Boyd County ex rel. Hedrick v. Merscorp, Inc.

985 F. Supp. 2d 823, 2013 WL 6181108, 2013 U.S. Dist. LEXIS 167134
CourtDistrict Court, E.D. Kentucky
DecidedNovember 25, 2013
DocketCivil Action No. 12-33-HRW
StatusPublished
Cited by3 cases

This text of 985 F. Supp. 2d 823 (Boyd County ex rel. Hedrick v. Merscorp, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Boyd County ex rel. Hedrick v. Merscorp, Inc., 985 F. Supp. 2d 823, 2013 WL 6181108, 2013 U.S. Dist. LEXIS 167134 (E.D. Ky. 2013).

Opinion

MEMORANDUM OPINION AND ORDER

HENRY R. WILHOIT, JR., District Judge.

This matter is before the Court upon Defendants’ Motion to Dismiss the First Amended Complaint [Docket No. 105]. The motion has been fully briefed by the parties [Docket Nos. 110 and 113] and, for the reason set forth herein, the Court finds that the First Amended Complaint fails to state any claim upon which relief can be granted and, thus, this dismissal is warranted.

I. FACTUAL AND PROCEDURAL BACKGROUND

This civil action was filed by forty-one County Attorneys on behalf of forty-one Kentucky counties: Boyd County, Breathitt County, Carter County, Christian County, Clark County, Floyd County, Franklin County, Greenup County, Johnson County, Letcher County, Magoffin County, Mason County, Pike County, Warren County, Ballard County, Barren County, Boone County, Carlisle County, Estill County, Garrard County, Hancock County, Harlan County, Hart County, Henry County, Hickman County, LaRue County, [827]*827Laurel County, Lewis County, Logan County, Menifee County, Monroe County, Montgomery County, Nelson County, Nicholas County, Ohio County, Oldham County, Perry County, Rockcastle County, Spencer County, Trimble County and Wolfe County. Plaintiffs allege that the financial institutions and mortgage/title companies Defendants devised and executed a scheme to avoid paying recording fees for mortgage assignments.

Specifically, Plaintiffs allege that the Defendants, shareholders of Defendant Mortgage Electronic Registration Systems, Inc. (“MERS”) established the MERS system in the mid-1990s to act as an electronic clearinghouse for the transfer of mortgage interests among its members expressly to avoid recording mortgage assignments with local recording systems and to avoid paying requisite recording fees [Docket No. 88 at ¶ 82]. Plaintiffs maintain that the MERS system circumvents the mortgage assignment recordation system of Kentucky’s counties by facilitating the selling and buying of notes secured by real property without complying with Kentucky’s requirements for the recordation of mortgage assignments. Id. Plaintiffs claim that the Defendants deliberately failed to record required mortgage assignments in the proper Kentucky county recording offices, and, as a result, deprived each county and the Commonwealth of Kentucky of recording fees required by Kentucky law. They further allege that the Defendants filed false mortgage documents, and, therefore deprived mortgagees of their statutorily required notice of mortgage assignments [Docket No. 88 at ¶ 75].

In their First Amended Complaint [Docket No. 88], Plaintiffs allege the following causes of action: (1) negligent and/or will violation of KRS 382.360 [Docket No. 88 at ¶¶ 107-109], (2) negligent and/or will violation of KRS 434.155 [Docket No. 88 at ¶¶ 110-112], (3) fraud [Docket No. 88 at ¶¶ 113-117], (4) unjust enrichment [Docket No. 88 at ¶¶ 118-121] and (5) civil conspiracy to violate KRS 382.360 and 434.155 [Docket No. 88 at ¶¶ 122-125],

Subsequently, Defendants sought entry of an order staying all proceedings in this matter pending final resolution of Christian County Clerk v. Mortgage Electronic Registration Systems, Inc. (6th Cir. No. 12-5237), a case involving the same legal issues presented in this case as well as several of the same Defendants. This Court sustained Defendants’ motion and this matter was stayed. Following the Sixth Circuit Court of Appeals’s decision in Christian County, the stay was lifted. Defendants now seek dismissal of all claims against them.

IL STANDARD OF REVIEW

The purpose of a motion to dismiss is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief. Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993). For purposes of dismissal pursuant to Fed.R.Civ.P. 12(b)(6), the complaint must be construed in the light most favorable to the nonmoving party and its allegations taken as true. Miller v. Currie, 50 F.3d 373, 377 (6th Cir.1995). The standard for dismissal is liberal. “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitled him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also, Monette v. Electronic Data Systems, Corp., 90 F.3d 1173, 1189 (6th Cir.1996). As a motion to dismiss is based solely upon the complaint, the focus is on whether the plaintiff is entitled to offer evidence to support the claims, rather than whether the plaintiff will ultimately prevail. See, Roth Steel [828]*828Prods. v. Sharon Steel Corp., 705 F.2d 134, 155 (6th Cir.1983).

III. ANALYSIS

A. Plaintiffs cannot maintain an action for violation of KRS. 382.360
1. Kentucky’s recording system

KRS Chapter 382 provides a system by which landowners record ownership of property through deeds, mortgage owners preserve priority and landowners remove encumbrances from their property once underlying debts are satisfied. Each step is codified as follows: Recording of deeds that are “acknowledged by the parties] who execute [them]” and “proved and lodged for record in the proper office, as prescribed by law.” KRS 382.080. The statutes also provide for recording of mortgages, which, like deeds, are recorded in “the county clerk’s office of the county in which the property ... is located.” KRS 382.110. Instruments generally must indicate the “next immediate source from which the grantor derived title to the property or the interest conveyed therein,” thereby showing the chain of title. Id. Instruments which satisfy these requirements and are properly acknowledged are recorded by the County Clerk. KRS 382.130.

Chapter 382 further provides for recording of releases and assignments of mortgages incertain circumstances. A mortgage can be released by recording a deed of release or by entering a marginal notation on the mortgage instrument. KRS 382.360(1, 2). Similarly, a mortgage may be assigned by a deed of assignment. KRS 382.360(3). Failure to record a mortgage assignment has no effect on the validity or perfection of the mortgage.

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Bluebook (online)
985 F. Supp. 2d 823, 2013 WL 6181108, 2013 U.S. Dist. LEXIS 167134, Counsel Stack Legal Research, https://law.counselstack.com/opinion/boyd-county-ex-rel-hedrick-v-merscorp-inc-kyed-2013.