In Hall v. Mortgage Electronic Registration Systems, Inc., ___ SW__ ___ (Ky. 2012), the Kentucky Supreme Court addressed a purported violation of KRS 382.365 – specifically, the alleged failure by a mortgagee, without good cause, to release a real estate lien within 45 days following a written request by the mortgagor. In this case, the mortgagee, MERS, did execute and file a release one week after satisfaction of the mortgage. However, due to a scrivener’s error, the release identified the wrong mortgage.
The MERS mortgage subsequently appeared on a title search, and the property owners, the Halls, demanded MERS release its mortgage. However, the Halls did not notify MERS of the defect in the filed release. MERS, believing the mortgage had already been released, took no action. The property owners sued, seeking statutory damages and attorneys’ fees.
The trial court, Court of Appeals, and Supreme Court all agreed that the “good cause” exception contained in the statute shielded MERS from statutory liability. The property owners did not did not notify MERS of the defect in the original release. MERS therefore reasonably believed it had already complied.
The Kentucky Supreme Court concluded its opinion by explaining the “good cause” exception as follows:
[W]e repeat here that the "good cause" determination is to be made on a case-by-case basis, under the totality of the circumstances. In this case, MERS prepared and timely filed a release. Ignorance of a simple scrivener's error, however, misled MERS, once it received the initial notice, into believing that it released the lien. The Halls, on the other hand, knew of the scrivener's error and believed that it rendered the lien release ineffective. They therefore provided MERS with a notice that, although legally sufficient, contributed to MERS's mistaken belief that it had filed an effective release.
Under the circumstances, MERS did the responsible thing and checked its records to confirm that a release had, in fact, been filed. Unfortunately, it did not take the extra step of insuring the release's contents referenced the correct mortgage for an effective filing. Yet, this release did not prevent the Halls from securing a second mortgage with L&N Credit, or otherwise cause them any ultimate harm, other than costs and attorney's fees, for which they were compensated.
Id. at 13.
While the opinion makes little reference to the issue, it should be noted that the plaintiffs, the Halls, were awarded attorneys’ fees. This ruling was not disturbed on appeal. However, because the Halls were in no other way damaged by MERS failure to strictly comply with the statute, the Halls were not also awarded statutory damages which the Court stated would constitute a “windfall.”