Plymouth Cnty. v. Merscorp, Inc.

• Decision Date: 19 December 2014
• Docket Number: No. 13–2334.,13–2334.
• Citation: 774 F.3d 1155
• Parties: PLYMOUTH COUNTY, IOWA, Darin J. Raymond, by and through agent of Plaintiff–Appellant v. MERSCORP, INC.; Mortgage Electronic Registration Systems, Inc.; Bank of America N.A.; BAC Home Loans Servicing, LP; CitiMortgage, Inc.; EverHome Mortgage Company Defendants–Appellees GMAC–Residential Funding Corporation Defendant HSBC Bank USA, N.A.; JPMorgan Chase Bank; Chase Home Finance LLC; EMC Mortgage Corporation; SunTrust Mortgage, Inc.; Wells Fargo Bank, N.A.; Wells Fargo Home Mortgage, Inc.; WMC Mortgage Corporation; John Doe, Defendants 1–100 Defendants–Appellees Corinthian Mortgage Corporation Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

774 F.3d 1155

PLYMOUTH COUNTY, IOWA, Darin J. Raymond, by and through agent of Plaintiff–Appellant

v.MERSCORP, INC.; Mortgage Electronic Registration Systems, Inc.; Bank of America N.A.; BAC Home Loans Servicing, LP; CitiMortgage, Inc.; EverHome Mortgage Company Defendants–Appellees

GMAC–Residential Funding Corporation Defendant

HSBC Bank USA, N.A.; JPMorgan Chase Bank; Chase Home Finance LLC; EMC Mortgage Corporation; SunTrust Mortgage, Inc.; Wells Fargo Bank, N.A.; Wells Fargo Home Mortgage, Inc.; WMC Mortgage Corporation; John Doe, Defendants 1–100 Defendants–Appellees

Corinthian Mortgage Corporation Defendant.

No. 13–2334.

United States Court of Appeals,

Eighth Circuit.

Submitted: Sept. 8, 2014.

Filed: Dec. 19, 2014.

John E. Tangren, argued Chicago, IL, (Edward J. Hershewe, Joplin, MO., Tim Dollar, Kansas City, MO., Adam J. Levitt, Chicago, IL., Michael S. Kilgore, Independence, MO., Patrick N. Murphy, Le Mars, IA., Shelly L. Friedland, New York, NY, on the brief), for Plaintiff–Appellant.

Thomas Hefferon, argued Washington, DC, (Deborah Marie Tharnish, Des Moines, IA., Jay Eaton, Des Moines, IA., Alan E. Fredregill, Sioux City, IA., Jeffrey Raymond Mohrhauser, I, Sioux City, IA., John Thomas Clendenin, Des Moines, IA., Thomas Hefferon, Washington, DC., Lance W. Lange, Des Moines, IA., Kerrie Marie Murphy, West Des Moines, IA., Joseph Yenouskas, Washington, DC., Daniel W. Huitink, Phoenix, AZ., Sarah K. Franklin, Des Moines, IA., Lucia Nale, Chicago, IL., Robert M. Brochin, Miami, FL., Gregory J. Marshall, Phoenix, AZ., Thomas V. Panoff, Chicago, IL., Andrew R. Louis, Washington, DC., Matthew P. Previn, New York, NY, on the brief), for Defendants–Appellees.

Before RILEY, Chief Judge, COLLOTON and SHEPHERD, Circuit Judges.

SHEPHERD, Circuit Judge.

Plymouth County, on its own behalf and on behalf of all similarly situated counties in Iowa, brought suit in state court alleging that Appellees, various loan originators and servicers (Lenders), deprived the County of revenue by using the Mortgage Electronic Registration System (MERS) to avoid paying recording fees on mortgage assignments. The Lenders removed the action to federal court and filed a motion to dismiss, which the district court ¹ granted. Plymouth County appeals, asserting that the district court erred in dismissing the complaint on the merits and in denying its motion to alter or amend the judgment and for leave to file an amended complaint. We affirm.

I.

Generally, under Iowa law, mortgages on real property and any subsequent assignments are recorded with the county recorder in the county where the real property is located. A fee is paid to the county when mortgages or assignments are recorded. The introduction of MERS significantly altered the recording process by establishing a national electronic registry to track mortgages and subsequent assignments. MERS does not originate, assign, or service any mortgages, but instead charges a fee when members record or transfer a mortgage on the registry. Upon initial recording, mortgages are recorded with the county recorder and MERS becomes the mortgagee of record. With subsequent transfers, MERS remains the mortgagee of record in the county property records, but tracks the transfers for priority purposes on its registry. These transfers are not recorded with the county recorder in the county where the real property is located. The Lenders in this suit are alleged to be members of MERS who register and track changes on the mortgages they maintain in the MERS database or shareholders of MERSCORP.

