Montgomery County Ex Rel. Becker v. MERSCORP Inc.
2015 U.S. App. LEXIS 13482
| 3rd Cir. | 2015Background
- Plaintiff Nancy J. Becker, Montgomery County Recorder of Deeds, brought a putative class action on behalf of Pennsylvania county recorders alleging MERS entities failed to record transfers of promissory notes/mortgages and thus avoided paying recording fees under 21 Pa. Cons. Stat. § 351.
- MERS is a national electronic registry that allows members to transfer promissory notes among themselves while MERS remains the mortgagee of record as nominee, avoiding local assignment recordings and related fees.
- The Recorder sought declaratory and injunctive relief, and claims for violation of § 351, civil conspiracy, and unjust enrichment based on unpaid recording fees; the District Court granted declaratory relief and denied summary judgment to MERS.
- MERS argued § 351 does not create a mandatory duty to record every conveyance, that transfers of promissory notes are not mortgage assignments requiring recording, and that the Recorder lacks a statutory right of action and sued the wrong corporate parties.
- The Third Circuit reviewed Pennsylvania law de novo, concluded § 351 does not impose a blanket duty to record all conveyances (it protects against subsequent bona fide purchasers), and reversed the District Court’s declaratory-judgment order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 21 Pa. Cons. Stat. § 351 create a mandatory duty to record all land conveyances? | § 351’s “shall be recorded” language requires recording of all conveyances, so MERS must record note/mortgage transfers. | “Shall be recorded” instructs where to record to protect against subsequent bona fide purchasers; it does not mandate recording of every conveyance. | Held: § 351 does not impose a duty to record all conveyances; it only prescribes recording’s effect (protection from bona fide purchasers). |
| Do transfers of promissory notes among MERS members constitute mortgage assignments that must be recorded? | Transfers of the note effectuate assignment of the mortgage and thus must be recorded. | Transfers of the beneficial interest in the note do not necessarily create an assignment of the mortgage requiring recording; MERS acts as nominee. | Held: Court did not need to decide on this fully because § 351 imposes no duty to record; plaintiff’s theory fails as a matter of law. |
| Can a county recorder enforce § 351 to recover unpaid recording fees? | Recorder has standing and a right to enforce § 351 to recover fees. | Recorder lacks an express statutory private right of action; enforcement is not provided by § 351. | Held: Court declined to decide here; denied certification to Pennsylvania Supreme Court; noted lack of a right of action would be an independent ground for judgment in favor of MERS. |
| Is unjust enrichment available where MERS did not record and avoided fees? | County confered benefit (recording system fees) that MERS unjustly retained by avoiding recording. | In absence of a duty to record, no benefit was conferred and unjust enrichment claim fails. | Held: Unjust enrichment claim fails as a matter of law because there was no duty to record and no conferral of a compensable benefit. |
Key Cases Cited
- Union Cnty. v. MERSCORP, Inc., 735 F.3d 730 (7th Cir.) (interpreting statute like § 351 as non-mandatory; “shall be recorded” conditions protection, not command)
- County of Ramsey v. MERSCORP Holdings, Inc., 776 F.3d 947 (8th Cir.) (similar conclusion under Minnesota law that recording statute does not impose duty to record assignments)
- Brown v. MERS, Inc., 738 F.3d 926 (8th Cir.) (rejection of claim that state recording law imposed mandatory recording requirement)
- Macon Cnty. v. MERSCORP, Inc., 742 F.3d 711 (7th Cir.) (unequivocal rejection of unjust-enrichment theory where no statutory duty to record existed)