1 

RECOMMENDED FOR FULL-TEXT PUBLICATION 

Pursuant to Sixth Circuit I.O.P. 32.1(b) 

File Name: 15a0153p.06 

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT 

_________________ 

LARRY HIGGINS, W. GLENN PERRY, JUANITA 

BUCKHALTER CLARKE, SHEILA H. BAKER, RHONDA 

A. DAY, DAVID NADEAU, and MARTHA MEGREDY, 

Plaintiffs-Appellees, 

v. 

BAC HOME LOANS SERVICING, LP, BANK OF 

AMERICA, N.A., JPMORGAN CHASE BANK, N.A.,

U.S. BANK, N.A., and WELLS FARGO BANK, N.A. 

(14-6168); FEDERAL NATIONAL MORTGAGE 

ASSOCIATION and FEDERAL HOUSING FINANCE 

AGENCY (14-6167), 

Defendants-Appellants. 

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Nos. 14-6167/6168 

Appeal from the United States District Court 

for the Eastern District of Kentucky at Lexington. 

No. 5:12-cv-00183—Karen K. Caldwell, Chief District Judge. 

Argued: April 30, 2015 

Decided and Filed: July 16, 2015 

Before: MERRITT, BOGGS, and ROGERS, Circuit Judges. 

_________________ 

COUNSEL 

ARGUED: Michael A.F. Johnson, ARNOLD & PORTER LLP, Washington, D.C., for 

Appellants in 14-6167. Thomas M. Hefferon, GOODWIN PROCTER LLP, Washington, D.C., 

for Appellants in 14-6168. Carroll M. Redford, III, MILLER, GRIFFIN & MARKS, P.S.C., 

Lexington, Kentucky, for Appellees. ON BRIEF: Michael A.F. Johnson, Howard N. Cayne, 

Asim Varma, Dirk C. Phillips, ARNOLD & PORTER LLP, Washington, D.C., Jill L. Nicholson, 

FOLEY & LARDNER LLP, Chicago, Illinois, for Appellants in 14-6167. Thomas M. Hefferon, 

Joseph F. Yenouskas, GOODWIN PROCTER LLP, Washington, D.C., Richard A. Vance, 

Bethan A. Breetz, STITES & HARBISON, PLLC, Louisville, Kentucky, Dustin E. Meek, 

TACHAU MEEK PLC, Louisville, Kentucky, Elizabeth Frohlich, MORGAN LEWIS & 

>
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 2

BOCKIUS LLP, San Francisco, California, Allyson N. Ho, MORGAN LEWIS & BOCKIUS 

LLP, Dallas, Texas, for Appellants in 14-6168. Carroll M. Redford, III, David T. Faugh, 

Elizabeth C. Woodford, MILLER, GRIFFIN & MARKS, P.S.C., Lexington, Kentucky, J.D. 

Kermode, ATKINSON, SIMS & KERMODE PLLS, Lexington, Kentucky, for Appellees. 

_________________ 

OPINION

_________________ 

 ROGERS, Circuit Judge. Kentucky’s recording statutes require that an assignment of a 

mortgage must be recorded within 30 days. Plaintiffs in this putative class action contend that, 

for purposes of the recording requirement, a transfer of a promissory note is an assignment of a 

mortgage securing the note, such that the transfer must be recorded. The district court below 

agreed and issued an order to that effect, but certified the order for interlocutory appeal, which 

we granted. Notwithstanding the thoughtful opinion of the district court, the text, structure, and 

purposes of Kentucky’s recording statutes indicate that transfer of a promissory note is not, by 

itself, an assignment of a mortgage securing the note. Our resolution of that question makes it 

unnecessary to resolve the companion interlocutory appeal before us regarding whether the 

applicable enforcement provision of Kentucky’s recording statutes imposes a “penalty” of the 

sort from which defendant Federal National Mortgage Association is immune under federal 

statute. 

These appeals arise in the context of the widespread use of the Mortgage Electronic 

Registration System (“MERS”), “a privately-held company that operates a national electronic 

registry to track servicing rights and ownership of mortgage loans in the United States.” 

