Following on the heels of a similar lawsuit by Dallas County Texas, late last week, Geauga County Ohio filed a class action lawsuit against MERSCORP and a number of financial institutions. The suit suggests that MERS and its members wrongfully avoided recording mortgage assignments and as a consequence, they have adversely affected the accuracy of Ohio’s land records and deprived Ohio counties of recording fees. Among other remedies, the suit seeks declaratory relief that would effectively end the practice of using MERS to freeze mortgages.
The action was filed by the Geauga County Prosecuting Attorney on behalf of all eighty-eight Ohio counties.
The lawsuit claims that Ohio’s recording statutes require mortgage assignments to be “recorded in proper county recording offices” and “County recorders are required to collect nominal fees” for the service. The County further contends that, by failing to record intervening assignments, MERS and its members have “violated … Ohio’s statutory recording requirements,” they have “systematically broke[n] chains of land title throughout Ohio,” and as a consequence, they have “eviscerated the accuracy of Ohio counties’ public land records.”
In the suit, the County has requested a number of remedies, including a declaration that MERS’ business model and practices violate Ohio law. Additionally, the County has asked the trial court to order MERS and its members “to correct their failure to record each and every prior and future … mortgage assignment” and have them “pay attendant recording fees.”
As with any lawsuit of this nature and magnitude, we can expect that any examination of the merits will be preceded by lengthy and robust litigation of a number of procedural and jurisdictional issues. During this phase, we should learn more about the factual and legal basis of the County’s case. Be that as it may, at this point, there is little doubt that this lawsuit amounts to a direct challenge of the MERS model.
The defendant couple entered into a land contract for the purchase of property and received a survivorship deed for the property. To finance the purchase, the defendant wife obtained a note from a mortgage company, but due to the defendant husband’s financial and employment situation, he was not included on the note. The mortgage company indorsed the note and the mortgage to a bank which subsequently indorsed the note twice to the plaintiff company. After the defendant wife twice defaulted on the mortgage, the plaintiff filed a complaint for foreclosure and reformation of mortgage. Thereafter, the plaintiff filed an amended complaint seeking an equitable lien, a constructive trust and a resulting trust as to the defendant husband’s one-half interest in the property and sought reformation of the mortgage to fully secure his interest in the property. The defendant hospitals were added as defendants due to a judgment lien obtained by them against the defendant couple. The trial court ruled in the plaintiff’s favor. After the property was sold, the court confirmed the sale and ordered distribution of the proceeds of the sale to the appropriate parties. The appellate court determined that although the defendant husband was not listed as a Borrower/Mortgagor on the first page of the mortgage, paragraph 12 of the mortgage made it clear that a “Borrower” who signed the mortgage instrument, but did not execute the note, mortgaged his interest in the property without assuming liability for repayment of the debt. The defendant husband signed as a “Borrower.” Further, there was no mention in the mortgage about the release of dower rights, nor was there any provision that suggested that the defendant husband signed the mortgage for a purpose other than to mortgage his interest in this property. Thus, even if the mortgage was ambiguous, the trial court had ample evidence to support its conclusion that the defendant husband had mortgaged his interest in the property. Accordingly, the judgment was affirmed. SFJV 2005, LLC v. Ream, 2010-Ohio-1615.
In a case that was decided on June 30, 2009, the Sixth District Court of Appeals held that in the absence of fraud, a defectively executed mortgage is valid and enforceable by a mortgagee’s assignee. LaSalle Bank N.A. v. Zapata, 2009-Ohio-3200.