South Carolina Supreme Court Holds That County Recorders May Not Sue MERS Under Recording Statute

The South Carolina Supreme Court recently held that county administrators and registers of deed may not pursue an action against Mortgage Electronic Registration System (“MERS”) under the state’s recording statute.  See Kubic v. MERSCORP Holdings, Inc., 2016 WL 1276344 (S.C. Mar. 30, 2016).  Under South Carolina law, the clerk of the court or register of deeds may refuse to accept a document for filing or may remove a filed document from the public records if he or she “reasonably believes that a conveyance, mortgage, judgment, lien, contract, or other document is materially false or fraudulent, or is a sham legal process.”  See S.C. Code Ann. § 30-9-30.  The statute further allows for the individual presenting the rejected document to file a lawsuit within thirty days to force the clerk or register to record the document.  Citing to this statute, five county administrators and registers of deeds sued MERS, among others, claiming that the defendants had caused damage to the public index by recording false documents.  The defendants filed a motion to dismiss, arguing that the statute does not provide the government officials the authority to bring this action.  The trial court denied the motion, finding that a motion to dismiss was inappropriate because the plaintiffs had presented a “novel issued of law.”  After the South Carolina Supreme Court granted the defendants’ writ of certiorari, it reversed the trial court’s decision.  It held that the plain language of the statute only granted the “person presenting the document” the right to file a lawsuit regarding allegedly fraudulent documents, and that “[w]hen the legislature delineated who would be able to bring a suit . . . it chose not to afford that right to government officials.”  Therefore, it found that the plaintiffs had failed to state a claim and dismissed the action.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.