Christian Cnty. Clerk ex rel. Kem v. Mortg. Elec. Registration Sys., Inc., 515 F. App’x 451, 452 

(6th Cir. 2013). We have previously summarized MERS’s operations as follows: 

When a home is purchased, the lender obtains from the borrower a promissory 

note and a mortgage instrument naming MERS as the mortgagee (as nominee for 

the lender and its successors and assigns). In the mortgage, the borrower assigns 

his right, title, and interest in the property to MERS, and the mortgage instrument 

is then recorded in the local land records with MERS as the named mortgagee. 

When the promissory note is sold (and possibly re-sold) in the secondary 

mortgage market, the MERS database tracks that transfer. As long as the parties 

involved in the sale are MERS members [as are most large financial institutions], 
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 3

MERS remains the mortgagee of record (thereby avoiding recording and other 

transfer fees that are otherwise associated with the sale) and continues to act as an 

agent for the new owner of the promissory note. 

Id. (quoting In re MERS Litig., 659 F. Supp. 2d 1368, 1370 n.6 (J.P.M.L. 2009)). 

Plaintiffs are landowners who obtained loans in exchange for promissory notes secured 

by mortgages on their Kentucky properties. The mortgages were all duly recorded with the 

appropriate county records offices. Each mortgage deed designated MERS as the mortgagee, 

“solely as nominee for Lender and Lender’s successors and assigns.” 

The original noteholders and their assignees—all members of MERS—subsequently 

transferred the notes to defendants, all of whom are also members of MERS. As the notes 

changed hands, MERS remained the mortgagee-of-record, in its capacity “as nominee for the 

[original] Lender and [that] Lender’s successors and assigns.” In accepting transfer of the notes, 

however, defendants acquired—by operation of Kentucky law—equitable interests in the 

mortgages securing the notes. See id. at 455. Defendants did not record with county records 

offices their acquisitions of these equitable interests in the mortgages. 

 Plaintiffs filed a complaint in federal district court alleging that transfer of the notes was 

an assignment of the underlying mortgages for purposes of Kentucky’s recording statutes. Those 

statutes mandate, inter alia, that, “When a mortgage is assigned to another person, the assignee 

shall file the assignment for recording with the county clerk within thirty (30) days of the 

assignment.” KRS 382.360(3). The recording statutes also create a private right of action for 

certain violations of the recording requirement, see KRS 382.365(3), and specify that damages 

for certain violations of the recording requirement “shall not exceed three (3) times the actual 

damages, plus attorney’s fees and court costs, but in no event less than five hundred dollars 

($500),” KRS 382.365(5). Because defendants had not timely recorded the mortgage 

assignments allegedly resulting from the note transfers, plaintiffs claimed defendants owed them 

$500 per transfer. 

Defendants moved to dismiss on the ground that transfer of a promissory note is not an 

assignment of the corresponding mortgage for purposes of Kentucky’s recording statutes, so that 

defendants did not violate Kentucky’s recording statutes by not recording the note transfers. The 
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 4

district court rejected that argument, holding, consistent with plaintiffs’ theory of the case, that: 

(1) the transfer of a note secured by a mortgage effects an assignment of the underlying 

mortgage; (2) Kentucky’s recording statutes require recording of all mortgage assignments, 

including those that occur by operation of law; and (3) “where a secured note is assigned by 

delivering the note to the assignee, the assignment of the mortgage that occurs by operation of 

law should be recorded as provided in Kentucky’s recording statutes.” Higgins, et al. v. BAC 

Home Loans Servicing, LP, No. 12-cv-183, 2014 WL 1333069, at *7 (E.D. Ky. Mar. 31, 2014). 

In the alternative, defendants argued for dismissal on the ground that plaintiffs lacked a 

private right of action against them. Defendants contended that KRS 382.360 and KRS 382.365 

authorized suit and recovery against lienholders only after satisfaction of the underlying debt. 

Since plaintiffs had not paid off their mortgages or sought release of the mortgages, defendants 

insisted that neither KRS 382.360 nor KRS 382.365 afforded plaintiffs a private right of action. 

