Two county registers of deeds filed a class action lawsuit Monday on behalf of Michigan’s 83 counties alleging that the Mortgage Electronic Registration Services owes millions of dollars in property title transfer taxes.

Curtis Hertel, Jr., the Ingham County Register of Deeds, and Branch County Registrar Nancy Hutchins filed the suit, which alleges that the company and numerous banks failed to pay property transfer taxes when the title to the company was transferred to another owner in the MERS system.

“MERS created a shadow registry system that has made it very difficult for the public and for government offices like mine to keep track of who owns what mortgage,” Hertel said. “They have also stated they were created to avoid fees in my office. When we began the investigation into robo-signing I asked my attorneys to research MERS foreclosures to see if there were patterns of irregularity. This lawsuit is a direct result of that investigation. I believe there has been a systematic attempt to avoid paying taxes by MERS and the banks that use MERS.”

Hertel alleges the company has created a “shell game” designed to dodge taxes.

“MERS has transformed the entire mortgage industry into a giant shell game”, said Hertel. “The current servicer of a mortgage is no longer a matter of public record, and once a property is foreclosed, the real games begin, as deeds and other paperwork are filed in such a way to avoid transfer taxes at every step. Property ownership is clouded, and the simple task of collecting transfer tax has been turned into this legal battle, largely because of the involvement of MERS.”

The lawsuit also targets three foreclosure attorneys — Marshall Isaacs from Orlans Associations and Ellen Coon and Jeanne Kivi of Trott and Trott. Both Orlans and Trott and Trott have come under fire in recent months for participating in robo-signing. Both organizations are also significant Republican donors in Michigan.

Also of interest, David Trott’s Attorney’s Title company is named as a defendant. Trott owns what is considered the largerst foreclosure law firm in the state. Linda Orlans’ title agency eTitle is also named. Orlans’ runs Orlans Associates.

“I am seeking repayment of both state and county transfer tax. Without discovery it’s hard to tell you an exact number,” Hertel said. “I am positive its in the millions of dollars for both of them.”

This is not the first lawsuit Hertel has filed in relation to recovering millions of dollars of unpaid taxes arising from the title transfers. Earlier this year he sued Fannie Mae, Freddie Mac and numerous banks over what he alleges is an improper claim to an exemption thus requiring the entities to pay millions of dollars in property title transfer taxes.

“I hope everything we are doing gives the banks, MERS and foreclosure firms pause,” Hertel said. “We could avoid a lot of these situations if they just worked with individual citizens instead of pushing people into the foreclosure process.”