STATE OF NORTH CAROLINA COUNTY OF GUILFORD GUILFORD COUNTY, ex rel. JEFF L.

THIGPEN, GUILFORD COUNTY REGISTER OF DEEDS, Plaintiff, v. LENDER PROCESSING SERVICES, INC.; DOCX, LLC; LPS DEFAULT SOLUTIONS, INC.; MERSCORP HOLDINGS, INC.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; WELLS FARGO BANK, N.A.; WELLS FARGO HOME MORTGAGE, INC.; BANK OF AMERICA, N.A.; JPMORGAN CHASE BANK, N.A.; CHASE HOME FINANCE LLC; EMC MORTGAGE CORPORATION; MIDFIRST BANK; SAND CANYON CORPORATION; CITI RESIDENTIAL LENDING, INC.; GREEN TREE SERVICING, LLC; AMERIQUEST MORTGAGE COMPANY; USAA FEDERAL SAVINGS BANK; AMERICAN HOME MORTGAGE SERVICING, INC.; MOREQUITY, INC.; U.S. BANK NATIONAL ASSOCIATION; EQUICREDIT CORPORATION OF AMERICA; NATIONSCREDIT FINANCIAL SERVICES CORP.; ARGENT MORTGAGE COMPANY, LLC; THE BANK OF NEW YORK MELLON; THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.; CAPITAL ONE, N.A.; FIRST FRANKLIN FINANCIAL CORP.; NAVY FEDERAL CREDIT UNION; and WEICHERT FINANCIAL SERVICES, Defendants.

IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION 12-CVS-4531 Now Pending in the NC Business Court ) ) ) ) RESPONSE AND MEMORANDUM OF ) LAW IN OPPOSITION TO ) DEFENDANTS’ MOTIONS TO ) DISMISS ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

TABLE OF CONTENTS

Page TABLE OF AUTHORITIES ...................................................................................................... iii STATEMENT OF THE CASE ...................................................................................................... 1 PRELIMINARY STATEMENT ....................................................................................................3 FACTUAL BACKGROUND ........................................................................................................ 4 LEGAL ARGUMENT ................................................................................................................... 9 I. II. Defendants Filed Partial Motions to Dismiss. ................................................................. 10 Guilford County Has Article III Standing. ..................................................................... 11 A. Guilford County has alleged injury in fact. ......................................................... 13 1. 2. Legal obligation to maintain public recording system. ............................ 13 Costs of time and financial resources to restore integrity to public recording system. ......................................................................................14 Economic and social harms suffered by Guilford County and its citizens. ......................................................................................... 15

3.

B.

North Carolina law imposes duties on Guilford County and its Register of Deeds (and ultimately Defendants) related to the Registry of Deeds. ............. 16 MERS, Inc.’s designation as a mortgagee is not legal and does impair chains of title. ....................................................................................................... 19 Guilford County has suffered an injury in fact that is not speculative or remote. .............................................................................................................. 20

C.

D.

III.

Guilford County Has Stated a Claim Under the Unfair and Deceptive Trade Practices Act. ................................................................................................................... 23 A. B. Guilford County has statutory standing to sue for UDTPA violations. ............... 23 The misconduct was unfair and deceptive, in or affecting commerce, and caused Guilford County injury. ..................................................................... 25

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C. IV. V.

N.C. Gen. Stat. Chapter 45 does not preempt this claim. .................................... 28

Guilford County Has Stated a Claim for Unjust Enrichment. ........................................ 29 Guilford County Has Stated a Claim for Violations of N.C. Gen. Stat. § 45-36.9. ........................................................................................................ 31 Guilford County Has Stated Claims Against Specific Defendants. ................................. 32 A. B. North Carolina is a true notice pleading jurisdiction. .......................................... 33 Guilford County’s Complaint meets and exceeds North Carolina’s notice pleading standard. .................................................................................... 34 Defendants’ argument that Guilford County’s UDTPA claims are subject to a heightened pleading standard is misguided and should be denied. ...................................................................................................................36

VI.

C.

CONCLUSION ............................................................................................................................ 37

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TABLE OF AUTHORITIES CASES Austin Hatcher Realty, Inc. v. Arnold, No. COA07-1377, 2008 WL 2246675 (N.C. Ct. App. June 3, 2008) ............................. 30 Bates v. Mortgage Elec. Registration Sys., Inc., No. 3:10-cv-00407-RCJ-VPC, 2011 WL 1304486 (D. Nev. Mar. 30, 2011) .................. 16 Booe v. Shadrick, 322 N.C. 567, 369 S.E.2d 554, reh'g denied, 323 N.C. 370, 373 S.E.2d 540 (1988) ..................................................................................................... 29 Boyd v. L.G. DeWitt Trucking Co., Inc., 103 N.C. App. 396, 405 S.E.2d 914 (1991) ..................................................................... 22 Canady v. Mann, 107 N.C. App. 252, 419 S.E.2d 597 (1992) ..................................................................... 36 Christian Cnty. Clerk v. Mortgage Elec. Registration Sys., Inc., No. 5:11CV-00072-M, 2012 WL 566807 (Feb. 21, 2012) .............................................. 13 City of East Liverpool v. Columbiana Cnty. Budget Comm’n, 870 N.E.2d 705 (Ohio 2007) ..................................................................................... 15, 22 Cleveland Constr., Inc. v. Ellis-Don Constr., Inc., 709 S.E.2d 512 (N.C. Ct. App. 2011) .............................................................................. 10 Concrete Serv. Corp. v. Investors Grp., Inc., 79 N.C. App. 678, 340 S.E.2d 755 (1986) ....................................................................... 33 Fleming v. Mann, 23 N.C. App. 418, 209 S.E.2d 366 (1974) ....................................................................... 18 F. Ray Moore Oil Co., Inc. v. State of North Carolina, 80 N.C. App. 139, 341 S.E.2d 371 (1986) ................................................................. 23, 24 Fussel v. N.C. Farm Bureau Mut. Ins. Co., Inc., 364 N.C. 222, 695 S.E.2d 437 (2010) .............................................................................. 33 Garrison v. Blakeney, 37 N.C. 73, 246 S.E.2d 144 (1978) ...................................................................................17 Gatlin v. Bray, 81 N.C. App. 639, 344 S.E.2d 814 (1986) ....................................................................... 33

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Georgia ex rel. Saunders v. Mortgage Elec. Registration Sys., Inc., No. 1:10-CV-3419-TWT, 2011 WL 1335824 (N.D. Ga., Mar. 11, 2011), report and recommendation adopted sub nom. Georgia v. Mortgage Elec. Registration Sys., Inc., 2011 WL 1322616 (N.D. Ga., Apr. 6, 2011) ........................ 30-31 Governors Club, Inc. v. Governors Club Ltd. P’ship, 152 N.C. App. 240, 567 S.E.2d 781 (2002), aff’d per curiam, 357 N.C. 46, 577 S.E.2d 620 (2003) ................................... 25-26, 27-28 HAJMM Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 403 S.E.2d 483 (1991) .............................................................................. 28 Haywood Cty. Consol. School Sys. v. U.S. Fid. & Guar. Co., 43 N.C. App. 71, 257 S.E.2d 670 (1979) ......................................................................... 15 Hughes v. Hodges, 102 N.C. 262, 9 S.E. 437 (1889) .................................................................................20, 27 J.M. Westall & Co., Inc. v. Windswept View of Asheville, Inc., 97 N.C. App. 71, 387 S.E.2d 67 (1990) ........................................................................... 24 Kirschbaum v. McLaurin Parking Co., 188 N.C. App. 782, 656 S.E.2d 683 (N.C. App. 2008) ................................................... 26 Kowalski v. Tesmer, 543 U.S. 125, 125 S. Ct. 564 (2004) .......................................................................... 15, 22 Landmark Nat’l Bank v. Kesler, 216 P.3d 158 (Kan. 2009) ................................................................................................ 19 Law Office of David J. Stern, P.A. v. State of Florida, 83 So.3d 847 (Fla. Dist. Ct. App. 2011) .......................................................................... 25 Lindner v. Durham Hosiery Mills, Inc., 761 F.2d 162 (4th Cir. 1985) ........................................................................................... 28 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ................................................................................................... 11-12 Mangum v. Raleigh Bd. of Adjustment, 362 N.C. 640, 669 S.E.2d 279 (2008) ............................................................................ 3, 9 Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981) ........................................................................ 26, 36

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Miller v. Nationwide Mut. Ins. Co., 112 N.C. App. 295, 435 S.E.2d 537 (1993), cert. denied, 335 N.C. 770, 442 S.E.2d 519 (1994) ........................................................................ 28-29 Mortgage Elec. Reg. Sys., Inc. v. Saunders, 2 A.3d 289 (Me. 2010) ..................................................................................................... 19 Mortgage Elec. Registration Sys., Inc. v. Sw. Homes of Ark., Inc., 301 S.W.3d 1 (Ark. 2009) ................................................................................................ 19 Neuse River Found., Inc. v. Smithfield Foods, Inc., 155 N.C. App. 110, 574 S.E.2d 48 (2002) ................................................................. 15-16 Nevada ex rel. Bates v. Mortgage Elec. Registration Sys., Inc., No. 3:10-cv-00407-RCJ-VPC, 2011 WL 1582945 (D. Nev. Apr. 25, 2011) .................. 16 North Carolina State Bar v. Erickson, No. COA09-765, 2010 WL 5135873 (N.C. Ct. App. 2010) ............................................ 17 Owen v. Claude De Bruhl Agency, 241 N.C. 597, 86 S.E.2d 197 (1955) ................................................................................ 22 Perry v. Doub, 249 N.C. 322, 106 S.E.2d 582 (1959) ...............................................................................10 Sellers v. Morton, 191 N.C. App. 75, 661 S.E.2d 915 (2008) ....................................................................... 31 Sideshow, Inc. v. Mammoth Records, Inc., 751 F. Supp. 78 (E.D.N.C. 1990) ..................................................................................... 28 Skinner v. E.F. Hutton & Co., 314 N.C. 267, 333 S.E.2d 236 (1985) .............................................................................. 28 South Atl. Ltd. P’ship of Tennessee v. Riese, 284 F.3d 518, 534 (2002) ................................................................................................. 28 SouthStar Funding, L.L.C. v. Warren, Perry & Anthony, P.L.L.C., 445 F. Supp. 2d 583 (E.D.N.C. 2006) .............................................................................. 10 State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 184 N.C. App. 613, 646 S.E.2d 790 (2007), rev’d in part, 362 N.C. 431, 666 S.E.2d 107 (2008) ..................................................................................................... 28 State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 666 S.E.2d 107 (2008) .............................................................................. 33

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Statesville Med. Grp., P.A. v. Dickey, 106 N.C. 669, 418 S.E.2d 256 (1992) .............................................................................. 22 Sutton v. Duke, 277 N.C. 94, 176 S.E.2d 161 (1970) ................................................................................ 10 Town of Ayden v. Town of Winterville, 143 N.C. App. 136, 544 S.E.2d 821 (2001) ..................................................................... 13 Turner v. Hammocks Beach Corp., 363 N.C. 555, 681 S.E.2d 770 (2009) .............................................................................. 10 Wake Cnty. v. Hotels.com, LP, No. 06-CVS-16256, 2007 WL 4125456 (N.C. Super. Ct., Nov. 19, 2007) ............... 23, 25 Wood v. Tinsley, 138 N.C. 507, 51 S.E. 59 (1905) .................................................................................... 5-6

