Editor: David Reiss
Brooklyn Law School

February 9, 2013

Pennsylvania Court Denies MERS Motion to Dismiss and Rules that a Recorder of Deeds May Bring a Quiet Title Action to Compel MERS to Record Mortgage Assignments

By Abigail Pugliese

In Montgomery County, Pennsylvania v. MERSCORP, INC., No. 11 CV 6968, 2012 WL 5199361 (E.D. Pa. Oct. 19, 2012), the court denied MERS’s motion to dismiss because 21 Pa. Stat. 351 requires recordation of all conveyances and because the “Legislature intended to create the quiet title claim” to enforce 21 Pa. Stat. 351.

The Montgomery County Recorder of Deeds brought a putative class action seeking to compel Defendants to record past, present, and future mortgage assignments. MERS filed a motion to dismiss stating “that the Plaintiff fails to state a claim because the Pennsylvania recording statute, 21 Pa. Stat. 351 does not make recording of conveyances compulsory.” However, the text of that statute clearly states that “all . . . conveyances. . . shall be recorded in the [relevant] office for the recording of deeds.” Further, the statute “appears under the heading “NECESSITY OF RECORDING AND COMPULSORY RECORDING.” Other statutes state “may be recorded” and appear under the heading “INSTRUMENTS SUBJECT TO RECORD.” which words would make filing permissive. That is not the case here.

The Defendants alternatively argued that Plaintiff is not entitled to bring an implied right of act under 21 Pa. Stat. § 351, because Plaintiff is not the present owner of the property. “In Pennsylvania, a quite title action ‘may be brought . . . to compel an adverse party to . . . record . . . any document, obligation or deed affecting any right, lien, title, or interest in land.’” Under Pa. R. Civ. P. 1061(b)(3). The court states, with reference to Pennsylvania legislative history and predecessor statutes,  that “a plaintiff states a claim for quiet title relief by pleading, among other elements, that she is ‘the present owner of such premises, or…any other person, or persons, in any manner interested in any such…conveyances.” Act of April 1, 1863, P.L. 188, § 1, P.L. 188, § 1, repealed in part by 42 Pa. Cons. Stat. § 20002(a)[414]. “A plaintiff must still show an interest of some type in the land at issue or some pecuniary interest which is affected by the status of the relevant documents as recorded or unrecorded.” Plaintiff pleaded that Plaintiff’s office collects no fee when MERS, as nominee for the mortgage owner, assigns mortgages. Further, since Plaintiff has recorded “At least 10,000 mortgages” for MERS, it would be entitled to fees if these mortgages were in fact recorded. Therefore, Plaintiff (1) is a party that may bring an implied right of action and (2) has pleaded sufficient facts to establish a pecuniary interest affected by the assignment recordation.

Plaintiff’s claim of unjust enrichment was not dismissed because Plaintiff adequately stated in its complaint the requisite three elements for such claim. (1) “Defendants availed themselves of the benefits of the recording system by recording mortgages in the name of MERS as nominee, (2) Defendants, by tracking the transfer of beneficial interests in a MERS-as-nominee mortgage, have evaded recording fees that the beneficial owners would otherwise owe based on these transfers, and (3) Defendants, by recording mortgages in the name of MERS-as-nominee but continuing to transfer the beneficial interest in these mortgages, artificially and unlawfully created gaps in the chain of title of these mortgages.”

Plaintiff’s claim of civil conspiracy was dismissed because Plaintiff did not plead that Defendants “acted with the specific intent to harm the Plaintiff,” and therefore the third element, requiring malice, was absent from the claim.

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