Stone v. Mellon Mortg. Co.

• Decision Date: 05 May 2000
• Parties: Jeffrey A. STONE v. MELLON MORTGAGE COMPANY.
• Court: Alabama Supreme Court

771 So.2d 451

Jeffrey A. STONE v. MELLON MORTGAGE COMPANY.

1980745.

Supreme Court of Alabama.

May 5, 2000.

Russell Jackson Drake, Joe R. Whatley, Jr., and Charlene P. Cullen of Whatley Drake, L.L.C., Birmingham; Richard A. Freese of Langston, Frazer, Sweet & Freese, P.A., Birmingham; and Herman Watson of Watson, Fees & Jimmerson, P.C., Huntsville, for appellant.

Henry E. Simpson, Robert D. Eckinger, and Laurence J. McDuff of Lange, Simpson, Robinson & Somerville, L.L.P., Birmingham, for appellee.

LYONS, Justice.

Jeffrey Stone and Susan Stone sued individually and on behalf of a class, seeking to recover a $15 fee paid to Mellon Mortgage Company ("Mellon") for facsimile transmissions of payoff statements ("fax fees") incurred in connection with refinancing their mortgage loan before its maturity. The Stones sought a recovery based on theories of breach of contract, money had and received, and unjust enrichment. Their complaint alleged that Mellon had wrongfully charged a fax fee to its customers and had wrongfully incorporated it into the amount necessary to discharge the loan; they alleged that this charge violated the terms of their note to Mellon. The trial court entered a summary judgment in favor of Mellon, and the Stones appealed.

I. Facts

Mellon is a mortgage banking company that services mortgage loans. It held a mortgage given by the Stones to secure a loan by which the Stones had financed the purchase of their home. The loan and mortgage provided for an adjustable rate of interest. The Stones' note and mortgage had been assigned to Mellon in 1992.

In 1993, the Stones began investigating the possibility of refinancing their debt to move from the adjustable-rate mortgage to a fixed-rate mortgage. Paragraph 21 of the Stones' mortgage explained the procedure necessary for a "release":

"Release. Upon payment of all sums secured by this Security Instrument, Lender shall release this Security Instrument without charge to Borrower. Borrower shall pay any recordation costs."

The Stones' note states that the borrower "may make full payment or partial prepayment without paying any prepayment charge."

In order to facilitate their refinancing, the Stones contacted Lawhorn & Associates ("Lawhorn"), a Huntsville mortgage-brokerage firm owned by Calvin Lawhorn. On October 21, 1993, the Stones hired Lawhorn to secure for them a fixed-rate loan. As part of this process, the Stones signed a "General Authorization," which provided:

"I hereby authorize Lawhorn & Associates, Inc., to verify my past and present employment, earning records, bank accounts, stock holdings and any other asset balances needed to process my mortgage loan application."

On October 22, 1993, the day after the Stones had engaged its services, Lawhorn contacted Mellon to request "payoff" information on the Stones' adjustable-rate mortgage. Mellon contends that as part of what it calls its "scripted" response to this request, it informed Lawhorn that the Stones' payoff information could not be disclosed orally, but could be sent by United States mail free of charge or by facsimile transmission for a fee of $15. It is undisputed that Lawhorn chose to have the payoff statement sent by fax and voluntarily incurred the fax fee. However, there is a dispute between the parties as to whether Lawhorn ever discussed the fax fee with the Stones.

In response to the request made by Lawhorn, Mellon faxed a two-page "payoff statement" to Lawhorn on October 25, 1993. The payoff statement read:

"DEAR BORROWER (TITLE COMPANY) THE TOTAL UNPAID PRINCIPAL BALANCE ON YOUR (THIS) LOAN AS OF 10/22/93 IS: $50006.53 INTEREST TO 10/22/93, AT 6.00000 172.63 ACCRUED LATE CHARGES 0.00 MIP/PMI PREMIUM TO 00/00/00 0.00 ESCROW/IMPOUND ADVANCE 0.00 PREPAYMENT PENALTY 0.00 STATEMENT FEE 0.00 FAX FEE 15.00 0.00 * * * * * *TOTAL TO PAY LOAN IN FULL* * * * * * $50194.16"

Lawhorn subsequently secured for the Stones a fixed-rate mortgage with Secure America mortgage company and forwarded the payoff statement to Secure America's closing attorney, George Williams, so that he could prepare the documents necessary for closing. Williams prepared a "Settlement Statement" containing a line item described as "Payoff 1st Mortgage; Mellon Mortgage"—the statement did not detail the underlying items making up the total payoff amount. This payoff amount included the $15 fax fee, but the Stones testified that when they attended and participated in the closing of the new loan arrangement—on November 24, 1993, approximately four weeks after they had had their initial contact with Lawhorn—they did not know the fax fee had been included in the payoff amount. The Stones commenced this action nearly three years after that closing.