CONSTITUTION, STATUTES AND RULES 42 U.S.C. § 408 ............................................................................................................................ 17 N.C. Gen. Stat. § 1A-1 R.53 ................................................................................................... 10, 11 N.C. Gen. Stat. § 12-3.1 .............................................................................................................. 21 N.C. Gen. Stat. § 14-118.6(b) ...................................................................................................... 18 N.C. Gen. Stat. § 14-118.12 ......................................................................................................... 18 N.C. Gen. Stat. § 45-36.9 ......................................................................................................... 2, 32 N.C. Gen. Stat. § 45-36.12 ..................................................................................................... 31, 32 N.C. Gen. Stat. § 75-1.1 ................................................................................................................. 2 N.C. Gen. Stat. § 75-1.1(b) .......................................................................................................... 26 N.C. Gen. Stat. § 75-1.1(d) .......................................................................................................... 26 N.C. Gen. Stat. § 75-16 ................................................................................................................ 24 N.C. Gen. Stat. § 75-16.1 ............................................................................................................. 24

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N.C. Gen. Stat. § 153A-102 ........................................................................................................... 5 N.C. Gen. Stat. § 153A-103 ........................................................................................................... 5 N.C. Gen. Stat. § 153A-149 ........................................................................................................... 5 N.C. Gen. Stat. § 161-4 ............................................................................................................ 5, 19 N.C. Gen. Stat. § 161-10(a)(1a) ................................................................................................... 21 N.C. Gen. Stat. §§ 161-14 to 161-22.3 ........................................................................................ 14 N.C. Gen. Stat. §§ 161-14 to 161-31 ................................................................................... 5, 6, 19 N.C. Gen. Stat. § 161-16 .......................................................................................................... 5, 19 N.C. Gen. Stat. § 161-27 .............................................................................................. 5, 14-15, 19 N.C. R. Civ. P. 12(b)(1) ................................................................................................................. 9 N.C. R. Civ. P. 12(b)(6) ................................................................................................................. 9 N.C. R. Evid. 706 ......................................................................................................................... 11

OTHER AUTHORITIES Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory, 53 WM. & MARY L. REV. 111 (2011) ....................................... 5, 6, 8

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Plaintiff Guilford County respectfully submits this memorandum of law in opposition to five motions to dismiss filed by defendants: (1) Lender Processing Services, Inc., DocX, LLC, and LPS Default Solutions, Inc., dated May 14, 2012 (Memorandum of Law referred to as “LPS Brief”); (2) MERSCORP Holdings, Inc. et al.,1 dated May 14, 2012 (Memorandum of Law referred to as “MERS Brief”); (3) Capital One, N.A. (“Capital One”), dated May 14, 2012; (4) Green Tree Servicing, LLC (“Green Tree”), dated May 10, 2012, and June 8, 2012; and (5) Homeward Residential, Inc. f/k/a American Home Mortgage Servicing, Inc. (“Homeward”), dated June 13, 2012.

STATEMENT OF THE CASE On March 13, 2012, Guilford County filed a Complaint and Motion for Appointment of a Special Master and for Injunctive Relief in the Guilford County Superior Court (“Complaint”). The lawsuit concerns the filing of thousands of false, forged, or fabricated mortgage-related documents in the Guilford County Registry of Deeds. (Complaint ¶¶ 1-5.) The Complaint identifies 29 separate Defendants who either filed or had filed in their names such documents. The Complaint seeks five major categories of equitable, legal, and restitutionary relief: (1) declaratory relief to determine that specific documents filed by Defendants are invalid (Complaint ¶¶ 122-23); (2) injunctive relief in the form of an order that Defendants file

The MERS Brief was submitted on behalf of the following defendants: MERSCORP Holdings, Inc. and Mortgage Electronic Registration Systems, Inc., Wells Fargo Bank, N.A., Wells Fargo Home Mortgage, Inc., MorEquity, Inc., Bank of America, N.A., EquiCredit Corportion of America, Midfirst Bank, NationsCredit Financial Services Corp., First Franklin Financial Corp., Sand Canyon Corporation, USAA Federal Savings Bank, Mortgage Access Corp. d/b/a Weichert Financial Services, Citi Residential Lending, Inc., U.S. Bank National Association, JPMorgan Chase Bank, N.A. for itself and as successor by merger for Chase Home Finance, LLC, EMC Mortgage LLC, formerly known as EMC Mortgage Corporation, Navy Federal Credit Union, Ameriquest Mortgage Company, and Argent Mortgage Company, LLC.

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corrective documents and cease and desist executing and filing fraudulent and/or falsified mortgage documents with the Register of Deeds (Complaint ¶¶ 124-25); (3) legal relief as a result of Defendants’ violation of N.C. Gen. Stat. § 45-36.9 governing the filing of satisfactions (Complaint ¶¶ 126-29); (4) legal relief as a result of Defendants’ violation of N.C. Gen. Stat. § 75-1.1 governing unfair and deceptive trade practices (Complaint ¶¶ 130-33); and (5) restitutionary relief in the form of an unjust enrichment claim. (Complaint ¶¶ 134-135.) On April 16, 2012, this case was assigned to the North Carolina Business Court, and on May 14, 2012, most Defendants filed motions to dismiss. There are two primary motions to dismiss in this case. The first, filed by Defendants Lender Processing Services, Inc., DOCX, LLC, and LPS Default Solutions (referred to collectively as “LPS Defendants”), seeks dismissal on the grounds that Guilford County lacks Article III standing to assert any claim against them and fails to state claims for violations of N.C. Gen. Stat. §§ 45-36.9 (filing of satisfactions) and 75-1.1 (unfair and deceptive trade practices) and for unjust enrichment. The second, filed by a bevy of Defendants led by MERSCORP Holdings, Inc. (referred to collectively as “MERS Defendants”)2 seeks dismissal on similar grounds. The third and fourth, filed by Capital One3 and Green Tree,4 argue additionally that the Complaint contains insufficient allegations against them individually. Importantly, none of Defendants’ motions to dismiss challenges Guilford County’s standing to obtain declaratory relief concerning the validity of documents filed in its Registry of Because Homeward simply adopted the arguments set forth in the MERS Brief, it is treated as a MERS Defendant. In addition to making independent arguments, Capital One adopts the arguments set forth in the MERS Brief. In addition to making independent arguments, Green Tree adopts the arguments set forth in the LPS and MERS Briefs.
4 3 2

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Deeds or to obtain injunctive relief in the form of an order to correct invalid filings or to cease and desist from making invalid filings. Defendants’ motions to dismiss likewise make no argument that Guilford County is not entitled to declaratory or injunctive relief as a matter of law. Thus, the motions on file are, at best, partial motions to dismiss that cannot resolve the case in its entirety. Plaintiff Guilford County’s Memorandum of Law in Opposition to Defendants’ Motions to Dismiss seeks to address the arguments made in all five motions.

PRELIMINARY STATEMENT Defendants filed thousands of mortgage documents with the Guilford County Register of Deeds containing: (1) flagrantly forged signatures, (2) illegal notarizations, and (3) perjured and other false statements of fact. Defendants may attempt to disagree with this assertion, but in considering a motion to dismiss, the Court must take all allegations as true. Mangum v. Raleigh Bd. of Adjustment, 362 N.C. 640, 644, 669 S.E.2d 279, 283 (2008). Defendants committed these acts through two practices: First, Defendants hired people to forge bank officers’ signatures in an assembly line fashion, disregarding all laws and regulations concerning the execution of documents and affidavits and the conduct of notaries public. Second, Defendants assign (or participated in the assignment of) mortgages to an inherently unreliable private registry run by Defendant Mortgage Electronic Registration Systems, Inc. (“MERS, Inc.” when referring the business entity and “MERS” when referring to the private registry), lose track of the note owner, and then have MERS, Inc. file a satisfaction of mortgage at the end of the process. In filing this satisfaction, MERS, Inc. has no idea whether or not the mortgage has been satisfied because MERS, Inc. admittedly does not own or service the note. Further, MERS, Inc.’s satisfaction is accomplished through forgery, illegitimate notarizations,

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perjury, and other false statements. Importantly, however, the Complaint does not depend on whether MERS, Inc.’s registry is legal or illegal. Irrespective of whether the registry is

illegitimate, the MERS Defendants filed false documents with the Register of Deeds. The allegations regarding MERS, Inc.’s inherently unreliable system simply show that the MERS Defendants cannot possibly know whether anything they state regarding the mortgage is true. As a result, Defendants have created a mess in the public land records of Guilford County. The Register of Deeds, who sought to create a model registry, now presides over a registry containing thousands of forged, false, and fabricated documents. The budget for the Register of Deeds does not provide the resources needed to clean up the mess or prevent further violations by Defendants, which continue to the present. This not only destroys the integrity of Guilford County’s public records, but also exposes the Register of Deeds individually to potential civil and criminal penalties and removal from office. Defendants take the position that they can commit perjury, violate notary laws, and forge signatures with impunity, for they are seeking to tell this Court that the governmental body charged with maintaining a reliable, honest registry has no right to redress this assault on its fundamental duty. The unstated but unavoidable premise to their argument is they can file true records or they can file false records, and it does not matter which because nothing can be done about it. Their position, however, is contradicted by the Complaint, the law, and thousands of years of human history, which tells us that the integrity of public records is of vital importance and that it is the County itself that suffers when those public records are fabricated.

