Union County, IL v. MERSCORP, Inc. (IL)

Summary: The Illinois Conveyances Act (765 ILCS 5/28) does not require recording of mortgages or mortgage assignments.


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Union County, IL. v. MERSCORP, Inc., 735 F.3d 730 (7th Cir. 2013).


Facts: Union County, with several of its officials, (‘Plaintiffs’) filed a class action lawsuit in Illinois state court against MERSCORP Holdings, Inc. (‘MERSCORP’) and several of their member banks, alleging that MERSCORP and its members violated the Illinois Conveyances Act (765 ILCS 5/28) by failing to record mortgages and mortgage assignments with county public-records offices. MERSCORP, described as a, “membership organization that recorded, traded, and foreclosed loans on behalf of many lenders, acting for their accounts rather than its own,” allowed member banks to register mortgages through their Mortgage Electronic Registration System (‘MERS’). Several member banks registered through MERS conducted repeated de facto assignments of mortgages to other mortgagees. MERSCORP also functioned as an assignee for mortgages as requested. When assigned a mortgage, MERSCORP recorded the mortgage with the county public-records office where the mortgage was located. However, when a mortgage passed from or through MERSCORP to another mortagee, that assignment was not successively recorded with the county.


MERSCORP removed to federal court under diversity, and the district court held Illinois law did not require registration of mortgages. The court dismissed the suit with prejudice, but without deciding whether to certify the matter as a class action. Lacking certification, plaintiffs subsequently appealed.


Holding: Affirmed. On appeal, the issue before the Seventh Circuit Court of Appeals was whether the Illinois Conveyances Act required recording of mortgages. Initially, the court stated, if the mortgage was recorded, 765 ILCS 5/28 specifically required it be recorded with the county public-records office. The court then addressed whether the plain language construction of the statute unambiguously mandated mortgage registration. The court summarily held there was an implicit “if” in 765 ILCS 5/28, indicating recording was a choice, but, if property was recorded, 765 ILCS 5/28 mandated registration with the county public-records office. Moreover, the interpretation was not the, “unarguable meaning,” but rather, within the context of the statute, “the better meaning.”


In support of its plain language interpretation, the court further held that another provision of 765 ILCS 5/28 would be redundant if registration was required. 765 ILCS 5/28 § 28 specifically barred parties to mortgages or other land instruments from including a “no recordation” instrument. The court reasoned that the provision would be redundant if mortgages and other land instruments required registration, as the illegality of the “no recordation” provision was assumed by default. However, recognizing superfluity was a common statutory feature, the court also cited 765 ILCS 5/28 § 30, expressly emphasizing the phrase “authorized to be recorded,” holding § 30 implied land instruments could be recorded but did not require recording.


The court concluded by citing relevant holdings by the Supreme Court of Illinois and, in denying plaintiffs request for certification, explained why it would not certify the issue to the Supreme Court of Illinois. Both Field v. Ridgeley, 6 N.E. 156, 159 (Ill. 1886) and Haas v. Sternbach, 41 N.E. 51, 54 (Ill. 1894) held that there was no recording requirement for mortagee assignments or other land instruments. Also referenced were recent decisions of the lower Illinois courts, emphasizing the courts’ tendency to uphold unrecorded mortgages assignments and land instruments as valid. The court reasoned, “[o]bviously they wouldn’t do this if failure to record violated Illinois law.” The court then explained that certification to the Supreme Court of Illinois was unwarranted because there existed controlling precedent, and because another Illinois county had recently filed a materially identical suit in state court, St. Clair County v. Mortgage Electronic Registration Systems, Inc., No. 12‐L‐267 (St. Clair County Circuit Court, July 12, 2013).


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By: ATG Underwriting Department | Posted on: Mon, 10/27/2014 - 2:37pm