Madison - St. Clair Record

Tuesday, April 7, 2020

MERS fires back at St. Clair County in class action; Says it accepted monetary benefits of mortgage system for 15 years

By Heather Isringhausen Gvillo | Nov 14, 2013


St. Clair County Circuit Judge Vincent Lopinot has denied a Rule 308 motion filed by Mortgage Electronic Recording System (MERS) and 20 lenders accused of  conspiring in a shadow mortgage system set up to avoid transparency and evade county recording fees.

Supreme Court Rule 308 allows the court to make an appeal when there is a question of law with "substantial ground for difference of opinion" and possible termination of the litigation.

According to the May 2012 lawsuit, State’s Attorney Brendan Kelly claims the defendants’ recording system effectively eliminates the ability to track the purchase and sale of properties through the traditional public records system, in violation of state statute. The five-count complaint also alleges unjust enrichment, civil conspiracy, deceptive trade practices and consumer fraud.

A memorandum supporting the defendants’ Rule 308 motion was filed on Sept. 20 on behalf of all the defendants requesting to stay proceedings pending appellate review.

They raise the question of whether Illinois law makes recording mortgage assignments permissive or mandatory.

“The focus of the complaint,” the motion states, “and the only articulated basis for awarding any damages to Plaintiff, is the claim that defendants did not record mortgage assignments that might have occurred in the absence of MERS and did not pay the associated recording fees that might have been incurred.

“As for plaintiff’s unsupported fraud and deception arguments, they depend entirely on the allegation that recording is mandatory.”

The defendants further argue that a lot of time and money could be saved by avoiding costly discovery and litigation if the appellate court determines that recording is not necessary.

Approximately 15 of the 20 defendants in the lawsuit filed answers to the complaint through their respective counsel denying the allegations against them.

MERSCORP, Inc. filed its answer on Sept. 25 through attorney Romeo S. Quinto and Megan R. Braden of Chicago and Robert M. Brochin of Miami.

MERS admitted that “a portion of the fees collected by the Recorder of Deeds office are used by the Plaintiff to maintain a publicly accessible repository of public land records reflecting those who assert an ownership interest in lands within St. Clair County, Illinois, and the remaining portion of the fees are transferred to the County’s General Revenue Fund to provide essential public services.”

MERS denied all other allegations and filed 15 affirmative defenses against the plaintiff. It argues that Kelly failed to allege and cannot prove that MERS’ “retention of any purported benefit violates the fundamental principles of justice, equity and good conscience.”

MERS further argues that the plaintiff has accepted MERS' methods for years, profiting from the recordings.

“Plaintiff has accepted MERS instruments for recording and has charged defendants, and accepted from defendants, millions of dollars in fees for such services rendered,” the answer states. “Plaintif continues to accept MERS instruments for recording and continues to charge and accept fees for such services rendered.”

Defendants First Collinsville Bank, FirstCo Mortgage Corporation, First County Bank, Compass Mortgage Inc, UMB Bank and Commerce Bank filed 15 affirmative defenses on Sept. 25 through attorneys Daniel C. Nester, Darci F. Madden and Christopher M. Blaesing of Bryan Cave LLP in St. Louis arguing that the plaintiff’s claims are barred by estoppels, waiver, unclean hands, governing standards of equity and good conscience.

They also argue that they were permitted “to act in the manner it did, including by permission granted by state law, license, federal charter, or regulatory approval or assent.”

CitiMortgage filed 16 affirmative defenses on Sept. 25 through attorney Louis F. Bonacorsi of Bryan Cave LLP in St. Louis; and Lucia Nale, Thomas V. Panoof, Christopher S. Comstock and Rusty J. O’Kane of Mayer Brown LLP in Chicago.

It claims the plaintiff failed to previously mention the defendants alleged actions “despite purportedly knowing of the conduct alleged in the complaint.”

It also claims mootness, claiming the plaintiff “seeks to force defendants to record alleged assignments that have already allegedly been consummated.”

Defendants Bank of America, Wells Fargo Bank, EverBank and CCO Mortgage Corporation filed 43 affirmative defenses on Sept. 25 through attorneys Rhiana A. Lauders of Bryan Cave LLP in St. Louis; and Thomas A. Hefferon and Joseph F. Yenouskas of Goodwin Procter LLP in Washington, D.C., arguing the plaintiff failed to state claims upon which relief could be granted.

They argue that the claims in the complaint are inconsistent with the Illinois Property Code and are “limited by federal preemption to the extent they conflict with federal law, regulation or administrative actions.”

The defendants say the plaintiff accepted the subject documents and fees for recording and “took no action to seek clarification or review of the legality of the documents.”

The defendants claim no violation of law has been alleged that would entitle the plaintiffs to an accounting.

“Plaintiff is not entitled to an accounting because such relief is unnecessary since information regarding assignments is publicly available on the MERS website and plaintiff has full access to the information it seeks.”

Defendants HSBC Finance Corporation and SunTrust Mortgage Inc. filed 10 affirmative defenses on Sept. 25 through attorneys Christopher M. Hohn and Matthew D. Guletz of St. Louis, claiming the Illinois Supreme Court has “long held that recording of mortgage documents is not mandatory.”

“Section 28 of the Conveyances Act does not, as plaintiff contends, impose a duty to record," the defendants state. "Rather, it authorizes recordings and mandates where the documents are to be recorded, if they are recorded.”

They also argue that the plaintiff has accepted the practices with full knowledge of the facts for about 15 years.

Mortgage Electronic Registration Systems (MSI) filed 22 affirmative defenses against the plaintiff on Oct. 16 through attorney Daniel A. Kaufman of Michael Best & Friedrich in Chicago, arguing that the plaintiff’s claims are unsustainable as a matter of law.

MSI says the plaintiff should be barred from any relief because the complaint “lacks authority or constitutional and prudential standing. Plaintiff has not suffered a legally cognizable injury that is fairly traceable to MSI’s alleged conduct and that would be redressed by the relief sought herein.”

Further, the plaintiffs have been silent about any alleged wrongdoing on the defendant’s part and has known of the situation for many years without objecting or bringing suit, MSI argues.

Paul Slocomb, special assistant state’s attorney, is representing the plaintiffs.

Jeffrey S. Heuer of Husch Blackwell LLP in Clayton, Mo., represents Regions Bank.

St. Clair County Circuit Court case number 12-L-267

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Bryan CaveIllinois Supreme CourtMayer Brown