II. Standard of Review

When reviewing the disposition of a motion for summary judgement, this Court applies the same standard the trial court applies "in determining whether the evidence before the court made out a genuine issue of material fact." Bussey v. John Deere Co., 531 So.2d 860, 862 (Ala. 1988). When a party moving for a summary judgment makes a prima facie showing that there is no genuine issue of material fact and that the movant is entitled to a judgment as a matter of law, the burden shifts to the nonmovant to present substantial evidence creating a genuine issue of material fact. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794 (Ala. 1989). "Substantial evidence" is defined as "evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assur. Co. of Florida, 547 So.2d 870, 871 (Ala.1989).

III. The Stones' Breach-of-Contract Claim

The Stones alleged a breach of contract in the first count of their complaint. First, the Stones allege that when they executed the note, they agreed to pay principal, interest, a loan charge, and the costs and expenses associated with collection should they default on their note, and they argue that the parties did not contemplate fax fees when they entered into the loan contract and that for Mellon to charge a fax fee violates the terms of the note.

We are persuaded by the rationale set forth in Cappellini v. Mellon Mortgage Co., 991 F.Supp. 31 (D.Mass.1997), where the court rejected this same argument:

"It would be difficult for form notes and mortgages that cover long time periods to anticipate and include each and every such incidental special request made by a borrower. Here the plaintiff was asking for faxed payoff statements in order to receive refinancing and take advantage of lower interest rates. To say that a borrower can make such requests for his or her own benefit, yet, under a principle such as contra proferentum, never allow the mortgage servicer to charge for the services unless they are specified in the loan documents would be an unreasonable interpretation of the contracts.

"Mellon provides certain basic services to the borrower free of charge, including up to four payoff statements a year, sent by U.S. mail. Because the plaintiff could have discharged the mortgage through the use of this free service, but for convenience chose to have payoff statements faxed, it is not forbidden by the language of the Note and Mortgage to charge a fee for the extra services."

Id. at 39-40. We conclude that Mellon did not violate the terms of the note by charging the Stones the fax fee.

The Stones next contend that Mellon's including the fax fee in the amount given in the payoff statement violated the terms of the mortgage because, according to the Stones, the effect of the term "TOTAL TO PAY LOAN IN FULL," used in reference to a figure that included the fax fee, was to condition the release of the mortgage on the Stones' paying the fax fee in addition to those expenses specified by the mortgage. Paragraph 21 of the mortgage, entitled "Release," states:

"Upon payment of all sums secured by this Security Instrument, Lender shall release this Security Instrument without charge to Borrower. Borrower shall pay any recordation costs."

This language states that the mortgage will be released upon payment of the secured sums (principal and interest) and any recordation fees. Indeed, if Mellon had in fact withheld the release of the Stones' mortgage until they paid the fax fee, Mellon's policy would have violated the terms of the mortgage.

We find no breach of contract in the simple imposition of a fax fee. As we discuss later in connection with the Stones' claims based on the theories of unjust enrichment and money had and received, the Stones' agent incurred the fax fee for expedited services and charging the Stones for it did not breach the terms of the mortgage. See Cappellini v. Mellon Mortgage Co., supra. In addition, the payoff statement purports to state a sum that would be the "Total To Pay Loan in Full," rather than the "Total To Pay Loan in Full and Discharge Security Instrument."

We conclude that the record before us does not suggest a breach of the terms of the mortgage. We agree with what the Washington Court of Appeals wrote in Cain v. Source One Mortgage Services Corp., 97 Wash.App. 1014 (1999) (notation of unpublished opinion).¹ On similar facts, that court held that charging the fax fee and listing it on the payoff statement did not breach the terms of the contract. That court also declined to address the question whether the payoff statement gave the misleading impression that the mortgage would not be released unless the fee was paid, because, that court held, the plaintiffs' fraud claims were barred by the running of the limitations period. Id. We, likewise, decline to address that question, because the Stones did not allege fraud as a theory of recovery and, if they had alleged fraud, their fraud claim would have been barred by the statute of limitations; this action was filed nearly three years after the closing on the refinancing loan.

The trial court...