Shamus Holdings, LLC v. LBM Financial, LLC (In Re Shamus Holdings, LLC)
642 F.3d 263
1st Cir.2011Background
- LBM Financial, LLC holds a second mortgage on a Boston condo; the term was four months.
- Foundry Realty, LLC defaulted; PBNT foreclosed, transferring to Beach Street Realty Trust, subject to LBM's senior mortgage.
- In 2007, Shamus Holdings, LLC was formed and the property was transferred to Shamus after a bankruptcy filing that triggered the automatic stay.
- Massachusetts Obsolete Mortgages Statute (Mass. Gen. Laws ch. 260, § 33) required enforcement action within five years of the term’s expiration, by September 9, 2008.
- Bankruptcy tolling under 11 U.S.C. § 108(c) extends the period for commencing actions when state-law periods are applicable, until stay ends or is lifted.
- Lower courts split: bankruptcy court voided the mortgage for not recording an extension; district court held the mortgage remained in force during the stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §108(c) toll the Massachusetts statute? | Shamus—extension available by recording; tolling not triggered. | LBM—§108(c) preserves the right to enforce after stay ends. | §108(c) tolls the period; mortgage remains enforceable after stay. |
| Is extension of the limitations period mandatory under §362(b)(3)? | Extension is mandatory to avoid stay effect. | Extension is permissive, not mandatory. | §362(b)(3) is permissive; not required to avoid stay effects. |
| Does state Obsolete Mortgages Statute control when federal stay is involved? | State law should govern deadlines regardless of bankruptcy. | Federal §108(c) governs tolling during the stay. | Federal §108(c) controls; stays toll state-law limits. |
| How do state and federal law interact to determine mortgage validity during a bankruptcy stay? | Mortgage becomes null if not extended within five years. | Stay preserves rights; extension not required to keep mortgage alive. | §108(c) tolls the limitations period, keeping the mortgage in force. |
Key Cases Cited
- Perry v. Blum, 629 F.3d 1 (1st Cir. 2010) (automatic stay tolling during stay)
- In re Morton, 866 F.2d 561 (2d Cir. 1989) (extension timing under §108(c))
- In re Spirtos, 221 F.3d 1079 (9th Cir. 2000) (§108(c) tolling mechanics)
- Jafari v. Wynn Las Vegas, LLC (In re Jafari), 569 F.3d 644 (7th Cir. 2009) (federal rule controls when applicable)
- 229 Main St. Ltd. P'ship v. Mass. Dep't of Envtl. Prot., 262 F.3d 1 (1st Cir. 2001) (automatic stay and tolling context)
- In re 201 Forest St., LLC, 422 B.R. 888 (B.A.P. 1st Cir. 2010) (bankruptcy panel on stay extensions)