MERSCorp v Romaine Appellants Brief 21 Nov 2001

8/6/2019 MERSCorp v Romaine Appellants Brief 21 Nov 2001

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Supreme Court, Appellate Division, Second Department, New York.MERSCORP, INC. and Mortgage Electronic Registration Systems, Inc.,

Petitioners-Appellants,v.

Edward P. ROMAINE, as Clerk of the County of Suffolk, State of New Yorkand

County of Suffolk, State of New York, Respondents-Respondents.No. 2001-04792.

Suffolk County Clerk's Index No. 01-9688.November 21, 2001.

Brief for Petitioners-AppellantsHiscock & Barclay, LLP, Attorneys for Petitioners-Appellants, Key BankTowers at Key Center, Suite 301, 50 Fountain Plaza, Buffalo, New York

14202, (716)856- 0911

1. The Index Number of the case in the Court below is 01-9688, SuffolkCounty Clerk's Office.2. The names of the parties to the instant appeal are: Petitioners-Appellants: MERSCORP, Inc. and Mortgage ElectronicRegistration Systems, Inc. Respondents: Edward P. Romaine, as Clerk of the County of Suffolk,State of New York and County of Suffolk, State of New York. Although not required to be named as a party, Petitioners have servedall pleadings on the Office of the Attorney General of the State of NewYork ("Attorney General") pursuant to CPLR 7804(c).There have no changes in the names of the parties, and no parties havebeen added or dismissed from the proceeding.,3. The proceeding was commenced in the Supreme Court, County ofSuffolk, State of New York.4. The proceeding was commenced on May 2, 2001 and the pleadings havebeen served as follows: On May 2, 2001, Petitioners served Respondents with the Order to ShowCause containing Temporary Restraining Order, as granted by theHonorable John Bivona on May 2, 2001, the underlying Petition, dated May1, 2001 and Petitioners' Motion for a*2 Preliminary Injunction, consisting of the aforesaid Petition, the

Affidavit of Sharon McGann Horstkamp, Esq., sworn to on April 27, 2001and the Affirmation of Charles C. Martorana, Esq., dated May 1, 2001. On May 3, 2001, Petitioners served the Attorney General with theOrder to Show Cause containing Temporary Restraining Order, as grantedby the Honorable John Bivona on May 2, 2001, the underlying Petition,dated May 1, 2001 and Petitioners' Motion for a Preliminary Injunction,consisting of the aforesaid Petition, the Affidavit of Sharon McGannHorstkamp, Esq. and the Affirmation of Charles C. Martorana, dated May1, 2001.


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On May 11, 2001, Petitioners served Respondents and the AttorneyGeneral with the Affidavits of R. K. Arnold, Daniel McLaughlin, JamesMaher and Joanne Moore, all sworn to on May 10, 2001 and made in furthersupport of Petitioners' Motion for a Preliminary Injunction. On May 14, 2001, Respondents served Petitioners with their joint

Answer, dated May 14, 2001 and attached Affidavits in support of theirapplication to vacate the Temporary Restraining Order and in oppositionto Petitioners' Motion for Preliminary Injunction. Such Affidavits weremade by Edward P. Romaine, sworn to on May 14, 2001, John M. Kennedy,Jr., sworn to on May 14, 2001, Christina L. Lotz, sworn to on May 9,2001, John J. Woodward, sworn to on May 10, 2001, Karen V. Murphy, swornto on May 11, 2001 and Richard C. Cahn, Esq., sworn to on May 11, 2001. The case was assigned to the Honorable James M. Catterson, and on May15, 2001, Justice Catterson vacated the Temporary Restraining Order anddenied the Petitioners' Motion for a Preliminary Injunction. On May 23,2001, Respondents served Justice Catterson's bench decision (consistingmerely of the transcribed stenographic transcript) as "So Ordered" onPetitioners. On May 25, 2001, Petitioners served Respondents with the Notice of

Appeal, "Form A-Request for Appellate Division Intervention-Civil" andthe decision (constituting the order) appealed from. On May 31, 2001, Justice Sondra Miller, Associate Justice of the

Appellate Division, Second Department, granted a Temporary RestrainingOrder to require Respondents to accept mortgages and other instrumentswhere MERS is named as the mortgagee, as nominee for the lender, ("MERSInstruments") for recording. Justice Miller further ordered Respondentsto show cause why a preliminary injunction should not be issued pursuantto CPLR 5518 and 6301 enjoining Respondents from refusing to acceptMERS Instruments and to compel performance of Respondent Suffolk CountyClerk's statutory duties to record conveyances of real propertyinterests. On June 19, 2001, this Court issued an Order to requireRespondents to accept such MERS Instruments for recording through theearlier of this Court's disposition of the instant appeal or the lower

Court's disposition of the case on the merits.*3 5. Petitioners commenced this proceeding to compel basic compliancewith New York statutes which direct Respondent Suffolk County Clerk torecord MERS Instruments and to properly index them in the Clerk'sindices. The Suffolk County Clerk had been accepting MERS Instruments,until it announced that it would stop recording them as of May 1, 2001.Indeed, as of April 27, 2001 (i.e., four days prior to the commencementof this proceeding), the Suffolk County Clerk had accepted over 16,000instruments wherein MERS is named as a party to the mortgage loantransaction, including 3,259 "MOM" mortgages naming MERS as originalmortgagee of record, and 13,139 assignments of mortgages naming MERS asassignee of record under the mortgage.6. The appeal is from the May 15, 2001 bench decision of the Honorable

James M. Catterson, JSC. There is no written order or judgment.Respondents have merely used the transcribed stenographic transcript ofJustice Catterson's bench decision "So Ordered" as the lower Court'sorder, which transcript and order was served by Respondents onPetitioners on May 23, 2001.7. The appeal is on the full, reproduced Record.

TABLE OF CONTENTSTABLE OF AUTHORITIES ... i


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QUESTIONS PRESENTED ... 1PRELIMINARY STATEMENT ... 2STATEMENT OF FACTS ... 3A. MERS and the MERS(R) System ... 3B. The MERS(R) System Provides Substantial Benefits to Lenders, TitleCompanies, and Borrowers ... 6C. The Informal Opinion and Respondents' Incorrect Interpretation ofthe Opinion ... 10D. Procedural History ... 11

ARGUMENT ... 15A. Standard for Injunctive Relief ... 15B. Injunctive Relief is Warranted Where a County Clerk Fails to PerformIts Statutory Duty ... 16C. Appellants Have Established a Reasonable Probability of Success onthe Merits ... 171. Mandamus to Compel the Suffolk County Clerk's Compliance with a

Purely Ministerial Act Enjoined by New York State Law Is Warranted ...17

a. Principles Governing a Mandamus to Compel ... 17b. New York Law Compels the Suffolk County Clerk to Record All

Mortgages Presented to Him ... 20c. MERS Mortgages Are "Conveyances" within the Meaning of RPL 291

... 22d. MERS Mortgages are "Mortgages" as Defined by New York Law ... 23

D. In Suffolk County, the MERS Mortgages Have Been Enforced inForeclosure Actions ... 29E. The Suffolk County Clerk Misconstrued the Informal Opinion ... 291. Even if it were Interpreted Correctly, the Informal Opinion was Not

Entitled to Deference by the Lower Court ... 30F. Irreparable Harm ... 321. Harm to the Public ... 322 Harm to MERS ... 34

G. Balance of Equities ... 35H. The Lower Court (Catterson, J.) Erred in Vacating the TemporaryRestraining Order and Refusing to Grant a Preliminary Injunction Pendinga Final Determination of this Case ... 381. The Lower Court Improperly Interjected its own Notions of Public

Policy ... 38


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2. The Lower Court Improperly Refused to Consider Affidavits Submittedby Appellants on May 11, 2001 ... 39CONCLUSION ... 41

*iTABLE OF AUTHORITIESFEDERAL CASES

99 Commercial Street Inc. v. Goldberg, 811 F. Supp. 900 (S.D.N.Y. 1993)... 27Cabrera v. Jakabovitz, 24 F.3d 372 (2d Cir. 1994), cert. denied, 513 US876 (1994) ... 27In Re Cushman Bakery, 526 F.2d 23 (1st Cir.), cert. denied, 425 U.S. 937(1976) ... 25In Re Fried Furniture Corp., 293 F. Supp. 92 (E.D.N.Y. 1968), affd, 407F.2d 360 (2d Cir. 1969) ... 26In Re Stockbridge Funding Corp. 145 B.R. 797 (Bankr. S.D.N.Y. 1992) ...33

STATE CASESAetna Insurance Co. v. Capasso, 75 N.Y.2d 860, 552 N.Y.S.2d 918 (1990)... 15

Albany Medical Center Hospital v. Bresland, 47 Misc. 2d 208, 262N.Y.S.2d 285 (Sup. Ct. Albany County 1965) ... 16

American Telephone & Telegraph Co. v. State Tax Comn, 61 N.Y.2d 393, 474N.Y.S.2d 434 (1984) ... 31

Amherst Factors, Inc. v, Kochenburger, 4 N.Y.2d 203, 173 N.Y.S.2d 570(1958) ... 25

Arens v. Shainswitt, 37 A.D.2d 274, 324 N.Y.S.2d 321 (1st Dep't 1971),

aff'd 29 N.Y.2d 663, 324 N.Y.S.2d 954 ... 27Association of Surrogate and Supreme Court Reporters within the City ofNew York v. Bartlett, 40 N.Y.2d 571, 388 N.Y.S.2d 882 (1976) ... 22Baccari v. DeSanti, 70 A.D.2d 198, 431 N.Y.S.2d 829 (2d Dep't 1979) ...20*iiBhutta Realty Corporation v. Sangetti, 165 A.D.2d 852, 560 N.Y.S.2d315 (2d Dep't 1990) ... 26Central Trust Co. v. Sheahen, 66 A.D.2d 1015, 411 N.Y.S.2d 741 (4thDep't 1978) ... 27Cymbol v. Cymbol, 122 A.D.2d 771, 505 N.Y.S.2d 657 (2d Dep't 1986) ...