FACTUAL BACKGROUND “Since the founding of the American republic, each county in the United States has maintained records of who owns the land within that county. Most states track changes in

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ownership of land, including mortgages and deeds of trust, by maintaining records indexed through the names of grantors and grantees.” Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory, 53 WM. & MARY L. REV. 111, 114 (2011). The State of North Carolina and Guilford County are no different. The organizers of North Carolina’s first colonial government appointed just two officials – a governor and “Secretary and Chiefe Register,” and North Carolina’s Colonial Assembly enacted laws governing a registry of deeds as early as 1715. Guilford County has maintained its Registry of Deeds since May 18, 1771. North Carolina law places primary responsibility for maintaining Guilford County’s Registry of Deeds in the hands of Guilford County and its Register of Deeds. The Register of Deeds is legally responsible for recording, maintaining, and preserving real estate and other vital records and for providing public access to those records. N.C. Gen. Stat. §§ 161-14 to 161-31. The Register of Deeds must give bond with surety conditioned on the safekeeping of records and the faithful discharge of his duties. N.C. Gen. Stat. § 161-4. The Register of Deeds may be held liable for failure to register a deed within the correct timeframe and in the correct legal manner or to otherwise properly uphold his duties. N.C. Gen. Stat. § 161-16. The Register of Deeds may also face misdemeanor charges and removal from office for failure to uphold his duties. N.C. Gen. Stat. § 161-27. Concomitantly, Guilford County is responsible for ensuring that the Register of Deeds has sufficient resources, including personnel and funding, to perform his duties. N.C. Gen. Stat. §§ 153A-102, 153A-103, and 153A-149. Guilford County’s Registry of Deeds provides a rich repository of historical information about property ownership, but its importance is far more than historical. “A public, enduring, authoritative, and transparent record of all land ownership provides a vital information

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infrastructure that has proven indispensible in facilitating not only mortgage finance, but virtually all forms of commerce.” Peterson, supra, at 115; see also Wood v. Tinsley, 138 N.C. 507, __, 51 S.E. 59, 62 (1905) (stating that Registry’s purpose is to “enable purchasers to rely with safety upon the examination of [its] records”). The Registry of Deeds provides individuals with reliable and public information regarding the history of real property interests, validity of title, and encumbrances and other interests affecting title. These features are essential for individuals buying and selling real property, discovering and remedying title defects in their own property, and financing the purchase of real property. The Registry also provides Guilford County with information needed to levy and collect property taxes, provide services, and promote the general welfare of its citizens. See N.C. Gen. Stat. §§ 161-14 to 161-31. “County real property records are the oldest and most stable metric tracking the ‘American dream’ of family homeownership.” Peterson, supra, at 115. Unfortunately, the

stability of that system, which has worked effectively for Guilford County for more than 220 years, has become increasingly unreliable. The reason behind the dramatic change: the sudden rush to securitize as many mortgages as possible over the last several decades and the sloppy practices used to make it happen, whatever the cost. Securitization is the process by which financial institutions collect mortgages into trusts and sell certificates in those trusts to investors, and investors in turn receive income from mortgage payments. The securitization process can result in several transfers of mortgages and mortgage notes over a short period of time, including a transfer from the loan Originator to the securitization Seller, from the securitization Seller to the securitization Depositor, and from the securitization Depositor to the securitization Trustee. Defendants are involved in various

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aspects of the mortgage securitization process. Their activities have resulted in a clouding of real estate records that has cost or will cost Guilford County and its Register of Deeds thousands of hours and millions of dollars to clean up. Defendants in this case engaged in or benefitted from the filing of robo-signed mortgagerelated documents in the Guilford County Registry of Deeds, primarily through Lender Processing Services, Inc., DocX, LLC, and LPS Default Solutions, Inc. (collectively “LPS”), which boasts that it is the nation’s leading provider of mortgage loan processing, settlement, and default services. LPS has executed numerous mortgage-related documents on behalf of its clients, including mortgage assignments, satisfactions, lien releases, and other documents, and filed them with the Guilford County Register of Deeds. LPS employees sign documents using names other than their own, sign documents as employees of organizations for which they do not work, lack personal knowledge concerning the information to which they vouch, are not placed under oath before signing documents, and sign documents without the presence of a notary. For ease of reference, these practices collectively are referred to as “robo-signing.” To assess the scope of robo-signing problems, Guilford County’s Register of Deeds and his staff surveyed mortgage-related documents filed there between August 2006 and April 2010. Of the 6,100 mortgage documents reviewed, 4,519 were signed by a known robo-signer. The signatures for these individuals, moreover, are clearly different, indicating that multiple individuals were forging signatures on official documents in the names of “Linda Green” (see Complaint Exh. 1) and “Christie Baldwin” (see Complaint Exh. 2), attached hereto as “Plaintiff’s Exhibit 1” and “Plaintiff’s Exhibit 2.” Robo-signing Defendants are entities who either

perpetrated the robo-signing or on whose behalf the robo-signing was perpetrated based on the

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Register’s review of legal filings. Every Defendant either robo-signed or had filed in its name a robo-signed document. All Defendants in this case also use MERS to subvert Guilford County’s public registry system. In 1995, major mortgage industry stakeholders, including several Defendants named in this lawsuit, created MERS, “a single shell company that would pretend to own all the mortgages in the country.” Peterson, supra, at 116 (emphasis added). The Defendants did this to allow MERS participants to transfer mortgage loans at high speeds while avoiding county recording systems. Under the MERS process, MERS, Inc. is designated as mortgagee of record with Guilford County’s Register of Deeds while MERS, Inc. does not claim to own the underlying mortgage note or collect borrowers’ payments. Additionally, MERS is inherently unreliable — with MERS members’ reporting of transfers being voluntary, MERS failing to maintain copies of transfer records, and property owners and the public having no ability to verify MERS’ accuracy. MERS filings, which are inherently false given that MERS is not what it claims to be, undermine Guilford County’s Registry of Deeds. Further, MERS, Inc. itself, which has no idea whether the underlying note has been paid, had filed in its name at least 999 robo-signed satisfactions with the Register of Deeds. (Complaint ¶ 91.) As a result of Defendants’ conduct, Guilford County, its Registry of Deeds, and its citizens have suffered, and will continue to suffer, harm. Defendants’ actions have undermined Guilford County’s entire Registry of Deeds, which Guilford County and its Register of Deeds are duty-bound to protect. Efforts to clean up the registry have cost and will continue to cost Guilford County and its Register of Deeds significant time and financial resources, without the budget to do so, for a problem it did not create. By contrast, failure to clean up the registry would expose the Register of Deeds to civil and criminal liability and deny Guilford County’s

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citizens public access to accurate real estate information – with the ultimate result being legal uncertainty concerning title, difficulty in discovering and remedying title defects and buying and selling property, losses of homes due to illegal foreclosures, decreases in real estate values, investments and tax collections, and decreases in employment, social stability, and quality of life for Guilford County’s citizens. There can be no dispute at this preliminary stage of the proceedings that Guilford County’s public property records are of vital importance. There can be no dispute at this preliminary stage of the proceedings that Defendants’ filings have destroyed the accuracy and reliability of those records. There can be also no dispute that no party other than Guilford County and its Register of Deeds has an interest in cleaning up these records; nor does Guilford County have any means to do so outside of this or a similar action. The question presented is simple: Will this Court, based on preliminary partial motions to dismiss, prevent the Guilford County Register of Deeds from attempting to remove from its registry thousands of forged, false, and fabricated documents?

LEGAL ARGUMENT Defendants have made motions to dismiss under Rule 12(b)(1) of the North Carolina Rules of Civil Procedure alleging that Guilford County lacks Article III standing and Rule 12(b)(6) alleging that Guilford County fails to state a claim upon which relief may be granted. When considering a motion to dismiss for lack of standing, the trial court is to “view the allegations as true and the supporting record in the light most favorable to the non-moving party.” Mangum, supra. The court should grant a “Rule 12(b)(1) motion to dismiss only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a

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matter of law.” SouthStar Funding, L.L.C. v. Warren, Perry & Anthony, P.L.L.C., 445 F. Supp. 2d 583, 584 (E.D.N.C. 2006) (internal quotations and citations omitted). “When ruling on . . . a [Rule 12(b)(6)] motion to dismiss, the trial court is to treat the plaintiff's factual allegations as true. Furthermore, the complaint is to be liberally construed, and the trial court should not dismiss the complaint unless it appears beyond doubt that the plaintiff could prove no set of facts in support of his claim which would entitle him to relief.” Turner v. Hammocks Beach Corp., 363 N.C. 555, 559, 681 S.E.2d 770, 774 (2009) (internal quotations and citations omitted). Under notice pleading requirements, “[m]ere vagueness or lack of detail is not ground for a motion to dismiss.” Sutton v. Duke, 277 N.C. 94, 102, 176 S.E.2d 161, 165 (1970). “[M]otions to dismiss should not be granted unless it is very clear that there can be no relief under any of the facts alleged in the pleading for the relief requested or for other relief.” Id. at 104, 176 S.E.2d at 167 (emphasis added).

I.

Defendants Filed Partial Motions to Dismiss. Defendants style their motions as “Motion to Dismiss” and ask the Court to dismiss the

case in its entirety. (See, e.g., MERS Brief, at 29.) However, Defendants entirely ignore Guilford County’s requests for declaratory judgment and injunctive relief, prominently labeled “Motion for Appointment of Special Master and for Injunctive Relief.” 5 (Complaint ¶¶ 119-

The LPS Brief addresses the request for a Special Master, but ignores the requests for injunctive and declaratory relief. (LPS Brief, at 23 n.14.) The LPS Brief asserts that there is no basis under North Carolina law for the Court to appoint a Special Master and implies that Defendants’ constitutional rights would be violated if the Court made such an appointment. These statements are incorrect. N.C. Gen. Stat. § 1A-1, R. 53 expressly gives courts the power to appoint referees either by consent, or compulsorily. See Cleveland Constr., Inc. v. Ellis-Don Constr., Inc., 709 S.E.2d 512, 518 (N.C. Ct. App. 2011) (noting that trial court appointed referee who conducted extensive evidentiary hearings in complicated case); Perry v. Doub, 249 N.C. 322, 326, 106 S.E.2d 582, 586 (1959) (stating that referee statutes are “liberally construed to (footnote continued) - 10 -

5

125.) Guilford County moved for the appointment of a Special Master (Complaint ¶ 122), but also moved for a determination that certain documents are invalid and ineffective (Complaint ¶ 123), and that Defendants file corrective documents. (Complaint ¶ 124.) Finally, Guilford County requested that Defendants “be ordered to cease and desist ‘robo-signing’ or otherwise executing and filing with the Register of Deeds fraudulent and/or falsified mortgage documents.” (Complaint ¶ 125.) Defendants ignore these Complaint allegations because standing here is unassailable. No other party could bring an action regarding the duties of the Register of Deeds to accept or maintain filed documents. Because Defendants completely ignore the requests for a determination as to the validity of documents and requests that Defendants file corrective documents and cease and desist filing them in the future, the Court cannot dismiss the Complaint in its entirety based on Defendants’ motions.

II.

Guilford County Has Article III Standing. To establish standing under Article III of the United States Constitution, Guilford

County6 must show (1) injury in fact, (2) causation, and (3) redressability. Lujan v. Defenders of

facilitate the work of the court and to simplify the issues to be submitted to a jury”). Further, the “Special Master” referenced here could be construed (as the Court must on a motion to dismiss) as a request for a Court-appointed expert witness to review and testify as to the validity of documents (Complaint ¶ 122; see also N.C.R. Evid. 706), with the Court making the final determination. (Complaint ¶ 123.) Defendants make no argument that N.C. Gen. Stat. § 1A-1, R. 53 or N.C. Rule of Evidence 706 violate the North Carolina Constitution, and therefore, no challenge exists to the request to appoint a Special Master, whatever form it ultimately takes. The MERS Brief argues that Jeff L. Thigpen, Guilford County’s Register of Deeds, does not have authority to bring this lawsuit. (MERS Brief, at 8 n.2.) For purposes of clarification, this lawsuit is being brought by Guilford County at the behest and under the authority of Guilford County’s Board of Commissioners. While ultimately essential to a meaningful resolution of these issues, Mr. Thigpen is not a stand-alone party. See Complaint ¶ 6 (referencing Mr. Thigpen as Register of Deeds, but not as an individual Plaintiff).
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Wildlife, 504 U.S. 555, 560-61 (1992). As alleged and shown herein, Guilford County clearly has standing on its own; it also has standing to act to protect the otherwise unprotected rights of its citizens under the Kowalski test set out below. The first element, injury in fact, is satisfied if there is “an invasion of a legally protected interest which is (a) concrete and particularized; and (b) actual or imminent, not conjectural or hypothetical.” Id. at 560 (internal quotations and citations omitted). The second element, causation, is satisfied if there is “a causal connection between the injury and the conduct complained of . . . .” Id. at 560. The third element,

redressability, is satisfied if, taking all well-pleaded allegations as true, it is “likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Id. at 561 (internal quotations and citations omitted). As alleged and shown herein, Guilford County clearly has standing on its own; it also has standing to act to protect the otherwise unprotected rights of its citizens under the Kowalski test set out below. Guilford County has alleged, and can ultimately show, all three elements. First, Guilford County and the public have a legally protected interest in the Registry of Deeds, which serves critical government functions. Second, Defendants have polluted Guilford County’s model registry by filing thousands of forged, false, and fabricated documents. And third, because Guilford County and its Register of Deeds lack the resources to correct the filings, the only way to redress the harm is to sort through the documents, either through a Special Master or otherwise, and force Defendants to correct the inaccuracies, and/or provide Plaintiff with the financial resources to do so.

