In a recent decision, the Court of Appeals ruled that a subsequent lender’s good faith reliance on a payoff statement was sufficient to release the prior mortgage under Indiana Code § 32-29-6-13, which provides in pertinent part that “a creditor or mortgage servicer may not withhold the release of a mortgage if the written mortgage payoff statement misstates the amount of the payoff and the written payoff is relied upon in good faith by an independent closing agent without knowledge of the misstatement … .”

In Sutton Funding, LLC v. Jaworski, 2011 W.L. 646702 (Ind.App.), a payoff statement misstated the amount of the payoff, thus, leaving a question of whether an independent closing agent’s reliance upon the payoff statement in good faith and without knowledge of the misstatement entitled a subsequent lender to a release of the prior mortgage. The Court observed that the point of a payoff statement is to assure the parties hoping to pay off the loan of the final, total amount needed to pay off the loan. The closing agent was entitled to rely on the payoff statement. Based on the record, the Court held as a matter of law that there was a misstatement in the payoff statement and that the closing agent relied upon the payoff statement in good faith and without knowledge of the misstatement. As such, the subsequent lender was entitled to a release of the prior mortgage.