27

Fingerlakes Racing Association v. New York State Racing, 45 N.Y.2d 471,410 N.Y.S.2d 268 (1978) ... 30, 36Finn v. Wells, 135 Misc. 53, 237 N.Y.S. 580 (Sup. Ct. Tioga Co. 1929)... 22Gambar Enterprises, Inc. v. Kelly Services, Inc., 69 A.D.2d 297, 418N.Y.S.2d 818 (4th Dep't 1979) ... 15


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Gibson v. Thomas, 180 N.Y. 483 (1905) ... 22Harris v. Crossland Mortgage Corp., 160 Misc. 2d 520, 610 N.Y.S.2d 423(Dist. Ct. Nassau Co. 1994) ... 33Heine v. Papp, 97 A.D.2d 929, 471 N.Y.S.2d 18 (3d Dep't 1983) ... 27Industrial Packaging Products Co. v. Fort Pitt Packaging International,Inc., 399 Pa. 643, 161 A.2d 19(1960) ... 26Karls Mariner Inn, Inc. v. Incorporated Village of Northport, 39 Misc.2d 951, 242 N.Y.S.2d 297 (Sup. Ct. Suffolk Co. 1963) ... 15, 34, 35Klostermann v. Cuomo, 61 N.Y.2d 525, 475 N.Y.S.2d 247 91984) ... 18, 28Kursh v. Verderame, 87 A.D.2d 803, 449 N.Y.S.2d 500 (1st Dep't 1982) ...26Larco Maintenance Co. v. Culkin, 255 A.D.2d 560, 681 N.Y.S.2d 79 (2dDep't 1998) ... 15Matter of Claim of Gruber, 89 N.Y.2d 225, 652 N.Y.S.2d 589 (1996) ... 29*iiiMatter of Town of Brookhaven v. New York State Board ofEqualization and Assessment, 88 N.Y.2d 354, 645 N.Y.S.2d 436 (1996) ...30Maurillo v. Park Slope U-Haul, 194 A.D.2d 142, 606 N.Y.S.2d 243 (2dDep't 1993) ... 27McCain v. Koch, 70 N.Y.2d 109, 517 N.Y.S.2d 918 (1987) ... 15Munoz v. Wilson, 111 N.Y. 295 (1888) ... 25Mutual Life Insurance Co. v. Nichols, 144 A.D. 95, 128 N.Y.S. 902 (1stDep't 1911) ... 26Natural Resource Defense v. Department of Sanitation, 83 N.Y.2d 215, 608

N.Y.S.2d 957 (1994) ... 20Nelson v. New York State Civil Ser. Comn, 96 A.D.2d 132, 469 N.Y.S.2d224 (3d Dep't 1983) ... 31In Re Orfali, 123 A.D.2d 275, 568 N.Y.S.2d 506 (1st Dep't. 1986) ... 21People v. Grifenhagen, 209 N.Y. 569 (1913) ... 16, 19People v. McQuade, 118 Misc. 785, 195 N.Y.S. 408 (Sup. Ct., Kings Co.1922) ... 16, 19People v. Prince, 110 Misc. 2d 55, 441 N.Y.S.2d 586 (Sup. Ct. Queens Co.1981) ... 23People v. Woodbury, 213 N.Y. 51 (1914) ... 17, 18

Phillips v. Town of Clifton Park Water Authority, 243 A.D.2d 911, 662N.Y.S.2d 867 (3d Dep't 1997) ... 15Preston v. Albee, 170 A.D. 89, 105 N.Y.S. 33 (1st Dep't 1907) ... 25Presutti v. Suss, 254 A.D.2d 785, 678 N.Y.S.2d 187 (4th Dep't 1998) ...40*ivPutnam v. Stewart, 97 N.Y. 411 (1884) ... 20


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Randisi v. Mira Gardens, Inc., 272 A.D.2d 387, 707 N.Y.S.2d 204 (2dDep't 2000) ... 15Tucker v. Toia, 54 A.D.2d 322, 388 N.Y.S.2d 475 (4th Dep't 1976) ... 15W.L. Development Corp. v. Trifort Realty, Inc., 44 N.Y.2d 489, 406N.Y.S.2d 437 (1978) ... 23, 24, 26Westminster Heights Co. v. Delany, 185 N.Y. 539(1906) ... 16Williams v. Wisner Building Co., 121 Misc. 32, 200 N.Y.S. 802, affd, 208

A.D. 783, 203 N.Y.S. 959 (1st Dep't 1924) ... 24Wood v. Travis, 231 A.D. 331, 248 N.Y.S.2d 22 (3d Dep't 1931) ... 25

FEDERAL STATUTESTruth in Lending Act and Real Estate Settlement Procedures Act 12 U.S.C. 2601 et seq. ... 4

STATE STATUTESNew York Civil Practice Law and Rules ("CPLR") Article 78 ... 13CPLR 2004 ... 40CPLR 3001 ... 13CPLR 6301 ... 15CPLR 7803(1) ... 16N.Y. County Law ("County Law") 525(1) ... 17, 20, 21County Law 525 ... 20County Law Article 12 ... 21Gen. Obl. Law 5150(1) ... 27*v New York Real Property Actions and Proceedings Law 1921(9)(a) ...24N.Y. Real Prop. Law ("RPL") 291 ... 17, 19, 20, 21, 22, 28, 29RPL 275(2)(a) ... 25, 33RPL 290(3) ... 22RPL 316 ... 10, 28Statutes 129(a) ... 31Statutes 129(b) ... 30

MISCELLANEOUSBlacks Law Dictionary727 (6th ed. 1991) ... 25J. Krasnowiecki, et al. The Kennedy Mortgage Company Bankruptcy Case:New Light Shed on the Position of Mortgage Warehousing Banks, 56 Am.Bankr. L.J. 325 (Fall, 1982) ... 6Restatement (Second) of Agency l(b)(c), 1958 ... 27


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9 Warrens Weed 7.02(1) ... 22

*viAPPENDIXA. Copy of the Supreme Court, Appellate Division (Second Department)Order dated June 19, 2001.B. Opinion of the New York State Attorney General (Informal) I 97-15.C. Opinion of the New York State Attorney General (Informal) I 96-38.

*1QUESTIONS PRESENTED1. Did the Court below abuse its discretion in vacating the temporaryrestraining order?The Court below answered this question in the negative. Petitioners-

Appellants maintain that the Court below abused its discretion invacating the temporary restraining order.2. Should the Court below have granted Petitioners'-Appellants' motionfor a preliminary injunction?The Court below answered this question in the negative. Petitioners-

Appellants maintain that the Court below should have granted thePetitioners'-Appellants' motion for preliminary injunction.3. Under the New York Real Property Law and related statutes, is theRespondent Suffolk County Clerk required to accept for recording themortgage documents at issue?The Court below answered this question in the negative, Petitioners-

Appellants maintain that under applicable New York law, the RespondentSuffolk County Clerk is required to accept for recording the mortgagedocuments at issue.4. Was the lower Court's Order, which is being appealed, properlyissued?The Court below answered this question in the affirmative. Petitioners-

Appellants maintain that the lower Court's Order, which is beingappealed, was not properly issued.

*2PRELIMINARY STATEMENTThis brief is respectfully submitted by petitioners-appellants ESCORT,INC. and Mortgage Electronic Registration Systems, Inc. ("MERS")(collectively "Appellants").Appellants commenced the underlying action to enjoin respondents EdwardP. Romaine, as Clerk of the County of Suffolk, State of New York("Suffolk County Clerk"), and County of Suffolk, State of New York(collectively "Respondents") from implementing an erroneous

interpretation of an informal opinion of the New York Attorney General(the "Informal Opinion," Record on Appeal, pp. 68-71) [FN1] , to theextent the Suffolk County Clerk refuses to record mortgage instrumentswherein MERS is denoted, named or listed as the mortgagee, and asnominee for the lender (the "MERS Mortgages"). In addition to suchmortgage instruments, MERS is also a party as the mortgagee, and asnominee for the lender, to other instruments such as assignments ofmortgages, consolidations, modifications and extensions of mortgages,and releases, satisfactions or discharges of mortgages. Theseinstruments, including MERS Mortgages, shall be referred to collectivelyas "MERS Instruments." The MERS Mortgages are uniform mortgage or


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security instruments approved by the Federal National MortgageAssociation ("Fannie Mae") and Federal Home Loan Mortgage Corporation("Freddie Mac") [R. 58, 129, 204-205, 216], and are used by numerousmortgage lenders in New York State. (R. 55, 126-128). The underlyingaction has been narrowly drawn to compel basic compliance with New Yorkstatutes which direct the Suffolk County Clerk to record mortgageconveyances and to *3 properly index mortgages in the clerk's indices[R. 65-66] - which presumably it would continue to do, had it notadopted an erroneous interpretation of the Informal Opinion.

FN1. All future references to the Record on Appeal shall be made as"R. ___".Respondents have adopted an erroneous interpretation of the InformalOpinion (which, itself was based upon an erroneous assumption of factand conclusion of law), resulting in a refusal to comply with astatutory duty to record the MERS Mortgages. Respondents' actions, ifnot enjoined, will cause irreparable harm to Appellants, New Yorkconsumers - homebuyers and homeowners alike, the secondary mortgagemarket and title insurers:a. Mortgages that are now "in the pipeline" will not be recorded,causing upcoming mortgage closings to be canceled. The ensuing "ripple

effect" on consumers' travel plans, contingency deals on the homes theyare selling, increased mortgage rates and the concomitant additionalcost to consumers will result in an untenable and unwarranted situation.(R. 125-130,215-220). b. Thousands of MERS Mortgages were accepted for recording in thepublic records prior to the adoption of the Suffolk County Clerk'serroneous interpretation of the Informal Opinion. (R. 126). The validityof these mortgages will likely be called into question. Lien prioritywill be affected, rights of creditors in bankruptcies will be severelyimpacted, and there will be numerous claims on title policies. (R. 125-130, 215-220). In addition, as of the commencement of this action,almost one thousand mortgage foreclosure proceedings were pending in NewYork wherein MERS Mortgages constitute the lien, and the validity ofsuch liens will likely be contested as part of each proceeding. (R.

