Macon County v. Merscorp, Inc.
2014 U.S. App. LEXIS 1873
| 7th Cir. | 2014Background
- The district court dismissed this suit against MERSCORP Holdings, Inc. and related banks as in Union County v. MERSCORP, Inc.; Macon County appeals.
- MERS uses an electronic system (MERS) to track assignments of mortgages; MERS is not the lender and does not hold a financial interest in the note or mortgage.
- Illinois law’s recording statute (765 ILCS 5/28) requires recording of mortgages in the county land records, but the court held recording is not required for mortgages or their assignments; the land records provide notice, not a universal obligation.
- MERS records the mortgage; subsequent assignees of the note do not record; only MERSCORP pays recording fees for its recorded interest.
- Macon County alleged unjust enrichment because banks used MERS to gain the protection of recording without paying the fees; the court rejected this theory as insufficient under Illinois law.
- The court affirmed the dismissal, aligning with Union County and subsequent Seventh Circuit and Eighth Circuit authorities that recording is not mandatory and unjust enrichment claims fail here.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Illinois law require recording of mortgages or assignments? | Macon County contends recording is required, and fees should accrue to the counties. | MERS system avoids mandatory recording and does not deprive counties of a valid recording mechanism. | Recording is not mandatory; fees not due for non-recorded assignments. |
| Is Macon County’s unjust enrichment claim viable? | Macon County seeks relief for unjust enrichment due to loss of recording fees. | No unlawful act or contract breach; benefits enjoyed are not unjustly retained by defendants. | Unjust enrichment claim fails; no contractual or tort basis, nor unjust retention shown. |
| Does MERS undermine the recording system or violate Illinois law by its structure? | MERS as a placeholder deprives counties of revenues; system is unlawful proxy for recording. | MERS is lawful; it does not require recording of notes, and competition does not create unjust enrichment. | MERS lawful; system does not violate Illinois law or create unjust enrichment. |
Key Cases Cited
- Union County v. MERSCORP, Inc., 735 F.3d 730 (7th Cir. 2013) (recording not required; notice function of land records)
- Brown v. Mortgage Electronic Registration Systems, Inc., 738 F.3d 926 (8th Cir. 2013) (unjust enrichment defense not supported; competition not a tort)
- Cleary v. Philip Morris Inc., 656 F.3d 511 (7th Cir. 2011) (unjust enrichment requires unlawful act or implied-in-law contract analysis)
- ConFold Pacific, Inc. v. Polaris Industries, Inc., 433 F.3d 952 (7th Cir. 2006) (two senses of unjust enrichment; substantive versus remedial meanings)
- Mather v. Village of Mundelein, 869 F.2d 356 (7th Cir. 1989) (indicates disposition standard for motions where briefs would be wasteful)