New York Court of Appeals Reports

MATTER OF MERSCORP v. ROMAINE, 179 (N.Y. 12-19-2006) 2006 NY Slip Op 09500 In the Matter of Merscorp, Inc., et al., Respondents, v. Edward P. Romaine, & c., et al., Appellants, et al., Defendant. 179. Court of Appeals of the State of New York. Decided on December 19, 2006.

Richard C. Cahn, for appellants.

Charles C. Martorana, for respondents.

Mortgage Bankers Association; American Land Title Association; Federal National Mortgage Association et al.

South Brooklyn Legal Services et al.; County Clerks of the Counties of Albany, & c., amici curiae.


We are asked to decide on this appeal whether the Suffolk
County Clerk[fn1] 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
respondents, 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

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 and discharges for purposes of recording
and indexing” (24 AD3d 673 [2nd 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 industry[fn2] to
track ownership interests in residential mortgages.
Mortgage lenders and other entities,[fn3] 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[fn4].
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. In 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”(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.

With 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], 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 instruments 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

[emphasis added].

Notably, section 321 (3) does not call for the unrecorded
MERS assignments to be listed on the MERS discharge.
Rather, under 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 section 321 (3)
was amended to, among other things, insert the term “of
record” (L 1951, c 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.
Memorandum by the Executive Secretary and Director of
Research of the Law Revision Committee in support of Bill
in Senate). 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[fn5]. 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 “[m]ortgage has not been
further assigned of record” 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.

[fn1] Edward P. Romaine resigned as County Clerk December
31, 2005. Judith A. Pascale is currently the Acting County

[fn2] Among the entities creating MERS were the Federal
National Mortgage Association, the Federal Home Loan
Mortgage Corporation, the Government National Mortgage
Association, and the Mortgage Bankers Association of

[fn3] Members of the MERS system also include entities such
as insurance companies, title companies and banks.

[fn4] If a MERS member transfers servicing interests in a
mortgage loan to a non-MERS member, an assignment from the
MERS member to the non-MERS member is recorded in the
County Clerk’s Office and the loan is deactivated within
the MERS system.

[fn5] The purpose of such requirement was to facilitate the
work of the recording officer in marking the record of the

CIPARICK, J.(concurring):

I am constrained to agree with the result reached by the
majority opinion. However, I write independently to
highlight the narrow breadth of this holding and to point
out that this issue may be ripe for legislative

I concur with the majority that the Clerk’s role is merely
ministerial in nature and that since the documents sought
to be recorded appear, for the most part, to comply with
the recording statutes, MERS is entitled to an order
directing the clerk to accept and record the subject
documents. I wish to note, however, that to the extent that
the County and various amici argue that MERS has violated
the clear prohibition against separating a lien from its
debt and that MERS does not have standing to bring
foreclosure actions, those issues remain for another day
(see e.g. Merritt v Bartholick, 36 NY 44, 45 [1867][“a
transfer of the mortgage without the debt is a nullity, and
no interest is acquired by it”]).

In addition to these substantive issues, a plethora of
policy arguments have surfaced during the pendency of this
proceeding. For instance, if MERS succeeds in its goal of
monopolizing the mortgage nominee market, it will have
effectively usurped the role of the County Clerk that
inevitably would result in a county’s recording fee revenue
being substantially diverted to a private entity.
Additionally, MERS’s success will arguably detract from the
amount of public data available concerning mortgage
ownership that otherwise offers a wealth of statistics that
are used to analyze trends in lending practices. Another
concern raised is that, once an assignment of the mortgage
is made, it can be difficult, if not impossible, for a
homeowner to find out the true identity of the loan holder.
Amici who submitted briefs in favor of the County argue
that this can effectively insulate a note holder from
liability and further that it encourages predatory lending

Unquestionably there is considerable public value in
allowing seamless assignments of mortgages in a secondary
market. However, whether this benefit will outweigh the
negative consequences cannot be ascertained by this Court.
Thus, as the recording act, which as relevant here has not
been substantially amended in the last 50 years, could not
have envisioned such a system nor its ancillary impacts, I
feel that such a decision is best left in the hands of the

