April 5, 2016
by John S. Kay
Hutchens Law Firm – USFN Member (North Carolina, South Carolina)
South Carolina now becomes the most recent state to have a legal decision weighing in on the validity of MERS documents, but not in the usual fashion that we have seen in most states. In fact, the result of the case does not resolve the issue as to whether MERS documents are valid in South Carolina at all. [Kubic v. MERSCORP Holdings, Inc., Op. No. 27619 (S.C. Sup. Ct. Mar. 30, 2016)].
County Administrators and Registers of Deeds in five South Carolina counties instituted lawsuits against MERSCORP, as well as various banks and mortgage servicers, alleging that those institutions had engaged in a practice of fraudulent recording of documents that disrupted the integrity of the public index. The South Carolina Supreme Court consolidated the lawsuits and assigned the case to a Business Court trial judge. MERSCORP and the banking institution defendants filed a motion to dismiss, asserting that the complaint failed to state a cause of action and that the action was barred by section 30-9-30 of the South Carolina Code (2007). The trial court denied the motion and the defendants petitioned the South Carolina Supreme Court for a writ of certiorari, which the Supreme Court granted.
Section 30-9-30(B) provides that if the clerk of court or register of deeds reasonably believes that a document presented to him or her is materially false or fraudulent, or is a sham legal process, the clerk of court or register of deeds may refuse to accept the document for filing. The statute further provides that within thirty days of written notice of such a refusal by the clerk of court or register of deeds, the person presenting the document may commence a lawsuit requiring the clerk of court or register of deeds to accept the document for filing.
The county administrators contended that the statute provided them, by implication, with a right to commence an action to remove MERS-related documents from the public index. The Supreme Court disagreed and found that the plain meaning of the statute afforded the right to bring such an action to the person attempting to file the document, rather than to the county clerk of court or register of deeds. Consequently, the trial court was reversed, and the Supreme Court dismissed the plaintiffs’ case.
So where are we regarding the MERS issue in South Carolina? The Supreme Court may have provided the answer in the decision itself. In dicta, the Court indicated “the statute already provides a remedy to government officials by allowing them to remove or reject any fraudulent records; by its express language a judicial blessing or directive is not required (and thus, not permitted) in performance of this executive function.” One can assume that the county administrators in South Carolina may start rejecting MERS mortgages and require lenders to commence a lawsuit in order to have the document recorded.
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