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A.

Guilford County has alleged injury in fact.

The gravamen of Defendants’ standing arguments is that Guilford County has not suffered an injury in fact. (LPS Brief, at 3-4;7 MERS Brief, at 7.) It may be helpful to briefly outline the primary injuries in fact alleged by Guilford County in its Complaint. The first relates to Guilford County’s duty to maintain a real property recording system and Defendants’ interference therewith. The second relates to the costs in terms of time and financial resources Guilford County has incurred and expects to incur in restoring the integrity of its Registry of Deeds. The third relates to the potential economic and social harms suffered more broadly by Guilford County and its citizens as a result of Defendants’ conduct. In short, the actions of Defendants in filing thousands of invalid documents have seriously undermined one of the principal governmental functions of Guilford County. 1. Legal obligation to maintain public recording system.

The first injury in fact is to the public recording system that Guilford County and its Register of Deeds have a legal obligation to maintain. Among other things, the Complaint alleges that “[m]aintenance of a registry of documents that affect title to property is one of the oldest and most vital functions of government” and that “North Carolina law places primary In the introduction to its injury-in-fact discussion, the LPS Brief cites several cases that address standing to sue under specific statutes, not standing to sue under Article III of the United States Constitution. (LPS Brief, at 3-5.) See, e.g., Town of Ayden v. Town of Winterville, 143 N.C. App. 136, 544 S.E.2d 821 (2001) (addressing statutory standing in context of North Carolina annexation statute). In one of those cases, Christian Cnty. Clerk v. Mortgage Elec. Registration Sys., Inc., No. 5:11CV-00072-M, 2012 WL 566807 (Feb. 21, 2012), attached hereto as “Plaintiff’s Exhibit 3,” the court actually rejected an Article III standing argument similar to the one raised here, stating that “Plaintiffs [County Clerks] have alleged an injury to [their] financial interest caused by the actions or omissions of Defendants [failure to file mortgage assignments and promissory notes] . . . . At this stage of the litigation, these allegations are sufficient to establish Article III standing.” Id. at *2 (bracketed language added). Guilford County addresses statutory standing issues raised separately and in the context of the particular statutes at issue in this case.
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responsibility for each county’s registry system in the hands of a Register of Deeds.” (Complaint ¶¶ 37, 46.) The Complaint further alleges that “[a]s a result of the creation and maintenance of MERS, the public recording system is no longer a reliable source for tracking the chain of title for property, identifying the current beneficial owner of a mortgage, or determining the validity of any satisfaction” (Complaint ¶ 72); that Defendants “endeavored to substitute MERS for the system of publicly recording property interests” (Complaint ¶ 73); and that, as a result, “Guilford County’s Register of Deeds faces great difficulty in fulfilling his fundamental duties . . . .” (Complaint ¶ 116.) If Defendants physically blocked public access to the Register of Deeds’ records or began systematically destroying them, it would be ludicrous to contend that Guilford County lacked standing to stop them. By the same token, Guilford County has Article III standing to stop Defendants from destroying the integrity of those same public records. The purpose of the Register of Deeds is to create a reliable repository of land records. The filing of thousands of invalid documents makes it impossible for Guilford County to fulfill its governmental mandate. Who, other than Guilford County, could possibly have standing to seek redress of this wrong? 2. Costs of time and financial resources to restore integrity to public recording system.

The second injury in fact relates to the direct costs Guilford County has incurred and expects to incur in restoring the integrity of its Registry of Deeds as a result of Defendants’ filing of thousands of forged, false, and fabricated documents, including robo-signed documents signed by and/or on behalf of Defendants. But for Defendants’ actions, Guilford County and its taxpayers would not otherwise have incurred this injury in fact. North Carolina law contains provisions about how Guilford County’s Register of Deeds is to maintain the Registry, see N.C. Gen. Stat. §§ 161-14 to 161-22.3, including criminal penalties for their violation, see, e.g., id.

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§ 161-27. These laws clearly give Guilford County and its Register of Deeds a concrete interest in the Registry and standing to protect it. Just as Guilford County would have standing to protect its interest in any damaged piece of its property, cf. Haywood Cty. Consol. School Sys. v. U.S. Fid. & Guar. Co., 43 N.C. App. 71, 73, 257 S.E.2d 670, 671 (1979) (upholding verdict in favor of county school system over damage to gym floor), Guilford County has standing to protect its interests in the Registry of Deeds that it is required by law to maintain. 3. Economic and social harms suffered by Guilford County and its citizens.

Guilford County’s Complaint identifies a series of tangible economic and social harms reasonably resulting from Defendants’ misconduct, including legal uncertainty concerning title, inability to discover and remedy title defects, losses of homes due to illegal foreclosures, decreases in real estate values, investments and tax collections, and decreases in employment, social stability, and quality of life for Guilford County’s citizens, if such misconduct is not addressed. (Complaint ¶ 115.) These injuries in fact harm Guilford County, its Register of Deeds, and its citizens, who possess a close relationship with one another. (Complaint ¶ 115.) Finally, these injuries in fact are injuries that Guilford County’s citizens, acting alone, would be ill-equipped to address. (Complaint ¶ 118.) Consistent with Kowalski v. Tesmer, 543 U.S. 125, 125 S. Ct. 564 (2004), and related cases, Guilford County may assert not only its own rights, but also the rights of its citizens and others.8 That, too, is the essence of what a local government is

A political subdivision may have standing to assert the rights of third parties, such as its citizens, when a plaintiff: (i) suffers its own injury in fact; (ii) possesses a sufficiently “‘close’ relationship with the person who possesses the right”; and (iii) shows some hindrance that stands in the way of the claimant seeking relief. Kowalski, 543 U.S. at 129-30, 125 S. Ct. at 567 (2004); see also City of East Liverpool v. Columbiana Cnty Budget Comm’n, 870 N.E.2d 705, 712 (Ohio 2007). This basis for standing is separate and distinct from parens patriae standing, which is not being asserted in this case. (See LPS Brief, at 4 n.3.) Neuse River Found., Inc. v. Smithfield Foods, Inc., 155 N.C. App. 110, 574 S.E.2d 48 (2002), likewise, is inapplicable here where (footnote continued) - 15 -

8

created to do and may be its most essential and fundamental mandate. Again, if Guilford County cannot seek redress of this wrong, who can? B. North Carolina law imposes duties on Guilford County and its Register of Deeds (and ultimately Defendants) related to the Registry of Deeds.

The LPS and MERS Briefs seek to minimize the Registry-related duties of Guilford County and its Register of Deeds by arguing that North Carolina law imposes few duties to file property-related documents and that the Register of Deeds’ role is purely ministerial. The former assertion is irrelevant; the latter is misguided. On the former front, the LPS and MERS Briefs argue that North Carolina law imposes “no duty to record deeds or mortgage-related documents” (LPS Brief, at 5), “no obligation ‘to record a written assignment’” (MERS Brief, at 9), and “no right to charge for recording satisfactions.” (MERS Brief, at 11.) This argument shows a fundamental misunderstanding of the wrong perpetuated by Defendants. Even if the law states there is “no obligation to record assignments,” a point that is not in dispute, that can hardly be deemed authorization to file false ones. Guilford County’s Complaint is not that Defendants failed to file assignments or satisfactions,9 but that they filed thousands of false and invalid

Guilford County is not attempting to sue “in a representative capacity for and on behalf of the using and consuming public of this State.” Id. at 119, 574 S.E.2d at 54. (See MERS Brief, at 78.) It is for this reason that the LPS Brief’s heavy reliance on Bates v. Mortgage Elec. Registration Sys., Inc., No. 3:10-cv-00407-RCJ-VPC, 2011 WL 1304486 (D. Nev. Mar. 30, 2011), attached hereto as “Plaintiff’s Exhibit 4,” and Nevada ex rel. Bates v. Mortgage Elec. Registration Sys., Inc., No. 3:10-cv-00407-RCJ-VPC, 2011 WL 1582945 (D. Nev. Apr. 25, 2011), attached hereto as “Plaintiff’s Exhibit 5,” is misplaced. (LPS Brief, at 6-8.) In Bates, the plaintiffs alleged that the defendants “made false claims by failing to record the assignments of interests in mortgages, thus avoiding county recording fees.” Bates, 2011 WL 1304486, at *1. In the paragraph immediately following the one quoted in the LPS Brief, the court observed: “A party may choose to avoid the filing fee and hassle of recording an assignment if it would rather bear the risk that its interest in property will not be protected from a potential subsequent bona fide purchaser . . . .” Id. at *3 Guilford County’s primary concern is not with the assignments not filed, but with assignments filed falsely.
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documents. This is hardly a subtle difference, and Defendants’ reliance on this irrelevant fact is, at best, puzzling. The law may allow Defendants to choose not to file assignments and certain other property-related documents, but the law prohibits the filing of forged, false, and fabricated documents to obtain a benefit to which they otherwise would not be entitled.10 By way of analogy, a person may choose not to testify before Congress, but if she does testify, she cannot lie. And a person may have no duty to file a social security disability claim, but he may be prosecuted for filing a false or fraudulent claim. Cf. 42 U.S.C. § 408. More to the point, a lawyer may have his or her license suspended by the North Carolina State Bar for filing fraudulent documents with the Register of Deeds. The North Carolina Court of Appeals

addressed that issue recently in North Carolina State Bar v. Erickson, No. COA09-765, 2010 WL 5135873 (N.C. Ct. App. 2010), attached hereto as “Plaintiff’s Exhibit 6.” The court in Erickson ultimately concluded that the law firm’s “filing of fraudulent titles in the register of deeds offices would create considerable confusion and lead to muddied titles.” Id. at *10. The absence of a filing requirement does not affect Guilford County’s standing to pursue litigation to remedy thousands of forged, false, and fabricated filings like those alleged here. The LPS Brief’s argument that the Register of Deeds’ role is purely ministerial and has no duty to verify recorded documents or to inquire into their legal sufficiency likewise takes a

In making its argument that North Carolina law does not impose a duty to record certain property-related documents with the Register of Deeds, the LPS Brief relies on a series of cases that recognize that unfiled documents are valid vis-à-vis the parties to the transaction. (LPS Brief, at 5-6.) Ironically, the bold-faced language in the case the LPS Brief chooses to highlight, Garrison v. Blakeney, 37 N.C. 73, 246 S.E.2d 144 (1978), actually exposes the flaw in the LPS Brief’s argument: “It is not the purpose of the recording statutes to make a deed effective to transfer title by recordation. Their purpose is to protect prospective purchasers of land and those who desire to encumber land.” Id. at 73, 246 S.E.2d at 151 (emphasis added). The flaw in Defendants’ argument is that they seek to obtain the Registry’s protection without complying with the legal requirements for obtaining that protection.