128).STATEMENT OF FACTS

A. MERS and the MERS(R) SystemIn 1993, the Government National Mortgage Association ("Ginnie Mae"),the Mortgage Bankers Association of America ("MBA"), Fannie Mae, FreddieMac and others within the real estate finance industry created anelectronic registration system and clearinghouse for title that issimilar to the process used with great success by the Depository TrustCompany for the securities industry. MERS was formed to facilitate thetransfer of the beneficial interests in mortgage loans *4 by serving asthe mortgagee of record in a nominee (that is, agency) capacity for allmembers of MERS. (R.54-55).MERSCORP, Inc., is the operating company that owns and operates theMERS(R) System. The MERS(R) System is a national electronic registryestablished to track beneficial ownership interests and servicing rightsin mortgage loans. MERS is the mortgagee of record for mortgage lendersregistered in the MERS(R) System (the "MERS Members") by serving as themortgagee of record in the public land records for all mortgage loansregistered on the MERS(R) System. As such, MERS is the mortgagee in MERSMortgages. (R. 55).MERS Members have contractually agreed, under the Rules Governing MERS,


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to appoint MERS to act as the mortgagee on all loans they register onthe MERS(R) System. (R. 56). All mortgage loans registered on theMERS(R) System must be recorded in the appropriate public land recordswhere the security real property is located. The MERS(R) System allowsMERS Members to access the central database. MERS Members can onlyaccess information on loans in which they have a legal interest, thatis, typically the holder of the promissory note or servicer of themortgage loan. Once MERS becomes the mortgagee of record, MERS remainsthe mortgagee of record when beneficial ownership interests or servicingrights are sold from one MERS Member to another, and the transfer istracked electronically on the MERS(R) System. MERS Members transfertheir beneficial ownership interests by endorsement of promissory notesand delivery of such notes to the transferee or agents or custodians forthe transferee. At all times during this process, the mortgage remainsof record in the public land records. The homeowner is notified by boththe selling MERS Member and buying MERS Member under the Truth inLending Act and Real Estate Settlement Procedures Act (12 U.S.C. 2601et seg.) of any transfer.*5 Anyone with an interest in the mortgage has access to the updatedmortgage servicer by calling a toll free number that appears on everyrecorded document naming MERS as the mortgagee. In addition, the MERS(R)System identifies each county clerk's office in which MERS Mortgages are

recorded. MERS does not, however, maintain or keep copies of anydocuments which are recorded with each county clerk. (R. 56-57).MERS becomes the mortgagee of record with respect to such mortgageloans, as nominee for such lenders, in one of two ways: (i) the borrowerand the lender name MERS as the mortgagee of record at the time themortgage loan is originated (sometimes referred to by the acronym "MOM",standing for "MERS as Original Mortgagee"), or (ii) the lender causes amortgage loan which was previously originated or acquired by such lenderto be assigned of record to MERS, so that MERS becomes the mortgagee ofrecord in the land records in which the mortgage was recorded. In eithercase, the security instrument constitutes a MERS Mortgage. (R. 57).Nominees serving as the mortgagee of record in county land records arevery common. As of May 2, 2001, the date the Appellants, as Petitioners,

filed the instant application for aftemporary restraining order, theMERS(R) System had 240 member lenders [FN2] (R. 55) who, already eitheract as nominees, or have representatives that act for them as nominees.They have recently elected to use MERS as their common nominee becausetechnology and electronic commerce now permit it. (R. 57).

FN2. Today the MERS(R) System has 385 member lenders throughout theUnited States.Mortgages naming MERS as mortgagee of record in the original securityinstrument or in an assignment list the name and address of themortgagor (the borrower) and the mortgagee *6 (MERS) as well as the dateand other pertinent information. (R. 57,108, 110). Please see a form ofthe MERS Mortgage beginning at R. 108. The documents recorded or filedby MERS comply with all requirements for the filing or recording of

mortgages.

MERS Members include many large and prominent national andinternational lenders, including: Countrywide Home Loans, Inc., GMACMortgage, Chase Manhattan Mortgage Corporation, Bank of New York andFirst Union Mortgage Corporation, as well as agencies such as FannieMae, Freddie Mac and the MBA. (R. 55,126).MERS Members also include many of the largest and most well-known titleassociations and insurance companies in the industry, including:

American Land Title Association, First American Title Insurance Co.,


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Stewart Title Guaranty and First Southwestern Title Company of Texas.(R, 55).B. The MERS(R) System Provides Substantial Benefits to Lenders, TitleCompanies, and BorrowersIn the year 2000, there were over $5 trillion in residential mortgageloans outstanding in the United States. Over the life of a mortgageloan, servicing rights of a loan may be sold and resold many times. TheMERS(R) System provides tremendous benefits to, and has been lauded bythe secondary mortgage market. [FN3] (R. 58-60, 72-101).

FN3. See generallyJ. Krasnowiecki, et al. The Kennedy MortgageCompany Bankruptcy Case: New Light Shed on the Position of MortgageWarehousing Banks, 56 Am. Bankr. L. J. 325 (Fall, 1982) for acomprehensive discussion of the operation of the modern secondarymortgage market.The use of MERS as the mortgagee of record has been approved by GinnieMae, the U.S. Department of Housing and Urban Development, the U.S.Federal Housing Administration, and the U.S. Department of Veterans

Administration. These approvals are significant because these *7governmental agencies constitute the primary regulatory agencies charged

with governing and regulating the mortgage lending industry. (R. 58), hiaddition, Fannie Mae, Freddie Mac, Federal Home Loan Bank Systems, Stateof New York Mortgage Agency and the California Housing Finance Agencyhave also approved of using MERS as the mortgagee of record. (R. 58,205).MERS has received correspondence from regulatory agencies in thelending industry and title insurance companies relative to the approvalof the MERS(R) System. These documents are quoted below in relevantpart: Letter from U.S. Department of Housing and Urban Development to

MERS, dated November 26, 1997:We have determined that, for our purposes, this request [to have

MERS act as nominee for the original mortgagee on FHA-insured loans]represents no substantive change to the current practice of assigningthe mortgage to MERS after the initial recording. (R. 58, 72).

We recognize, however, that this change will greatly benefit ourmutual customers by reducing their up-front costs of loan recordationand are pleased with the efforts that MERS is making in that area.(Emphasis added) (R. 58-72).

We are very pleased with the responsiveness MERS has shown toprovide the most comprehensive savings to the mortgage industry whilegiving them the means to enhance their processing by use of electronictechnology. (R. 59, 72). Letter from Chicago Title Insurance Company to Freddie Mac, dated

December 19, 1997:

We will be happy to consider making any policy changes which arenecessary to support your having the full coverage of the policies asthe purchasers of mortgages *8 made to MERS as the nominee of theoriginal mortgagee. However, it appears to us that our policies in theirpresent form now accomplish this. (R. 59, 75). Letter from First American Title Insurance Company to Freddie Mac,

dated December 16, 1997:


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Please be advised that with respect to the existing MERS(R) System,First American is willing to name either or both MERS and the actualowner of the indebtedness secured by the insured mortgage as the namedinsured in each policy of title insurance even though MERS is the onlyrecord mortgagee. The lender closing instructions need only to identifywhom we are to insure, (R. 59, 77).

First American is a supporter of MERS and wants to do what it can tohelp the system flourish. (R. 59, 77). Fannie Mae announcement No. 97-08:Fannie Mae has been an active supporter of MERS since the concept of

electronic tracking was first discussed in 1993, contributingsubstantial resources and effort to help the concept come to fruition.We are pleased that the benefits of this system are now available to alllenders. (R. 59, 80).

By electronically tracking interests in mortgages. MERS is expectedto streamline- and reduce the costs associated with - servicingtransfers, lien releases, and quality control processes (Emphasisadded). (R. 59,60, 80). Freddie Mac Bulletin Number 98-2, dated March 31, 1998:We are also announcing that we will purchase Mortgages originated

with MERS as the original mortgagee of record, (R. 60,91).The use of MERS as the mortgagee of record has also been approved byall major Wall Street rating agencies, consisting of Moody's, Fitch andStandard & Poor's as well as the Federal Home Loan Banks. (R. 60).*9 The MERS(R) System benefits both lenders and consumers. Lenders arebenefited because transfers among MERS Members can be reflectedinstantaneously on the MERS(R) System electronically on the date onwhich they occur. Consumers are benefited because originating lenderstypically pass the costs of assignments onto the borrowers to the extentthey know in advance that the loan will be sold immediately subsequent

to the closing. Through the use of the MERS(R) System, these costs areeliminated. In May 2001, there were over four million mortgagesregistered in the MERS(R) System, in the aggregate these cost savings toconsumers are substantial. (R. 57). The MERS(R) System further benefitsconsumers by speeding up the flow of funds, and enabling the consumer toeasily and instantly determine which lending institution owns orservices his or her mortgage loan by calling a toll free number which isavailable 24 hours a day - seven days a week. The present cost toregister a loan on the MERS(R) System is $3.50. (R. 300). The lender maypass this cost on to the consumer, as borrower, (as disclosed on theHUD-1 Settlement Statement) as the lender's transaction cost to enrollthe borrower's mortgage loan in the MERS(R) System. By contrast, if theMERS Mortgage is not used, the lender passes on to the borrowerapproximately $20.00 or more to record an assignment of a traditionalmortgage from the lender to another lender or to MERS, as nominee for

the lender, and usually additional document preparation fees to preparesuch assignment. (R. 60-62, 127).The MERS(R) System benefits title insurance companies by substantiallyreducing their risks in insuring title to mortgage liens because thetransfer of beneficial ownership of a mortgage loan is reflected in theMERS(R) System instantly at the time it occurs. In addition, the MERS(R)System eliminates the burden on title companies to arrange for therecording of *10 subsequent assignments of mortgage liens where MERS isalready the mortgagee. (R. 61, 216- 217).


