Robertson v. MERSCORP, Inc., et al

Filing 23

OPINION AND ORDER granting 12 MOTION to Remand and that, pursuant to 28 USC § 1447(c), this case is remanded to the Circuit Court of Barbour County, AL for want of jurisdiction; further ORDERED that all other pending motions are left for resol ution by the state court after remand; DIRECTING the clerk to take appropriate steps to effect the remand; This case is closed. Signed by Honorable Judge Myron H. Thompson on 4/2/2012. Certified Copy mailed to the Barbour County Circuit Clerk. (Attachments: # 1 Civil Appeals Checklist)(wcl, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

NANCY O. ROBERTSON, in her
official capacity as
Probate Judge of Barbour
County, Alabama, on behalf
of herself and all others
similarly situated,

)
)
)
)
)
)
)
Plaintiff,
)
)
v.
)
)
MERSCORP, INC., a Delaware )
corporation, and MORTGAGE )
ELECTRONIC REGISTRATION
)
SYSTEMS, INC., a Delaware )
corporation,
)
)
Defendants.
)

CIVIL ACTION NO.
2:11cv1111-MHT
(WO)

OPINION AND ORDER
Plaintiff Nancy O. Robertson (“Robertson”), acting in
her official capacity as probate judge of Barbour County,
Alabama, and on behalf of all probate judges in the
State, brought suit in state court against defendants
MERSCORP,

Inc.

(“MERSCORP”),

and

Mortgage

Electronic

Registration Systems, Inc. (“MERS”), claiming that the
defendants

failed

to

record

certain

assignments

of

interests in mortgages.

Pursuant to 28 U.S.C. §§ 1332,

1441, and 1446, the defendants removed this case to
federal

court

on

a

diversity-of-citizenship

ground.

Robertson moves to remand to state court because the
defendants

have

failed

to

satisfy

their

burden

of

demonstrating that the $ 75,000 amount-in-controversy
requirement for diversity jurisdiction has been met in
this case.

For the reasons that follow, Robertson’s

remand motion will be granted.

I.

STANDARD FOR REMAND

Where, as here, a defendant seeks to remove a case on
a diversity-jurisdiction ground and the damages have not
been specified by the plaintiff, the removing defendant
“must prove by a preponderance of the evidence that the
amount in controversy exceeds the $ 75,000 jurisdictional
requirement.”

Leonard v. Enterprise Rent A Car, 279 F.3d

967, 972 (11th Cir. 2002).

“A removing defendant bears

the burden of proving proper federal jurisdiction.”

2

Id.

The court may not “speculate in an attempt to make up for
Lowery v. Alabama Power Co., 483

the notice’s failings.”

F.3d 1184, 1215 (11th Cir. 2007).

II.

BACKGROUND

The defendants operate the MERS system, which is a
digital marketplace for mortgages and mortgage-backed
securities.

As

the

Ninth

Circuit

Court

of

succinctly explained:
“MERS is a private electronic database,
operated by MERSCORP, Inc., that tracks
the
transfer
of
the
‘beneficial
interest’ in home loans, as well as any
changes in loan servicers.
After a
borrower takes out a home loan, the
original lender may sell all or a
portion of its beneficial interest in
the loan and change loan servicers. The
owner of the beneficial interest is
entitled to repayment of the loan. For
simplicity, we will refer to the owner
of the beneficial interest as the
‘lender.’
The servicer of the loan
collects payments from the borrower,
sends payments to the lender, and
handles administrative aspects of the
loan.
Many of the companies that
participate in the mortgage industry--by
originating loans, buying or investing
3

Appeals

in the beneficial interest in loans, or
servicing loans--are members of MERS and
pay a fee to use the tracking system.
“When a borrower takes out a home loan,
the borrower executes two documents in
favor of the lender: (1) a promissory
note to repay the loan, and (2) a deed
of trust, or mortgage, that transfers
legal
title
in
the
property
as
collateral to secure the loan in the
event of default.
State laws require
the lender to record the deed in the
county in which the property is located.
Any subsequent sale or assignment of the
deed must be recorded in the county
records, as well.
“This
recording
process
became
cumbersome to the mortgage industry,
particularly as the trading of loans
increased.
It has become common for
original
lenders
to
bundle
the
beneficial interest in individual loans
and
sell
them
to
investors
as
mortgage-backed securities, which may
themselves be traded. MERS was designed
to avoid the need to record multiple
transfers of the deed by serving as the
nominal record holder of the deed on
behalf of the original lender and any
subsequent lender.
“At the origination of the loan, MERS is
designated in the deed of trust as a
nominee for the lender and the lender's
‘successors and assigns,’ and as the
deed's ‘beneficiary’ which holds legal
4

title to the security interest conveyed.
If the lender sells or assigns the
beneficial interest in the loan to
another MERS member, the change is
recorded only in the MERS database, not
in
county
records,
because
MERS
continues to hold the deed on the new
lender's behalf.
If the beneficial
interest in the loan is sold to a
non-MERS member, the transfer of the
deed from MERS to the new lender is
recorded in county records and the loan
is no longer tracked in the MERS
system.”
Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034,
1038-39 (9th Cir. 2011) (internal citations omitted).
In her role as probate judge of Barbour County,
Robertson is responsible for compiling and maintaining an
accurate index of grantors and grantees of interests in
real

estate.

