Volume 32 • Number 1 • January 2013
Banking & Financial Services Policy Report •
deserve money for assignments unrecorded. As will beexplained,
, courts have not been especially recep-tive to clerks’ arguments, even in the face of statutorylanguage which appears to mandate recording transfersof interest.
Claim Two: MERS Uses DeceptiveLanguage to Avoid Recording
Clerks have also alleged that MERS uses deceptiveterms in its mortgage documents for the purpose of avoiding recording requirements and fees. This pointcan take several different angles: in the Dallas County,Texas lawsuit, for example, the clerk argued that MERSfalsely described itself as a beneficiary on deeds of trustin order to get the clerk to accept those documents for recording.
This can result in an asserted cause of actionfor misrepresentation, whether fraudulent or negligent.The argument that MERS cannot be a mortgageewhile simultaneously describing itself as merely anominee has already been discussed extensively. Theclerks who assert this idea largely parrot the argumentsof Professor Christopher Peterson, who cites to vari-ous anti-MERS decisions holding that MERS is not atraditional mortgagee or beneficiary.
Peterson and theclerks argue that it is improper for MERS to list itself asa mortgagee because “[i]t causes county recorders thatmaintain grantor-grantee indexes to list MERS in thechain of title for the land” and “creates a false lead inthe true chain of title defeating an essential purpose of recording mortgages and deeds of trust.”
In the context of foreclosure litigation, such argu-ments have not fared well in the majority of cases. AsI have discussed elsewhere, many courts have ruledthat MERS has standing to bring foreclosure actions,regardless of whether it is a true or traditional mort-gagee.
MERS can be deemed an agent, a nominee, or any number of other such statuses giving it standing tobring foreclosure. In clerks’ lawsuits, however, it was notso clear from the outset that this type of attack againstMERS would fail. For the time being, the argument hasnot resonated with courts in the arena of clerks’ lawsuitseither, as will be examined,
Essentially, this argument is another pathway thatclerks travel upon to arrive at the same place as in their initial claim: MERS engaged in wrongful conductresulting in economic harm to clerks. In a fraudulent or negligent misrepresentation through falsely stating it isthe mortgagee, MERS undertakes its wrongful conductby commission. In failure to record claims, its allegedharm is perpetrated through omission. In either case,the wrongs result in fewer recordings and less revenuegenerated for clerks.
Claims Three, Four and Five: UnjustEnrichment, MERS is Evil, and Other Such Arguments
As a corollary to the first two claims typically madeby clerks in lawsuits against MERS, such lawsuits fre-quently contain a claim for unjust enrichment.
Theseclaims are natural extensions of the first two claimsabove. The core idea remains the same: MERS allegedlydiverts money from county clerks in an improper man-ner by failing to record assignments.Aside from the most common claims and the unjustenrichment theory discussed above, clerks also haveattacked MERS on various other grounds. One tactic,taken by the Dallas County Clerk’s lawsuit, is to paint apicture of MERS as a primary cause of the economicbubble and collapse.
This line of argument asserts that,but for MERS’ easing of the assignment process, secu-ritization of residential mortgages would never havereached the heights achieved during the housing bub-ble. Thus, such an argument essentially accuses MERSof causing the current economic crisis. Although it isbeyond the scope of this Article to assess the extent of the validity of this claim, it is undisputed that MERS’easing of the assignment process did facilitate the secu-ritization of home mortgage loans. It is not clear thatany clerks are attempting to fashion this argument intoa legal claim for relief, but it is nonetheless noteworthyfor its attempt to produce judicial skepticism towardsthe MERS system.Another anti-MERS argument produced in thecontext of these newly burgeoning clerks lawsuits isthat MERS has effectively usurped the public functionof clerks and has created a private recording system.Florida’s Duval County Clerk propounded this argu-ment in its lawsuit against MERS by including a novelcount for a writ of
, which sought to pre-vent MERS from acting as a private recording systemand to force MERS to record every future transfer in the public records.
These claims were echoed bythe Dallas County Clerk, who claimed that MERS