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C. The Informal Opinion and Respondents' Incorrect Interpretation ofthat OpinionOn April 5, 2001, the Attorney General of the State of New York (Officeof the Solicitor General) issued the Informal Opinion which concluded,in response to an inquiry from the Nassau County Attorney, that:

Real Property Law 316 prohibits the Nassau County Clerk fromnaming MERS as mortgagee for the purposes of recording a mortgage whereMERS holds no legal interest in that mortgage.... [and that] [t]he Clerkmust record the mortgage under the name of the actual mortgagee. (R.68).The Attorney General did not afford Appellants an opportunity to beheard prior to, or after the rendering of the Informal Opinion. Indeed,the Attorney General refused to review the form of an actual MERSMortgage or consider any other information which Appellants offered toprovide. (R. 135-136, 144-145).The Attorney General did not direct or advise the Nassau County Clerk(or any other county clerk) to reject MERS Mortgages. Instead, asemphasized above, the Informal Opinion directed the Nassau County Clerkto record the MERS Mortgages. (R. 68). Respondents, however, have

misconstrued or wrongly extended the Informal Opinion, and, in doing so,have refused to record the MERS Mortgages and other MERS Instruments.The Informal Opinion itself relied upon the erroneous assumption thatMERS "holds no legal interest" in mortgages in which it is named. Asdemonstrated below and in the MERS Mortgages, MERS does hold a legalinterest in the MERS Mortgages.*11 Apart from relying upon an erroneous "informal opinion" which wasrendered without affording Appellants an opportunity to be heard,Respondents have caused irreparable harm by refusing to record validmortgage loan conveyances: mortgage loan closings in Suffolk County havebeen disrupted, causing consumers to cancel contract closings andreschedule mortgage loan transactions, creating unreliable loan closingin Suffolk County, causing MERS Members to abandon the MERS(R) System inNew York and causing MERS Members to purchase new non-MERS loan

documents and software. (R. 126-129). Notably, the Informal Opinionitself describes a two step process, by which a county clerk must firstaccept and record MERS Mortgages, and then index them against thelender. (R. 68-71).D. Procedural HistoryOn April 5, 2001, the New York Attorney General issued the InformalOpinion. (R. 68-71). Respondents have misconstrued the InformalOpinion, wrongly determining that it directs the State's county clerksto reject MERS Mortgages for recording. On April 17, 2001, RespondentSuffolk County Clerk issued a memorandum to "All Title Companies"directing that "our department will no longer accept instruments whereMERS is listed as the mortgagee or nominee of record unless MERS, infact, is the actual mortgagee." (R. 102). One week later, on April 24,

2001, Respondent Suffolk County Clerk issued a memorandum to "AllTitle/Insurance/Abstract Companies" which, again advised that "ourdepartment will no longer accept instruments where MERS is listed as themortgagee or nominee of record, unless MERS, in fact, is the actualmortgagee, 1' and also indicated that Respondent's ban on MERS Mortgageswould "become effective Tuesday, May 1, 2001," (R. 103).*12 In response to these directives from the Suffolk County Clerk,

Appellants' counsel wrote to Robert Cimino, Esq., Suffolk CountyAttorney, by letter dated April 26, 2001, wherein, among other things,counsel requested additional time on behalf of Appellants prior to the


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May 1, 2001 effective date of the Suffolk County Clerk, to providefurther information to both the Suffolk County Attorney, Suffolk CountyClerk, and the New York State Attorney General with respect to why MERSMortgages should be accepted for recording. (R. 104- 105, 135),Counsel's letter requested that Respondent Suffolk County Clerk"withdraw its directive, dated April 24, 2001, so that we may work withthe Attorney General and provide an appropriate response to the opinionthat has been rendered." (R, 105).In addition, because the Suffolk County Clerk indicated that theInformal Opinion was the basis for ceasing to accept MERS Mortgages forrecording, Appellants' counsel also contacted the New York State

Attorney General, Assistant Solicitor General, James Cole by letterdated April 26, 2001 to request additional time to review the issuespresented by the Informal Opinion. (R. 135,144-145).On April 27, 2001, Appellants' counsel followed up with a telephoneconversation with both James Cole, Esq., at the office of the AttorneyGeneral and with Robert Cimino, Esq., the Suffolk County Attorney.Notwithstanding Appellants' various efforts to obtain more time and topresent further information about MERS Mortgages to these two attorneys,they both refused to accommodate the requests contained in counsel'sletters, notably, so as to provide further time to accept MERS Mortgages

in Suffolk County, while their issues with MERS Mortgages could beanswered without judicial intervention. (R. 135-136).In light of the May 1, 2001 effective date of Respondents' directiveand Respondents' refusal to delay such effective date to review theissues with Appellants, Appellants had no *13 choice other than tocommence this proceeding, and did so on May 2, 2001 in Supreme Court,Suffolk County, by filing a Petition, and by obtaining an order to showcause, pursuant to Article 78 and CPLR 3001 for an order (i)determining and declaring that the MERS Mortgages submitted forrecording in the Suffolk County Clerk's Offices are lawful in allrespects and shall be accepted for recording by Respondents, and (ii)permanently enjoining Respondents from failing to perform theirstatutory duties to record the MERS Mortgages. (R. 50-67).On May 2, 2001, Supreme Court, Special Term (Bivona, J.), granted anorder to show cause, with temporary restraining order, which requiredRespondents to accept the MERS Mortgages presented for recording inSuffolk County, after hearing argument on Appellants' application forthe TRO from the parties' respective counsel. (R. 50-51,146-202). Thecase was thereafter assigned to the Hon. James M. Catterson, who on May15, 2001, vacated the TRO and denied Petitioners' motion for apreliminary injunction on the erroneous conclusion that Appellants hadno legal right to have the MERS Mortgages recorded in the Suffolk CountyClerk's Office. (R. 6-49).On May 22, 2001, Respondents filed Justice Catterson's bench ruling,which was embodied in the transcript of the oral argument held on May15, 2001 [R. 48], and served it on Appellants on May 23, 2001.

Appellants filed a notice of appeal from Justice Catterson's "So

Ordered" bench ruling in the Suffolk County Clerk's Office on May 25,2001, and served a notice of appeal on Respondents' counsel and the NewYork State Attorney General on May 25, 2001. (R. 4-5).On May 31, 2001, Justice Sondra Miller, Associate Justice of thisCourt, granted a Temporary Restraining Order to require Respondents toaccept mortgages and other instruments where MERS is named as themortgagee, as nominee for the lender, collectively the MERS *14Instruments, for recording. Justice Miller further ordered Respondentsto show cause why a preliminary injunction should not be issued pursuantto CPLR 5518 and 6301 enjoining Respondents from refusing to accept


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MERS Instruments and to compel performance of Respondent Suffolk CountyClerk's statutory duties to record conveyances of real propertyinterests.On June 19, 2001, this Court exercised jurisdiction over the appeal andissued an Order to require Respondents to accept such MERS Instrumentsfor recording through the earlier of this Court's disposition of theinstant appeal or the lower Court's disposition of the case on themerits. By the June 19, 2001 Order, this Court also denied Respondents'Cross-Motion to dismiss the instant appeal "as academic." To date, thelower Court has not disposed of the case and, therefore, this Court'sOrder requiring Respondents to accept MERS Instruments for recordingremains in full force and effect. A copy of this Court's Order datedJune 19, 2001 is attached hereto as Appendix A.Respondent Suffolk County Clerk's abrupt change in position and rush tojudgment over the MERS Mortgages and refusal to review the issues withcounsel should be viewed by this Court as inappropriate andunreasonable: Until April 27,2001, Respondent Suffolk County Clerk hadaccepted and recorded over 16,000 MERS Instruments, including 3,259"MOM" mortgages naming MERS, as nominee, as original mortgagee ofrecord, and 13,139 assignments of mortgages naming MERS, as nominee, asassignee of record under the mortgage. (R. 66-126). Indeed, counsel for

the New York City Register concurred that the Informal Opinion onlyreferred to indexing, not recording of the MERS Mortgages. (R. 138).Moreover, Appellants' counsel asked Respondents' counsel at the oralargument before Justice Catterson on May 15,2001 "to show where [theInformal Opinion says] do not record the *15 mortgage with MERS as themortgagee." (R, 10- 11). While Respondents' counsel did not answer thisquestion at that time, in the presence of Justice Sondra Miller on May31, 2001, Respondents' counsel, Richard C. Cahn, conceded that theInformal Opinion does not direct county clerks not to record MERSMortgages.

ARGUMENTA. Standard for Injunctive ReliefPreliminary injunctive relief is properly issued when necessary topreserve the status quo pending further proceedings on the underlyingproceeding. CPLR 6301. Preliminary injunctive relief should begranted where the movant demonstrates a likelihood of success on themerits, irreparable injury in the absence of injunctive relief, and afavorable balancing of the equities.Aetna Insurance Co. v. Capasso, 75N.Y.2d 860, 552 N.Y.S.2d 918 (1990); Randisi v. Mira Gardens, Inc., 272

A.D.2d 387, 707 N.Y.S.2d 204 (2d Dep't 2000); Larco Maintenance Co, v.Culkin, 255 A.D.2d 560,681 N.Y.S.2d 79 (2d Dep't 1998).Likelihood of success on the merits is properly demonstrated where "themoving party makes a prima facie showing of his right to relief; theactual proving of his case should be left to a full hearing on themerits." Tucker v. Tola, 54 A.D.2d 322, 326, 388 N.Y.S.2d. 475, 478 (4th

Dep't 1976). See also Gambar Enterprises, Inc. v. Kelly Services, Inc.,69 A.D.2d 297, 418 N.Y.S.2d 818 (4th Dep't 1979).These standards apply equally to municipal defendants. See Karl'sMariner Inn, Inc. v. Incorporated Village ofNorthport, 39 Misc.2d 951,242 N,Y.S.2d 297 (Sup. Ct. Suffolk County 1963); PhOlips v. Town ofClifton Park Water Authority, 243 A.D.2d 911, 662 N.Y.S.2d 867 (3d Dep't1997); and McCain v. Koch, 70 N.Y.2d 109, 517 N.Y.S.2d 918, 920 (1987)("There is no *16 question that in a proper case Supreme Court has poweras a court of equity to grant a temporary injunction which mandatesspecific conduct by municipal agencies.")