Robertson

also

collects

fees

for

the

assignment and recording of mortgages.
Robertson alleges that the MERS system illegally
circumvents Alabama’s recording statutes for interests in
real estate.

Robertson seeks an accurate accounting and

index of all transfers in real estate involving the MERS
system for the past ten years, an injunction ordering the
5

defendants to comply with Alabama’s recording statutes,
and reimbursement for any fees that should have been
paid.

III.
The

defendants

liability

that

DISCUSSION

posit

they

two

believe

theories
push

of

the

potential
amount-in-

controversy above the $ 75,000 threshold.

They are

uncertain which theory Robertson intends to pursue in
this litigation, but base these theories on a reading of
the complaint.

As the defendants have the burden of

establishing this court’s jurisdiction, the court focuses
on

these

two

theories

to

ascertain

whether

removal

jurisdiction is proper.
First, the defendants put forward a Note Transfer
Theory: any sale or transfer of notes constitutes an
assignment

of

Alabama law.

mortgages

that

must

be

recorded

under

According to the defendants, approximately

3,475 mortgages naming MERS as mortgagee of record were

6

recorded in Barbour County for the past ten years, the
relevant

time

period

in

Robertson’s

complaint.

The

defendants argue that these mortgages were transferred at
least 2,693 times.

The Barbour County Probate Court

charges a $ 16.50 fee to record the first page of an
assignment and $ 2.50 for each additional page.

Assuming

that each assignment is one page, the defendants would
owe $ 44,434.50 in recording fees for the past ten years.
Acknowledging that this figure falls short of the
jurisdictional threshold, the defendants extrapolate the
cost of recording fees ten years into the future.

They

presume that the number of note transfers would be the
same,

thereby

reaching

an

amount-in-controversy

of

$ 88,869.
This methodology, however, ignores that the past ten
years witnessed an unprecedented housing boom followed by
the worst recession since the 1930s.

It is simply

unrealistic to assume that the number of note transfers
in the next ten years would mirror the past decade.

7

The

defendants have put forward no evidence to back up their
assumption about a constant rate of note transfers over
the next ten years. This court cannot speculate as to
Lowery, 483 F.3d at 1215

future-note-transfer rates.

(“The absence of factual allegations pertinent to the
existence of jurisdiction is dispositive and, in such
absence, the existence of jurisdiction should not be
divined by looking to the stars.”).

Because the Note

Transfer Theory cannot surmount the amount-in-controversy
requirement without resort to hypothetical future costs,
the defendants have failed to meet their burden.
The defendants’ alternative theory of liability is
the False Mortgage Theory: the listing of MERS as the
mortgagee

of

concealment.

record

is

a

false

designation

and

Under this theory, MERS would have to re-

record approximately 3,475 mortgages in Barbour County to
update

the

mortgagee

of

record.

According

to

the

defendants, a standard mortgage is 15 pages long and the
Barbour County Probate Court charges $ 16.50 for the

8

first page and $ 2.50 for each additional page.
total

cost

to

re-record

these

mortgages

The

would

be

approximately $ 178,962.50.
While this figure is above the amount-in-controversy
threshold, Robertson expressly disavows any reliance on
the False Mortgage Theory.

Rather, Robertson claims that

the “mortgage, as recorded, does not conceal the real
parties in interest.”
18) at 9.
after

Robertson’s complaint concerns actions taken

the

interest

mortgage
is

Defendants’
accounting

Robertson’s Reply Brief (Doc. No.

is

bought

and

operation.”
of

invalidation

the
and

recorded,
sold

“when

under

in

re-recording

real
of

security

cover

Robertson

Id.

interests

the

of

the

seeks

an

estate,

mortgages.

not

an

Given

Robertson’s representations to this court, the defendants
would not be liable for $ 178,962.50 under the False
Mortgage Theory.
Finally, in their notice of removal, the defendants
comment that the costs incurred by them to provide an

9

accurate index would be substantial.

They provide no

monetary estimate of these costs, however.

But even if

the defendants were to calculate this figure, “the costs
borne by the defendant in complying with the injunction
are irrelevant” because “the value of an injunction for
amount in controversy purposes must be measured by what
the plaintiff stands to gain.”

Morrison v. Allstate

Indemnity Co., 228 F.3d 1255, 1268 n.9 (11th Cir. 2000).
To the extent that there is any uncertainty as to the
theory of liability in this litigation, “uncertainties
are resolved in favor of remand.”

Burns v. Windsor

Insurance Co., 31 F.3d 1092, 1095 (11th Cir. 1994).
defendants,

therefore,

have

failed

to

satisfy

The

their

burden of establishing the amount in controversy.

*

*

*

Accordingly, it is the ORDER, JUDGMENT, and DECREE of
the court that plaintiff Nancy O. Robertson’s motion to

10

remand (Doc. No. 12) is granted and that, pursuant to 28
U.S.C. § 1447(c), this case is remanded to the Circuit
Court

of

Barbour

County,

Alabama

for

want

of

jurisdiction.
It is further ORDERED that all other pending motions
are left for resolution by the state court after remand.
The

clerk

of

the

court

is

DIRECTED

to

appropriate steps to effect the remand.
This case is closed.
DONE, this the 2nd day of April, 2012.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE

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