The district court rejected that argument as well, holding that plaintiffs had a private right of 

action under KRS 382.365(3), which provides that “A proceeding may be filed by any owner of 

real property or any party acquiring an interest in the real property in District Court or Circuit 

Court against a lienholder that violates [subsection (2), which requires compliance with the 

recording requirements of KRS 382.360].” Plaintiffs had a cause of action under KRS 

382.365(3), the district court reasoned, because they had plausibly alleged that defendants failed 

to timely record certain assignments, despite having acquired an interest in the mortgages to 

plaintiffs’ properties. Higgins, 2014 WL 1333069, at *13. 

On the same day that the district court issued its order largely denying defendants’ joint 

motion to dismiss, another federal district court in Kentucky reached the opposite conclusion on 

a materially indistinguishable motion in an indistinguishable case. See Ellington v. Fed. Home 

Loan Mortg. Corp., 13 F. Supp. 3d 723, 729–30 (W.D. Ky. 2014). The Ellington court held that 

transfer of an equitable interest in the mortgage—as occurs with a transfer of a promissory 

note—“is not a mortgage assignment or a recordable event under KRS § 382.360.” Id. at 729. 

Under plaintiffs’ theory of the case, the Ellington court explained, every note transfer would 

result in an obligation to record, because every note transfer would, in effect, double as a 

mortgage assignment. The Ellington court determined that such a result was inconsistent with the 
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 5

terms of Kentucky’s recording statutes, which treat notes and mortgages as separate legal 

instruments, address them in separate provisions, and provide that recording of note transfers is 

optional, rather than mandatory. Id. Because “[i]t is a primary rule of statutory construction that 

the enumeration of particular things excludes the idea of something else not mentioned,” the 

Ellington court held that the mortgage assignment statutes on which the suit rested do not require 

recording of a note transfer or the transfer of any interests in the mortgage incidental to the note 

transfer. Id.

The statutory language on balance supports the analysis in Ellington, and the district 

court in this case should have granted defendants’ motion to dismiss. It is true that, under 

Kentucky law, transfer of a promissory note effects a transfer of an equitable interest in any 

corresponding mortgage. See, e.g., Drinkard v. George, 36 S.W.2d 56, 57 (Ky. 1930). That, 

however, is not the issue in this case. The issue here is whether KRS 382.360(3) requires 

recording whenever a party acquires an interest in a mortgage, regardless of whether the party 

acquires the actual mortgage. The text, structure, and purposes of Kentucky’s recording statutes 

compel the conclusion that recording is not required when a party acquires merely an interest in 

the mortgage, without acquiring the actual mortgage deed. 

KRS 382.360(3) provides: 

When a mortgage is assigned to another person, the assignee shall file the 

assignment for recording with the county clerk within thirty (30) days of the 

assignment and the county clerk shall attest the assignment and shall note the 

assignment in the blank space, or in a marginal entry record, beside a listing of the 

book and page of the document being assigned. 

Although the statute does not make express whether “mortgage” means “the mortgage deed” or 

simply “an interest in the mortgage,” it does mention “filing” and notation “of the document 

being assigned.” This suggests the statute applies with respect to assignments of fileable 

documents—i.e., mortgage deeds—and not with respect to assignments of intangible interests. 

 Language from other sections of the recording statutes supports the conclusion that a 

“mortgage” is an instrument, as opposed to an interest. For example, KRS 382.110(1) provides 

that “All deeds, mortgages and other instruments required by law to be recorded . . . shall be 

recorded in the county clerk’s office” (emphasis added). Similarly, KRS 382.385(7) explains 
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 6

that the section of which it is a part “shall not prohibit the use of other types of mortgages or 

other instruments given for the purpose of creating a lien on real property permitted by law” 

(emphasis added). “When the Legislature has used the word in a statute in one sense with one 

meaning, and when it subsequently uses the same word in legislation respecting the same 

subject-matter, it will be understood to have used it in the same sense, unless there is something 

in the context or nature of the case to indicate that it is intended a different meaning thereby.” 

Bd. of Councilmen of City of Frankfort v. Commonwealth, 94 S.W. 648, 649 (Ky. 1906) (citing 

In re Cnty. Seat of Linn Cnty., 15 Kan. 500, 527 (Kan. 1875)). Thus, the language from KRS 

382.110(1) and KRS 382.385(7) suggests that, throughout the recording statutes, “mortgages” 

refers to one class of “instruments,” and not to a mere interest in an instrument. 