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B. Injunctiye Relief is Warranted Where a County Clerk Fails to PerformIts Statutory DutyInjunctive relief is especially apt where, as here, a party fails toperform statutory duties mandated by law, albeit the result of anerroneous interpretation of the Informal Opinion. CPLR 7803(1) Seealso Albany Medical Center Hospital v. Bresland, 47 Misc.2d 208, 262N.Y.S.2d 285 (Sup. Ct. Albany County 1965) (Article 78 proceeding isappropriate vehicle to compel performance of a duty specificallycompelled by law).Indeed, New York courts have compelled a county clerk to accept andrecord instruments in the county clerk's office. See, e.g., WestminsterHeights Co. v. Delany, 185 N.Y. 539 (1906) (affirming order of theSecond Department granting "motion for a preemptory writ of mandamus tocompel the defendant to accept and record certain deeds ofconveyance."); People v. Grifenhagen, 209 N.Y. 569 (1913) (affirming the"granting of a motion for a preemptory writ of mandamus to compel [theregister of the County of New York] to receive and record a certainmortgage which he had refused to record on the ground that the realtorhad not complied with the provisions of Section 256 of the Tax Law inregard to indeterminate mortgages."); People v. McQuade, 118 Misc. 785,

195 N.Y.S. 408 (Sup, Ct., Kings County 1922) (motion for mandamus tocompel the register to record a deed granted).The New York State Court of Appeals has recognized proceeding bymandamus to compel a county clerk to record mortgage instruments:

Had Mr. Franey, the county clerk, refused to record the mortgage inquestion, the mortgagor might then have proceeded by mandamus to compelthe recording of the *17 same and the question of the validity of thetax claim by Mr. Franey would be determined in such proceeding, and, inthat proceeding, the attorney-general would, if called upon, be requiredto defend the county clerk, and such has been the practice.People v. Woodbury, 213 N.Y. 51, 59-60 (1914).Thus, the lower Court erred in denying Appellants' motion for apreliminary injunction compelling the Suffolk County Clerk to record theMERS Mortgages. Moreover, this Court has already and recently reviewedthe lower Court's action with disfavor. On June 19, 2001, this Courtgranted Appellants' motion for a preliminary injunction pending theinstant appeal.C. Appellants jgavejJlstablished a Reasonable Probability of Success onthe Merits1. Mandamus to Compel the Suffolk County Clerk's Compliance with aPurely Ministerial Act Enjoined by New York State Law Is Warranted.a. Principles Governing a Mandamus to Compel.The Suffolk County Clerk has issued directives and notices that theMERS Mortgages will no longer be accepted for recording in SuffolkCounty. Aside from adopting an erroneous interpretation of the InformalOpinion, the Suffolk County Clerk's refusal to record MERS Mortgagesviolates Section 291 of the New York Real Property Law ("RPL"), andSection 525(1) of the New York County Law. These statutory provisionsconfer no discretion upon the Suffolk County Clerk when recordingmortgages. Instead, the recording role of the County Clerk is purelyministerial: the statutes at issue provide that duly acknowledgedconveyances "shall" be recorded by the County Clerk upon presentment ofthe document, and payment of the appropriate recording fee.


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*18 The New York State Court of Appeals, in Klostermann v. Cuomo, 61N,Y.2d 525, 539-540,475 N.Y.S.2d 247, 254-255 (1984), summarized NewYork law relating to a mandamus to compel a government official to actpursuant to state law as follows:

Traditionally, "mandamus lies to compel the performance of a purelyministerial act where there is clear legal right to the relief sought."The long-established law is that "while a mandamus is an appropriateremedy to enforce the performance of a ministerial duty, it is wellsettled that it will not be awarded to compel an act in respect to whichthe officer may exercise judgment or discretion,".

What must be distinguished, however, are those acts the exercise ofwhich is discretionary from those acts which are mandatory but areexecuted through means that are discretionary. For example, the decisionto prosecute a suit is a matter left to the public officer's judgmentand, therefore cannot be compelled. In contrast, when a town council isdirected by statute to designate up to four newspapers having thelargest circulation for the purpose of receiving city advertising, thecourt can compel the council to___execute its statutory! duty, but itmay not direct the particular papers to be named.

What has been somewhat lost from view is this function of mandamusto compel acts that officials are duty-bound to perform, regardless ofwhether they may exercise their discretion in doing so.

The general principle is that mandamus will lie against anadministrative officer only to compel him to perform a legal duty, andnot to direct how he shall perform that duty. (Emphasis added).(Quotations and citations omitted).Mandamus has been granted compelling county clerks to accept and recordmortgages, deeds, and other instruments. Indeed, the New York courtshave compelled county clerks to record instruments even where there is adispute concerning the tax owed, or the content of the instrument to berecorded. See, e.g., People v. Woodbury, 213 N.Y. 51, 59-60 (1914)("Had... the county clerk refused to record the mortgage in question,

the mortgagor might then have *19 proceeded by mandamus to compel therecording of the same and the question of the validity of the tax claimby [the county clerk] would be determined in such proceeding."); Peoplev. Grifenhagen, 209 N.Y. 569 (1913) (affirming a writ of mandamus tocompel a county to receive and record a mortgage which the county hadrefused to record on the grounds that the provisions of Section 256 ofthe Tax Law were not followed).Jn People v. McQuade, 118 Misc. 785, 195 N.Y.S. 408 (Sup. Ct. KingsCounty 1922), the Register refused to record a deed to real propertycontending that the acknowledgment before a master and chancery in theState of New Jersey did not satisfy the requirements of New York law.The court granted the application for a preemptory mandamus compellingthe county to record the deed and stated:

And this certificate, right or wrong, must be accepted bv ourrecording officers, since they are given no power to determine thecorrectness of its conclusion, assuming what is at least doubtful, thatrecording officers ordinarily possess the qualifications to such a task.(Emphasis added).The simple fact is, the Suffolk County Clerk lacks authority toquestion the validity of the documents it records, beyond thestatutorily prescribed, and narrowly drawn prerequisites for recording.b. New York Law Compels the Suffolk County Clerk to Record All Mortgages


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Presented to Him.By statute, the Suffolk County Clerk must accept MERS Mortgagespresented to him for recording. RPL 291 states:

A conveyance of real property within New York State... may berecorded in the office of the clerk of the county where such realproperty is situated, and such county clerk shall, upon the request ofany party, on tender of the lawful

*20 fees therefor, record the same in his said office. (Emphasisadded).In addition, Section 525(1) of New York County Law states that a countyclerk "shall perform the duties prescribed by law as register and heshall perform such additional and related duties as need be prescribedby law and directed by the board of supervisors." (Emphasis added).It is beyond dispute that RPL 291 is a mandatory direction by theLegislature to the Suffolk County Clerk that it must record mortgageinstruments presented to it for recording. As this Court clearly stated:

Sections 291 and 316 [of the RPL] impose upon the county clerk the

non-delegable duty of recording and indexing instruments affecting realproperty....Baccari v. DeSanti, 70 A.D.2d 198, 203, 431 N.Y.S.2d 829, 833 (2d Dep't1979). See also Putnam v. Stewart, 97 N.Y. 411, 416 (1884) (county clerkhas duty to record conveyance instruments in the words as presented tohim). (Emphasis added).The use of the word "shall" in RPL 291 and County Law 525(whi)his contained in Article 12 of the County Law) establishes that theSuffolk County Clerk's duty to record the MERS Mortgages is mandatory,hi Natural Resource Defense v. Department of Sanitation, 83 N.Y.2d 215,220-221, 608 N.Y.S.2d 957, 959 (1994), the Court of Appeals discussedthe import of the word "shall" when it is used in a statute, holding:

The use of the verb "shall" throughout the pertinent provisionsillustrates the mandatory nature of the duties contained therein. Theclear import of the words used is one of duty, not discretion....*21 Compare In Re Oracle, 123 A,D.2d 275, 568 N.Y.S.2d 506 (1st Dept.1986) which notes that New York statutory law at issue provided that thecity clerk "may" take action to correct documents, to the mandatory verb"shall" contained in the statutes at issue in this proceeding.In 1997, the New York State Attorney General issued an informalopinion, addressing the mandatory nature of the county clerks' recordingobligations:

Similarly, other provisions of the RPL direct the Clerk to fileinstruments offered for recording when accompanied by the proper fee.

See, e.g. [RPL] 291.

OP. Attorney General (Inf) 197-15 (a copy of which is attached heretoas Appendix B). Indeed, the Attorney General explained that thisobligation is not subject to any discretion:

Article 12 of the County Law does not authorize the county clerk toevaluate documents presented for filing to determine their validity. Ina prior opinion, we concluded that the County Clerk's duty under the RPLis to accept a deed for filing if it is submitted injrecordable form andthat the clerk is not authorized or required to ascertain the accuracy


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or veracity oL a deed. (Citing OP. AG (Inf) 196-38, which pertains toRPL 291)) (Emphasis added).Id. (A copy of Op. AG (Inf) 196-38, advising that the clerk may notquestion the accuracy of a deed presented for filing, is annexed heretoas Appendix C). See also 9 Warren's Weed New York Real Property (4thEd.), 7.02(1):

Upon the request of any party, the County Clerk or registrar mustrecord the conveyance of an interest in real property when theconveyance is presented with lawful fees, duly acknowledged, and incompliance with all applicable legal requirements. (Emphasis added).It is settled beyond cavil that a county clerk "shall perform theduties prescribed by law as register and he shall perform suchadditional and related duties as need be prescribed by law and directedby the board of supervisors." N.Y. County Law 525(1). (Emphasisadded), In *22 short, there is no "reasonable doubt or controversy" thatthe Suffolk County Clerk must comply with New York State law.Ass'n ofSurrogate and Supreme Court Reporters within the City of New York v.Bartlett, 40 N.Y.2d 571, 574, 388 N.Y.S.2d 882, 884 (1976). Appellantshave established a clear legal right to mandamus relief pending appeal.c. MERS Mortgages Are "Conveyances" within the Meaning of RPL 291.Pursuant to RPL 291, "a conveyance of real property" must berecorded by the County Clerk. The term "conveyance" is defined in RPL 290(3) as follows:

The term "conveyance" includes every instrument by which an estateor interest in real property is created, transferred, mortgaged orassigned... (Emphasis added).There can be no dispute that mortgages and assignment of mortgages are"conveyances of real property" within the meaning of RPL 291(3). "Amortgage is a conveyance within the recording statute and is entitled tobe recorded." 9 Warren's Weed 7.02(1).Moreover, the Court of Appeals, in Gibson v. Thomas, 180 N.Y. 483, 488(1905), has held:

Mortgages and assignments of mortgages are conveyances within theintendment of [the Recording Act]. That is clear from its language andis settled by authority. (Citation omitted).See also Finn v. Wells, 135 Misc. 53, 237 N.Y.S. 580 (Sup. Ct. TiogaCounty 1929) ("The assignment of the mortgage to plaintiffs was aconveyance within the meaning of Sections 290 and 291 of the RealProperty Law.)d. MERS Mortgages are "Mortgages" as Defined by New York Law.Pursuant to New York law, a "mortgage" must contain these elements:*23 (i) an agreement to convey an interest in property; and(ii) an intent that the interest in property act as security for the

payment of money or the doing of some prescribed act.W.L. Development Corp. v. Trifort Realty, Inc., 44 N.Y.2d 489, 406N.Y.S.2d 437, 442 (1978). See also People v. Prince, 110 Misc.2d 55, 441N.Y.S.2d 586 (Sup. Ct. Queens County 1981).The MERS Mortgages are uniform mortgage or security instruments


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approved by Fannie Mae and Freddie Mac. The MERS Mortgages are used bynumerous mortgage lenders in New York State. The fact that the MERSMortgages create an interest in real property is clearly demonstrated inthe MERS Mortgages:

I [Borrower] mortgage, grant and convey the Property to MERS (solelyas nominee for Lender and Lender's successors in interest) and itssuccessors in interest subject to the terms of this Security Agreement.

