IN THE MATTER OF MERSCORP, INC. v. ROMAINE

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Docket Number

2004-04735.

Judges

Reinaldo E. Rivera

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Factual and Procedural Background

Merscorp, Inc. and its subsidiary Mortgage Electronic Registration Systems, Inc. (MERS) operate a national electronic registration system for residential mortgages and related instruments, where lenders designate MERS as their nominee or mortgagee of record for recording purposes. The Suffolk County Clerk announced that, starting May 1, 2001, he would no longer accept MERS Instruments listing MERS as mortgagee or nominee unless MERS was the actual mortgagee. In response, Merscorp and MERS commenced a hybrid proceeding pursuant to CPLR article 78 and an action seeking a judgment declaring these instruments acceptable for recording and indexing. Earlier, this Court preliminarily compelled the Clerk to record such instruments pending a final determination. The Supreme Court, Suffolk County, granted summary judgment to compel recording of mortgages but denied summary judgment for assignments and discharges. Both parties appealed from parts of the Supreme Court’s order and judgment.

Legal Issues Presented

Whether the Suffolk County Clerk has a ministerial duty to record and index mortgages, assignments, and discharges naming MERS as the lender's nominee or mortgagee of record.
Whether there is a valid legal distinction between MERS mortgages and MERS assignments or discharges for the purpose of recording and indexing.
Whether the instruments naming MERS as mortgagee or nominee are acceptable for recording and indexing under New York recording statutes.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Klostermann v. Cuomo, 61 NY2d 525, 539	Affirmed that the county clerk has a ministerial duty to record duly acknowledged conveyances accompanied by proper fees.	Supported the conclusion that the Suffolk County Clerk must record MERS mortgages as a ministerial duty.
People ex rel. Frost v. Woodbury, 213 NY 51	Confirmed the ministerial nature of the recording clerk’s duty to accept proper conveyances.	Reinforced that the Clerk cannot refuse recording instruments that meet statutory requirements.
People ex rel. Title Guar. Trust Co. v. Grifenhagen, 209 NY 569	Similar principle regarding the ministerial duty of the recording clerk.	Supported the mandatory recording obligation of the Clerk.
Matter of Westminster Hgts. Co. v. Delany, 107 App Div 577, affd 185 NY 539	Addressed the recording clerk’s statutory duties.	Used to confirm the ministerial nature of recording duties.
Putnam v. Stewart, 97 NY 411	Established that the clerk must record instruments meeting statutory prerequisites.	Supported the Court’s conclusion on mandatory recording.
Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853	Set the standard for making a prima facie showing on a motion for summary judgment.	Applied to find Merscorp and MERS made a prima facie showing entitling them to summary judgment.
Artistic Landscaping v. Board of Assessors, 303 AD2d 699	Further clarified summary judgment standards.	Supported the Court’s assessment of the burden shifting after prima facie showing.
Alvarez v. Prospect Hosp., 68 NY2d 320, 324	Clarified that once prima facie showing is made, burden shifts to opposing party to raise triable issue.	Applied to find the Clerk failed to raise a triable issue to oppose summary judgment.
Zuckerman v. City of New York, 49 NY2d 557, 562	Established burden-shifting framework in summary judgment context.	Supported the Court’s conclusion on the Clerk’s failure to oppose.
Lanza v. Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901	Addressed declaratory judgment actions and the acceptability of certain instruments for recording.	Supported the Court’s addition of a declaration that MERS instruments are acceptable for recording and indexing.

Court's Reasoning and Analysis

The Court analyzed the statutory framework governing the recording and indexing of real estate instruments in Suffolk County, emphasizing the ministerial nature of the Clerk’s duties under Real Property Law §§ 290, 291, 316-a, and County Law § 525. It found no valid legal distinction between mortgages and assignments or discharges naming MERS as nominee or mortgagee of record, as the statutes require recording and indexing of all instruments that meet statutory prerequisites. The Court applied the summary judgment standard, determining that Merscorp and MERS made a prima facie case by showing compliance with the recording statutes, shifting the burden to the Clerk, who failed to raise any triable issue of fact. The Court modified the lower court’s order to grant summary judgment compelling recording and indexing of all MERS instruments and declared these instruments acceptable for recording and indexing.

Holding and Implications

The Court modified and affirmed the order and judgment by granting summary judgment to compel the Suffolk County Clerk to record and index mortgages, assignments, and discharges naming MERS as lender's nominee or mortgagee of record, and declared these instruments acceptable for recording and indexing.

