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Campbell v. Bank of America

August 11, 2009


The opinion of the court was delivered by: Norma L. Shapiro, J.


This action arises from defendant's failure to record satisfaction of a mortgage secured by property jointly owned by plaintiffs. The action, arising under Pennsylvania state law and filed in state court, was properly removed to this court under 28 U.S.C. § 1332 (diversity jurisdiction). The matter was tried without a jury. This opinion constitutes the court's findings and conclusions under Federal Rule of Civil Procedure 52(a)(1).*fn1


On February 10, 1998, plaintiffs acquired title to real property consisting of 2.302 acres located at 746 Langhorne-Yardley Road in Middletown Township, Pennsylvania (Bucks County Parcel Number 22-21-42-2) (hereinafter, the "Property"). On or about November 3, 2000, the Campbells obtained a construction loan in the amount of $389,200 from Summit Bank.*fn3 The construction loan was secured by: (1) a mortgage on the Property (hereinafter, the "Mortgage"); (2) mortgages on three commercial or investment properties owned by the Campbells; and (3) certificates of deposit totaling $89,000 purchased by the Campbells from Summit Bank. The Mortgage was recorded in the Office of the Bucks County Recorder. The Campbells used the construction loan to build a home on one of the two subdivided lots on the Property (hereinafter, "Plot A" and "Plot B"). Upon the building's completion, the Campbells repaid the construction loan by obtaining a permanent mortgage on Plot A, on which their residence was built; they planned to sell Plot B.

On May 18, 2001, the Campbells attended a closing on the permanent mortgage during which they tendered full payment of $391,006.47, inclusive of interest and fees, of the construction loan to Joseph Campbell (of no relation to plaintiffs), an employee of Summit Bank. Before and after the closing, Walter Campbell made numerous oral demands for a satisfaction piece for the Mortgage to document plaintiffs' repayment of the construction loan and clear the Property of the encumbrance.*fn4 By letter of June 27, 2003, Walter Campbell submitted a written request for the satisfaction piece (Pl. Ex. 5). By letter dated June 18, 2004, Walter Campbell acknowledged receiving satisfaction pieces for the three other mortgages used as security for the construction loan, but not the satisfaction piece for the Mortgage secured by the Property (Pl. Ex. 8). On August 25, 2004, Bank of America tendered a satisfaction piece for the Mortgage. On September 8, 2004, the Campbells recorded the satisfaction piece with the recorder of deeds. Bank of America does not contest these facts. The Campbells filed this action in state court on January 21, 2005.


The Campbells claim they are entitled to damages under 21 P.S. §§ 681 and 682*fn5 for defendant's failure to record satisfaction of the Mortgage.*fn6 The statute provides, in relevant part:

§ 681. Satisfaction of mortgage on margin of record or by satisfaction piece

Any mortgagee of any real or personal estates in the Commonwealth, having received full satisfaction and payment of all such sum and sums of money as are really due to him by such mortgage, shall, at the request of the mortgagor, enter satisfaction either upon the margin of the record of such mortgage recorded in the said office or by means of a satisfaction piece, which shall forever thereafter discharge, defeat and release the same; and shall likewise bar all actions brought, or to be brought thereupon. § 682. Fine for neglect And if such mortgagee, by himself or his attorney, shall not, within forty-five days after request and tender made for his reasonable charges, RETURN to the said office, and there make such acknowledgment as aforesaid, he, she or they, neglecting so to do, shall for every such OFFENCE, forfeit and pay, unto the party or parties aggrieved, any sum not exceeding the mortgage-money, to be recovered in any Court of Record within this Commonwealth, by bill, complaint or information.

Claiming Bank of America provided the satisfaction piece 380 days after receipt of Walter Campbell's written request and the 45-day grace period under 21 P.S. § 682, the Campbells seek $389,200, the maximum damages allowed by statute. The Campbells contend:

(1) strict proof of actual damages should not be required because the harm arising from defendant's violation is difficult to quantify; (2) Section 682 provides liquidated damages as a remedy for defendant's extensive delay in recording satisfaction; and (3) the legislature intended the penalty under 21 P.S. § 682 to be in proportion to amount of the mortgage: "If the size of the transaction is large the penalty may likewise be large." Pl. Trial Memorandum, p. 3 (paper no. 36).

At trial, plaintiffs presented evidence of their purported damages. Mr. Campbell testified he was embarrassed when he attempted to sell Plot B and the buyers discovered the uncleared encumbrance. However, it seems unlikely that the Campbells had reason to be embarrassed by the buyers' discovery of the lien. The transaction was satisfactorily completed and plaintiffs received the full purchase price; they were not required to indemnify the buyers against a potential claim from defendant. Mrs. Campbell, who might also have been embarrassed, was present in the courtroom but did not testify.

Mr. Campbell testified that defendant's violation prevented plaintiffs from purchasing investment property in North Brigantine, New Jersey. Plaintiffs, who own several properties at the New Jersey shore including six in Brigantine, were planning to purchase two units of a duplex property offered by the developer for $219,900 each, for a total investment of $439,800.

The seller's terms of sale offered the properties for $391,000 if plaintiffs paid cash; plaintiffs would have to tender a non-refundable $50,000 deposit and the balance in cash within 30 days. Mr. Campbell testified that plaintiffs were unable to obtain a timely home equity loan on the Property because the potential lender discovered, in addition to the permanent mortgage, a lien for the Mortgage recorded as unsatisfied. Plaintiffs produced no documentary evidence of the bank's rejection or proof the bank would have granted financing if the Property had been encumbered by one mortgage instead of two. Mr. Campbell testified that plaintiffs refused to pursue financing by using one of several other properties they owned as collateral because that ...

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