Adopting plaintiffs’ interpretation of the recording statutes would also render the 

statutory scheme somewhat incoherent. Plaintiffs concede that their interpretation would 

mandate recording of note assignments. But Kentucky’s recording statutes pointedly distinguish 

between mortgage assignments—which must be recorded, see KRS 382.360(3)—and note 

transfers—for which recording is optional, see KRS 382.290(2). If every note transfer operated 

as a mortgage assignment, and every mortgage assignment must be recorded, then every note 

transfer would have to be recorded, albeit as a mortgage assignment. It would be strange for 

Kentucky’s legislature to require recording of note transfers as mortgage assignments while 

elsewhere in the same statutes providing that note transfers need not be recorded. Kentucky’s 

distinct treatment of notes and mortgages for recording purposes was laid out compellingly in 

Ellington: 

Kentucky’s statutes address the recording of notes and mortgages in 

separate provisions. [Christian Cnty. Clerk, 515 F. App’x at 455]. KRS 

§ 382.290(2) provides that the recording of a note assignment is not required. 

Specifically, KRS § 382.290(2) provides “[w]hen any note named in any deed or 

mortgage is assigned to any other person, the assignor may . . . note such 

assignment in the blank space, or in a marginal entry record [in the county clerk’s 

office].” In contrast, KRS § 382.360(3) and KRS 382.365(2) require the 

recording of mortgage assignments. KRS § 382.360(3) provides that “[w]hen a 

mortgage is assigned to another person, the assignee shall file the assignment for 

recording with the county clerk within thirty (30) days of the assignment[.]” 

Similarly, KRS § 382.365(2) provides that “[a]n assignee of a lien on real 

property shall record the assignment in the county clerk's office as required by 

KRS 382.360[.]” “Failure of an assignee to record a mortgage assignment shall 
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 7

not affect the validity or perfection, or invalidity or lack of perfection, of a 

mortgage lien under applicable law.” Id. Neither KRS § 382.360(3) nor KRS 

§ 382.365(2) mentions the recording of promissory notes which are secured by 

the mortgages. Thus, the Court does not interpret the statutes to require the 

recording of an assignment of a promissory note. “It is a primary rule of statutory 

construction that the enumeration of particular things excludes the idea of 

something else not mentioned.” Smith v. Wedding, 303 S.W.2d 322, 323 (Ky. 

1957). 

Furthermore, throughout KRS Chapter 382, the General Assembly 

deliberately utilized the terms “note” and “mortgage” in multiple provisions 

recognizing that a promissory note and mortgage deed are separate legal 

instruments. Significantly, when the General Assembly amended §§ 382.360(3) 

and 382.365(2) in 2006, it required the recording of a mortgage assignment with 

the county clerk's office, not the recording of a promissory note with the county 

clerk's office. As discussed above, KRS § 382.290(2) instructs on the method of 

recording promissory notes emphasizing the permissive nature of the recording. 

The terms “note” and “mortgage” are separate and distinct terms, and they have 

separate and distinct meanings. For the Court to “infuse the second [word] with 

the meaning . . . for the first would obliterate the distinction between the two 

terms and make one or the other redundant.” United States v. 0.376 Acres of 

Land, 838 F.2d 819, 825 (6th Cir. 1988). If the General Assembly had intended 

to require the recording of promissory note assignments under KRS § 382.360 

and KRS § 382.365, it could have expressly done so. It did not. Thus, from a 

plain reading of the KRS § 382.290, § 382.360(3), and § 382.365(2), only 

mortgage assignments are required to be recorded pursuant to KRS § 382.360, not 

promissory note assignments. 

Ellington, 13 F. Supp. 3d at 728–29. 

