Summary:
The Register of Deeds for Guilford County (ROD) brought suit against MERS, LPS and most of the large mortgage servicers asserting that the various practices of the mortgage industry violated the requirements of N.C.G.S. § 45-36.9, were unfair and deceptive trade practices, and constituted an unjust enrichment. The Defendants sought dismissal of the complaint pursuant to Rule 12(b)(1) and (6).
N.C.G.S. § 45-36.9(a) requires secured creditors to “submit for recording a satisfaction of a security instrument within 30 days after the creditor receives full payment or performance of the secured obligation.” Failure to comply with this requirement can make, pursuant ton N.C.G.S. § 45-36.9 (b) and (c), the secured creditor liable to “the landowner” for actual and, in the event the creditor fails to timely record a satisfaction following a demand, punitive damages. The ROD asserted that the Defendants had routinely filed untimely “fraudulent and invalid satisfactions”, due to its robo-signing and use of MERS to avoid public recordation of assignments. The court, however, found that the ROD was not a “landowner” as required by the statute and further lacked third-part standing “as the purpose of the statute is to provide landowners with a private right of action against secured creditors who do not timely file a satisfaction, and Plaintiff has not adequately demonstrated any hindrance to the ability of Guilford County landowners to pursue their own rights under G.S. 45-36.9.”
Similarly, the ROD argued that the utilization of MERS was done to “avoid accurately recording property interests, transfers, and satisfactions and to prevent landowners and the public from accessing property records” and was, as such, an unfair and deceptive trade practice under N.C.G.S. § 75-1. The Court found that for N.C.G.S. §§ 75-1.1 and 16.1 to apply, a plaintiff must show following:
(a) the defendant committed an unfair or deceptive act or practice;
(b) the act or practice in question was in or affecting commerce; and
(c) it proximately caused injury to the plaintiff. Dalton v. Camp, 353 N.C. 647, 656 (2001).
Even assuming arguendo that robo-signing and the use of MERS were unfair and deceptive trade practices, the Court found that the claims by the ROD failed, as the ROD and Defendants were engaged in “administrative interactions” that could not be considered as “in or affecting commerce” as required. Again, the ROD could not assert third-party standing to bring these claims on behalf of the public, as there was neither “a sufficient hindrance to the ability of the public to pursue its own Chapter 75 claims” nor did the ROD “stand in a sufficiently close relationship to the citizens of Guilford County” to assert these claims.
The ROD also alleged that by failing to publically record assignments and pay the consequent filing fees, the Defendants were unjustly enriched. "In order to establish a claim for unjust enrichment the Plaintiff must show the following:
1. That a party must have conferred a benefit on the other party.
2. That the benefit must not be:
a. gratuitous;
b. conferred officiously; and
c. conferred by an interference in the affairs of the other party in a manner not justified under the circumstances.
3. That the benefit must be:
a. measurable;
b. consciously accepted; and
c. enrichment,
See Booe v. Shadrick, 322 N.C. 567, 570 (1988) and Greeson v. Byrd, 54 N.C. App. 681, 683 (1981). The court held that the allegation that Defendants did not pay filing fees for assignments that were not recorded with Plaintiff, without more, did not describe sufficiently any benefit conferred on Defendants by the ROD. The alleged benefit that the Defendants obtained the rights and protections of North Carolina real property recording law without paying the attendant costs failed as N.C.G.S. § 47-17.2 “contemplates that once a mortgage interest is initially recorded with the Register of Deeds, it may be transferred and assigned many times over without each subsequent transfer or assignment also needing to be recorded.” As N.C.G.S. § 47-17.2 suggests that invalid assignments, for example forged/robo-signed assignments as the ROD asserted, are not protected, the Defendants received no benefit and was not, consequently, unjustly enriched.
Due to the above described flaws, the requests in the complaint for the appointment of a special master to determine the validity of recorded documents, the injunctive relief prohibiting further robo-signing and to correctly file documents determined to be fraudulent, was also dismissed.
Commentary:
Counting 46 attorneys for the various Defendants in this case.
For a copy of the opinion, please see:
Guilford County v. LPS- MERS
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