by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
The Reporter for today's development is Professor Cyril Fox of the University of Pittsburgh.
MORTGAGES; MISREPRESENTATION; DAMAGES: A mortgagee that intentionally misrepresents the payoff amount on the mortgage debt may be liable to the mortgagor for damages for emotional distress, as well as actual and punitive damages under the District of Columbia Consumer Protection Procedures Act. Osbourne v. Capital City Mortgage Corporation, 667 A.2d 1321 (D.C. 1995).
In this factually complex case, mortgagors asserted numerous claims against their second mortgagee. The trial court granted summary judgment in favor of the mortgagee on all counts and the Court of Appeals affirmed in part and reversed in part. The court distinguished between allowing recovery for financial embarrassment or emotional distress in cases of intentional acts from cases of negligent misrepresentation. Actions for intentional misrepresentation are based on an intentional tort, even where the misrepresentation arises in a contractual relationship. If the mortgagors can prove intentional misrepresentation by the mortgagee, they may recover for emotional harm that resulted from that misrepresentation. However, if the proof shows only negligent misrepresentation, recovery for emotional harm is not available. Damages for emotional distress are a "natural and proximate" consequence of an intentional tort but not of a claim sounding in negligence.
Reporter's Comment: Note that under the Restatement of Land Security, mortgagees will have to provide balance information on demand to numerous parties with interests in the property. This will expand and already growing trend to require mortgagees to provide information, and thus increase the range of possible liability claims.
Although one might say that an "intentional" act would be rare, "intent" sometimes is in the eye of the beholder. Further, mortgage servicers always have "maverick" employees who may, for instance, try to cover an earlier mistake in the account by requiring a payoff that includes unlawful charges. This is particularly true in second mortgage practice, where consumer statutes frequently limit the types of charges mortgagees can make.
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