Merscorp, Inc. v. Del. Cnty.
207 A.3d 855
Pa.2019Background
- County recorders in Delaware, Chester, Bucks and Berks Counties sued MERSCORP, MERS, and member banks, alleging the MERS® System avoids county recording of mortgage assignments and violates 21 P.S. § 351.
- Section 351 states that conveyances "shall be recorded" in the county recorder's office and that unrecorded instruments are "fraudulent and void" as to subsequent bona fide purchasers without notice.
- A related federal case (Montgomery Cty. v. MERSCORP) reached the Third Circuit, which held § 351 does not impose a mandatory duty to record all conveyances.
- The Commonwealth Court (divided) adopted the Third Circuit view: § 351 does not command blanket recording and does not confer enforcement authority on county recorders.
- The Pennsylvania Supreme Court granted review to decide whether § 351 mandates recording of all mortgages/assignments and whether recorders have a right to enforce § 351.
- The Supreme Court affirmed the Commonwealth Court: § 351 does not impose a mandatory duty to record every conveyance; the statute provides a limited remedy (invalidate vis-à-vis certain subsequent purchasers) and contains no express enforcement mechanism for recorders.
Issues
| Issue | Plaintiff's Argument (Recorders) | Defendant's Argument (MERSCORP) | Held |
|---|---|---|---|
| Whether 21 P.S. § 351 mandates recording of all conveyances (including mortgages and assignments) | "Shall be recorded" is mandatory; Pennsylvania's title/recording history and related statutes show legislative intent to require recording and preserve chain of title. | "Shall be recorded" is directory: read in context § 351 prescribes where to record if one elects to record; long Pennsylvania precedent treats recording as optional and failure to record has limited statutory consequence. | Held: § 351 does not create a blanket, mandatory duty to record all conveyances; it prescribes where to record and sets limited consequences for failure to record. |
| Whether § 351 confers a private right or standing on county recorders to enforce recording duties | Recorders have statutory duties and implied authority to pursue litigation to protect the public record; they may appoint solicitors and seek declaratory/injunctive relief. | No express enforcement provision exists; because § 351 is not mandatory, recorders lack an implied cause of action under the statutory scheme. | Held: Court need not decide in detail because § 351 is not mandatory; no implied enforcement authority recognized here and the Commonwealth Court was correct to reject recorders' enforcement claim as pleaded. |
| Effect of construing "shall" as directory vs. mandatory | Reading "shall" as directory eviscerates long-standing recording regime and public notice protections; leads to loss of public chain of title and harms homeowners. | Treating "shall" as directory respects statutory context, existing precedent that recording is not required for validity, and the statute's explicit limited remedy for failure to record. | Held: Contextual reading controls; "shall" in § 351 is not an absolute command to record every conveyance. |
| Whether failure to record renders conveyance void generally | Recorders: Failure to record should be treated as legally insufficient, not merely affecting priority, per historical acts and related statutes. | MERSCORP: § 351 already limits the consequence to being void only as to subsequent bona fide purchasers without notice; unrecorded conveyances can still be valid and enforceable in many contexts. | Held: § 351 itself limits the consequence; unrecorded conveyances are not automatically void in all respects and recording is not a prerequisite to validity. |
Key Cases Cited
- Montgomery Cty. v. MERSCORP, Inc., 795 F.3d 372 (3d Cir. 2015) (Third Circuit held § 351 does not impose a mandatory recording duty)
- Union Cty., Ill. v. MERSCORP, Inc., 735 F.3d 730 (7th Cir. 2013) (analogous reading of Illinois statute; "shall be recorded" read as prescribing where to record if recordation is chosen)
- U.S. Bank N.A. v. Mallory, 982 A.2d 986 (Pa. Super. Ct. 2009) (recording of mortgage assignment not prerequisite to bringing foreclosure; unrecorded assignments can be effective)
- Fiore v. Fiore, 405 Pa. 303, 174 A.2d 858 (Pa. 1961) (recording not essential to validity or transfer of title)
- In re Estate of Plance, 175 A.3d 249 (Pa. 2017) (failure to record can bear on intent to convey; recording status not dispositive of validity)
- Appeal of Pepper, 77 Pa. 373 (Pa. 1875) (historical precedent discussing recording as optional in many contexts)