Daily Development for Tuesday, November 1, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

Lenders - if Jack Murray’s Halloween posting wasn’t scary enough - try this one.  Ed. 

MORTGAGES; SATISFACTION; STATUTORY PENALTIES; STATUTE OF LIMIATIONS:    A claim against a mortgage arising out of a failure to timely record the satisfaction of a mortgage is a remedial action, not a penal one, and thus is subject to a six-year limitations period for actions created by a statute other than a forfeiture or penalty. 

Rosette v. Countrywide Home Loans, Inc., 825 N.E.2d 599 (Ohio Sup. Ct. 2005). 

Mortgagors sought statutory damages, costs, and interest from Mortgagees under Ohio statute R.C. 5301.36(C) which provides damages of $250 for failure to timely record mortgage satisfactions and releases.  The statute requires that such recording must occur within 90 days of the payoff.  In each case, the trial court denied certification to the proposed out-of state class and certified the Ohio mortgagor class, but only those cases meeting the one-year statute of limitations in R.C. 2305.07 applying “for a penalty or forfeiture.” 

Mortgagors appealed, arguing that R.C. 5301.36(C) is remedial rather than penal, and that therefore a six-year statute of limitations should apply under R.C. 2305.07.  The appellate court affirmed the trial courts’ rulings for the one-year limitation and additionally ruled that

Mortgagors’ appellate notice of appeal had divested the trial courts of the ability to modify their class certification, thus rendering the appeal itself moot. 

Mortgagors appealed both findings to the Ohio Supreme Court.  The court reviewed the statute to determine the legislative intent underlying it.  The court found that since the statute used the word “damages”, the legislature must not have meant a penalty or a forfeiture, citing other Ohio statutes, such as R.C. 1321.56, which do explicitly identify financial payments as penalties or forfeits.  Since the $250 payment is not a penalty or forfeiture, it falls within the provision in R.C. 2305.7 for actions other than penalties or forfeitures, which carries a six-year statute of limitations.  The appeals court erred in upholding the trial courts’ application of the one-year limitation and in finding the appeal moot.  The court case remanded the case to the trial court for further proceedings.

Comment 1: Six years is a long time for a nice fat class to develop.  The mortgagees will be required to provide to the plaintiffs their own records, which should make shopping for the late settlements relatively painless at $250 a pop.  Note, however, that other jurisdictions have penalties (damages???) far greater than this.

Borrowers, of course, rarely suffer more than inconvenience (which can be substantial) when lenders are sloppy about releasing.  Title companies in many areas of the country insure over a late delivered satisfaction.  But there are risks, of course, and in any event prompt satisfaction is part of what the borrower bought when it took out the mortgage.  The mortgagee accepted the interest and fees, didn’t it?  And it’s not too patient with borrowers who aren’t punctilious about their payments. 

Comment 2: Lenders concerned about the penalites associated with late releases ought to take a look at the new Uniform Mortgage Satisfaction Act, released last year by NCCUSL.  Although it doesn’t solve all problems, the Act attempts to balance the interests of lenders and borrowers and focuses much more on getting the title cleared than it does on nicking careless mortgagees in massive class actions. 

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