MERS Wins Action Seeking to Remove Filed Mortgage Records

South Carolina now becomes the most recent state to have a legal decision weighing in on the validity of MERS documents, but not in the usual fashion as we have seen in most states. In fact, the result of the case does not resolve the issue as to whether MERS documents are valid in South Carolina at all.

In Kubic v. MERSCORP Holdings, Inc., Op. No. 27619 (S.C. Sup. Ct. filed Mar. 30, 2016) (Shearouse Adv. Sh. No. 13 at 51) County Administrators and Registers of Deeds in five South Carolina counties instituted lawsuits against MERSCORP, various banks, and mortgage servicers alleging those institutions had engaged in a practice of fraudulent recording of documents that disrupted the integrity of the public index. The South Carolina Supreme Court consolidated the lawsuits and assigned the case to a Business Court trial judge. MERSCORP and the banking institution defendants filed a motion to dismiss alleging that the complaint failed to state a cause of action and that the action was barred by section 30-9-30 of the South Carolina Code (2007). The trial court denied the motion and the defendants petitioned the South Carolina Supreme Court for a writ of certiorari, which the Supreme Court granted.    

Section 30-9-30(B) provides that if the clerk of court or register of deeds reasonably believes that a document presented to him or her is materially false or fraudulent or is a sham legal process, the clerk of court or register of deeds may refuse to accept the document for filing. The statute further provides that within thirty days of written notice of such a refusal by the clerk of court or register of deeds, the person presenting the document may commence a lawsuit requiring the clerk of court or register of deeds to accept the document for filing. 

The county administrators argued that the statute provided, by implication, their right to commence this action to remove MERS-related documents from the public index. The Supreme Court disagreed and found that the plain meaning of the statute provided the right to bring such an action belongs to the person attempting to file the document, rather than the county clerk of court or register of deeds. The Supreme Court dismissed the plaintiff’s lawsuit. The Court observed that rights of the county officials were protected because they were authorized to reject the documents for filing.

So where do we go from here regarding the MERS issue in South Carolina? The Supreme Court may have provided that answer in the decision itself. In dicta, the Court indicated “the statute already provides a remedy to government officials by allowing them to remove or reject any fraudulent records; by its express language a judicial blessing or directive is not required (and thus, not permitted) in performance of this executive function.”  One can assume that the county administrators in South Carolina may start rejecting MERS mortgages and require lenders to bring a lawsuit in order to have the document recorded.

Published by John S. Kay on April 12, 2016