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truism and applies it to reach an absurd conclusion. This argument, too, shows a fundamental misunderstanding of Plaintiff’s relatively simple Complaint. This action does not seek

permission to police filings or serve as a gatekeeper for filings, which was the question in Fleming v. Mann, 23 N.C. App. 418, 209 S.E.2d 366 (1974).11 Rather, the Complaint reveals the discovery of thousands of invalid documents already filed, shows the likelihood of many more invalid documents, and seeks redress for this wrong.12 It is true that a Register of Deeds generally must file documents that appear on their face to be valid. But this does not mean that a Register of Deeds must engage in willful blindness where, as here, “Linda Green’s” signature on official documents is plainly forged with at least 15 distinct signatures and “Christie Baldwin’s” signature on official documents is plainly forged with at least 12 distinct signatures. Nor does it mean that the Register of Deeds must ignore overwhelming evidence that MERS is not really the mortgagee it claims to be on property filings and has no clue as to whether or not the satisfaction it files is accurate. North Carolina law expects more than willful blindness from elected officials such as the Register of Deeds. Otherwise, it would not impose extensive requirements for recording, maintaining, and Fleming is irrelevant here because in Fleming, the plaintiff requested from the Register of Deeds a “writ of mandamus requiring her to expunge from the records in her office certain instruments recorded therein.’ Id. at 420, 209 S.E.2d at 368. The court addressed only the Register of Deeds’ responsibility to file facially accurate documents; the filer’s potential liability was not at issue. Id. Although the Register of Deeds is not seeking authority to function as a gatekeeper of future filings, as implied by Defendants, it is interesting to note that the North Carolina General Assembly has seen fit to give Registers of Deeds express authority to do exactly that. N.C. Gen. Stat. § 14-118.6(b) expressly authorizes the Register of Deeds to reject filings that he or she has a reasonable suspicion to be false liens or encumbrances. Further, N.C. Gen. Stat. § 14-118.12 expressly makes someone liable for residential mortgage fraud if he or she “[k]nowingly files in a public record…a document falsely claiming that a mortgage loan has been satisfied, discharged, released, revoked, or terminated or is invalid.” The “ministerial duties of the Register of Deeds” as defined by statute extend far beyond simply serving as a repository of whatever documents, including patently false and invalid documents, presented to it.
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preserving real estate and other vital records and for providing public access to those records, N.C. Gen. Stat. §§ 161-14 to 161-31, require the Register of Deeds to give bond with surety, id. § 161-4, or hold the Register of Deeds liable, civilly and criminally, for failing to properly uphold his duties. Id. §§ 161-16, 161-27. C. MERS, Inc.’s designation as a mortgagee is not legal and does impair chains of title.

The MERS Brief’s argument that MERS is legal is incorrect,13 but, more importantly, irrelevant. (MERS Brief, at 12-14.) While MERS’s operational structure is part of what led to the filing of false records, it is the false filings themselves that are the primary basis for this Complaint. Contrary to the assertions made in the MERS Brief, Guilford County did not “tack on” allegations about defects in the notarization and execution of unspecified mortgage documents. (MERS Brief, at 15.) Rather, those allegations are the centerpiece of this litigation. As

discussed previously, MERS’ practices have harmed the Registry of Deeds, which Guilford County has a duty to maintain; resulted in and will result in costs in terms of time and financial resources to restore the integrity of that system; and has resulted in and will result in larger economic and social harm if not corrected. MERS argues in opposition only that document defects will not impair chains of title. (MERS Brief, at 15.) MERS again is incorrect. The unabated and systematic filing of thousands of forged, false, and fabricated documents in the

See Mortgage Elec. Registration Sys., Inc. v. Sw. Homes of Ark., Inc., 301 S.W.3d 1 (Ark. 2009), (MERS, Inc. was not “the beneficiary, even though it is so designated in the deed of trust.”); Landmark Nat’l Bank v. Kesler, 216 P.3d 158 (Kan. 2009), (“MERS did not demonstrate, in fact, did not attempt to demonstrate, that it possessed any tangible interest in the mortgage beyond a nominal designation as the mortgagor.”); and Mortgage Elec. Registration Sys., Inc. v. Saunders, 2 A.3d 289 (Me. 2010) (“MERS is not a mortgagee … because it has no enforceable right in the debt obligation securing the mortgage.”).

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Guilford County Registry of Deeds calls into to question Guilford County’s entire real property registration system, which the North Carolina Supreme Court has long recognized as a key to “benefit[ting] commerce and … promot[ing] general prosperity.” Hughes v. Hodges, 102 N.C. 262, __, 9 S.E. 437, 437 (1889). Finally, issues about the level of harm suffered as a result of Defendants’ conduct generally are questions of fact, not questions of law, and thus not ripe for resolution in a motion to dismiss. Whether MERS filed these false and invalid documents in the capacity of mortgagee, assignee or, by virtue of some legal alchemy as a mortgagee and assignee simultaneously, is irrelevant to the actual Complaint before the Court. Neither MERS nor any other entity should be allowed to file false and invalid documents in the Guilford County Registry; it is really that simple. D. Guilford County has suffered an injury in fact that is not speculative or remote.

The arguments in the LPS and MERS Briefs that Guilford County suffered no injury in fact based on a loss of recording fees (LPS Brief, at 5; MERS Brief, at 10), economic and social harms (MERS Brief, at 17), or public harm (MERS Brief, at 20) likewise should fail. The LPS and MERS Briefs seek to turn this case into one primarily about lost recording fees when the harm to be addressed and remedies Guilford County seeks are far broader and deeper. Guilford County does allege that the very purpose of MERS is for its members to obtain the benefit traditionally provided by Registry filings without filing the paperwork. (Complaint

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¶ 64.) And Guilford County does expect to receive applicable “filing fees for all instruments of correction” Defendants must file.14 (Complaint Request 4.) But, at heart, Guilford County wants something more fundamental than filing fees: Guilford County seeks to restore the integrity of its public Registry of Deeds and seeks all relief, equitable and legal, necessary to ensure this occurs. Relief sought includes appointment of a Special Master; declarations concerning the validity or invalidity of Registry documents; an order that Defendants file instruments of correction; an order that Defendants cease and desist from engaging in the activities alleged in this case; the costs for a Special Master; filing fees associated with documents of correction; compensatory, treble, and punitive damages; applicable attorneys’ fees; court costs; and any other relief the Court deems appropriate. This case is about far more than filing fees, as the Complaint makes abundantly clear; but foregone filing fees may be relevant to the Court’s ultimate analysis of the damages available from Defendants.15 The MERS Brief also argues that the larger Guilford County and public economic and social harms outlined in the Complaint are too speculative and remote to support standing, and that Guilford County cannot base its standing on public harm. (MERS Brief, at 17-20.) While Guilford County bases its claims primarily on the injury in fact to the integrity of the Registry of
14

The MERS Brief does argue Guilford County would not be entitled to fees for filing corrected mortgage satisfactions because N.C. Gen. Stat. § 161-10(a)(1a), which deals with satisfactions, forbids charging such fees. (MERS Brief, at 11.) Once again, Defendants are attempting to win a battle in which Guilford County is not engaged. The instruments of correction sought by Guilford County are not mere refilings of the false and invalid satisfactions already foisted upon Guilford County. Rather, Guilford County seeks a document notifying all concerned of the invalid documents and placing the broken chain of title back on valid and reliable footing. The MERS Brief also argues that N.C. Gen. Stat. 12-3.1 is applicable here and bars Guilford County from charging fees for services not actually rendered. (MERS Brief, at 10.) N.C. Gen. Stat. § 12-3.1 only applies to state agencies and, therefore, is not applicable. See N.C. Gen. Stat § 12-3.1 (“The term [agency] does not include counties . . . .”).
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Deeds and the costs associated with restoring the integrity of the Registry, Guilford County appropriately recognizes the relevance of these larger economic and social harms to the ultimate calculation of damages. First, and as discussed previously, Guilford County has standing to assert the rights of a third party when it has suffered an injury in fact itself, possesses a sufficiently close relationship with another claimant, and shows some hindrance that stands in the way of the claimant seeking relief. See Kowalski, 543 U.S. at 129-130, 125 S. Ct. at 567; East Liverpool, 870 N.E.2d at 712. Second, Guilford County seeks equitable relief here, and public harm is a consideration in granting or denying equitable relief. Cf. Statesville Med. Grp., P.A. v. Dickey, 106 N.C. App. 669, 675, 418 S.E.2d 256, 260 (1992) (holding that harm to public health was valid consideration in denying equitable enforcement of covenant not to compete). Third, Guilford County seeks treble and punitive damages, as applicable, against Defendants, and public harm is an important consideration in evaluating such a claim. See Boyd v. L.G. DeWitt Trucking Co., Inc., 103 N.C. App. 396, 404, 405 S.E.2d 914, 920 (1991) (holding that the plaintiff may pursue punitive damages due to the defendant trucking company’s knowledge that one of its drivers was a “danger to the rest of the driving public”); Owen v. Claude De Bruhl Agency, 241 N.C. 597, 598, 86 S.E.2d 197, 198 (1955) (affirming a finding of punitive damages against defendants who fired guns over the plaintiff’s property, which “constituted a continuous nuisance, both private and public in character”). Furthermore, the issue of whether Guilford County can prove the larger set of economic and social harms alleged in the Complaint is appropriate for resolution at the summary judgment stage or at trial, not at the motion to dismiss stage.

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III.

Guilford County Has Stated a Claim Under the Unfair and Deceptive Trade Practices Act. The LPS and MERS Briefs make three arguments in support of their assertion that

Guilford County has not stated a claim under the North Carolina Unfair and Deceptive Trade Practices Act (UDTPA). First, the LPS Brief argues that Guilford County lacks statutory

standing to bring a UDTPA claim. (LPS Brief, at 15.) Second, the LPS and MERS Briefs argue that Guilford County cannot satisfy various elements of a UDTPA claim, including the element of unfair or deceptive conduct (MERS Brief, at 26), “in or affecting commerce” element (LPS Brief, at 17; MERS Brief, at 23), and the element of causation. (LPS Brief, at 20.) Third, the MERS Brief argues that the UDTPA does not apply to mortgage recording. (MERS Brief, at 25.) A. Guilford County has statutory standing to sue for UDTPA violations.

