The County of Ramsey v. MERSCORP Holdings, Inc.
2014 U.S. App. LEXIS 23961
| 8th Cir. | 2014Background
- Eighty-seven Minnesota counties sued mortgage lenders (members of MERS) in a class action, alleging MERS allowed lenders to avoid county recording of mortgage assignments, depriving counties of recording fees and creating title gaps.
- MERS is a national electronic registry; it becomes mortgagee of record in county records at initial recording and thereafter tracks transfers on its registry without recording each assignment in county offices.
- Counties sought declaratory relief and asserted unjust enrichment and public nuisance claims, alleging lenders bypassed county recordation and fees.
- Lenders removed the case to federal court and moved to dismiss under Fed. R. Civ. P. 12(b)(6).
- The district court dismissed, holding Minnesota’s Recording Act does not impose a mandatory duty to record assignments and that without such a duty the unjust enrichment and public nuisance claims fail.
- The counties appealed and asked the federal court to certify the recording-duty question to the Minnesota Supreme Court; the Eighth Circuit declined certification and affirmed dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Minn. Stat. § 507.34 impose a mandatory duty to record all mortgages and assignments? | The Recording Act’s language “shall be recorded” requires county recording of every conveyance and assignment; MERS’s registry use violates this duty. | The Recording Act does not create an obligation to record; it specifies where to record to obtain recording benefits (priority protection), not a mandatory duty. | The Act is not mandatory; Minnesota case law treats recording as elective to protect priority, so no duty to record. |
| Can counties recover unjust enrichment for lost recording fees when lenders use MERS? | Counties contend lenders were unjustly enriched by avoiding county recording fees and keeping benefits of recordation without payment. | Without a statutory duty to record, lenders retained nothing they were not entitled to; no unjust enrichment exists. | Dismissed: unjust enrichment fails because there is no duty to record, so no wrongful retention requiring restitution. |
| Can counties maintain a public nuisance claim based on MERS’s bypassing of county records? | Counties argued MERS’s practices interfered with maintaining accurate land records, creating a public nuisance. | Lenders argued the claim differs from what was presented below and/or is unsupported absent a recording duty. | The appellate court deemed the counties’ public nuisance theory on appeal waived for not having been raised below and affirmed dismissal. |
| Should the federal court certify the novel state-law question to the Minnesota Supreme Court? | Counties urged certification, arguing the duty-to-record issue is novel and unsettled. | Defendants argued Minnesota precedent clearly interprets the Recording Act and certification is unnecessary. | Certification declined: Minnesota case law is sufficient and the question is not a close or unsettled one requiring certification. |
Key Cases Cited
- David v. Tanksley, 218 F.3d 928 (8th Cir.) (federal courts bound by state supreme court on state-law questions)
- Citizens State Bank v. Raven Trading Partners, Inc., 786 N.W.2d 274 (Minn. 2010) (Recording Act protects recorded titles; not a recording duty)
- Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487 (Minn. 2009) (Recording Act creates no obligations; it resolves priority disputes)
- Miller v. Hennen, 438 N.W.2d 366 (Minn. 1989) (Recording Act’s purpose is to protect bona fide purchasers)
- Brown v. Mortg. Elec. Registration Sys., Inc., 738 F.3d 926 (8th Cir.) (county unjust enrichment claim fails absent a duty to record)
- Macon Cnty. v. MERSCORP, Inc., 742 F.3d 711 (7th Cir.) (no statutory requirement to record mortgage or assignment; counties cannot force recording)