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North Carolina judge finds fatal flaws in lawsuit against MERS, LPS

The register of deeds for Guilford County, N.C., lost a very public court battle against mortgage document processing firm Lender Processing Services and the Mortgage Electronic Registration Systems.

The lost court battle ends the register's closely-followed attempt to obtain a special master to investigate the two firms' handling of mortgage documents and the recording of property assignments in the county.

In the original lawsuit, the Guilford County Register of Deeds Jeff Thigpen painted a picture of two firms – MERS and LPS – as causes of a major county recording mess.

Thigpen alleged the use of the MERS registry – along with the LPS handling of certain mortgage documents – ended up making a mess of county property and land records.

All of the claims pushed by Guilford County – including its main push for injunctive relief and the appointment of a special master to investigate documents for potential fraud – were dismissed by Judge John Jolly, a chief special superior court judge for complex business cases in North Carolina.

The original case touched upon every legal issue typically raised by plaintiffs filing against MERS and LPS. The laundry list includes allegations of title defects, losses on taxes from recording assignments, foreclosures, confusion over property records, the cost of having to identify property ownership and local declines in property values.

But when it came to reviewing the case, the court dismissed most of the allegations against MERS and LPS one-by-one. The big barrier for Guilford County turned out to be standing. The judge believed the county simply lacked the legal standing to bring most of the claims.

One of the claims raised by Guilford County was that the defendants violated state law by allegedly filing fraudulent and invalid satisfications with the register of deeds.

However, the court knocked down this claim, saying the rule makes creditors liable to landowners and the Guilford County Register of Deeds is not a landowner.

The county also suggested the parties were unjustly enriched by their actions, but the court said the register of deeds failed to plead the necessary elements of unjust enrichment for that claim to survive.

Indeed, most of the key claims were dismissed, including the county’s request for a special master funded by the defendants to "identify fraudulent or invalid documents filed by defendants."

The judge ruled against an independent review of the records saying it was not appropriate since "the Plaintiff's underlying causes of action are fatally flawed."

kpanchuk@housingwire.com

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