The LPS Brief argues that Guilford County lacks statutory standing. (LPS Brief, at 15.) In making this argument, the LPS Brief begins by citing a series of cases that explain that the UDTPA is intended to protect consumers before proceeding to concede that the UDTPA’s protections extend to businesses and that they also extend to government entities like Guilford County. See, e.g., F. Ray Moore Oil Co., Inc. v. State of North Carolina, 80 N.C. App. 139, 14243, 341 S.E.2d 371, 374 (1986) (state); Wake Cnty. v. Hotels.com, LP, No. 06-CVS-16256, 2007 WL 4125456, at *10 (N.C. Super. Ct., Nov. 19, 2007) (counties). The LPS Brief ultimately is reduced to the following quotation in F. Ray Moore Oil Co.: “There is no reason why the State as a consumer cannot take advantage of [the UDTPA] if it is the victim of an unfair or deceptive trade practice.” Id. at 142-43, 341 S.E.2d at 374. The LPS Brief relies on this language to argue that Guilford County cannot bring a claim because it is not a consumer of LPS Defendants’

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services.16 Unfortunately for Defendants, the opposite also is true; there is no reason why any person cannot take advantage of the UDTPA if he or she has been harmed by an unfair or deceptive act. While it is true that the statute specifically authorizes the State of North Carolina, through the North Carolina Attorney General’s Office, to initiate actions, the statute also clearly shows that this authority is supplemental to and does not in any way limit other parties’ rights under the Act. In fact, a civil action is specifically authorized for any person injured by an unfair or deceptive act and treble damages and attorneys’ fees are authorized. N.C. Gen. Stat. §§ 75-16 and 75-16.1. The court in F. Ray Moore Oil Co. explained the UDTPA’s purpose as follows: “The statute is aimed at unfair and deceptive practice by those engaged in business for profit.” Id. at 142, 341 S.E.2d at 374. In this case, the LPS Defendants are engaged in business for profit, and they are alleged to have engaged in the unfair and deceptive practice of filing of thousands of forged, false, and fabricated property-related documents and to have filed those documents with Guilford County’s Register of Deeds, who, as recipient, qualifies as a consumer of them.17 (Complaint ¶ 131.) North Carolina case law is very clear that the UDTPA does not require a commercial relationship between plaintiff and defendant; rather, the “proper inquiry” is “whether the defendants’ allegedly deceptive acts affected commerce.” See, e.g., J.M. Westall & Co., Inc. v. Windswept View of Asheville, Inc., 97 N.C. App. 71, 74-75, 387 S.E.2d 67, 69 (1990)

The MERS and LPS Briefs make the same argument in claiming that Guilford County cannot establish the “in or affecting commerce” element of a UDTPA cause of action. Guilford County does not concede, however, that it must be a “consumer” to bring a UDTPA claim.
17

16

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(emphasis in original). In this case, the filing of property-related documents with a Register of Deeds clearly affects commerce. In making the argument that Guilford County lacks statutory standing, the LPS Brief relies on the North Carolina Business Court’s unpublished decision in Hotels.com, 2007 WL 4125456. That case involved several North Carolina counties’ efforts to collect occupancy taxes from Hotels.com and other internet hotel suppliers. In rejecting the counties’ UDTPA claims, the court stated that the victims of the alleged unfair and deceptive trade practices identified in that case were not the counties, but rather people “duped into paying more for a room than they would otherwise.” Id. at *10. In this case, by contrast, Guilford County has identified direct injuries to Guilford County itself, including harm to the real property recording system that Guilford County and its Register of Deeds have a legal obligation to maintain and costs associated with the clean-up of that system. Similarly, Law Office of David J. Stern, P.A. v. State of Florida, 83 So.3d 847 (Fla. Dist. Ct. App. 2011), cited in the LPS Brief, is of no relevance here; just as one cannot allege a UDTPA claim against a law firm for the professional services it provides in North Carolina, one also cannot do so in Florida. Id. at 850. In addition, because Guilford County is entitled to sue on behalf of its citizens under Kowalski and Liverpool, those citizens’ traditional consumer standing under UDTPA is sufficient to grant Guilford County standing under the Act. B. The misconduct was unfair and deceptive, in or affecting commerce, and caused Guilford County injury.

To establish a claim for violation of the UDTPA, a plaintiff must show: (1) a defendant engaged in an unfair or deceptive practice or act; (2) in or affecting commerce; and (3) such act proximately caused actual injury to the plaintiff. Governors Club, Inc. v. Governors Club Ltd. P’ship, 152 N.C. App. 240, 250, 567 S.E.2d 781, 788 (2002), aff’d per curiam, 357 N.C. 46, 577

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S.E.2d 620 (2003). Between the LPS and MERS Briefs, there are arguments that Guilford County cannot satisfy any of these elements, which is patently wrong. The MERS Brief argues that there is no unfair or deceptive act here. (MERS Brief, at 2627.) “An act is unfair if it is unethical or unscrupulous, and it is deceptive if it has a tendency to deceive.” Kirschbaum v. McLaurin Parking Co., 188 N.C. App. 782, 788, 656 S.E.2d 683, 687 (N.C. App. 2008). “Proof of actual deception is not required.” Marshall v. Miller, 302 N.C. 539, 548, 276 S.E.2d 397, 403 (1981) (citations omitted). The Complaint is replete with

examples of unfair and deceptive practices by MERS. As discussed previously, the MERS Defendants filed forged, false, and fabricated documents with the Register of Deeds. There can be no serious question that forging signatures, committing perjury, and fabricating facts are “unethical or unscrupulous” or have a “tendency to deceive.” Further, MERS, Inc.’s filings are inherently false because MERS designates itself as mortgagee of record when it does not claim to own the underlying mortgage note or collect borrowers’ payments, files robo-signed documents, and does so without possessing information to verify its claims. (Complaint ¶¶ 67, 70, and 91.) The LPS and MERS Briefs allege that the “in or affecting commerce” element of a UDTPA cause of action cannot be satisfied. (LPS Brief, at 17; MERS Brief, at 23.)

“Commerce” under the UDTPA “includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession.” N.C. Gen. Stat. § 75-1.1(b). “Any party claiming to be exempt from the [UDTPA] shall have the burden of proof with respect to such claim.” Id. at § 75-1.1(d). There can be no serious doubt that Defendants’ filing of mortgage-related documents with the Registry of Deeds is an act “in or affecting commerce.” As the North Carolina Supreme Court explained more than a century ago:

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It has been repeatedly declared to be sound public policy to remove every obstacle to the ready sale of real estate upon the market, in order to benefit commerce, and thereby promote general prosperity. It was in furtherance of this object that our general assembly, but a few years since, so altered our registration laws that persons proposing to purchase lands could be well advised as to the titles by a careful inspection of the public records. Hughes v. Hodges, 102 N.C. 262, __, 9 S.E. 437, 437 (1889) (emphasis added). More recent North Carolina court cases are consistent with Hughes. In Governors Club, Inc. v. Governors Club Ltd. P’ship, 152 N.C. App. 240, 567 S.E.2d 781 (2002), aff’d per curiam, 357 N.C. 46, 577 S.E.2d 620 (2003), for instance, the court stated: “The business of buying, developing and selling real estate is an activity ‘in or affecting commerce’ for the purposes of [the UDTPA].” Id. at 250, 567 S.E.2d at 788. Misdeeds associated with filing documents with the Registry of Deeds are a proper target of the UDTPA. Finally, the LPS Brief argues that the alleged actions of the LPS Defendants did not cause Guilford County injury. (LPS Brief, at 20.) The LPS Brief largely repeats arguments made

previously to the effect that Guilford County has alleged no injury and that damages here are speculative. As discussed previously, Guilford County has indeed alleged injury to its Registry of Deeds and costs associated with fixing that injury, as well as broader economic and social injuries. Guilford County’s Complaint clearly alleges causation: “As a direct and proximate result of Defendants’ unfair and deceptive conduct, Guilford County, the Register of Deeds, and the public have been harmed and damaged.” (Complaint ¶ 132; see also id. ¶¶ 115-117.) Guilford County also clearly alleges injury, including extremely tangible financial costs associated with cleaning up Guilford County’s Registry of Deeds. (Complaint ¶¶ 115-117.) These allegations alone are more than sufficient to defeat a motion to dismiss, especially given that the causal

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relationship between a UDTPA violation and injury is a “question of fact for the jury.” South Atl. Ltd. P’ship of Tennessee v. Riese, 284 F.3d 518, 534 (2002). C. N.C. Gen. Stat. Chapter 45 does not preempt this claim.

The MERS Brief incorrectly argues that the UDTPA does not apply in this context. (MERS Brief, at 25.) While the UDTPA’s language is broad, the UDTPA does not apply to pervasive and intricate statutory schemes with clearly delineated penalties for legal violations exist, such as tobacco sales,18 corporate securities,19 trademark infringement,20 securities fraud,21 and securities transactions.22 The MERS Brief wrongly conflates the types of pervasively and intricately regulated activity to which the UDTPA does not apply with activities governed by any type of statutory framework, declaring that application of the UDTPA would “create the exact risk” of “unnecessary and overlapping” liability. The MERS Brief is wrong. Such a restrictive reading of the aforementioned case law would essentially render the UDTPA meaningless because most consumer transactions are governed by some sort of law or regulation other than the UDTPA. The mere fact that some activity is subject to regulation does not “take the field” as required for preemption. In fact, one would be hard-pressed to find a business activity to which the UDTPA has been applied, see, e.g., Governors Club, Inc., supra (real estate); Miller v. Nationwide Mut. Ins. Co., 112 N.C. App. 295, 435 S.E.2d 537 (1993), State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 184 N.C. App. 613, 646 S.E.2d 790 (2007), rev’d in part, 362 N.C. 431, 666 S.E.2d 107 (2008). HAJMM Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 594, 403 S.E.2d 483, 493 (1991) (denying UDTPA claim for the additional reason that the issuance and redemption of corporate securities are not “business activities” within the meaning of the statute, but rather an “extraordinary event” done for the purpose of raising capital).
20 21 22 19 18

Sideshow, Inc. v. Mammoth Records, Inc., 751 F. Supp. 78 (E.D.N.C. 1990). Skinner v. E.F. Hutton & Co., 314 N.C. 267, 333 S.E.2d 236 (1985). Lindner v. Durham Hosiery Mills, Inc., 761 F.2d 162 (4th Cir. 1985).

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cert. denied, 335 N.C. 770, 442 S.E.2d 519 (1994) (insurance), that is not as regulated as mortgage document filing. Moreover, the MERS Brief’s argument here contradicts its argument that the statutory scheme related to mortgage filings does not regulate or provide a cause of action for its fabricated filings.

IV.

Guilford County Has Stated a Claim for Unjust Enrichment. The LPS and MERS Briefs argue that Guilford County’s unjust enrichment claim should

be dismissed because Guilford County conferred no benefit on them. (LPS Brief, at 22; MERS Brief, at 28.) To establish a claim of unjust enrichment under North Carolina law: (1) one party must confer a benefit on the other party; (2) the benefit must not have been conferred officiously; (3) the benefit must not be gratuitous and must be measurable; and (4) the defendants must have consciously accepted the benefit. Booe v. Shadrick, 322 N.C. 567, 570, 369 S.E.2d 554, 556, reh'g denied, 323 N.C. 370, 373 S.E.2d 540-41 (1988). The LPS and MERS Briefs argue that the first element – conferral of a benefit – is not satisfied here. As explained throughout this brief, Defendants are attempting to obtain the benefit of North Carolina’s real property recording laws and Guilford County’s Registry of Deeds without incurring the costs associated therewith. Indeed, without the benefit of Guilford County’s real property recording system, Defendants would not be able, as a practical matter, to do business in Guilford County. The benefit conferred upon Defendants here was their use, or more accurately, abuse of the Guilford County real property recording system. Defendants collectively benefitted and enriched themselves by using Guilford County’s recording system to file thousands of forged, false, and fabricated documents and by designating a shell company as mortgagee in order to avoid filing assignments.

