Maine Mortgagees: Send Your Mortgagor the Actual Recorded Release, Not a Copy

On September 13, Maine’s Supreme Judicial Court (the “Law Court”), in a 4-2 split decision, issued an opinion that may expose mortgagees and mortgage servicers to significant liability under the Maine statute that governs the discharge of mortgages, 33 M.R.S. § 551. In Sabina v. JPMorgan Chase Bank, N.A., 2016 ME 141, the Law Court announced that a mortgagee who timely records a release of its mortgage and informs the mortgagor of its recording, nevertheless violates § 551 when the mortgagee sends to the mortgagor a copy of the recorded release rather than the original recorded document. In such circumstances, the Law Court announced, § 551 subjects a mortgagee (defined to include any servicer who receives final payment on a mortgage) to exemplary damages of $500 per violation as well as court costs and reasonable attorney’s fees in any action to enforce the statute.

How Did the Court Reach its Conclusion?

Maine law requires a mortgagee to do two things after a mortgagor fully performs his or her obligations under a mortgage. First, the mortgagee must record a release of the mortgage within 60 days. 33 M.R.S. § 551. Next, upon receipt of the recorded release from the registry of deeds, the mortgagee must send the release by first class mail to the mortgagor within 30 days. Id. These statutory requirements serve two purposes: (i) removal of a cloud upon the mortgagor’s title; and (ii) notice to the mortgagor that the cloud has been removed.

In filing their class action law suit against JPMorgan Chase Bank, N.A. (“Chase”), Alec and Emma Sabina, represented by Portland law firm Bernstein Shur, did not argue that Chase, represented by Morgan Lewis & Bockius, of Boston and Miami, violated § 551 by failing to timely record a release or by failing to timely inform the Sabinas that the release had been recorded.[1] Rather, the Sabinas argued that Chase violated the statute merely because it mailed them a copy of the recorded release rather than the original. The Superior Court dismissed the Sabinas’ complaint for failure to state a claim. On appeal, a four judge majority of the Law Court reversed, relying entirely on its interpretation of the plain language of the statute. The Court specifically focused on the statute’s mandate that “[w]ithin 30 days after receiving the recorded release of the mortgage from the registry of deeds, the mortgagee shall send the release to the mortgagor’s address.”  33 M.R.S. § 551 (emphasis added). The Court concluded that “[t]he Legislature’s use of the definite article ‘the’ as opposed to the indefinite article ‘a’ or the phrase ‘a copy of’—indicates that it intended to require the mortgagee to mail the same document that it receives from the registry of deeds.”  2016 MR 141, ¶9. Justices Jabar and Alexander dissented, reasoning that “interpreting [§ 551] according to its plain meaning leads to an absurd result” since § 551’s purposes are served equally where mortgagor provides a copy of the recorded release rather than the original. Id. at ¶14. Penalizing a mortgage for “noncompliance” where the statute’s purposes are fulfilled, the dissenters reasoned, is illogical. Id. at ¶¶14, 17-19. Chief Justice Saufley did not participate in the decision.

What Is a Mortgagee to Do After Sabina?

Sabina clearly tells us that, where a mortgagee records a release in paper form, the mortgagee must send the mortgagor the original “wet ink” recorded release it receives returned from the registry of deeds, not a photocopy. Many registries, however, now accept electronic recording and many mortgagees use it, eliminating “wet ink” original documents from the process. Where a mortgagee records electronically, the registry receives only an electronic copy of the original release and, in turn, provides only an electronic copy of the recorded release to the mortgagee. Over time, this will undoubtedly become the predominant if not exclusive means of recording mortgage discharges.

So what constitutes “the release” that a mortgagee must mail to its mortgagor to comply with § 551 in the case of electronic filing? In Sabina, the parties raised some of the issues electronic recording creates with respect to compliance with § 551 as interpreted by the Law Court. The Court clearly stated that where a registry never receives a “wet ink original,” such as in the case of electronic recording, § 551 does not require the mortgagee to mail one to the mortgagor. Yet, the Court presumed that, when the mortgagee records its release electronically, the registry still returns to the mortgagee a recorded release in paper format and, consequently, did not explain what a mortgagee must mail when it receives the recorded release from the registry only in electronic format. 2016 ME 141, at ¶11 n.5. Rather than confronting and resolving the issues presented as urged by Chase, the Court merely suggested that “the Legislature may wish to clarify how a mortgagor could ‘send the release by first class mail’ to a mortgagor,” if registries return the release only in electronic format. Given the growing prevalence of electronic recording in Maine, the Court’s suggestion that there is ambiguity in the statute in this context calls into question the very premise of its principal holding in Sabina – that the statute is supposedly unambiguous. Until that ambiguity is resolved by the Law Court or the Legislature, mortgagees are left to guess what they must send to mortgagors to avoid penalties under § 551 in the event of electronic filing —a paper copy of the electronic file provided by the registry, an electronic copy of the file, both, or something else?

If you have questions regarding the Law Court’s Sabina decision, how it may impact your business or what steps you might take to ensure it does not, please contact Eric Wycoff (207-791-1221) or Ryan Kelley (207-791-1336).

[1] Pierce Atwood LLP represented Bank of America, N.A. in a companion case that raised the same issues brought by plaintiffs who were also represented by Bernstein Shur. That case was dismissed with prejudice and was not appealed.