Plymouth Cnty. v. Merscorp, Inc.
| Decision Date | 21 August 2012 |
| Docket Number | No. C 12–4022–MWB.,C 12–4022–MWB. |
| Parties | PLYMOUTH COUNTY, IOWA, by and through Darin J. RAYMOND, Plymouth County Attorney, Plaintiff, v. MERSCORP, INC.; Mortgage Electronic Registration Systems, Inc.; Bank of America, N.A.; BAC Home Loans Servicing; CitiMortgage, Inc.; Corinthian Mortgage Co.; GMAC Residential Funding Corp.; HSBC Bank, U.S.A., N.A.; JPMorgan Chase Bank, N.A.; Chase Home Finance, L.L.C.; EMC Mortgage Corp.; SunTrust Mortgage, Inc.; Wells Fargo Bank, N.A.; Wells Fargo Home Mortgage, Inc.; WMC Mortgage Corp.; and John Doe Defendants 1–100, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
OPINION TEXT STARTS HERE
Michael P. Murphy, Patrick N. Murphy, Scott L. Bixenman, Murphy, Collins & Bixenman, PLC, Le Mars, IA, Adam J. Levitt, Wolf Haldenstein Adler Freeman & Herz LLC, Chicago, IL, Demet Basar, Malcolm Brown, Wolf, Haldenstein, Adler, Freeman & Herz LLP, Lydia A. Keaney, Wolf Haldenstein Adler Freeman & Hertz LLP, New York, NY, for Plaintiff.
Jeffrey R. Mohrhauser, Rawlings Ellwanger Jacobs Mohrhauser & Nelson LLP, Alan E. Fredregill, Heidman Redmond Fredregill Patterson Plaza Dykstra & Prahl, Sioux City, IA, Lance W. Lange, Faegre, Baker, Daniels, LLP, Deborah M. Tharnish, Sarah Kathleen Franklin, Davis, Brown, Koehn, Shors & Roberts, PC, Jesse Linebaugh, Faegre Baker Daniels, LLP, Jay Eaton, Nyemaster Goode Voigts West Hansell & O'Brien, PC, John T. Clendenin, Nyemaster Goode West Hansell & O'Brien, PC, Des Moines, IA, Robert M. Brochin, Morgan, Lewis & Bockius, LLP, Miami, FL, Kerrie M. Murphy, Laurie Jo Wiedenhoff, Gonzalez, Saggio & Harlan, LLP, West Des Moines, IA, Lucia Nale, Thomas V. Panoff, Mayer Brown, LLP, P. Russell Perdew, Locke Lord, LLP, Chicago, IL, Gregory J. Marshall, Snell & Wilmer, LLP, Phoenix, AZ, Andrew R. Louis, Buckley & Sandler, LLP, Washington, DC, Matthew P. Previn, Buckley & Sandler, LLP, New York, NY, for Defendants.
In this putative class action, filed on February 23, 2012, in state court, then removed to this federal court on March 9, 2012,1 Plymouth County, Iowa, (the County) seeks to pursue claims on its own behalf and on behalf of all other similarly situated counties in the State of Iowa against Mortgage Electronic Registration Systems, Inc. (MERS) and its parent company, MERSCORP, Inc. (MERSCORP), the owner and operator of a national registry that tracks ownership interests and servicing rights associated with residential mortgage loans, and against various mortgage companies and John Doe defendants (the Member Defendants), which are alleged to be members of MERS, shareholders of MERSCORP, or both.2 The County's claims arise from the defendants' “intentional failure to record all mortgage assignments and instruments that affect real estate in county recording offices and pay the attendant recording fees, as required by Iowa law.” Class Action Petition (docket no. 3), ¶ 1. The County asserts claims for unjust enrichment, civil conspiracy, piercing the corporate veil, declaratory judgment, and injunctive relief. The defendants have moved to dismiss this class action on various grounds, including that the Iowa recording statutes create no private cause of action in favor of the County, that there is no obligation to record mortgages or assignments of mortgages under Iowa law, that the County has suffered no compensable injury that would give it standing, and that the County's allegations fail to state claims upon which relief can be granted. The County resists the motion to dismiss.
The factual background here must be drawn from the County's Class Action Petition. See Section II.A., infra. The Class Action Petition succinctly summarizes the nature of the action and the factual and legal basis for it, as follows:
1. This class action seeks to redress the economic and public harm to Plaintiff Plymouth County, Iowa, and all other counties in Iowa, caused by Defendants' intentional failure to record all mortgage assignments and instruments that affect real estate in county recording offices and pay the attendant recording fees, as required by Iowa law.
2. In the late 1990s, securitizations of mortgage loans exponentially expanded because of the outsize profits they generated. Banks and other financial organizations securitized residential mortgage loans by selling mortgage loans to intermediaries—usually investment banks—which, through yet other intermediaries, pooled the mortgages into trusts that issued and sold mortgage-backed securities (“MBS”) to investors. Each of the intermediaries along the way profited handsomely by collecting fees and other charges.
3. Each link in the chain of sale from the originating lender to the issuer of the MBS, however, required a valid assignment of the mortgage, which, under state law, mandated that the assignment be recorded in the county where the real property is located.
4. To create even greater profits through the securitization process, Defendants and other leaders in the mortgage industry conspired to develop a confidential, electronic registry that would track ownership and servicing rights for residential mortgage loans outside and to the manifest detriment of the traditional state recording regimes. MERSCORP, MERS, and the MERS® System were created as a result.
5. Members of MERS, such as Defendant Bank of America, N.A., name MERS as mortgagee of record when recording land instruments and use MERS, which has no meaningful interest in the mortgage, as their proxy in county land records until a mortgage-terminating event such as a release or foreclosure occurs.
6. By using MERS as a placeholder in county land records, Defendants were and are able to leverage the initial recording of the land instrument in MERS' name to evade county recording fees and avoid publicly recording assignments of mortgages and deeds of trust to other MERS Members (defined below).
7. Defendants' scheme, perpetrated through the creation, implementation, and use of MERS and the MERS® System, to evade payment of recording fees and recording assignments of mortgages and deeds of trust, has wrongfully deprived Plaintiff and the other members of the below-defined Class of millions of dollars in recording fees. Equally important, Defendants' intentional conduct has broken once transparent chains of title in Iowa counties' public land records by creating gaps through the assignment of mortgages and deeds of trust that were required to be but were not recorded.
Class Action Petition at ¶¶ 1–7 (emphasis added); and compare id. at ¶¶ 58–77 (). The Class Action Petition later identifies the Class on behalf of which it is brought as “comprised of each of the 99 counties of the State of Iowa.” Id. at ¶ 94.
The County's assertion that the defendants failed to record mortgage assignments as required by Iowa law rests primarily on the following allegations regarding portions of Iowa's recording statutes:
33. In keeping with this centuries-old scheme, Iowa has a mandatory recording statute, which provides as follows:
The evidence of title shall be filed with the recorder of deeds of the county in which the real estate is situated, who shall record the same, and place an abstract thereof upon the index of deeds. The recording thereof shall be constructive notice to all persons, as provided in the cases of entries upon said index, and the recorder shall receive the same fees therefore as for recording...
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...statutes, some of these actions have been dismissed. See, e.g., Plymouth Cnty., Iowa ex rel. Raymond v. MERSCORP, Inc., 886 F.Supp.2d 1114, 1127, No. C 12–4022–MWB, 2012 WL 3597430, at *11 (N.D.Iowa Aug. 21, 2012); Fuller v. Mortgage Elec. Registration Sys., Inc., 888 F.Supp.2d 1257, 1279, ......
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