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The LPS and MERS Briefs attempt to shift the focus away from themselves and argue that there was no unjust enrichment because Guilford County’s Register of Deeds actually performed fewer services as a result of their actions. Guilford County’s Complaint alleges otherwise. The Complaint, for instance, states that the Register of Deeds surveyed filings between August 2006 and April 2010 and found that 4,519 were signed in the name of a known robo-signer. (Complaint ¶ 87.) That is more work, not less. The Complaint goes on to allege that the costs of identifying and repairing impaired chains of title would vastly exceed the Guilford County Register of Deeds’ budget. (Complaint, ¶ 117; cf. id. ¶ 47.) That is more cost, not less cost. Not only are Defendants unjustly enriching themselves, they are doing so at the expense of Guilford County. Guilford County appropriately seeks disgorgement of Defendants’ unjust enrichment, whether or not it takes the form of avoided filing fees. (Complaint ¶ 135.) The LPS Brief goes on to call Guilford County’s unjust enrichment argument as it applies to them “bizarre” because “the LPS Defendants, mere vendors, have no authority to file such ‘corrective’ documents, and that, therefore, no fee would be due from them.” (LPS Brief, at 23.) Yet the LPS Defendants find nothing strange in the legal argument that they have authority to file documents, falsified by their employees, pretending to be employees of other Defendants, but no authority to file true and correct documents. The cases cited in the LPS and MERS Briefs are readily distinguishable. The plaintiff’s complaint in Austin Hatcher Realty, Inc. v. Arnold, No. COA07-1377, 2008 WL 2246675 (N.C. Ct. App. June 3, 2008), attached hereto as “Plaintiff’s Exhibit 7,” for instance, was dismissed because that complaint, unlike the Complaint here, “include[d] no specific allegations as to what benefits were conferred . . . .” Id. at 5. This is also true of the complaint in Georgia ex rel. Saunders v. Mortgage Elec. Registration Sys., Inc., No. 1:10-CV-3419-TWT, 2011 WL 1335824

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(N.D. Ga., Mar. 11, 2011) (“Here, plaintiffs have not alleged that they or any other party have conferred a benefit upon any of the defendants”), attached hereto as “Plaintiff’s Exhibit 8,” report and recommendation adopted sub nom. Georgia v. Mortgage Elec. Registration Sys., Inc., 2011 WL 1322616 (N.D. Ga., Apr. 6, 2011). Sellers v. Morton, 191 N.C. App. 75, 661 S.E.2d 915 (2008), concerned the absence of proof, rather than the absence of an allegation, of conferral of a benefit at the summary judgment stage. Id. at 84, 661 S.E.2d at 923. Finally, and importantly, slightly more than one month ago, the U.S. District Court for the Northern District of Texas rejected the same unjust enrichment argument that the LPS and MERS Briefs make in this case in Dallas County, Texas v. MERSCORP, Inc., 3:11-CV-02733-O, (N.D. Tex., May 23, 2012), which raises many of the same issues as does this case. Motion Hearing Transcript, attached as “Plaintiff’s Exhibit 9,” at 81:10-19. The district court in Dallas County used one word to describe the benefit the MERS defendants in that case received: “protection.” Id. at 58, ln. 24-25. Similarly, it is the protection that a Registry filing confers that is the benefit alleged here. Defendants also obtained the benefit of being able to securitize millions of mortgage loans, including loans secured by properties in Guilford County, which would not have been possible without the ability to research chains of title and file assignments and other documents with the Register of Deeds. (Complaint ¶¶ 42, 43, 51-62.)

V.

Guilford County Has Stated a Claim for Violations of N.C. Gen. Stat. § 45-36.9. The LPS Brief argues that Guilford County lacks standing to bring a claim under N.C.

Gen. Stat. § 45-36.9 because “Plaintiff is not a landowner and the LPS Defendants are not secured creditors.” (LPS Brief, at 11.) However, as already noted, Guilford County can bring an action under Kowalski and Liverpool on behalf of the Guilford County citizens who are landowners. As for a “secured creditor,” LPS Defendants create, and indeed even rely upon the

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creation of, an agency relationship with the secured creditors who are MERS members. See, e.g., LPS Brief, at 10. Thus, if Defendants seek to operate under North Carolina law as if they were the secured creditor – MERS as the mortgagee of record for filing purposes and LPS executing documents on behalf of the secured creditors – then they should also be bound by laws regulating the procedure for secured creditors. MERS and LPS Defendants should not be allowed to argue that they can operate as agents under North Carolina law, and simultaneously seek shelter from North Carolina law when they violate its reporting procedure. Neither MERS nor the LPS Defendants can seek safe harbor under N.C. Gen. Stat. § 4536.12 because they have neither “[e]stablished a reasonable procedure to achieve compliance with its obligations” nor was their noncompliance due to “circumstances beyond its control.” N.C. Gen. Stat. § 45-36.12. First, the MERS Defendants’ practice of operating as a renegade private deeds recording system is the very reason why they are noncompliant with § 45-36.9. Second, Defendants’ failure to file was entirely within their own purview. Thus, the proper parties are before this Court, and Guilford County has proper standing to bring this action against MERS and LPS Defendants on behalf of Guilford County landowners under N.C. Gen. Stat. § 45-36.9. Guilford County seeks two forms of relief under the statute: (1) monetary damages, both compensatory and statutory; and (2) an equitable injunction against Defendants to compel them to properly file all paperwork and to cease filing thousands of forged, false, and fabricated paperwork with the Register of Deeds.

VI.

Guilford County Has Stated Claims Against Specific Defendants. Defendants Capital One and Green Tree argue that Guilford County’s Complaint fails to

state claims against them. The LPS Brief likewise claims that the Complaint is “conclusory” and that nothing in the Complaint ties the allegations to the claims against LPS Defendants or

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explains their involvement with MERS. (LPS Brief, at 2, 10.) And MERS argues that the Complaint fails to state a UDTPA claim. (MERS Brief, at 27 n.14.) All of these Defendants ignore that North Carolina is a notice pleading jurisdiction. Guilford County has alleged

numerous detailed facts about the wrongful acts committed by all of these Defendants. Those allegations are more than sufficient to put all of these Defendants on notice of the claims against them. A. North Carolina is a true notice pleading jurisdiction.

The North Carolina General Assembly has adopted the “notice theory of pleading.” Gatlin v. Bray, 81 N.C. App. 639, 643, 344 S.E.2d 814, 817 (1986). “A pleading complies with the rule if it gives sufficient notice of the events or transactions which produced the claim to enable the adverse party to understand the nature of it and the basis for it . . . .” Id. (quoting Sutton v. Duke, 277 N.C. 94, 104, 176 S.E.2d 161, 167 (1970)). Under notice pleading, even “[a]n incorrect choice of legal theory should not result in dismissal where the pleader has given sufficient notice of facts concerning the wrong complained of.” Concrete Serv. Corp. v.

Investors Grp., Inc., 79 N.C. App. 678, 681, 340 S.E.2d 755, 758 (1986) (citing Jones v. City of Greensboro, 51 N.C. App. 571, 277 S.E.2d 562 (1981)). This liberal notice pleading system is intended to “resolve controversies on the merits, not on technicalities of pleading.” Id. (citing Johnson v. Johnson, 14 N.C. App. 40, 187 S.E.2d 420 (1972)). Under this system, “the complaint is to be liberally construed, and the trial court should not dismiss the complaint unless it appears beyond doubt that [the] plaintiff could prove no set of facts in support of his claim which would entitle him to relief.” State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 444, 666 S.E.2d 107, 116 (2008) (quoting Dixon v. Stuart, 85 N.C. App. 338, 340, 354 S.E.2d 757, 758 (1987) (alteration in original); accord Fussel v. N.C. Farm Bureau Mut. Ins. Co., Inc., 364 N.C. 222, 225, 695 S.E.2d 437, 440 (2010). - 33 -

B.

Guilford County’s Complaint meets and exceeds North Carolina’s notice pleading standard.

Green Tree and Capital One argue that Guilford County’s Complaint should be dismissed because: (1) it contains a “single paragraph . . . that contains any allegation related to the activities of Green Tree” (Green Tree Brief, at 2-3); and (2) “the only allegations referencing Capital One . . . appear in [one] paragraph . . . .” (Capital One Brief, at 2.) Green Tree further argues that “Plaintiff has shown no misconduct” by it (Green Tree Brief, at 3), and Capital One argues that “nothing averred about Capital One establishes the existence of any misconduct.” (Capital One Brief, at 1.) MERS joins this argument as to the UDTPA claims in footnote 14 of its brief. (MERS Brief, at 27.) By contrast, the LPS Defendants simply ignore the extensive allegations tying them to the claims for relief and to the operation of MERS. Each of these arguments falls short and ignores the numerous, detailed allegations against all of the Defendants. MERS argues that the UDTPA allegations somehow fail because the Complaint does not specifically name each of the 29 Defendants each time Guilford County makes an allegation. MERS’ argument fails to recognize that the Complaint makes collective allegations against the Defendants, which explicitly include each of the 29 Defendants by reference. Thus, MERS simplistic argument should be rejected. Likewise, Green Tree and Capital One are referenced individually and/or collectively throughout the Complaint. The Complaint identifies Green Tree as a “servicer,” “master

servicer” or “subservicer.” (Complaint ¶ 22.) Thus, every allegation in the Complaint against servicers, master servicers, and subservicers is against Green Tree. Further, the Complaint alleges that Green Tree filed or had filed robo-signed documents and is a member of MERS. (Complaint ¶ 22.) The Complaint identifies Capital One as an “originator” and “seller.”

(Complaint ¶ 32.) Thus, every allegation in the Complaint against originators and sellers is

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against Capital One. Further, the Complaint alleges that Capital One also filed or had filed robosigned documents and is a member of MERS. (Complaint ¶ 32.) Thus, the Complaint’s extensive allegations concerning robo-signing and MERS apply with equal force to Green Tree and Capital One as they do to other Defendants. LPS Defendants similarly ignore express allegations that specifically tie them to MERS as “certifying officers” (Complaint ¶¶ 74-76), as well as the multitude of allegations involving their conduct, including document forgeries. (Complaint ¶¶ 82-94.) The allegations against LPS Defendants, which extend far beyond notice pleading requirements, include former DocX employees’ forgery admissions on 60 Minutes (Complaint ¶ 95); the Nevada Attorney General’s lawsuit against LPS Defendants, attached hereto as “Plaintiff’s Exhibit 10,” for false documentation practices (Complaint ¶ 96); criminal forgery charges against DocX, attached hereto as “Plaintiff’s Exhibit 11,” (Complaint ¶ 97); consent orders with the United States Comptroller of the Currency and others, attached hereto as “Plaintiff’s Exhibit 12,” involving filing of fraudulent documents (Complaint ¶ 101); a lawsuit by a so-called “principal,” attached hereto as “Plaintiff’s Exhibit 13,” for forging authorized signatories’ names (Complaint ¶¶ 112113); all supporting allegations of forged signatures filed with the Register of Deeds (see “Plaintiff’s Exhibit 1” and “Plaintiff’s Exhibit 2”); and the Register of Deeds’ findings of robosigned documents filed by or in the name of each and every Defendant in this case. Defendants are on notice concerning the bases for Guilford County’s claims against them for violations of North Carolina’s recording statute requirements and UDTPA and for unjust enrichment. Their motions to dismiss fail on all accounts and should be denied.

