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Connecticut Supreme Court Upholds Statute Affecting “Nominee” Recording Fees

Posted By USFN, Thursday, March 31, 2016
by Robert J. Wichowski
Bendett & McHugh, PC – USFN Member (CT, ME, VT)

 

In the case of MERSCORP Holdings, Inc. v. Malloy, 320 Conn. 26 (Feb. 23, 2016), the Connecticut Supreme Court upheld the validity of a statute that tripled the recording fees for any entity referring to itself as a “nominee.” The Connecticut State Legislature amended Connecticut General Statute § 7-34a (a) (2) and § 49-10 (h) in 2013 to greatly increase the cost of recording any documents related to a mortgage by the nominee of that mortgage. The legislation did not alter or affect the recording fees for filers not identified as a “nominee of a mortgagee.”

 

On July 2, 2013, facing the effective date of the legislation of July 15, 2013, MERSCORP Holdings, Inc. and Mortgage Electronic Registration Systems, Inc. (as joint plaintiffs) filed an action in Connecticut Superior Court against various officials of Connecticut. The lawsuit requested an order declaring the above-referenced statutes unconstitutional and, therefore, void and ineffective for any purpose. After the plaintiffs were unsuccessful in seeking a temporary injunction that would have exempt them from the legislation, the parties filed cross-motions for summary judgment. The trial court granted summary judgment in favor of the defendants; the plaintiffs appealed. The Connecticut Supreme Court transferred the matter from the Appellate Court docket to its own docket on its own motion, indicating a matter of public interest.

 

Non-parties to the case (amici) filed briefs in the appeal. After argument and consideration of each of the amici briefs, the Supreme Court issued an extensive opinion addressing, and denying,  each of the plaintiffs’ claimed grounds for unconstitutionality.

 

The parties had agreed that one of the reasons that the legislation was enacted was to generate revenue and balance the budget, which amounted to a legitimate purpose for the legislation. Accordingly since the legislation served a legitimate purpose, and because the plaintiffs did not discount every conceivable potential legitimate purpose for the legislation, the legislation did not violate the equal protection clauses of the United States or the Connecticut constitutions. The legislation was likewise not found to violate the dormant commerce clause of the U.S. Constitution, as the increase in fees does not inhibit interstate commerce.

 

Because the plaintiffs failed to meet the extremely weighty burden necessary to overturn a statute on constitutional grounds, the ruling of the trial court granting summary judgment for the defendants was affirmed, effectively ending the challenge of MERS to this statute.

 

Editor’s Note: Further coverage of the Malloy case summarized in this article will be published in the USFN Report (spring 2016 Ed.).


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