I [Borrower] understand and agree that MERS holds only legal titleto the rights granted by me in this Security Instrument, but, ifnecessary to comply with law or custom, MERS (as nominee for Lender andLender's successors and assigns) has the right:

(A) to exercise any or all of those rights, including, but notlimited to, the right to foreclose and sell the Property; and

(B) to take any action required of Lender including, but not limitedto, releasing and canceling this Security Instrument.

I [Borrower] give MERS (solely as nominee for Lender and Lender'ssuccessors in interest) rights in the Property described in (A) through(G) below:*24 (R. 110).The critical significance of this conveyance is that the Borrower has,as part of the security, first designated MERS as the mortgagee to themortgage contract, and second, conveyed specific rights and powers toMERS to act with respect to the security interest.Although the MERS Mortgages appear different than the traditionalmortgage in which only the borrower and the lender have been identified,in New York, a mortgage is a contract, which the parties may adapt tomeet the needs of the particular transaction. Williams v. WisnerBuilding Co., 121 Misc. 32, 200 N.Y.S. 802, aff'd, 208 A.D. 783, 203N.Y.S. 959 (1st Dep't 1924). See also W. L. Dev. Corp., 44 N.Y.2d 489,406 N.Y.S.2d at 442 ("A mortgage [is] an agreement.... [and] requires no

specific statutory authorization to be valid...."). Moreover, New Yorklaw does not prevent a mortgagor from pledging his property to more thanone party in the security instrument:

"Mortgagee" means (i) the current holder of the mortgage of recordor the current holder of the mortgage, or (ii) any person to whompayments are required to be made, or (iii) then: personalrepresentatives, agents, successors, or assigns. (Emphasis added.)New York Real Property Actions and Proceedings Law ("RPAPL") 1921(9)(a).Whether MERS is identified as the "mortgagee" or the "nominee" (thatis, the "agent") for the lender in a mortgage instrument, MERS fitssquarely within the RPAPL 1921(9)(a) definition of "mortgagee" (a

person with a legal interest in the security instrument), because themortgagor has named MERS as the "holder of the mortgage of record," orin the role of "nominee" or "agent" for the lender.It is well settled in New York that where a mortgage is signed by themortgagor, delivered to and accepted by the mortgagee, or its agent, themortgage constitutes a valid *25 contract and security or lien. Munoz v.Wilson, 111 N.Y. 295 (1888); Wood v. Travis, 231 A.D. 331, 248 N.Y.S.2d22 (3d Dep't 1931). The recording of a mortgage is presumptive evidenceof delivery by the mortgagor and acceptance by the mortgagee. Preston v.

Albee, 170 A.D. 89, 105 N.Y.S. 33 (1st Dep't 1907).


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Indeed, MERS' status as a "nominee" is a common occurrence in New Yorklaw. Individuals frequently confer rights to a "nominee," "agent,""fiduciary," or "trustee" to enable that individual to act on theirbehalf. A "nominee" is defined as one designated to act for another inhis or her place or one designated to act for another as hisrepresentative in a rather limited sense. Black's Law Dictionary727(6th ed. 1991). Nominees are often used by institutional investors insecurities registration, which allow the investor to avoid onerousrequirements of establishing the right of registration by a fiduciary.Id. In fact, RPL 275(2)(a) expressly recognizes the commercialpractice of lenders selling mortgages in the secondary market, as wellas the practice of designating "nominees" as representatives in mortgageloan transactions.The validity of nominees in real property transactions has beenroutinely upheld in New York. For example, in In Re Cushman Bakery, 526F.2d 23, 30 (1st Cir.) (citing New York law), cert, denied, 425 U.S. 937(1976), the court noted:

... it is clear that the recording of the real estate mortgages andfinancing statements was entirely proper despite the fact that Bakers,as Seaboard's nominee, rather than Seaboard, as the principal creditor,

was named as the mortgagee and secured party. The use of a nominee inreal estate transactions and as mortgagee in a recorded mortgage haslong been sanctioned as a legitimate practice. (Citations omitted),(emphasis added).Indeed, the use of a nominee or agent as a representative of themortgagor or the mortgagee has long been upheld in New York. See, e.g.,

Amherst Factors, Inc. v. Kochenburger, *26 4 N.Y.2d 203, 173 N.Y.S.2d570, 573 (1958); Mutual Life Ins. Co. v. Nichols, 144 A.D. 95, 128N.Y.S. 902 (1st Dep't 1911); In Re Fried Furniture Corp., 293 F.Supp. 92(E.D.N.Y. 1968), aff'd, 407 F.2d 360 (2d Cir. 1969). The use of anominee is also recognized under the Uniform Commercial Code. See, e.g.,Industrial Packaging Products Co. v. Fort Pitt Packaging International,Inc., 399 Pa. 643, 161 A.2d 19, 21 (1960).In the MERS Mortgage, the lender discloses that MERS is acting as itsmortgagee and as mortgagee for its successors and assigns. While thisdisclosure is not necessary to establish the validity of the mortgage,it is done openly to facilitate transfers of interests in the secondarymortgage market. Even without such disclosure New York courts haveenforced real estate contracts with nominees. For example, a judgment ofspecific performance was granted to a purchaser who entered into acontract for the sale of real estate with an individual who held himselfout as having authority to make the sale even though the property wasowned by a corporation. The court held that the corporation, asundisclosed principal, was bound by the individual shareholder's actionsand the consent of other shareholders. Kursh v. Verderame, 87 A.D.2d803, 449 N.Y.S.2d 500 (1st Dep't 1982). See also Bhutta RealtyCorporation v. Sangetti, 165 A.D.2d 852, 560 N.Y.S.2d 315 (2d Dep't1990).Likewise, it is a fundamental principle that the courts, much lesscounty clerks, should not interfere with the contractual rights setforth in a mortgage agreement:

To treat this mortgage as a mechanic's lien, as the AppellateDivision did, would constitute an impairment of the obligations of thecontract that the parties chose to make. Absent clear statutoryauthorization to do so, the court should not interfere with such rights.W. L. Dev. Corp., 406 N.Y.S.2d at 442.


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*27 MERS' relationship with its member lenders is that of agent andprincipal. This is a fiduciary relationship, which results from themanifestation of consent of one person to allow another to act on hisbehalf and subject to his control, and consent by the other to so act.The principal is the one for whom action is to be taken, and the agentis the one who acts. Restatement (Second) of Agency l(b)(c), 1958.See also Maurillo v. Park Slope U-Haul, 194 A.D.2d, 142, 146, 606N.Y.S.2d 243 (2d Dep't 1993); and Cabrera v. Jakabovitz, 24 F.3d 372 (2dCir. 1994), cert, denied, 513 US 876 (1994). An agency relationship maybe established by conduct, oral agreement or a written instrument. Heinev. Papp, 97 A.D.2d 929, 471 N.Y.S.2d 18 (3d Dep't 1983). An agent may beappointed to do the same acts and to achieve the same legal consequencesas if the principal had himself personally acted, except as to actswhich by their nature, by public policy, or by contract require personalperformance or acts which are illegal. Central Trust Co. v. Sheahen, 66

A.D.2d 1015,411 N.Y.S.2d 741, 743 (4th Dep't 1978).An agreement entered into by an agent pursuant to authority granted bythe agency agreement or by instruction of the parties is valid andenforceable. 99 Commercial Street Inc. v. Goldberg, 811 F.Supp. 900, 906(S.D.N.Y. 1993). One form of an agency agreement, a power of attorney,may take any form "desired by the parties concerned" Gen. Obi. Law 5-

1501(1). Indeed, the public policy of New York requires that there beliberal use and judicial recognition of the efficacy of powers ofattorney.Arens v. Shainswitt, 37 A.D.2d 274, 324 N.Y.S.2d 321 (1stDep't 1971), aff'd, 29 N.Y.2d 663, 324 N.Y.S.2d 954. Powers of attorneyare governed by general principles of agency. See, e.g., Cymbol v.Cymbol, 122 A.D.2d 771, 505 N.Y.S.2d 657 (2d Dep't 1986).MERS is appointed "nominee" by the lender, as a MERS Member, in awritten agreement. Pursuant to the MERS-Lender Agreement, MERS is themortgagee and appointed as *28 nominee for the lender and is givenspecific rights and duties to act with respect to the mortgage andmortgaged property. (R. 56-57),D. In Suffolk County, the MERS Mortgages Have Been Enforced inForeclosure ActionsAs of April 27, 2001, there were 976 foreclosure proceedings pending inNew York in the name of MERS, and MERS had proceeded to judgment on 185of these cases. None of such proceedings had been dismissed. (R. 128).Of necessity, each of the courts considering these matters has passed onthe issue of MERS' legal interest in the mortgage documents at issue,and perforce, concluded that MERS had the lawful right to foreclose eachsuch MERS Mortgage and extinguish the property owners' equity right ofredemption.E. The Suffolk County Clerk Misconstrued the Informal OpinionThe Suffolk County Clerk read the Informal Opinion as prohibiting itfrom recording the MERS Mortgages. However, a plain reading of theInformal Opinion warrants the conclusion that it was advising as to the

indexing (RPL 316), not the recording (RPL 291) of the MERSMortgages. This construction is consistent with New York law.Klosterman, 61 N.Y,2d at 539-540,475 N.Y.S.2d at 254-255.In the Informal Opinion, the Assistant Solicitor General advises(rather than "determines," or "rules") that indexing MERS as the"mortgagee" upon recording the MERS Mortgages, violates the terms of RPL 316(the)statute governing indexing of mortgages). In fact, the

