Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

MERSCORP, Inc. v. Delaware County

Commonwealth Court of Pennsylvania

May 4, 2017

MERSCORP, Inc. n/k/a MERSCORP Holdings, Inc.; Mortgage Electronic Registration Systems, Inc.; Bank of America, N.A.; CitiMortgage, Inc.; Citibank, N.A.; Credit Suisse Financial Corporation; Everhome Mortgage Company; JP Morgan Chase Bank, N.A.; State Farm Bank F.S.B.; Wells Fargo Bank, N.A.; Sovereign Bank; HSBC Bank USA, N.A.; HSBC Finance Corporation; Gateway Funding Diversified Mortgage Services, L.P. n/k/a Finance of America Mortgage LLC; Customers Bancorp, Inc.; Customers Bank; The Bank of New York Mellon; The Bank of New York Mellon Trust Company, N.A.; Deutsche Bank National Trust Company; Deutsche Bank Trust Company Americas; Santander Bank, N.A. f/k/a Sovereign Bank, N.A.; and Trident Mortgage Company, L.P., Appellants
v.
Delaware County, Pennsylvania, Recorder Of Deeds, By and Through Thomas J. Judge, Sr., In His Official Capacity As The Recorder Of Deeds Of Delaware County, Pennsylvania; Frederick C. Sheeler, In His Official Capacity As Recorder Of Deeds In And For The County Of Berks, Pennsylvania; The Office Of The Recorder Of Deeds In And For The County Of Berks, Pennsylvania; The County Of Berks, Pennsylvania; Joseph J. Szafran, In His Official Capacity As Recorder Of DeedsIn And For The County Of Bucks, Pennsylvania; The Office Of The Recorder Of Deeds In And For The County Of Bucks, Pennsylvania; The County Of Bucks, Pennsylvania; Richard T. Loughery, In His Official Capacity As The Recorder Of Deeds In And For The County Of Chester, Pennsylvania; The Office Of The Recorder of Deeds In And For The County Of Chester, Pennsylvania; and The County of Chester, Pennsylvania

          Argued: October 19, 2016

          BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE JULIA K. HEARTHWAY, Judge, HONORABLE JOSEPH M. COSGROVE, Judge.

          OPINION

          MICHAEL H. WOJCIK, JUDGE

         In this interlocutory appeal, involving coordinated actions, MERSCORP, Inc., n/k/a MERSCORP Holdings, Inc., Mortgage Electronic Registration Systems, Inc., and the additional above-named appellants, (collectively, Appellants), appeal from the February 12, 2016 order of the Court of Common Pleas of Delaware County denying their preliminary objections to complaints filed by the Recorders of Deeds for Berks, Bucks, Chester, and Delaware Counties, and the Counties of Berks, Bucks, and Chester, Pennsylvania (collectively, the Recorders). We reverse.

         Petitioner MERSCORP, Inc., n/k/a MERSCORP Holdings, Inc. (MERSCORP) owns and operates the MERS® System, a national electronic registry system for mortgage loans secured by residential real estate. Petitioner Mortgage Electronic Registration Systems, Inc. (MERS), MERSCORP's wholly-owned subsidiary, serves as a mortgagee of record for mortgage loans registered in the MERS® System. Under the MERS® System, when the promissory note associated with a loan is transferred from one MERS® System member to another, MERS remains as the mortgagee and title holder of the mortgage. The remaining appellants are financial institutions alleged to have improperly used and/or otherwise benefited from the MERS® System to circumvent statutory recording and fee requirements.

         This appeal arose from four lawsuits filed by the Recorders.[1] In each action, the Recorders claim that Section 1 of the Act of May 12, 1925, P.L. 613, as amended, 21 P.S. §351 (Section 351), requires Appellants' transfers of interests in promissory notes to be recorded as mortgage assignments in county land records. The Recorders contend that Appellants violated Section 351 by not recording documents and paying recording fees when a promissory note associated with a mortgage loan was transferred from one MERS® System member to another. The Recorders assert six different claims: a statutory claim for violation of Section 351; aiding and abetting a violation of Section 351; civil conspiracy to violate Section 351; quiet title; unjust enrichment; and a request for declaratory and injunctive relief to require the recording of mortgage assignments. Each of these claims is based on two legal assumptions: first, that Section 351 imposes a duty to record mortgage assignments; and second, that the Recorders have a statutory right to enforce Section 351.

