Daily Development for Thursday, November 13, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

MORTGAGES; DISCHARGE; SATISFACTION STATUTE: Ohio Court approves class certification in action for violation of mortgage satisfaction statute.

Radath v. Federal National Mortgage Association, 891 N.E.2d, (Ohio App.6th Dist. 2008).

Radath entered into a loan agreement on December 6, 2000, regarding real property in Cleveland, Ohio. The mortgage was recorded on December 11, 2000. Radath paid the mortgage in full on or about August 28, 2002, and the entry of satisfaction was filed on November 29, 2002. Ohio Revised Code Section 5301.36 requires filing of satisfaction within 90 days. For any one violation, the statutory penalty is $250.

On August 7, 2003, Radath filed a class-action complaint against FNMA alleging violation of the statute. Radath's proposed class consisted of: "All persons who, since May 9, 1997 and thereafter, paid off residential mortgages recorded in Ohio, where FNMA was the mortgagee at the time of mortgage satisfaction and where the mortgage satisfaction was not recorded within 90 days." The trial court granted Radath's motion for class certification and denied Radath's partial motion for summary judgment.

FNMA appealed asserting three assignments of error: superiority, identifiability, and predominance. FNMA argued that the element of superiority was not satisfied because the trial court failed to recognize the existence of parallel class actions against mortgage servicers that covered half of the putative FNMA class members. FNMA argued that because it hired servicers to manage the mortgages and to file entries of satisfaction, it was not the proper defendant in this case. FNMA argued that a superior method for fair and efficient adjudication required that the proposed class members recover against mortgage servicers.

The Appellate court found that the interest of members of the class in individually controlling the prosecution of separate actions is low because the recovery for each mortgagor was only $250. The Court further found that a high desirability to concentrate litigation of the claims in a particular forum exists. In granting class certification in the instant case, the lower court avoids duplication of time, effort, and resources because FNMA acted as mortgagee to 981,861 mortgages that were satisfied during the time frame set forth by the class-certification order. The Court, therefore, overruled FNMA's first assignment of error.

In the second assignment of error, FNMA argued that the certification order failed to identify any objective means for ascertaining membership in the class. The Court found that there is no law requiring that the class members in this action be ascertained from public records, nor is there a law requiring that the class-certification order identify the exact means by which class membership will be ascertained. Therefore, the Court overruled FNMA's second assignment of error. Finally, FNMA argued in its third assignment of error that common issues did not predominate over individualized issues. The key issue regarding this assignment is whether FNMA violated R.C. 5301.36 by failing to timely record a satisfaction of mortgage. The Court noted that the trial court is in the best position to consider the feasibility of gathering and analyzing class-wide evidence. Because the trial court's ruling did not exceed the bounds of reasonableness, the Court found that it acted within its disc
retion in resolving that there were common questions of fact among class members that could be presented in an efficient manner.
As to the argument that the servicers were in fact responsible, Ohio Revised Code Section 5301.36 makes no provision for mortgage servicers. Therefore, courts have not found issue with class-action lawsuits against the mortgagee where servicers were responsible for recording the satisfaction. Thus the trial court did not err in finding the element of predominance satisfied and FNMA's third assignment of error was overruled.

Comment 1: Late mortgage satisfactions were a serious problem in the late lamented "hot market." Many states enacted statutes with relatively severe penalties for foot dragging in this area. Another example of how chaotic things had become is that, despite this fact, servicers nevertheless messed up the timing of releases. To the editor, there's really no excuse for being unable to grant a release within 90 days of payoff. If things are so confused that a servicer can't get that done, then it's time to unconfused.

Although FNMA looks like it will get tagged with a big judgment here, it likely will be able to lay liability off in its servicers, if they're still in business. In any event, we really aren't that sure just how many mortgagees got late releases. The class action lawyers may not enjoy the payday they anticipated (but don't count on it.)

Comment 2: For a kinder, gentler look at this issue, see: Huber v. Wells Fargo Home Mortgage, Inc., 248 S.W.3d 611 (2008) (The DIRT DD for 8/4/08) (A lender that records a satisfaction of a mortgage within the time allowed by the state's mortgage payment statute is not liable for statutory damages, despite the fact that the lender did not "deliver" the satisfaction to the mortgagor as required by the statute.)

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