Assistant Solicitor General reiterates the fundamental rule regardingthe clerk's obligation to record the MERS Mortgages:


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Under New York Real Property Law, a County Clerk 'shall' record a'conveyance of real property' upon the *29 'request of 'any party,' solong as that conveyance has been 'duly acknowledged by the personexecuting the same,' or approved and certified as required. N.Y. RealProp. Law 291(McK) nney's 1989 & Supp. 2000).Each of these recording elements, under RPL 291 has been met: theMERS Mortgages are conveyances of real property, presented for recordingwith a duly executed signature of the borrower, and tender of therequisite recording fee.Nowhere in the Informal Opinion does the Assistant Solicitor Generalinstruct the Suffolk County Clerk to refuse to record the MERSMortgages. Indeed, Appellants' counsel asked Respondents' counsel at theoral argument before Justice Catterson on May 15, 2001 "to show where[the Informal Opinion says] do not record the mortgage with MERS as themortgagee." (R. 10-11). While Respondents' counsel did not answer thisquestion at that tune, in the presence of Justice Sondra Miller on May31, 2001, Respondents' counsel Richard C. Cahn' V conceded that theInformal Opinion does not direct county clerks not to record MERSMortgages.1. Even if it were Interpreted Correctly, the Informal Opinion was Not

Entitled to Deference by the Lower CourtAlthough New York Courts have extended varying degrees of judicialdeference to an interpretation of a statute made by an entity chargedwith implementing it, the Informal Opinion was not ehtitled totieference by the lower court, because his office is not charged withimplementing the Recording Act. In Matter of Claim ofGruber, 89 N,Y.2d225,231,232, 652 NrY.k-2d 589, 593 1996), the New York State Court of

Appeals discussed the standard of review when interpreting a statestatute, as follows:

By contrast, where "the question is one of pure statutory readingand analysis, dependent only on accurate *30 apprehension of legislativeintent, there is little basis to rely on any special competence orexpertise of the administrative agency." In such circumstances, the

judiciary need not accord any deference to the agency's determination,and is free to ascertain the proper interpretation from the statutorylanguage and legislative intent, (quotations and citations omitted.)The issues presented in this proceeding involve questions of purestatutory interpretation. As such, "there is little basis to rely on anyspecial competence or expertise of the [Attorney General]." Id. See alsoMatter of Town ofBrookhaven v. New York State Board of Equalization and

Assessment, 88 N.Y.2d 354, 360, 645 N.Y.S.2d 436, 440 (1996) ("Sincematters of statutory construction and interpretation are particularlywithin the competence of the judiciary and present pure questions oflaw, we are not limited to determining whether [the agency's]determination was rational on this appeal.")When ruling on the interpretation of state law, the New York State

Court of Appeals has cautioned lower courts:

[C]ourts should be extremely hesitant in interpolating their notionsof policy in the interstices of legislative provisions. Courts areconstitutionally bound to give effect to the expressed will of theLegislature and the plain and obvious meaning of a statute is alwayspreferred to any curious, narrow or hidden sense that nothing but astrained interpretation of legislative intent or discern.Fingeflakes Racing Ass'n v. New York State Racing, 45 N.Y.2d 471, 479-480, 410 N.Y.S.2d 2,68,272-273 (1978) (citations omitted).


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Moreover, Section 129(b) of Statutes provides, in pertinent part:

Courts should not blindly follow the rulings of executive oradministrative officers in construing statutes, and a practicalconstruction by such officers should not be followedwherethe statute isunambiguous, (Emphasis in original).*31See also American Telphone & Telgraph Co, v. State Tax Com 'n, 61N.Y.2d 393, 474 N.Y.S.2d 434 (1984) ("Finally, an opinion of the

Attorney-General is an element to be considered but is not binding onthe courts"); Nelson v. New York State Civil Ser, Com'n, 96 AD.2d 132,469 N.Y.S.2d 224, 225 (3d Dep't 1983) ("Because we interpret Section131(Sub). 4) of the Civil Service Law in a manner different than the

Attorney General, reversal is warranted and the petition must bedismissed.").Moreover, the "long continued course of action by [Suffolk County andother county courts throughout New York State in enforcing MERSMortgages in foreclosure actions] is entitled to great weight unlessmanifestly wrong." Section 129(a) of Statutes.F. Irreparable HarmAppellants, consumers, mortgagors, homeowners, title insurers,financial institutions participating in the MERS(R) System, and thesecondary mortgage market will suffer irreparable harm if Respondentsare allowed to continue to misinterpret the Informal Opinion and refuseto record the MERS Mortgages and MERS Instruments.1. Harm to the Public.As is explained in the affidavit of Sharon McGann Horstkamp, Esq.,Appellants' Vice-President and Corporate Counsel [R. 125-130], theRespondent Suffolk County Clerk's abrupt refusal to record MERSMortgages would have immediately adversely impacted homebuyers whoseMERS Mortgages were "in the pipeline," had Supreme Court Justice John C.Bivona not enjoined the Clerk's actions by granting a temporary

restraining order on May 2, 2001 (R. 50-51) and this Court's issuance ofan Order on June 19, 2001 requiring the Suffolk County Clerk to *32accept for recording all MERS Instruments. Those deals would have neededto have been restructured with new financing, different interest ratesand different closing dates, Homebuyers relying on the funds theyexpected to receive from the closing of deals involving the MERSMortgages may have defaulted on their purchases because of theunavailability of funds; travel plans by out-of-town buyers would havehad to have been rearranged, as would arrangements made with movingcompanies. (R. 126-128),Respondents' harm to the public is further explained in the affidavitof Joanne Moore, Vice-President of GMAC Mortgage [R. 219-220], asfollows:

The Suffolk County Clerk's prior actions of refusing to accept MERSdocuments for recording and the threat that the TRO may be vacated hascaused some closing agents to refuse to accept our MERS version of theSecurity Instrument. This refusal usually occurs at the settlementtable, thereby, affecting our relationship with our new customers. Whilethe new customer is sitting at the table ready to sign the mortgagedocuments, the closing agents have called up GMAC Mortgage to inform usthat they refuse to close the loans on the MERS documents. The newcustomer is left sitting at the closing table wondering if the loan isgoing to close that day. We had more than ten fundings last week [theweek of April 30, 2001] where this situation occurred in Suffolk County,


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On one occasion, the Title Company would not complete the fundingtransaction unless GMAC Mortgage allowed an endorsement to the TitlePolicy that read that the title company will not insure against loss ifclosed on a MERS mortgage, (R. 220).Title companies that have insured the MERS Mortgages will have tocancel, and rewrite policies, causing further delays in closing dates.(R. 127, 132, 215- 218).Refusal to accept and record the MERS Mortgages will cause an immediateissue among creditors as to priority claims and may result in juniorlien creditors attempting to negate the *33 MERS Mortgages, (R. 127).This would defeat one of the primary purposes of the recording statute,which is to establish priority among lienholders.2. Harm to MERS.Over 3,220 counties across the United States in all fifty states andthe District of Columbia have recorded MERS Mortgages. (R. 62).The nationwide MERS(R) System will be put at great risk as a result ofthe action by the Suffolk County Clerk, because MERS members (includingprimary mortgage lenders who grant residential mortgages to consumers

and sell such mortgages in the secondary mortgage market to buyers, suchas Fannie Mae and Freddie Mac), will be unable to market the MERSMortgages on the secondary market if they cannot be recorded in theSuffolk County Clerk's office. If MERS members cannot sell theirmortgages in the secondary market, then the very reason for membershipin the MERS(R) System will be abrogated, which will put MERS out ofbusiness in New York, and elsewhere. (R. 129). This disruption in thesecondary mortgage market and interstate commerce is unwarranted, evenfor one day, and a court of New York State should not give it approval,without a full and fair hearing on the merits. The New York Legislatureand Courts recognize "the commercial practice of lenders trading orselling mortgages on the secondary market," RPL 275(2)(a). See also,Harris v. Crossland Mortgage Corp., 160 Misc.2d 520, 610 N.Y,S.2d 423,425 (Dist. Ct. Nassau Co. 1994); In Re Stockbridge Funding Corp., 145 B.R. 797 (Bankr. S.D.N.Y. 1992). The MERS(R) System will no longer be able

to facilitate this practice. MERS Member lenders will leave the MERS(R)System altogether, rather than using two different document preparationsystems depending on whether a particular New York State county does ordoes not accept MERS Mortgages (R. 129).*34 In Karl's Manner Inn, 39 Misc.2d 951, 242 N.Y.S.2d 297 (Sup. Ct.Suffolk County 1963), the New York State Supreme Court, Suffolk County,granted the application of a restaurant to restrain the enforcement ofan ordinance prohibiting egress of motor vehicles. In its applicationfor a preliminary injunction, the restaurant owners asserted that theordinance made it more difficult for its customers to find theirrestaurant. Although the ordinance merely required vehicles travelingfrom a certain direction to travel an additional 1.64 miles, thisdistance posed particular problems for a "stranger trying to find hisway in the night-time around the circuitous route." Although the

restaurant owners did not use the buzzwords "irreparable harm" in theirapplication, nor did they explicitly set forth the manner in which theywould be irreparably harmed if a preliminary injunction was not issued,the court imposed a preliminary injunction finding:

If plaintiff loses customers because of this ordinance, it has beenirreparably damaged. Sufficient cause has been shown in the movingpapers to indicate a loss, actual or threatened, of some patronage.242 N.Y.S.2d at 300.