 Plaintiffs argue that portions of the legislative history of KRS 382.360(3) and KRS 

382.365(3) support their proffered interpretation of those provisions. That legislative history was 

accurately summarized in Ellington: 

In 2006, KRS § 362.360 and KRS § 382.365 were amended to ensure timely 

release of liens. Specifically, in explaining the reasons for the amendments, the 

chairman of the Kentucky Senate Banking Committee explained that “people 

were getting fast refinancing, and there was not a good record kept, you couldn't 

find out who had the last mortgage. You thought you were sending the payoff, 

but they had already been paid off, and there was another company holding” the 

debt. (Ky. Sen. Banking & Ins. Cmte. Hearing, Jan. 26, 2006.) According to 

Senator Tom Buford, this situation created difficulty for refinancing homeowners 

“in trying to determine who is the last holder of the lien.” (Ky. Sen. Chambers, 

Feb. 8, 2006.) When the last holder of a lien could not be determined, “payoffs 

get delayed and some cannot be made at all, which is unfair to the consumer.” 
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 8

(Id.) The Kentucky General Assembly sought “an expedited way to have these 

releases taken care of in a court” and, thus, amended KRS § 382.360 and KRS 

§ 382.365 in 2006 to provide that an assignee shall file a mortgage assignment 

with the county clerk within 30 days of the assignment. (Ky. Sen. Chambers, 

April 10, 2006.) KRS § 382.365 likewise noted that “[a] proceeding filed under 

this section shall be given precedence over other matters pending before the 

court.” In other words, the Kentucky General Assembly viewed these 

amendments as an expedited way to ensure that “when a mortgage is not released, 

the borrower knows who to go to to get it released.” (Ky. Sen. Banking & Ins. 

Cmte. Hearing Jan. 26, 2006). 

Id. at 727. This legislative history is consistent with distinguishing between notes and mortgages 

for purposes of the Kentucky requirement that mortgage assignments be recorded. 

[T]he MERS system aids in the ability to determine the lienholder and advances 

the aim of the legislative attempt to ensure the timely release of liens. Once a 

loan held by a MERS member is registered in the MERS database, MERS serves 

as the nominal mortgagee for the lender and any successors and assigns. When 

the security instrument is recorded, the local land records list MERS as the 

mortgagee. Thus, when members transfer an interest in a promissory note to 

another MERS member, MERS privately tracks the assignment within its system, 

but remains mortgagee of record. Thus, the “borrower knows who to go to to get 

it released.” (Ky. Sen. Banking & Ins. Cmte Hearing, Jan. 26, 2006.) 

Id. at 729–30. 

In sum, KRS 382.360(3) applies to those instances in which a transferee fails to record a 

transfer of a mortgage deed. It does not require recording of transfers of promissory notes. 

Because it is undisputed that defendants transferred only promissory notes and did not fail to 

record any transfers of mortgage deeds, defendants did not violate KRS 382.360(3) and the 

district court should have dismissed plaintiffs’ action on that basis. 

It is not necessary for us to resolve whether plaintiffs would have a cause of action had 

we ruled differently, or whether the $500 minimum damages provision in KRS 382.365(5) 

applies where there is no “fail[ure] to release a satisfied real estate lien.” We address neither 

issue. 

The issue in the companion interlocutory appeal granted in this case also does not need to 

be resolved. The district court below denied a motion by defendant Federal National Mortgage 

Association and its conservator, the Federal Housing Finance Agency (FHFA), to dismiss 
Nos. 14-6167/6168 Higgins, et al. v BAC Home Loans Servicing, et al. Page 9

plaintiffs’ statutory damage claims on federal statutory grounds. A so-called penalty bar 

provides that “[t]he [FHFA] shall not be liable for any amounts in the nature of penalties or fines, 

including those arising from the failure of any person to pay any real property, personal property, 

probate, or recording tax or any recording or filing fees when due.” 12 U.S.C. § 4617(j)(4). The 

district court held that the state damages provision under which plaintiffs sought $500 per 

unrecorded note transfer was not a penalty or fine for purposes of the penalty bar, but certified 

that issue for interlocutory appeal, which we granted. In light of our ruling on the merits of the 

claim against all of the defendants, however, the penalty bar issue no longer presents “a 

controlling question of law” the resolution of which “may materially advance the ultimate 

termination of the litigation.” 28 U.S.C. § 1292(b). Seen with the benefit of hindsight, the order 

resolving this issue does not meet the requirements of § 1292(b), and we therefore withdraw our 

discretionary grant of interlocutory appeal. 

For the foregoing reasons, we reverse the order appealed from in No. 14-6168, and 

dismiss the interlocutory appeal in No. 14-6167.