The opinion of the court was delivered by: O'neill, J.
This is the second suit brought by plaintiff Squires Golf Club against defendant Bank of America.
Plaintiff brought its first suit against defendant in the Court of Common Pleas of Montgomery County to recover damages for an alleged violation of the Pennsylvania Mortgage Satisfaction Act, 21 Pa. Cons. Stat. § 721-6 (2003). On May 28, 2010, defendant removed the case to this Court, Civil Action 10-2579, and subsequently filed a motion to dismiss.
On or about July 1, 1998, Prime Bank, predecessor-in-interest to
defendant, loaned $1,750,000.00 to plaintiff. Compl. ¶ 4.*fn1
The parties signed a promissory note that contained a
prepayment fee provision establishing certain financial penalties
which would result from any prepayment of the principal amount of the
loan by plaintiff. The note contained a handwritten provision which
was dated and initialed by representatives of both plaintiff and Prime
Bank. The provision stated: "[b]orrower can make principal reductions
at any time without penalty, so long as the reduction is not through a
refinance with another institution." The loan from Prime
Bank was secured by a mortgage on property owned by plaintiff and a
mortgage document was signed and executed by the parties on July 16,
1998. Compl. Ex. A.
At some point after the execution of the promissory note and mortgage, defendant acquired plaintiff's mortgage. Defendant sent plaintiff two payoff statements dated November 17, 2009 and December 18, 2009 which specified the total amount due in order to satisfy the loan. Compl. Exs. B and C. Neither document stated that there was a prepayment fee. Id. The statements did contain a disclaimer, however, which stated in relevant part that ". . . in the event of error or omission, the Bank does not, in any way, prejudice its rights or entitlement to all moneys lawfully due under terms of any credit documents." Id.
On December 29, 2009, plaintiff refinanced with Continental Bank. Compl. ¶¶ 7, 10. Using the funds from this refinancing, plaintiff paid defendant $1,127,903.73, the total amount due according to the December 18, 2009 payoff statement. Compl. ¶ 9. Plaintiff asserts that its decision to refinance with Continental Bank was made in reliance on the fact that defendant's payoff statements did not contain any reference to a prepayment penalty. Compl. ¶ 10.
In a letter dated February 8, 2010, defendant informed plaintiff that a prepayment fee of $139,421.24 was due because plaintiff had paid off its loan with funds obtained through refinancing. Compl. Ex. D. Defendant further explained that it had "omitted the prepayment fee from the payoff letter[s] . . . based on information confirmed by [plaintiff] that the funds to repay the loan would be obtained from private sources." Id. Defendant's letter informed plaintiff that upon receipt of the prepayment fee the mortgage lien on plaintiff's property would be released. Id. Plaintiff refused to pay the prepayment fee, claiming that if defendant had notified it of the fee it would have used private funding to pay the debt. Compl. Ex. E. Plaintiff demanded that defendant satisfy the mortgage, and defendant refused to do so. Id.
The Pennsylvania Mortgage Satisfaction Act provides that when a mortgagee has received "payment of the entire mortgage obligation and tender of all required satisfaction and recording costs" the mortgagee must issue and record a "duly executed satisfaction piece," i.e. a document which certifies that the mortgage obligation has been satisfied. 21 Pa. Cons. Stat. § 721-4. If within 60 days of the mortgagee's receipt of "payment of the entire mortgage obligation and all required satisfaction and recording costs" and a written request by the mortgagor for the satisfaction document the mortgagee fails to issue and record a certification of mortgage satisfaction "the mortgagee shall forfeit and pay to the mortgagor a penalty in a sum not exceeding the original loan amount." 21 Pa. Cons. Stat. § 721-6.
The dispositive question for the purposes of defendant's motion to dismiss in Civil Action No. 10-2579 was whether plaintiff's prepayment penalty fee which was activated by its refinancing with Continental Bank was part of "the entire mortgage obligation." If the fee was part of this obligation, plaintiff had not stated a claim under the MSA.
The "Full Performance" section of the mortgage provided that defendant would release its interest in plaintiff's property only if plaintiff paid "all the [i]ndebtedness when due." Compl. Ex. A at 5. The mortgage defined "[i]ndebtedness" as "all principal and interest payable under the [promissory note] . . . [as well as] all obligations, debts and liabilities, plus interest thereon . . ." owed by plaintiff to defendant. Id. at 2. The term "[i]ndebtedness" as used in the mortgage was synonymous with "the entire mortgage obligation" as used in the MSA. In other words, in order for plaintiff to have satisfied its entire mortgage obligation--and therefore to state a claim under the MSA--it must have satisfied all of its indebtedness under the contract.
The handwritten provision to the promissory note, which was initialed and dated by a representative of plaintiff, clearly stated that plaintiff would be subject to a prepayment fee if it refinanced with a different financial institution and used the funds obtained through that refinancing to make reductions of the principal. When plaintiff refinanced with Continental Bank and used the funds obtained in that refinancing to pay off the principal owed to defendant the prepayment fee became a part of "the entire mortgage obligation." Accordingly, I concluded that plaintiff had not satisfied the entire mortgage obligation and thus could not state a claim under the MSA.
In sum, taking the well-pleaded facts alleged in the complaint as true, I held that plaintiff had failed to state a claim under the MSA. I held that to establish a claim under the MSA a plaintiff must prove that it had fully paid "the entire mortgage obligation." I held that the unpaid prepayment penalty fee was a part of plaintiff's mortgage obligation to defendant and that, therefore, plaintiff could not state a claim under the MSA because it had failed to satisfy its full financial obligation to defendant under the terms of the agreement. Squires Golf Club v. Bank of Am., No. 10-2579. 2010 WL 2813340, at *6 (E.D. Pa. Jul. 14, 2010).
On July 14, 2010, I filed an Order granting defendant's motion to dismiss. Id. No appeal was taken from that Order.
On October 20, 2010, Squires Golf Club filed a second suit against the Bank of America in the Court of Common Pleas of Montgomery County, an action to quiet title. Again, the Bank removed the action to this Court, Civil Action 10-6734. The Complaint in this action alleges that the Bank has refused to satisfy the mortgage on the Club's property because the Club has not paid the ...