Plymouth County initiated this class action in state court against the Lenders alleging that the Lenders intentionally failed to record mortgage assignments in the county recorder's office and failed to pay the accompanying recording fees in violation of Iowa law. The County brought claims for unjust enrichment and civil conspiracy and sought declaratory judgment, injunctive relief, and to pierce the corporate veil. After removing to federal court, the Lenders filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). The Lenders also challenged Plymouth County's standing to bring the suit.

The district court granted the Lenders' motion to dismiss, finding that a determination of whether Iowa's Recording Act imposed a mandatory recording requirement resolved all of the claims. Although the County asserted that its complaint did not allege a mandatory recording requirement, the district court found this to be “blatantly contrary” to the allegations contained in the complaint. The district court found that the Iowa Recording Act does not impose a duty to record mortgages and assignments in the county where the property is located. Because the district court determined that Iowa law did not impose a mandatory recording requirement, the court dismissed all of the County's claims on the basis that they could not survive in the absence of mandatory recording.

After the district court granted the motion to dismiss, Plymouth County filed a motion to alter or amend the judgment and for leave to file an amended complaint. Plymouth County argued that reconsideration was necessary because its brief in opposition to the motion to dismiss requested leave to amend the complaint, and the district court made no ruling on this request. The district court acknowledged the oversight and reconsidered the County's request to amend the complaint. Finding that allowing the County leave to amend the complaint would be futile because the otherwise meritless claims could not be saved by amendment, the district court denied the motion. This appeal followed.

II.

We first consider whether Plymouth County has standing to bring this suit. The Lenders argue that Plymouth County lacks standing because it has suffered no injury in fact from mortgagees' use of MERS over the county recorder system. We review a determination that a party has standing de novo. St. Paul Area Chamber of Commerce v. Gaertner, 439 F.3d 481, 484 (8th Cir.2006). A plaintiff has standing when he suffers a concrete injury, or an “injury in fact.” Urban Contractors Alliance of St. Louis v. Bi–State Dev. Agency, 531 F.2d 877, 881 (8th Cir.1976) (internal quotation marks omitted). “The test of constitutional standing has been variously expressed as ‘real and immediate injury’ to the plaintiff, ‘a distinct and palpable injury to himself,’ or ‘injury in fact’.... [I]t is fundamental that the plaintiff himself must have suffered the injury he seeks to redress.” Id. (citations omitted).

The injury Plymouth County has identified is sufficient to support standing. The County alleged that the use of MERS to bypass recordation with the county recorder has deprived the County of fees associated with recordation and interfered with the County's duty as the recorder of property records. We believe this is a sufficient injury in fact to allow the County to maintain an action against the Lenders. Further, other courts considering the standing of counties bringing similar claims have determined that the parties had standing. See Christian Cnty. Clerk v. Mortg. Elec. Registration Sys., Inc., 515 Fed.Appx. 451, 454 (6th Cir.2013) (finding county had standing to bring suit against MERS in case interpreting Kentucky law); Fuller v. Mortg. Elec. Registration Sys., Inc., 888 F.Supp.2d 1257, 1269–70 (M.D.Fla.2012) (“Plaintiff has alleged an injury in fact—that the MERS recording system both usurps his lawful authority to maintain public land records and reduces the amount of revenue his office receives. In addition, Plaintiff alleges that this ‘non-public recording’ interferes with the integrity of the public records by misstating that MERS is the true mortgage holder and rendering the public unable to identify who has the true mortgage interest in the property. With these allegations, Plaintiff has satisfied Article III's standing requirements.”). Because Plymouth County's loss of fees and the interference with the recording system are sufficient injuries, we conclude that Plymouth County has standing to pursue these claims.

III.

We next consider whether the district court erred in dismissing Plymouth County's unjust enrichment and civil conspiracy claims and in denying its requests to pierce the veil and for injunctive and declaratory relief. We review the dismissal of a complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) de novo. Botten v. Shorma, 440 F.3d 979, 980 (8th Cir.2006). Plymouth County first argues that the Lenders have been unjustly enriched because MERS allows the Lenders to realize the benefits of the recording system by maintaining priority without paying the accompanying fee to the County. Plymouth County asserts that the district court's dismissal of this claim was in error, claiming not that there is a duty to record a mortgage under Iowa law, but instead that MERS enjoys protection afforded by recording mortgage assignments at the expense of the County.

Our own court has recently held that when state law imposes no duty to record a mortgage or subsequent assignment, a county cannot successfully state a claim for unjust enrichment. See Brown v. Mortg. Elec. Registration Sys., Inc., 738 F.3d 926, 934–35 (8th Cir.2013) (“Because Arkansas law does not impose a duty on assignees of real estate...