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Kubic v. MERSCORP Holdings, Inc.

Supreme Court of South Carolina

March 30, 2016

Gary Kubic, in his official capacity as County Administrator for Beaufort County, South Carolina, and Dale L. Butts, in his official capacity as Register of Deeds for Beaufort County, South Carolina, Respondents,
v.
MERSCORP Holdings, Inc., Mortgage Electronic Registrations Systems, Inc., Bank of America, N.A., Deutsche Bank National Trust Company, JPMorgan Chase Bank, N.A., CitiMortgage, Inc., HSBC Bank USA, N.A., HSBC Mortgage Corporation (USA), HSBC Mortgage Services, Inc., South State Bank, Coastal Banking Company, Inc., and Tidelands Bank, Petitioners. 2013-CP-07-1340 Thessa G. Smith, in her official capacity as County Administrator for Allendale County, South Carolina, and Elaine Sabb, in her official capacity as Register of Deeds for Allendale County, South Carolina, Respondents,
v.
MERSCORP Holdings, Inc., Mortgage Electronic Registrations Systems, Inc., Bank of America, N.A., South State Bank, SunTrust Mortgage, Inc., Branch Banking and Trust Company, Citibank, N.A., Quicken Loans, Inc., Wells Fargo Bank, N.A., Regions Bank, and Green Tree Servicing, LLC, Petitioners. 2014-CP-03-00146 Andrew P. Fulghum, in his official capacity as County Administrator for Jasper County, South Carolina, and Patsye M. Greene, in her official capacity as Register of Deeds for Jasper County, South Carolina, Respondents,
v.
MERSCORP Holdings, Inc., Mortgage Electronic Registrations Systems, Inc., Bank of America, N.A., CitiMortgage, Inc., South State Bank, Nationstar Mortgage, LLC, Wells Fargo Bank, N.A., SunTrust Mortgage, Inc., Branch Banking and Trust Company, 1st Choice Mortgage/Equity Corporation of Lexington, Regions Bank, and Countrywide Home Loans, Inc., Petitioners. 2014-CP-27-00242 Sabrena P. Graham, in her official capacity as County Administrator for Hampton County, South Carolina, and Mylinda Nettles, in her official capacity as Register of Deeds for Hampton County, South Carolina, Respondents,
v.
MERSCORP Holdings, Inc., Mortgage Electronic Registrations Systems, Inc., Bank of America, N.A., South State Bank, Wells Fargo Bank, N.A., SunTrust Mortgage, Inc., Branch Banking and Trust Company, and Countrywide Home Loans, Inc., Petitioners. 2014-CP-25-00262 Kevin Griffin, in his official capacity as County Administrator for Colleton County, South Carolina, and Debbie Gusler, in her official capacity as Register of Deeds for Colleton County, South Carolina, Respondents,
v.
MERSCORP Holdings, Inc., Mortgage Electronic Registrations Systems, Inc., Bank of America, N.A., South State Bank, SunTrust Mortgage, Inc., Branch Banking and Trust Company, Countrywide Home Loans, Inc., Citibank, N.A., TD Bank, N.A., Quicken Loans, Inc., and Capital One, N.A., Petitioners2014-CP-15-00650

         Heard February 10, 2016.

Page 596

          Appeal from Beaufort County. The Honorable R. Lawton McIntosh, Circuit Court Judge. Appellate Case No. 2015-001366.

