Montgomery County ex rel. Becker v. Merscorp, Inc.
16 F. Supp. 3d 542
E.D. Pa.2014Background
- Plaintiff Nancy Becker, Montgomery County Recorder of Deeds, sued Merscorp, Inc. and Mortgage Electronic Registration Systems, Inc. (MERS) on behalf of Pennsylvania recorders, alleging MERS’s registry practice avoids public recording of mortgage/note transfers in violation of 21 P.S. § 351.
- MERS functions as mortgagee of record as nominee for lenders and maintains a private electronic database tracking beneficial ownership of promissory notes; members transfer notes frequently without recording corresponding mortgage assignments in county records.
- Plaintiff seeks declaratory and equitable relief (declaration/ injunction requiring recording of assignments), and claims for quiet title and unjust enrichment plus damages (recording-fee losses alleged).
- Key legal question: whether transfers of promissory notes secured by mortgages (including transfers effected by mere delivery) constitute conveyances or instruments of writing that must be recorded under Pennsylvania recording statutes.
- The court considered whether MERS is a proper defendant (as nominee/agent or undisclosed agent) and whether plaintiff may pursue relief via quiet title and unjust enrichment claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does transfer of a promissory note secured by a mortgage create a conveyance subject to PA recording statutes? | Becker: note transfers are inseparable from the mortgage; transfers effect mortgage assignments that must be recorded. | MERS: notes transfer by possession and are not "written instruments" requiring recording under §351. | Held: Transfer of a secured promissory note is equivalent to a mortgage assignment and is subject to recording requirements. |
| Must transfers of secured debt be documented in writing suitable for recording? | Becker: yes — transferee acquires equitable interest that must be memorialized and recorded. | MERS: recording not required where note transfers are non-written. | Held: Pennsylvania law requires secured-debt transfers be documented and recorded. |
| Are Merscorp/MERS proper defendants and potentially liable (agency/undisclosed agent or nominee)? | Becker: MERS acts as mortgagee of record and as nominee/agent for lenders; may be undisclosed agent and liable for failing to record. | MERS: it does not buy/sell notes and is not involved in transfers; members report transfers; thus not liable. | Held: MERS is a proper defendant — it acts as mortgagee/nominee and may be liable (including as undisclosed agent); summary judgment for defendants denied. |
| Are quiet title and unjust enrichment claims viable at summary judgment? | Becker: record is corrupted, fee revenue lost, and harms to public/title searchers support both claims. | MERS: insufficient proof of essential elements and causation. | Held: Genuine factual disputes exist; defendants’ summary judgment denied on quiet title and unjust enrichment; partial summary judgment granted only on declaratory liability (not damages or injunction). |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment framework)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (genuine-issue standard at summary judgment)
- Carpenter v. Longan, 83 U.S. 271 (note and mortgage legally inseparable; assignment of note carries mortgage)
- Pines v. Farrell, 848 A.2d 94 (Pa. 2004) (mortgages treated as conveyances for recording purposes)
- EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d 253 (3d Cir. 2010) (elements of unjust enrichment)