition . . . to be paid, performed or observed by the [trust] under said [p]romissory [n]ote, [r]eal [e]state [m]ortgage and [s]ecurity [a]greement, [a]ssignment of [1]eases and [r]entals, and [f]inancing [s]tatement.
"The liability of the undersigned hereunder is direct and unconditional, and joint and several, and the [b]ank shall not be required to pursue or exhaust any of its rights or remedies against the [trust], or any other guarantor or endorser . . . or to resort to any security before enforcing this [g]uaranty against any of the undersigned."

         On February 28, 1991, the bank and the trust agreed to extend the term of the note until July 21, 1994, and to increase the interest rate.[3] Thereafter, the bank went into liquidation and, on September 20, 1991, the Federal Deposit Insurance Corporation (FDIC) became the liquidating agent. On May 26, 1994, the FDIC foreclosed on the property secured by the mortgage, selling it for $165, 000 and leaving a substantial deficiency. As of December, 1995, the trust still owed an outstanding balance of $362, 193.26 with a total amount then due of $417, 591.53. The interest on the debt was continuing to accrue at 11.75 per cent annually.

         Pursuant to a chain of assignments from the FDIC through several intermediary holders, the trust's debt was ultimately acquired by the plaintiff. The plaintiff commenced this action on March ...


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