KAYE, Chief Judge (dissenting in part):

In 1993, members of the real estate mortgage industry
created MERS, an electronic registration system for
mortgages. Its purpose is to streamline the mortgage
process by eliminating the need to prepare and record paper
assignments of mortgage, as had been done for hundreds of
years. To accomplish this goal, MERS acts as nominee and as
mortgagee of record for its members nationwide and appoints
itself nominee, as mortgagee, for its members’ successors
and assigns, thereby remaining nominal mortgagee of record
no matter how many times loan servicing, or the mortgage
itself, may be transferred. MERS hopes to register every
residential and commercial home loan nationwide on its
electronic system.

But the MERS system, developed as a tool for banks and
title companies, does not entirely fit within the purpose
of the Recording Act, which was enacted to “protect the
rights of innocent purchasers . . . without knowledge of
prior encumbrances” and to “establish a public record which
would furnish potential purchasers with notice, or at least
`constructive notice’, of previous conveyances” (Andy
Assocs. v Bankers Trust Co., 49 NY2d 13, 20 [1979]; see
Witter v Taggert, 78 NY2d 234, 238 [1991]). It is the
incongruity between the needs of the modern electronic
secondary mortgage market and our venerable real property
laws regulating the market that frames the issue before us.


The Suffolk County Clerk, pursuant to the Recording Act,
has a duty to record conveyances that are “entitled to be
recorded” (Real Property Law § 316-a [5]), and to
discharge mortgages when presented with a validly executed
and acknowledged certificate of discharge (Real Property
Law § 321). Thus, as part of this ministerial duty,
the Clerk is called upon to examine an instrument to see
that it is, facially, a “conveyance” of real property or to
see that the certificate of discharge complies with the
statutory mandates. “The performance of his uniform clerical
duty requires him to compare the instruments which come to
his possession for record . . . and certify as to the
identity of their physical contents. Such a certificate
does not involve the expression of an opinion, but calls
for the statement of a fact capable of absolute
demonstration” (Putnam v Stewart, 97 NY 411, 418 [1884]).

When presented with a MERS mortgage to record, the Clerk is
able to discern from the face of the instrument that MERS
has been appointed, as nominee, “mortgagee of record.” As
the instrument appears to reflect a valid conveyance (Real
Property Law § 290 [3]), the Clerk is required to
record the instrument in MERS’ name “as nominee for lender”
(Real Property Law § 291). Given that the identity
of the actual lender is ascertainable from the mortgage
document itself — indeed, the use of a nominee as
the equivalent of an agent for the lender is apparent, and
not unusual — I concur with the majority that the
Clerk is obligated to record MERS mortgages.[fn1]

When presented with a certificate of discharge, however,
the Clerk has the duty to examine the mortgage’s prior
assignments. The Clerk collects fees precisely for this
purpose (Real Property Law § 321 [3] [“the fee or
fees which the recording officer is entitled to receive for
filing and entering a certificate of discharge of a
mortgage and examining assignments of such mortgage shall
be payable with respect to each mortgage”]). Section 321
(3) of the Real Property Law further 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 or 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 mortgage 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).

“[W]here the statutory language is clear and unambiguous,
the court should construe it so as to give effect to the
plain meaning of the words used” (Raritan Dev. Corp. v
Silva, 91 NY2d 98, 107 [1997][emphasis and citations
omitted]). Plainly, the statute requires all assignments of
the mortgage to be listed on the certificate of discharge,
whether recorded or not. The statute first sets out this
general requirement, then it addresses each possible
scenario in turn: if the assignment was recorded, the Clerk
must enter the book and page; if the assignment of mortgage
is being recorded simultaneously, the certificate shall so
state; if the assignment was not recorded, the certificate
similarly shall so state. To read the statute as providing
that the certificate “either” list the recorded mortgage
“or” simply state that the assignment has not been recorded
renders the language of the preceding sentences superfluous
and the clause regarding the listing of recording details
“if recorded” nonsensical.

