January-February Vol. 5, No. 1




US Bank Natl Assoc v Seeley, 953 NE2d 486 (Ind Ct App, 2011).

Facts: On January 16, 1998, the Seeleys obtained a revolving line of home equity credit, secured by real estate. They executed an "Indiana Open-End Mortgage" with Star Bank. The mortgage secured repayment of an "Equiline Agreement" that stated "Ohio and Federal law govern the Lender's interest and charges." Neither the mortgage nor the agreement contained any specific procedures to be followed to obtain release of the mortgage or closure of the line of credit.

On October 6, 1999, the Seeleys sold the real estate to the Roberts. Freedom Title Company ("Freedom") conducted the closing. In its title search, Freedom discovered the mortgage to Star Bank. On September 30, 1999, Freedom sent Star Bank's successor, Firstar Bank, a "Mortgage Payoff Request." On October 1, 1999, Firstar sent Freedom a "Consumer Loan Payoff Request" listing a payoff of $71,129 as of October 1, 1999 with an additional $15.92 each day beyond that.

On October 7, 1999, Freedom sent Firstar a check for $71,240, which was an appropriate amount. The check was accompanied by a letter that stated, in relevant part, "Please close account and release mortgage. This property has been sold." Firstar accepted the check, but did not release the mortgage or close the line of credit. Firstar and its successor U.S. Bank allowed the Seeleys to continue to draw on the line of credit. Later, the Davidsons purchased the real estate from the Roberts.

On May 14, 2009, U.S. Bank filed a complaint to foreclose on the real estate because the Seeleys had defaulted under the terms of the agreement, and sought to enforce the mortgage against the Davidsons. U.S. Bank moved for summary judgment and Davidsons responded to U.S. Bank's move for summary judgment and cross-moved for summary judgment. The trial court granted the Davidsons' summary judgment cross-motion and denied U.S. Bank's summary judgment.

Holding: Affirmed. First, Indiana law, and not Ohio law, governed the "Equiline Agreement." The contract itself referred to the "Indiana Open-End Mortgage" and referenced an Indiana statute but made no reference to any Ohio laws. Therefore, the choice-of-law language in the agreement only governs the "interests and charges" that Star Bank and its successors were entitled to collect, and did not govern the entire agreement or mortgage.

Second, Freedom's payment of the account down to zero required a release of the mortgage. Due to the unique nature of a revolving line of credit, paying such an account down to zero does not automatically terminate the agreement. Termination requires evidence of the parties' intent to do so, which was shown in this case. "Payoff" in the real estate context means the amount needed to release the mortgage. In addition, Freedom Title gave Firstar specific instructions to close the account and release the mortgage.

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