MERS Prevails in Michigan Federal Court Transfer Tax Suit
Court Finds That the County Registers Suit Fails on the Merits
Reston, Virginia – May 7, 2013 – (RealEstateRama) — MERSCORP Holdings, Inc. today announced that Judge Robert Holmes Bell of the U.S. District Court for the Western District of Michigan dismissed a lawsuit filed by Ingham and Branch County, Michigan Registers of Deeds, ruling in favor of MERSCORP Holdings, Inc., Mortgage Electronic Registration Systems, Inc. (MERS) and other member defendants.
In Hertel-Hutchins v. MERS, et al., Judge Bell dismissed the case on its merits. The Registers alleged that the defendants did not pay transfer tax on assignments of mortgages and that they improperly avoided tax by transferring quit claim deeds for nominal consideration. For many reasons, Judge Bell dismissed these claims, holding that “none of the instruments submitted by Plaintiffs were subject to the transfer tax.” With regard to the assignments of mortgages, the Court relied on the recent Sixth Circuit Court of Appeals’ McLaughlin v. Chase Home Finance decision, which held that “[a]ssignments of mortgages . . . are specifically exempt from transfer taxes under” Michigan law.
As to the quit claim deeds, the Court held that “nominal consideration on a quit claim deed has been found presumptively valid by the Michigan Court of Appeals.” The Court further explained that these quit claim instruments are not evidence of a sale of property for its full value, and that nominal consideration is typical and valid between agents and principals when the agents “who foreclosed on and purchased properties in their capacity as agents of lenders, return the properties to the lenders, who at all times maintain the beneficial ownership interest in the debt and the property securing the debt.”
Judge Bell also found that the Registers of Deeds for the two Counties lacked standing to challenge alleged violations of Michigan’s County Real Estate Transfer Tax Act (CRETTA). “Michigan statutes expressly define the powers of registers of deeds…but no statute authorizes a register of deeds to file lawsuits,” Judge Bell ruled. “Moreover, no statute empowers a county’s board of commissioners to authorize a register of deeds to do so.”
Despite the County Registers’ lack of standing, Judge Bell commented sternly on their arguments, saying, “Plaintiffs’ complaint and briefs make inaccurate statements of the law under the CRETTA and allege far-fetched theories of liability…the Court will not allow Plaintiffs to continue ‘fishing’…when transfer taxes are indisputably not owed…”
“We are pleased that Judge Bell addressed the liability question and invested his time in debunking each of the Plaintiffs’ fanciful theories in this decision, despite their inability to bring the suit on procedural grounds in the first place,” said MERSCORP Holdings’ Director for Corporate Communications Jason Lobo.
MERSCORP Holdings, Inc. is a privately held corporation that owns and manages the MERS® System and all other MERS® products. It is a member-based organization made up of thousands of lenders, servicers, sub-servicers, investors and government institutions. Mortgage Electronic Registration Systems, Inc. (MERS) serves as the mortgagee in the land records for loans registered on the MERS® System, and is a nominee (or agent) for the owner of the promissory note. The MERS® System is a national electronic database that tracks changes in mortgage servicing and beneficial ownership interests in residential mortgage loans on behalf of its members.