“[T]he clearest indicator of legislative intent is the
statutory text” (Majewski v Broadalbin-Perth Cent. School
Dist., 91 NY2d 577, 583 [1998]). The Court need not look to
legislative history when the plain meaning of the statute
is clear, and surely should not look to legislative history
to override the plain meaning of the statute, as the
majority now does.

Here, moreover, the legislative history of § 321 is
inapposite. Real Property Law § 321 was amended in
1951 to ameliorate the situation “where assignments are
known by the signing party to have existed but are not in
his chain of title because the mortgage has been reassigned
to the assignor,” such as when “a mortgage has been pledged
to secure a loan and on repayment . . . has been reassigned
to the mortgagee without the assignment ever having been
recorded” (Recommendation of the Law Revision Comm, Bill
Jacket, L 1951, ch 159, at 20; see also Mem of Law Revision
Comm, Bill Jacket, L 1951, at 11). Thus, the situation the
amendment addressed was when a mortgagee’s assigned,
unrecorded mortgage was reassigned back to the mortgagee,
and the mortgage was then transferred by the mortgagee to a
subsequent holder or discharged by the original mortgagee
himself. In such a case, “there appears to be no reason for
requiring a statement that the mortgage has not been
assigned [as] the certificate is executed by the original
mortgagee” (Recommendation of the Law Revision Comm, Bill
Jacket, L 1951, ch 159, at 20 [emphasis added]), or
transferred by the original assignor after it had been
assigned back to him (see Report of Comm on Real Property
Law, Bill Jacket, L 1951, at 9).

Under the MERS system, by contrast, assignments are made
from one lender, to another lender, to another lender, and
so on down the line. The 1951 amendment, which assumed that
the mortgagee would be discharging the reassigned mortgage,
or that a subsequent holder would discharge it unaware that
the previous owner had assigned away and been reassigned
the mortgage, is thus inapplicable to the issue under


The MERS system raises additional concerns that should not
go unnoticed.

The benefits of the system to MERS members are not
insubstantial. Through use of MERS as nominee, lenders are
relieved of the costs of recording each mortgage assignment
with the County Clerk, instead paying minimal yearly
membership fees to MERS. Transfers of mortgage instruments
are faster, allowing for efficient trading in the secondary
mortgage market; a mortgage changes hands at least five
times on average.

Although creating efficiencies for its members, there is
little evidence that the MERS system provides equivalent
benefits to home buyers and borrowers — and, in
fact, some evidence that it may create substantial
disadvantages. While MERS necessarily opted for a system
that tracks both the beneficial owner of the loan and the
servicer of the loan, its 800 number and Website allow a
borrower to access information regarding only his or her
loan servicer, not the underlying lender. The lack of
disclosure may create substantial difficulty when a
homeowner wishes to negotiate the terms of his or her
mortgage or enforce a legal right against the mortgagee and
is unable to learn the mortgagee’s identity. Public records
will no longer contain this information as, if it achieves
the success it envisions, the MERS system will render the
public record useless by masking beneficial ownership of
mortgages and eliminating records of assignments altogether.
Not only will this information deficit detract from the
amount of public data accessible for research and
monitoring of industry trends, but it may also function,
perhaps unintentionally, to insulate a note holder from
liability, mask lender error and hide predatory lending
practices. The County Clerks, of course, are concerned
about the depletion of their revenues — allegedly
over one million dollars a year in Suffolk County alone.

Admittedly we do not know, at this juncture, the extent to
which these concerns will be realized. But it would seem
prudent to call to the attention of the Legislature what is
at least a disparity between the relevant statute —
now 55 years old — and the burgeoning modern-day
electronic mortgage industry.

[fn1] I also agree that the issues concerning the underlying
validity of the MERS mortgage instrument — in
particular, whether its failure to transfer beneficial
interest renders it a nullity under real property law,
whether it violates the prohibition against separating the
note from the mortgage, and whether MERS has standing to
foreclose on a mortgage — are best left for another
day. Although MERSCORP initially requested a declaratory
judgment that the MERS instruments were “lawful in all
respects” (which Supreme Court denied) the instruments’
validity has not yet been addressed.