         J. Edward Bell, III, of Bell Legal Group, of Georgetown, for Petitioner Capital One, N.A.; Tobias G. Ward, Jr. and J. Derrick Jackson, of Tobias G. Ward, Jr., PA, of Columbia, for Petitioner 1st Choice Mortgage/Equity Corporation of Lexington; B. Rush Smith, III, and Brian P. Crotty, of Nelson Mullins Riley & Scarborough, LLP, of Columbia, for Petitioners MERSCORP Holdings, Inc., et al., Bank of America, N.A., Countrywide Home Loans, Inc., Quicken Loans, Inc., Wells Fargo Bank, N.A., CitiMortgage, Inc. and Citibank, N.A., JPMorgan Chase Bank, N.A., Deutsche Bank National Trust; C. Pierce Campbell, of Turner Padget Graham & Laney, PA, of Florence, for Petitioner South State Bank; Michael C. Griffin, of Bradley Arant Boult Cummings, LLP, of Charlotte, NC, for Petitioner Nationstar Mortgage, LLC; William Grayson Lambert, of McGuireWoods, LLP, of Charlotte, NC, for Petitioner TD Bank, N.A.; Clay M. Carlton and Robert M. Brochin, of Miami, FL, for Petitioner MERSCORP Holdings, Inc., et al.; Brian A. Herman, of Morgan Lewis & Bockius LLP, of New York, NY, for Petitioner JPMorgan Chase Bank, N.A.; Lucia Nale and Thomas V. Panoff, of Mayer Brown LLP, of Chicago, IL, for Petitioners CitiMortgage, Inc. and Citibank, N.A.; Robert E Sumner, IV, of Moore & Van Allen, PLLC, of Charleston, for Petitioner Tidelands Bank; Joseph F. Yenouskas and Thomas F. Hefferon, of Goodwin Procter LLP, of Washington, DC, for Petitioners Bank of America, N.A., Countrywide Home Loans, Inc., Quicken Loans, Inc., and Wells Fargo Bank, N.A.; Elizabeth A. Frohlich, of Morgan Lewis & Bockius, of San Francisco, CA, for Petitioner Deutsche Bank National Trust.

         James P. Scheider, Jr., Roberts Vaux, and Antonia T. Lucia, of Vaux Marscher Berglind, P.A., of Bluffton, for Respondents.

         ACTING CHIEF JUSTICE HEARN. Acting Justices Aphrodite K. Konduros, John D. Geathers, William H. Seals and Tanya A. Gee, concur.

          OPINION

Page 597

          HEARN, ACTING CHIEF JUSTICE :

          This case is a consolidation of five separate lawsuits instituted by county administrators and registers of deeds in Allendale, Beaufort, Colleton, Hampton, and Jasper Counties (collectively, Respondents) against MERSCORP Holdings, Inc.; Mortgage Electronic Registrations Systems, Inc. (MERS); and numerous banking institutions (collectively, Petitioners). Respondents contend Petitioners have engaged in a practice of fraudulent recordings that have disrupted the integrity of the public index Respondents are statutorily required to maintain. Petitioners filed a motion to dismiss, which the trial court denied. Petitioners then filed a motion for a writ of certiorari pursuant to Rule 245, SCACR, which this Court granted. We now reverse the decision of the trial court and dismiss Respondents' suits.

         FACTUAL/PROCEDURAL BACKGROUND

         Because this appeal arises from the denial of a motion to dismiss, we accept the facts as alleged in the complaint for the purposes of our analysis. MERS is a subsidiary of MERSCORP and is a member-based organization made up of lenders and investors, including mortgage banks, title companies, and title insurance companies. When MERS member-lenders issue a mortgage and promissory note, MERS is listed as the mortgagee, specifically as " nominee" in place of the lender. The mortgage is then recorded in the county where the real property is located, and internally, the loan is registered in the MERS system. Accordingly, MERS becomes the grantee in the public index, despite the fact that MERS holds no security

Page 598

interest in the promissory note. This allows the lender to retain priority with MERS as the nominee without having to record each time there is an assignment of the mortgage when the promissory note is transferred. MERS essentially provides a convenient framework through which members can transfer notes amongst themselves without having to record each exchange. However, as a result of this system, the public index may not accurately reflect who has an interest in the real property, as the note has been severed from the mortgage.

         Respondents filed lawsuits in their respective counties against Petitioners, alleging fraud and misrepresentation, unfair trade practices, conversion, and trespass to chattels. Additionally, Respondents sought a declaratory judgment stating Petitioners had caused damage to the public index in recording false documents. Furthermore, they requested injunctive relief enjoining Petitioners from recording any document indicating MERS has a lien on real property as well as requiring Respondents to correct the falsely filed documents. Respondents prayed for direct and consequential damages to remediate deficiencies in the index, as well as compensatory and punitive damages in the event ...


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