The U.S. District Court for the Western District of Missouri recently ruled that a county's putative class action lawsuit against MERS for failing to record assignments of mortgages, and thus to allegedly avoid paying county recording fees, failed to state a claim for relief, concluding that MERS had no legal duty to record under Missouri's recording statute.
In so ruling, the court opined that Plaintiff's recourse was to approach the state legislature to amend the recording statute to require that assignments be recorded. A copy of the opinion is attached.
Plaintiff, a county in Missouri, filed a putative class-action lawsuit against Mortgage Electronic Registration Systems, Inc. ("MERS") and its parent company along with various MERS members and shareholders ("collectively, "Defendants"). The complaint alleged that Defendants failed to record assignments of deeds of trust and thus failed to pay applicable county recording fees to Plaintiff, which, according to Plaintiff, amounted to over $8 billion that would have been paid to Plaintiff but for the MERS system of tracking and transferring rights for residential mortgage loans.
Asserting common law causes of action for: (1) Unjust Enrichment; (2) Civil Conspiracy; (3) Prima Facie Tort; (4) Declaratory Judgment; and (5) Injunctive Relief, Plaintiff pointed out that, although it was not suing to enforce any recording statute, Missouri's recording statutes "encourage" recording.
Defendants moved to dismiss, arguing that: (1) Plaintiff lacked standing; (2) there was no private right of action in Plaintiff's favor; (3) there was no duty under Missouri law to record deed of trust assignments; and (4) the complaint failed to state claims upon which relief could be granted.
Rejecting Defendants' argument that Plaintiff lacked standing because Plaintiff failed to allege an injury in fact, the District Court noted that Plaintiff alleged an injury to its financial interest in the form of lost recording fees and inaccurate county land records.
Turning to Defendants' other arguments for dismissal and noting that Plaintiff was not suing to enforce a recording statute, that there was no duty to record under Missouri law, and that Plaintiff was asserting common-law causes of action rather than claims based on conduct that violated any statute, the court also rejected Defendants' assertion that there was no private right of action to enforce alleged violations of recording statutes.
Nevertheless, the court dismissed the complaint in its entirety for failure to state claims upon which relief could be granted. In so doing, the court ruled that the claim for unjust enrichment failed in part because it was premised on a non-existent duty to record assignments, and Plaintiff failed to allege that it had conferred a benefit onto Defendants or that Defendants appreciated and retained the benefit under inequitable circumstances.
Pointing out that Plaintiff never alleged that Defendants failed to pay the applicable recording fees for the initial deeds of trust that were recorded with the county, the court observed that Missouri recording statutes merely provide that "Security Instruments may be assigned . . ., and may be recorded in the office of the recorder of deed" and that not recording subsequent assignments was not done at the expense of the county. See Fuller v. Mortgage Electronic Registration Systems, Inc., No. 3:11-CV-1153-J-20MCR, 2012 WL 3733869 (M.D. Fla. June 27, 2012); Plymouth County, Iowa ex rel. Raymond v. MERSCORP, Inc. No. 12-4022-MWB, 2012 WL 4903099 (N.D. Iowa Oct. 16, 2012). Cf. Montgomery County v. MERSCORP, No 11-cv-6968, 2012 WL 5199361 (E.D. Pa. Oct. 19, 2012)(upholding theory of unjust enrichment because Pennsylvania's recording statute required that all assignments be recorded).
The court also concluded that Plaintiff's civil conspiracy claim, lacking an underlying tort or wrongful act and also based on allegations of unjust enrichment likewise failed to state a claim. See Rice v. Hodapp, 919 S.W.2d 240, 245 (Mo. 1996)(reasoning that "if tortious acts alleged as elements of a civil conspiracy claim fail to state a cause of action, then the conspiracy claim fails as well.").
Similarly, the court ruled that Plaintiff's cause of action for prima facie tort failed because the complaint never alleged that Defendants acted maliciously, one of the requisite elements of a claim for prima facie tort. As the court explained, Plaintiff's allegations merely demonstrated that Defendants sought to save money and time and that "[u]nder Missouri law, the mere awareness that one's conduct could harm the Plaintiff is not enough to establish an actual intent to injure; Plaintiff must prove that Defendant acted with 'specific, clear-cut express malicious intent to injure." Tamko Roofing Products, Inc. v. Smith Engineering Co., 450 F.3d 822, 831 (8th Cir. 2006).
Finally, noting that declaratory judgment and injunctive relief are remedies and not independent causes of action, the court also dismissed those counts because the remedies were not attached to any viable claims, as the court had dismissed Plaintiff's common law claims.
Accordingly, the court granted Defendants' motion to dismiss and dismissed the complaint in its entirety for failure to state a claim upon which relief could be granted.
Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
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Email: RWutscher@mtwllp.com
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