Consumer Finance Litigation

A judge in North Carolina recently dismissed an action brought by Guilford County's Register of Deeds against twenty-nine defendants, including Mortgage Electronic Registration Systems ("MERS"), for a lack of legal standing to bring their claims, in Guilford Cty, ex rel. Jeff L. Thigpen, Guilford Cty. Register of Deeds v. Lender Processing Services, Inc., 12 CVS 4531 (N.C. Gen. Ct. J. Super. Ct. Div. May. 29, 2013). The Register of Deeds of Guilford County filed the civil action on behalf of Guilford County making several state law claims against the defendants, including unfair and deceptive trade practices and unjust enrichment, as well as requesting the appointment of a Special Master and for Injunctive Relief. The basic premise of the County's allegations was that the creation of mortgage-backed securities, the use of MERS, and the practice of robo-signing harmed the county and its citizens. The County's many alleged injuries included the following: (1) legal uncertainty concerning title; (2) decreases in real estate values; (3) reductions in tax collections; and (4) difficulty identifying ownership of land parcels. The North Carolina judge dismissed all the County's claims stating that they were "fatally flawed." For the most part, the judge simply found that the County did not have standing to sue. For example, the County alleged the defendants violated G.S. 45-36.9, which 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." However, the statute only created a liability for a "landowner" and, therefore, the County did not have standing to sue. The County's claims were also "fatally flawed" beyond just standing. For example, the County also alleged "[d]efendants unfairly and deceptively utilized MERS to avoid accurately recording property interests, transfers, and satisfactions and to prevent landowners and the public from accessing property records." However, to state a claim for an unfair or deceptive trade practice, the County had to show that the action was "in or affecting commerce," which the court found the county failed to properly demonstrate. In addition, he court found the County's claim that it lost filing fees from the assignments that the defendants failed to record could not serve as the basis for a claim for unjust enrichment "absent an allegation of a specific benefit conferred on Defendants by Plaintiff." Finally, the court held that the County could not seek injunctive relief or for the Appointment of a Special Master to indentify fraudulent or invalid documents absent standing or any cause of action to bring the underlying suit. In short, the Chief Special Superior Court Judge for Complex Business Cases dismissed all the Guilford County Register of Deeds claims against MERS and all other defendants because the County lacked standing to bring the claims. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.