Merscorp., Inc. v. Romaine

OPINION OF THE COURT

We are asked to decide on this appeal whether the Suffolk County Clerk1 is compelled to record and index mortgages, assignments of mortgage and discharges of mortgage, which name Mortgage Electronic Registration Systems, Inc. the lender’s nominee or mortgagee of record.

Petitioners, MERSCORP, Inc. and Mortgage Electronic Registration Systems, Inc. (collectively MERS), commenced this hybrid proceeding in the nature of mandamus to compel the Clerk to record and index the instruments, and to declare them acceptable for recording and indexing.

Supreme Court denied in part petitioners’ motion for summary judgment and granted in part the cross motion of *96respondents, the Suffolk County Clerk and the County of Suffolk (collectively the County), holding that although the Clerk must record and index the MERS mortgage when presented, the Clerk may refuse to record a MERS assignment and discharge, because those instruments violate the “factual mandates” of section 321 (3) of the Real Property Law.

The Appellate Division reversed so much of Supreme Court’s ruling as relates to the assignments and discharges, finding “no valid distinction between MERS mortgages and MERS assignments or discharges for the purpose of recording and indexing” (24 AD3d 673, 674-675 [2d Dept 2005]). This Court granted leave and we now affirm.

In 1993, the MERS system was created by several large participants in the real estate mortgage industry2 to track ownership interests in residential mortgages. Mortgage lenders and other entities,3 known as MERS members, subscribe to the MERS system and pay annual fees for the electronic processing and tracking of ownership and transfers of mortgages. Members contractually agree to appoint MERS to act as their common agent on all mortgages they register in the MERS system.

The initial MERS mortgage is recorded in the County Clerk’s office with “Mortgage Electronic Registration Systems, Inc.” named as the lender’s nominee or mortgagee of record on the instrument. During the lifetime of the mortgage, the beneficial ownership interest or servicing rights may be transferred among MERS members (MERS assignments), but these assignments are not publicly recorded; instead they are tracked electronically in MERS’s private system.4 In the MERS system, the mortgagor is notified of transfers of servicing rights pursuant to the Truth in Lending Act, but not necessarily of assignments of the beneficial interest in the mortgage.

*97In April 2001, in response to an informal opinion of the Attorney General, which concluded that recording a MERS instrument violates Real Property Law § 316 and frustrates the legislative intent of the recording provisions (2001 Ops Atty Gen No. 2001-2), the Suffolk County Clerk ceased recording the MERS instruments. This proceeding ensued.

The County contends that the MERS mortgage is improper because that mortgage names MERS, an entity that has no interest in the property or loan, as the “nominee” for the lender. Thus, the County contends MERS is not a proper “mortgagee” and the document created cannot be considered a proper “conveyance” for purposes of the recording statute. We disagree.

Section 291 of the Real Property Law provides, in pertinent part, that:

“[a] conveyance of real property, within the state, on being duly acknowledged by the person executing the same, or proved as required by [the Real Property Law], and such acknowledgment or proof duly certified when required by [such law], may be recorded in the office of the clerk of the county where such real property is situated, and such county clerk shall, upon the request of any party, on tender of the lawful fees therefor, record the same in his said office” (emphasis added).

Real Property Law § 316-a, which pertains exclusively to Suffolk County, provides that

“[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 on and after the first day of January, nineteen hundred fifty-one, shall be recorded and indexed pursuant to the provisions of this act” (§ 316-a [1] [emphasis added]).

Thus, sections 291 and 316-a of the Real Property Law impose upon the Suffolk County Clerk the ministerial duty of recording and indexing instruments affecting real property (see Real Property Law § 290 [3]; §§ 291, 316-a [1], [2]; § 321 [1]; County Law § 525 [1]). The Clerk lacks the statutory authority to look beyond an instrument that otherwise satisfies the limited requirements of the recording statute (see Putnam v Stewart, 97 NY 411 [1884]). Therefore, the County Clerk must accept the MERS mortgage when presented for recording.

*98With respect to the MERS assignments and discharges of mortgage, the County argues that by requiring the Clerk to record the instrument, the Clerk is recording a document that ignores the mandates prescribed by Real Property Law § 321.

Section 321 (1) (a) provides that where it does not appear from the record that any interest in a mortgage has been assigned, a certificate of satisfaction must be signed by the mortgagee or the mortgagee’s personal representative in order for the recording officer to mark the record of the mortgage as “discharged.” Where it appears from the record that a mortgage has been assigned, the recording officer cannot mark the record of that mortgage with the word “discharged” unless a certificate is signed by “the person who appears from the record to be the last assignee” of the mortgage, or his or her personal representative (Real Property Law § 321 [1] [b]). As the nominee for the mortgagee of record or for the last assignee, MERS acknowledges the instrument and therefore, the County Clerk is required to file and record the instruments.

Other provisions are not to the contrary. Under section 321 (2) (b), the Clerk is required to record “every other instrument relating to a mortgage,” if that instrument is properly acknowledged or proved in a manner entitling a conveyance to be recorded. Such instrúments include “certificates purporting to discharge a mortgage” that are signed by persons other than those specified in Real Property Law § 321 (1).

Further, section 321 (3) of the Real Property Law provides:

“Every certificate presented to the recording officer shall be executed and acknowledged or proved in like manner as to entitle a conveyance to be recorded. If the mortgage has been assigned, in whole or in part, the certificate shall set forth the date of each assignment in the chain of title of the person or persons signing the certificate, the names of the assignor and assignee, the interest assigned, and, if the assignment has been recorded, the book and page where it has been recorded or the serial number of such record; or if the assignment is being recorded simultaneously with the certificate of discharge, the certificate of discharge shall so state. If the mortgage has not been assigned of record, the certificate shall so state” (emphasis added).

Notably, section 321 (3) does not call for the unrecorded MERS assignments to be listed on the MERS discharge. Rather, *99under the statute, the discharge is required either to list the assignment by the name of the assignor and assignee, the interest assigned, and the book and page number, where recorded, or, if the assignment has not been recorded, to “so state.”

The legislative history of the statute supports this interpretation. In 1951, Real Property Law § 321 (3) was amended to, among other things, insert the term “of record” (L 1951, ch 159, § 1). The relevant memoranda submitted to the Legislature in connection with the amendment indicate that the term was inserted to “correct a difficulty” in complying with the statute (see e.g. Mem in Support of Exec Secretary and Director of Research of Law Rev Commn, Bill Jacket, L 1951, ch 159). Prior to the amendment, the statute required that a discharge certificate presented to the County Clerk either list all of the assignments in the chain of title or state that the mortgage was unassigned.5 However, problems developed when an assignment, known to the person executing the discharge, was not in the chain of title. In those situations, the person executing the discharge would make the untrue statement that the mortgage was unassigned. Thus, the Legislature amended the statute allowing the discharge certificate to either list the assignments in the chain of title or to state that the assignment has not been made “of record.” The MERS discharge complies with the statute by stating that the “mortgage has not been further assigned of record” (emphasis added) and, therefore, the County Clerk is required to accept the MERS assignments and discharges of mortgage for recording.

Accordingly, the order of the Appellate Division should be affirmed, with costs.