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Injunctive relief in this proceeding is even more compelling than inKarl's Mariner Inn. In Karl's Mariner Inn, the Town's ordinance onlymade it more difficult for customers to patronize the restaurant. Inthis matter, Appellants face the prospect of the demise of an efficientand reliable nationwide system, established and promoted byapproximately 240 members, including Fannie Mae and Freddie Mac. (R. 54-55).G. Balance of EquitiesThe public harm and harm to the Appellants and its members to besuffered far exceeds any possible harm or inconvenience to Respondents.Respondents, on the other hand, can point *35 to no real prejudicecaused by complying with existing statutes. Moreover, the fact thatRespondents have recorded numerous of the MERS Instruments (in excess of16,000; see R. 62, 126), and have knowingly recorded the MERS Mortgagesafter Respondents' receipt of the Informal Opinion, further demonstratesthat Respondents will not be prejudiced by the imposition of injunctiverelief. Supreme Court Justice John C. Bivona recognized this fact whenhe granted Appellants' application for a Temporary Restraining Order onMay 2, 2001 [R. 50-51], after a review of Appellants' papers and afterhearing oral argument from Appellants' and Respondents' respectivecounsel. (R. 146-202).The lower Court (Justice Catterson) vacated the May 2, 2001 temporaryrestraining order issued by Justice Bivona and denied Appellants' motionfor a preliminary injunction on May 15, 2001, almost six (6) weeks afterthe issuance of the Informal Opinion. The fact that as of May 15, 2001,none of the New York States' other County Clerks (including the New YorkCity Register), other than Respondent Suffolk County Clerk, had electednot to record the MERS Mortgages, also demonstrates that injunctiverelief is proper, (see R. 136, showing that as of the commencement ofthis proceeding, Appellants' counsel had contacted other county clerks,notably Erie County, Genesee County, Monroe County, Albany County andthe New York City Register.) In its analysis of the "balancing ofequities" prong of the test for a preliminary injunction in the Karl'sMarinercase, discussed supra, the court found the followingsignificant:

The ordinance to date has not been given maximum enforcement and afurther short delay will not jeopardize its future enforcement if it isupheld as to the plaintiff. Thus, the question answers itself.242N.Y.S.2dat301.*36 Moreover, the refusal by the Suffolk County Clerk to accept theMERS Mortgages results in a troubling inconsistency, not only withrespect to other counties throughout the State, but also with respect tothose within the Second Department.Finally, unless the injunction issued by this Court on June 19, 2001pending the instant appeal is effectively continued in the lower Courtfollowing disposition of the appeal, the enforceability of the MERS

Mortgages already recorded in Suffolk County and elsewhere in New Yorkwill be called into question.H. The Lower Court (Catterson, J.) Erred in Vacating the TemporaryRestraining Order and Refusing to Grant a Preliminary Injunction Pendinga Final Determination of this Case1. The Lower Court Improperly Interjected its own Notions of PublicPolicy,As set forth throughout this brief, Appellants have established a


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"clear legal right" to the mandamus relief requested. New York lawmandates that a county clerk record mortgages that are presented, uponpayment of the requisite fee. The lower court (Catterson, J.), rendereda determination inconsistent with New York law, including precedentestablished by the New York State Court of Appeals. The lower Court alsoadopted Respondents' erroneous interpretation of the Informal Opinion.In so doing, and as is made abundantly clear in the transcript of theproceedings [R. 7-49], the lower Court erroneously, and improperly"interpolated] [its] notions of public policy in the interstices oflegislative provisions." Fingerlakes Racing Ass 'n, 45 N. Y.2d at 479-480.Notably, the statutes at issue in this application are unambiguous, andrequire the Suffolk County Clerk to record the MERS Instruments. Insteadof enforcing the clear statutory mandate of the New York StateLegislature, the lower Court improperly characterized the MERS(R) *37System as a "private recording system" intended to supplant the countyclerk's functions, and denied the application for a preliminaryinjunction. (R, 22-25). The MERS(R) System is an information service toits members, and was not designed to, nor does it function as areplacement or "privatization" of the County Clerk's role in the publicrecording process.The MERS(R) System is no more a threat to the public recording systemthan is the electronic tracking systems of the automobile industry. Aswith the MERS Mortgages, the automobile companies track the history of agiven vehicle, by way of the vehicle's identification number ("VIN").For example, if a consumer had a question concerning the service historyof a particular Ford car, the consumer could call Ford Motor Company,provide it with the VIN, and obtain the necessary information. By nomeans does this "tracking system" interfere with, or supplant therequirement of New York law with respect to the registration of avehicle in the county clerk's office and Department of Motor Vehicles.In the same way, the MERS "MIN" number does not interfere withrecordation of mortgages in the county clerk's office.The MERS Mortgages must always be recorded in the local county clerk'soffice. The MERS(R) System merely confers additional benefits, as

discussed more fully above. Since the MERS Mortgages must always berecorded, the lower court's concerns regarding "privatization" wereunfounded.Likewise, as is more fully explained in the Affidavit of DanielMcLaughlin, Executive Vice-President of Appellant MERSCORP, Inc.,extensive procedures and precautions have been developed to ensure thereliability and uninterrupted operation and security of the MERS(R)System. (R. 207-208).*382. The Lower Court Improperly Refused to Consider AffidavitsSubmitted by Appellants on May 11, 2001.On May 2, 2001, Appellants commenced the instant action and filed andserved (by hand delivery) the May 2, 2001 TRO and the motion for a

preliminary injunction on Respondents' counsel. Although the May 2, 2001TRO scheduled the hearing on the preliminary injunction application forMay 14, 2001 [R. 51,221], on May 10, 2001, counsel for the partiesstipulated to adjourn the return of the hearing to May 15, 2001 topermit Appellants time to receive and review Respondents* oppositionpapers in accordance with Justice Bivona's Order. (R. 221). On May 11,2001, Appellants submitted and served (by facsimile) the following shortaffidavits in further support of their motion for a preliminaryinjunction: The affidavit of Joanne Moore, consisting of two (2) pages and


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describing the harm which Respondents' actions have caused lenders andconsumers. (R. 219- 220). The affidavit of James Maher, consisting of four (4) pages and

describing the harm which Respondents* actions have caused the titleindustry. (R. 215- 218). The affidavit of Daniel McLaughlin, consisting of two (2) pages (and

a six (6) page attachment) and describing the safety and securitymeasures MERS has implemented to maintain the integrity of the MERS(R)System. (R. 207-208). The affidavit of R. K. Arnold, consisting of four (4) pages and

describing establishment of the MERS(R) System. (R. 203-206).These affidavits are very brief, consisting in the aggregate of twelve(12) pages in length. Despite this brevity, they are very pertinent tothe underlying action and would have assisted the lower Court in rulingover Appellants' application. Most notably, the lower Court's unfoundedconcerns over Appellants' purported "privatization" of the publicrecording system and related concerns over the security of the MERS(R)System is fully addressed in the two page McLaughlin affidavit which thelower Court refused to read or otherwise consider. (R. 44).*39 Appellants' counsel submitted a letter to the lower Court andRespondents' counsel along with the aforementioned affidavits,explaining the difficult circumstances of the late filing and requestingthat these affidavits be accepted and considered by the Court, asfollows:

Late in the afternoon on April 27, 2001 [Friday], we learned fromSuffolk County Attorney Robert Cimino that Suffolk County would notprovide our client an opportunity or any time to address the CountyClerk's directive to stop accepting mortgages where MERS is named themortgagee as of May 1, 2001, Accordingly, we moved expeditiously overthe weekend and on Monday, April 30, 2001 to prepare an order to showcause and application for a temporary restraining order to enjoin theCounty Clerk from implementing such directive. Given the great and

irreparable harm that the County Clerk had already and would impose onour client and consumers in Suffolk County, we simply did not haveenough time to prepare and obtain the affidavits we now request that youaccept and review.

These affidavits are very germane to this proceeding and demonstratethe key role MERS serves in the secondary mortgage market [R. 203-206],how the title insurance industry supports and relies on MERS Mortgages[R., 215-218] and the harm that would befall, for example, GMAC MortgageCompany [R. 219-220] if it cannot use MERS Mortgages. In addition, theaffidavit of Daniel McLaughlin [R. 207-208] demonstrates the safety andsecurity measures MERS has implemented to maintain the integrity of theMERS(R) System.(R. 221-222).Despite claims to the contrary [R. 223-224], Respondents' counsel had asufficient opportunity to consider and respond to Appellants' May 11,2001 submission prior to the May 15, 2001 return date. Moreover,Respondents' counsel admitted to having reviewed the Appellants' four(4) affidavits at the oral argument before Justice Catterson. (R. 44).

As previously stated, these affidavits consist of only twelve (12) pagesof text in the aggregate and *40 the Moore and Maher affidavits [R. 215-220] merely expand upon points already contained in the affidavit ofSharon McGann Horstkamp, dated April 27, 2001 [R. 125-130] and submittedas part of the original motion. [FN4] The lower Court abused its


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discretion in rejecting Appellants' affidavits and should haveconsidered them at the May 15, 2001 return date or adjourned such returndate. Appellants' counsel's letter [R. 221-222], as quoted in partabove, demonstrates both the reason for the delay in submitting theaffidavits and their merit. The lower Court erred in not eitheraccepting them or adjourning the motion. CPLR 2004; Presutti v. Suss,254 A.D.2d 785,678 N.Y.S.2d 187 (4th Dep't 1998).

FN4. The Moore and Maher affidavits demonstrate the harmRespondents' actions are causing Appellants, consumers and the titleindustry. To the extent, however, that this Court rejects the Moore andMaher affidavits, Appellants will have nonetheless addressed the issueof harm by way of the Horstkamp affidavit as reproduced in the record on

Appeal at pages 125-130, The Moore and Maher affidavits expand on pointsalready made in the Horstkamp affidavit.

*41CONCLUSIONBased on the foregoing, it is respectfully submitted that the Order ofthe lower Court vacating the May 2, 2001 temporary restraining order anddenying Appellants' motion for a preliminary injunction should bereversed with a direction that an injunction be issued pending the finaldisposition of this case to require the Respondents to accept forrecording and indexing all MERS Instruments in the Office of the SuffolkCounty Clerk.Appendix not available.

Documents

MERSCorp v Romaine Appellants Brief 21 Nov 2001