The direct effect of this decision is to require the Suffolk County Clerk to record and index all such MERS instruments, ensuring the operability of the MERS System within Suffolk County. The decision does not establish new precedent beyond confirming the ministerial duty of the Clerk under existing recording statutes.

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In the Matter of MERSCORP, INC., et al., Appellants-Respondents, v. EDWARD P. ROMAINE et al., Respondents-Appellants.

Ordered that the order and judgment is modified, on the law, by (1) deleting the provision thereof denying that branch of the petitioners' motion for summary judgment which was to compel the Suffolk County Clerk to record and index the subject assignments and discharges, and substituting therefor a provision granting that branch of the motion, and (2) adding thereto a provision declaring that the mortgages, assignments, and discharges which name Mortgage Electronic Registration Systems, Inc., as the lender's nominee or the mortgagee of record are acceptable for recording and indexing; as so modified, the order and judgment is affirmed insofar as appealed and cross-appealed from, with one bill of costs to the petitioner.

The petitioners, Merscorp, Inc. (hereinafter Merscorp), and its subsidiary, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), operate a national electronic registration system (hereinafter the MERS System) for residential mortgages and related instruments (hereinafter MERS Instruments). In essence, lenders who subscribe to the MERS System (hereinafter MERS Members) designate MERS as their nominee or the mortgagee of record for the purpose of recording MERS Instruments in the county where the subject real property is located. The MERS Instruments are registered in a central database, which tracks all future transfers of the beneficial ownership interests and servicing rights among MERS Members throughout the life of the loan.

Merscorp and MERS commenced this hybrid proceeding and action in response to the announcement by the Suffolk County Clerk (hereinafter the Clerk) that, as of May 1, 2001, he would no longer accept MERS Instruments that listed MERS as the mortgagee or nominee of record unless MERS was, in fact, the actual mortgagee. In June 2002 this Court granted the motion by Merscorp and MERS to preliminarily compel the Clerk to record MERS Instruments and list MERS as the mortgagee in the County's alphabetical indexes pending the Supreme Court's determination of the hybrid proceeding and action on the merits ( see Matter of Merscorp, Inc. v. Romaine, 295 AD2d 431).

The Supreme Court properly compelled the Clerk to record MERS mortgages ( see Klostermann v. Cuomo, 61 NY2d 525, 539). In short, the Clerk has a statutory duty that is ministerial in nature to record a written conveyance if it is duly acknowledged and accompanied by the proper fee ( see Real Property Law § 290; § 291; County Law § 525). Accordingly, the Clerk does not have the authority to refuse to record a conveyance which satisfies the narrowly-drawn prerequisites set forth in the recording statute ( see People ex rel. Frost v. Woodbury, 213 NY 51; People ex rel. Title Guar. Trust Co. v. Grifenhagen, 209 NY 569; Matter of Westminster Hgts. Co. v. Delany, 107 App Div 577, affd 185 NY 539; Putnam v. Stewart, 97 NY 411).

Similarly, Real Property Law § 316-a (1), which only applies to the Suffolk County indexing system, provides that the Clerk must record and index "[e]very instrument affecting real estate or chattels real, situated in the county of Suffolk, which shall be, or which shall have been recorded in the office of the clerk of said county . . . pursuant to the provisions of this act." Pursuant to Real Property Law § 316-a (2), the Clerk must maintain the indexes so they "contain the date of recording of each instrument, the names of the parties to each instrument and the liber and page of the record thereof" ( see also Real Property Law § 316-a, [5]). Thus, the Clerk's duty to index recorded instruments is mandatory and ministerial in nature.

Contrary to the Supreme Court's determination, there is no valid distinction between MERS mortgages and MERS assignments or discharges for the purpose of recording and indexing. Pursuant to Real Property Law § 321 (1), the discharge document may be signed either by the mortgagee, the person who appears from the public record to be the last assignee, or their personal representatives.

As the proponents of a motion for summary judgment, Merscorp and MERS made a prima facie showing that they were entitled to judgment as a matter of law by tendering sufficient evidence to establish that they complied with the applicable recording statutes ( see Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853; Artistic Landscaping v. Board of Assessors, 303 AD2d 699). Once this showing was made, the burden shifted to the Clerk, who failed to raise a triable issue of fact in opposition to the motion ( Alvarez v. Prospect Hosp., 68 NY2d 320, 324; Zuckerman v. City of New York, 49 NY2d 557, 562).

Since this is a declaratory judgment action, the order and judgment must be modified, inter alia, by adding a declaration that the mortgages, assignments, and discharges which name MERS as the lender's nominee or the mortgagee of record are acceptable for recording and indexing ( see Lanza v. Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).