Mortgage

MERS wins in class-action suit from Minnesota counties

Court of Appeals upholds lower court’s ruling on bypassing recording fees

MERSCORP has won again in a legal battle stemming from its assignment of a mortgage, but this time the challenge wasn’t over MERS’ authority to assign the mortgage.

In this case, 87 counties in Minnesota filed a class-action lawsuit against MERS, stating that MERS deprived the counties of recording fees for mortgage assignments by allowing parties to bypass recordation with the counties, causing the loss of statutory recording fees and creating gaps in chains of title.

The U.S. Court of Appeals for the Eighth Circuit ruled on an appeal brought by the counties and upheld the District Court of Minnesota’s decision, which found that there is no mandatory recording requirement under Minnesota law and dismissed the challenge brought by the counties against MERS.

The Circuit Court held that, “ … because we believe Minnesota case law establishes that Minnesota law imposes no duty to record a mortgage or a mortgage assignment with the county recorder, the district court did not err in its determination that there was no mandatory recording requirement under Minnesota law.” 

The Circuit Court cited a number of Minnesota court cases interpreting the Recording Act, which found that the recording is permissive. The Court also noted that the district court held that the wording “shall be recorded” in the Recording Act does not require recordation of land transfers.

Instead, the Recording Act informs parties where they should record their instrument if they desire the benefits of recording the security instrument, namely providing notice of the lien and its priority.

Additionally, the Eighth Circuit held that a county did not and cannot state a claim for unjust enrichment or public nuisance “when there is no duty under state law to record mortgages or subsequent assignments.”

MERSCORP Holdings Vice President for Corporate Communications Janis Smith said that the company did not believe the case had merit. “The appellate court’s ruling, once again, confirms the legality of MERS and its business,” Smith added.

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