Editor: David Reiss
Brooklyn Law School

March 29, 2013

Sixth Court of Appeals Clarifies Recording Fee Standing Issue

By Karl Dowden

In Christian County Clerk, et al. v. Mortgage Electronic Registration Systems, Inc., et al., No. 12-5237 (6th Cir. 2013), the United States Sixth Circuit Court of Appeals heard a case on appeal from the United States District Court for the Western District of Kentucky. The case involved two county clerks suing MERS, its parent company (MERSCorp), and a number of financial institutions to collect the two counties’ lost recording fees as a result of MERS. The District Court dismissed the action under rule 12(b)(6) because the court found there is no private right of action under the relevant Kentucky statute that requires mortgage assignments be filed for recording with the county clerk’s office.

On appeal, the plaintiffs argued that the defendants either willfully or negligently violated Kentucky’s recording fee statute.

The court found that the Kentucky statutory scheme recognized three categories of persons protected under the recording fee statute: existing lienholders and lenders who record their security interests in the land to give notice of their secured status; prospective lienholders and purchasers; and property owners and borrowers whose loans have been satisfied. The court further found that the plaintiffs do not fall into the categories listed.

Next, the court rejected the plaintiff’s argument that officers charged with maintaining property records are within the class of persons protected by the statute. It found that the statute only permits causes of action for persons protected by statutes, not the public officers who administer the law.

The plaintiffs argued that the Kentucky legislature stated that its statutes “shall be liberally construed with a view to promote their objects and carry out the intent of the legislature.” However, the court found no indication in the legislative history that the legislature intended to protect county clerks so they rejected this argument as well.

The court then states that property owners and the Kentucky attorney general, “who presumably has the power to act to enforce the state’s statutes,” are parties that would have standing in this case.

The court then addressed the plaintiff’s claim of civil conspiracy and dismissed the claim because the cause of action required an underlying tort. In this case, since the negligence per se argument was dismissed, the civil conspiracy claim is dismissed as well.

Finally, the court dismissed the unjust enrichment claim because the action was based on the alleged willful violation of the recording statute, not on an implied contract as required for an unjust enrichment claim.

As a result, the court affirmed the district court’s dismissal of the case.

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