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Court: fixture filings, real property mortgage not same

August 7, 2007

OKLAHOMA CITY – “UCC fixture filings” might seem in many ways similar to a mortgage on real property, but the two things are not interchangeable when it comes to the law, the Oklahoma Court of Civil Appeals ruled Friday.

Penalties set out in the law for untimely release of a mortgage cannot be applied to a lending company that has similarly handled Uniform Commercial Code (UCC) financing statements, also called UCC fixture filings, the court ruled.
Landowners Nat and Joy Rhynes had taken EMC Mortgage Corp., Bankers Trust Company of California NA and United Companies Lending Corp. to court in Logan County. The lending companies had released mortgages on the Rhynes’ real estate in a timely manner after the mortgages were paid in full. Yet, the lenders failed to release in a timely fashion certain liens created by fixture filings on two mobile homes affixed to the mortgaged real estate on the property. 
Title 46 Section 15 of the Oklahoma statutes provides penalties for untimely release of a mortgage on real estate. The holder of the mortgage has 50 days from the time a mortgage is paid to file a release of the mortgage with the county clerk. If the mortgage holder takes longer than 50 days, the mortgager may request the release in writing.
The mortgage holder has 10 days from the date of the written request to file a release before penalties are assessed. The mortgage holder must forfeit and pay to the mortgager 1 percent of the principal debt, up to $100 a day, for every day the release is not recorded after the 10-day period has expired, up to 100 percent of the total principal debt.
The landowners attempted to apply the statutory penalties proscribed for untimely release of mortgage to the untimely release of the UCC fixture filings.
“They (the landowners) concede that Section 1 does not mention or refer to UCC fixture filings, but contend that does not matter because ‘the Legislature clearly intended the statute to apply in this very situation’, i.e., ‘when a mortgage company… failed to release a ‘cloud’ or ‘encumbrance,’ even though the underlying debt had been paid,” read the court ruling.
But the court found that when penalties are concerned, the law must be very strictly construed to apply only to the items specifically mentioned in the statute. The penalties allowed by law are exclusive to mortgages on real estate and may not be extended by implication or equitable considerations. The court supported its position by citing other instances in the law where the Legislature treated mortgages and fixture filings as different instruments.

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