Ellington v. Federal Home Loan Mortgage Corp.
13 F. Supp. 3d 723
| W.D. Ky. | 2014Background
- Kentucky recording statutes require mortgage assignments to be recorded; note transfers are not the same as mortgage assignments.
- Ellingtons executed a mortgage to Old National Bank recorded Oct 14, 2009; Old National assigned the mortgage to MERS on Oct 26, 2009 and recorded Nov 9, 2009.
- Plaintiffs allege multiple subsequent transfers within the MERS system were not recorded as required by KRS § 382.360 and § 382.365.
- MERS system tracks note transfers while the mortgage remains the record mortgagee; thus assignment of the note does not automatically create a recordable mortgage assignment.
- Plaintiffs assert statutory claims for failure to record and a civil conspiracy to violate the recording statutes, seeking damages and penalties.
- Defendants move to dismiss under Fed. R. Civ. P. 12(b)(6) arguing no recordable event for note transfers, and additional statutory/standing defenses for Freddie Mac and FHFA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether note transfers require mortgage recording under KRS 382.360/382.365 | Ellington claims failure to record violates statutes. | Only mortgage assignments, not note assignments, are recordable under the statutes. | Note transfers not recordable; statutes require mortgage assignments to be recorded. |
| Whether civil conspiracy depends on viable statutory claims | Conspiracy based on statutory violations supports recovery. | If statutory claims fail, conspiracy claim fails as well. | Conspiracy claim fails because statutory claims fail. |
| Whether 12 U.S.C. § 4617(j)(4) bars penalties against Freddie Mac/HFA | Penalties and treble damages are recoverable under state law. | Penalties barred by 12 U.S.C. § 4617(j)(4). | Statutory penalty bar applies; penalties not available against Freddie Mac/HFA. |
| Whether 12 U.S.C. § 4617(f) bars injunctive/declaratory relief | Requests for injunctive relief are permissible under state law. | Federal statute precludes such relief. | Injunctive and declaratory relief barred by § 4617(f). |
| Whether Plaintiffs pled actual damages sufficiently | Damages flowed from unrecorded assignments. | Damages not plausibly connected to recordation deficits given note vs. mortgage separation. | Plaintiffs failed to plead plausible actual damages. |
Key Cases Cited
- Boyd County ex rel. Hedrick v. Merscorp, Inc., 985 F. Supp. 2d 823 (E.D. Ky. 2013) (recording priority and expedited relief under Kentucky Chapter 382)
- MERS v. Roberts, 366 S.W.3d 405 (Ky. 2012) (assignment/recordation and MERS framework in Kentucky)
- Napier v. Duff, 136 S.W.2d 1085 (Ky. 1939) (note transfers and mortgage interests interplay)
- Drinkard v. George, 36 S.W.2d 56 (Ky. 1930) (note vs. mortgage transfer concepts)
- Sec. Inv. Co. of St. Louis v. Harrod Bros., 7 S.W.2d 492 (Ky. 1928) (early Kentucky recording principles)
- United States v. 0.376 Acres of Land, 838 F.2d 819 (6th Cir. 1988) (statutory interpretation and textual reading of enumerated terms)
- In re: Mortgage Electronic Registration Systems (MERS) Litigation, 659 F. Supp. 2d 1368 (S.D.N.Y. 2009) (MERS structure and recording concepts in federal multidistrict context)