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C.

Defendants’ argument that Guilford County’s UDTPA claims are subject to a heightened pleading standard is misguided and should be denied.

The Capital One and the LPS Briefs incorrectly argue that Guilford County is required to allege “particularized facts” and must meet a heightened pleading standard. (Capital One Brief at 1, 3; LPS Brief, at 2.) North Carolina’s UDTPA is not a fraud statute. To prove a violation of the UDTPA, “[p]laintiffs do not have to prove fraud, bad faith, or intentional deception.” Canady v. Mann, 107 N.C. App. 252, 260, 419 S.E.2d 597, 602 (1992) (citing Myers v. Liberty Lincoln-Mercury, Inc., 89 N.C. App. 335, 336-37, 365 S.E.2d 663, 664 (1988)). “[A]n action for unfair or deceptive acts or practices is a distinct action apart from fraud. . . .” Id.; accord Marshall v. Miller, 302 N.C. 539, 543-44, 276 S.E.2d 397, 400 (1981) (explaining that UDTPA was enacted in part to protect plaintiffs from “heavy burden of proof” required by fraud). Guilford County’s claims do not require heightened fraud pleading and need only put Defendants on notice of the claims against them. Even if Guilford County’s claims sounded in fraud – which they do not – Guilford County has alleged and demonstrated that each and every Defendant has filed a robo-signed document. Those findings are incorporated by reference into the Complaint and are prominently and widely available. See, e.g., www.restorepublicrecords.com under “General Information.” Further, Guilford County cannot discover and repair the particularized extent of Defendants’ unlawful actions without legal intervention. The Complaint itself seeks the relief necessary to identify and repair the numerous additional robo-signed documents unlawfully filed by Defendants. (Complaint ¶¶ 119-25.) Defendants’ argument that Guilford County should be required to “identify which of the satisfactions filed by Capital One” were invalid in order to

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proceed with its lawsuit is absurd and should be rejected – and would needlessly burden this Court with a pleading containing 4,519 attachments.23

CONCLUSION For the reasons set forth above, Plaintiff Guilford County respectfully requests that the Court deny the various parties’ motions to dismiss its Complaint. Alternatively, Guilford County requests leave to replead its Complaint if the Court determines its pleading of one or more causes of action to be insufficient.

Dated: July 9, 2012 Respectfully submitted,

/s/ J. Mark Payne J. Mark Payne Guilford County Attorney N.C. State Bar # 11046

/s/ Matthew J. Turcola Matthew J. Turcola Deputy Guilford County Attorney N.C. State Bar # 24577

Capital One’s Brief includes a footnote describing Guilford County’s request for equitable and injunctive relief as it relates to robo-signed satisfactions as “puzzling.” (Capital One Brief, at 3 n.1.) Guilford County seeks to require Defendants to file corrective documents with the Registry of Deeds in place of all forged, false, and fabricated documents, whether they be satisfactions or other documents, because all documents whose validity can readily be called into question cloud chains of title.

23

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OF COUNSEL: Office of the Guilford County Attorney PO Box 3427 Greensboro, NC 27402 336-641-3852 (telephone) 336-641-3642 (facsimile) OF COUNSEL: TALCOTT FRANKLIN P.C. Andrew D. Shore N.C. State Bar # 20130 Talcott J. Franklin N.C. State Bar # 22060 Shannon E. Brown N.C. State Bar # 21633 200 North Harbor Place Suite 200 Davidson, NC 28036 704.246.3896 (telephone) 877.577.1356 (facsimile)

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CERTIFICATE OF COMPLIANCE Pursuant to Business Court Rule 15.8, counsel for Guilford County hereby certifies that based on the word count of the system used to prepare this Response and Memorandum of Law in Opposition to Defendants’ Motions to Dismiss, the Response is 12,186 words in length, including headings, footnotes, quotations, and citations.

By:

/s/ J. Mark Payne J. Mark Payne Guilford County Attorney N.C. State Bar # 11046

/s/ Matthew J. Turcola Matthew J. Turcola Deputy Guilford County Attorney N.C. State Bar # 24577

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CERTIFICATE OF SERVICE This certifies that a copy of the foregoing Response and Memorandum of Law in Opposition to Defendants’ Motions to Dismiss was served upon the following by first class mail, postage prepaid, addressed as follows: See Attached Service List. This 9th day of July, 2012.

By:

/s/ J. Mark Payne J. Mark Payne Guilford County Attorney N.C. State Bar # 11046

/s/ Matthew J. Turcola Matthew J. Turcola Deputy Guilford County Attorney N.C. State Bar # 24577

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Guilford County, et al v. Lender Processing Services, Inc., et al.  (Guilford County Case No. 12‐CVS‐4531)  SERVICE LIST      D. Kyle Deak  Paul T. Flick  Troutman Sanders LLP  JORDAN, PRICE,WALL GRAY  434 Fayetteville St., Ste. 1900  JONES & CARLTON  Raleigh, NC 27601  P.O. Box 10669    Raleigh, NC 27605‐0669  Mary Zinsner    S. Moshin Reza    Troutman Sanders LLP    1660 International Dr., Ste. 600      McLean, VA 22102      Attorney for Green Tree Servicing, LLC  Attorneys for Capital One, NA      William Mayberry  Brian M. Freedman  Sarah H. Roan  Jennifer L. King  OLGETREE, DEAKINS, NASH, SMOAK, STEWART  Jason Evans  2725 Horse Pen Creek Rd., Ste. 1010  Jonathan Vogel  Greensboro, NC 27401  McGuire Woods LLP    201 N. Tryon Street, Ste. 3000  Mancy Pendergrass  Charlotte, NC 28202  Kalley Aman    Buchalter Nemer    1000 Wilshire Boulevard, Ste. 1500    Los Angeles, CA 90017‐2457        Attorneys for Ameriquest Mortgage Company and  Attorneys for Bank of America, NA; EquiCredit  Argent Mortgage Company, LLC  Corporation of America; NationsCredit Financial  Services Corp.; First Franklin Financial Corp.; and  MidFirst Bank      Deborah Wolfe  Mary Mandeville  MidFirst Bank  Alexander Ricks PLLC  999 NW Grand Blvd.  2901 Coltsgate Rd., Ste. 202  Oklahoma City, OK 73118  Charlotte, NC 28211        Lucia Nale    Thomas Panoff    Mayer Brown LLP    71 South Wacker Dr.    Chicago, IL 60606      Attorney for MidFirst Bank  Attorneys for CitiResidential Lending, Inc.     

R. Andrew Patty, II  McGlinchey Stafford, PLLC  301 Main St., 14th Floor  Baton Rouge, LA 70801    Gerald E. Wimberly, Jr.  David Dugas  Dylan M. Tuggle  Daniel T. Plunkett  McGlinchey Stafford, PLLC  601 Poydras Street, 12th Fl.  New Orleans, LA 70130    M. Jay Devaney  Brian T. Pearce  Nexsen Pruet, PLLC  701 Green Valley Road, Ste. 100  Greensboro, NC 27408    Jeffrey S. Southerland  TUGGLE DUGGINS & MESCHAN, PA  Post Office Box 2888   Greensboro, North Carolina 27402  ( Motion to  Substitute Counsel Pending)    Attorneys for Homeward Residential, Inc. f/k/a  American Home Mortgage Servicing, Inc.      Robert Brochin  Morgan, Lewis & Bockius LLP  200 S. Biscayne Blvd., Ste. 5300  Miami, FL 33131‐2339    John Bussain  Jonathan Wall  The Bussian Law Firm  150 Fayetteville St., 16th Fl.  Raleigh, NC 27601          Attorneys for MERSCorp Holdings, Inc. and  Mortgage Electronic Registration Systems, Inc.     

B. Rush Smith, III  Nelson Mullins Riley & Scarborough, LLP  Meridian,17th Floor  1320 Main Street  Columbia, SC 29201    Donald Pocock  Nelson Mullins Riley & Scarborough, LLP  380 Knollwood St., Ste. 530  Winston‐Salem, NC 27103    Mary Beth Hogan  Dino La Verghetta  Debevoise & Plimpton LLP  919 Third Avenue  New York, NY 10022                      Attorneys for JPMorgan Chase Bank, NA; Chase  Home Financial, LLC; EMC Mortgage Corporation;  and First Franklin Financial Corp.    Fred Goldberg  Mitchell W. Berger  Berger Singerman, LLP  350 East Las Olas Blvd. Ste. 1000  Miami, FL 33301    Reid Phillips  Jim W. Phillips, Jr.  D.J. O'Brien III  Brooks, Pierce, McClendon  Humphrey & Leonard, LLP  P.O. Box 26000  Greensboro, NC 27420    Attorneys for Lender Processing Services, Inc.;  DOCX, LLC; and LPS Default Solutions, Inc. 

  Brent Rosser  Hunton & Williams LLP  Bank of America Plaza, Ste. 3500  101 South Tryon St.  Charlotte, NC 28280    Mark Bierbower  Hunton & Williams LLP  220 Pennsylvania Ave., NW  Washington, D.C. 20037‐1701    George Sibley, III  Hunton & Williams LLP  Riverfront Plaza, East Tower  951 East Byrd Street  Richmond, VA 23219‐4074        Attorneys for Navy Federal Credit Union    Don Lampe  DYKEMA  Bank of America Corporate Center  100 N. Tryon St., Suite 2700  Charlotte, NC 28202‐4011    Attorneys for Sand Canyon Corporation f/k/a  Option One Mortgage Corporation, USAA Federal  Savings Bank, Mortgage Access Corp., d/b/a  Weichert Financial Services    Gerald L. Hassell, Chairman, President and CEO  The Bank of New York Mellon  The Bank of New York Mellon Trust Company, NA  One Wall Street  New York, NY 10286   

  Henry Reichner  Reid Smith LLP  2500 One Liberty Place  1650 Market St.  Philidelphia, PA 19103    Thomas H. Segars  Ellis & Winters, LLP  P.O. Box 33550  Raleigh, NC 27636    C. Scott Meyers  Ellis & Winters, LLP  333 N. Greene St. Suite 200  Greensboro, NC 27401          Attorneys for US Bank, National Association    Richard E. Gottlieb  Dawn N. Williams  DYKEMA  10 S. Wacker Drive, Ste. 2300  Chicago, NC 60606    Attorneys for Sand Canyon Corporation f/k/a  Option One Mortgage Corporation, USAA Federal  Savings Bank, Mortgage Access Corp., d/b/a  Weichert Financial Services    Jim Cooley  Jackson R. Price  Womble, Carylyle, Sandridge & Rice, LLP  One Wells Fargo Center  301 S. College St., Ste 3500  Charlotte, NC 28202‐6037    Joseph Yenouskas  Thomas M. Hefferon  Goodwin Procter  901 New York Ave., NW  Washington, DC 20001    Attorneys for Wells Fargo Bank, NA; Wells Fargo  Home Mortgage, Inc.; and MorEquity, Inc. 

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