         In its entirety, Section 351 (Failure to record conveyance) states as follows:

All deeds, conveyances, contracts, and other instruments of writing wherein it shall be the intention of the parties executing the same to grant, bargain, sell, and convey any lands, tenements, or hereditaments situate in this Commonwealth, upon being acknowledged by the parties executing the same or proved in the manner provided by the laws of this Commonwealth, shall be recorded in the office for the recording of deeds in the county where such lands, tenements, and hereditaments are situate. Every such deed, conveyance, contract, or other instrument of writing which shall not be acknowledged or proved and recorded, as aforesaid, shall be adjudged fraudulent and void as to any subsequent bona fide purchaser or mortgagee or holder of any judgment, duly entered in the prothonotary's office of the county in which the lands, tenements, or hereditaments are situate, without actual or constructive notice unless such deed, conveyance, contract, or instrument of writing shall be recorded, as aforesaid, before the recording of the deed or conveyance or the entry of the judgment under which such subsequent purchaser, mortgagee, or judgment creditor shall claim. Nothing contained in this act shall be construed to repeal or modify any law providing for the lien of purchase money mortgages.

21 P.S. §351.

         Virtually identical claims were asserted by the Montgomery County Recorder of Deeds in Montgomery County v. MERSCORP, 904 F.Supp.2d 436 (E.D. Pa. 2012); the district court declared that Appellants are obligated to create and record written documents memorializing the transfer of the promissory notes. The parties agreed to stay these actions while an appeal was pending, and subsequently, the Court of Appeals reversed and held that Section 351 does not create a duty to record all land conveyances. Montgomery County, Pennsylvania, Recorder of Deeds v. MERSCORP, Inc., 795 F.3d 372 (3rd Cir. 2015) (Montgomery County).

         In doing so, the court determined that the statute's language "shall be recorded, " when read in context, "indicates that not every conveyance must be recorded, but only that conveyances must be recorded in the county where the property is situated in order to preserve the property holder's rights as against a subsequent bona fide purchaser." Id. at 376. In a footnote, the court added that "the Recorders' lack of an express or implied right of action under Section 351 would provide an independent ground for judgment in favor of MERS." 795 F.3d at 379 n.8.

         Following the decision in Montgomery County, Appellants filed joint preliminary objections, Reproduced Record (R.R.) at 351a-57a, which the trial court denied. Appellants then sought an interlocutory appeal, asserting that the trial court's ruling conflicts with the Third Circuit's decision. The trial court refused to certify its order under 42 Pa.C.S. §702(b) (related to interlocutory appeals by permission). This Court granted Appellants' petition for review, filed pursuant to the note to Pa. R.A.P. 1311, to consider two issues: (1) whether Section 351 requires the recording of all mortgages and mortgage assignments; and (2) whether the General Assembly conferred on the Recorders a right of action to enforce Section 351.

         Before this Court, [2] Appellants argue that the trial court erred in overruling their preliminary objections; Appellants assert that the Recorders' complaints must be dismissed because Section 351 does not mandate the recording of every mortgage and mortgage assignment. Instead, Section 351 provides a mechanism for the holder of a mortgage lien to establish priority of its lien by recording the mortgage in the county in which the property is located.

         While the Recorders argue that the words "shall be recorded" are mandatory, Appellants contend that the Recorders' interpretation of the statute fails to consider Section 351 in its entirety. Appellants argue that the text of Section 351, taken as a whole, simply advises property owners of the steps they must take to safeguard their interests. Notably, Section 351 does not specify who must record the conveyance of real property: the assignor, the assignee, or some other person or entity; nor does it state when the recording must take place. Further, Section 351 does not indicate how or by whom such a duty would be enforceable, or that a failure to record constitutes a violation of the statute. It does, however, set forth one consequence of a failure to record, which is that every conveyance not recorded "shall be adjudged fraudulent and void as to any subsequent bona fide purchaser or mortgagee or holder of any judgment . . . unless such . . . conveyance . . . shall be recorded, as aforesaid, before the recording of the [subsequent purchaser's] deed or conveyance . . . ." 21 P.S. §351.

         Accordingly, we agree with the court's conclusion in Montgomery County that, "Section 351 does not issue a blanket command that all conveyances must be recorded; it states that a conveyance 'shall be recorded' in the appropriate place, or else the party risks losing his interest in the property to a bona fide purchaser." 795 F.3d at 377. While the plain language of Section 351 "informs property owners of what steps they must take in order to safeguard their interests [it] does not in any way state or imply that failure to record constitutes [an enforceable] violation of the statute . . . ." 795 F.3d at 377-78.

         Our conclusion is grounded in the clear language of the statute, and it also is supported by a body of case law interpreting Pennsylvania recording laws that specifically addresses the purpose of those ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.