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CASEY LAW OFFICE, P.C. ! 595 Round Rock West Drive, Suite 102 ! Round Rock, Texas 78681

512-257-1324 (phone) ! (512) 853-4098 (fax)

Transforming Lives Through Justice

 

 

 Micah 6:8 

 22 May 2015 

Third Court of Appeals 

209 West 14th Street, Room 101 

Austin, Texas 78701 

PO Box 12547 

Austin, Texas 78711 

RE: Notice of brief affecting cited case within No. 03-14-00304-CV, Judah v. EMC Mortgage 

Corporation. 

To the Honorable Justices of the Third Court of Appeals, 

This notice letter and accompanying attachments directly relate to a critical underlying 

question in the appeal pending before this Court, No. 03-14-00304-CV, Mikael and Laura Judah v. 

EMC Mortgage Corporation, as well as other cases pending, such as No. 03-14-00135-CV, Burge v. 

Ocwen Loan Servicing; No. 03-14-00376-CV, and Stanley v. W.R. Starkey Mortgage, LLC. 

Within Appellants’ principal and reply briefs in Judah, the system by which Mortgage 

Electronic Registration System (“MERS”), which admittedly has zero ownership interest in any 

of the mortgage (i.e., no “stick” in the bundle), is directly challenged with the claim that it runs 

contrary to standing law in Texas for more than 160 years and all three editions of TEXAS 

JURISPRUDENCE. 

Cited to specifically within the reply brief is the case of Montgomery County v. Merscorp, Inc., 

No. 11-CV-6968, 2014 U.S. Dist. LEXIS 89222 (E.D. Penn Jul. 1, 2014). The district court 

decision in that case found that the entire concept of MERS ran contrary to the historical, and 

well-settled, understandings of property law theory that have existed for decades. See id. (esp. at 

554). A courtesy copy of that opinion is attached. That case was appealed by MERS on 

interlocutory appeal to the federal Court of Appeals for the Third Circuit. 

Important to this appeal, a critical amicus brief was filed by several parties: 

1) Law professors: 

a. Joseph William Singer, the Bussey Professor of Law at Harvard Law School; 

b. David Reiss is a Professor of Law and Research Director at the Center forUrban 

Business Entrepreneurship at Brooklyn Law School; 

c. Rebecca Tushnet is a Professor of Law at Georgetown Law School; and

d. Melanie Leslie is Vice Dean and Professor of Law at Benjamin N. Cardozo 

School of Law at Yeshiva University. 

And; 

2) The Harvard Law School Legal Services Center. 

ACCEPTED

03-14-00304-CV

5395094

THIRD COURT OF APPEALS

AUSTIN, TEXAS

5/22/2015 11:21:57 AM

JEFFREY D. KYLE

CLERK

 RECEIVED IN 3rd COURT OF APPEALS AUSTIN, TEXAS 5/22/2015 11:21:57 AM JEFFREY D. KYLE Clerk
Page 2 of 2

These professors and this organization are requesting that the Third Circuit completely

uphold the district court’s decision against MERS based, in large part, that the entire concept of 

MERS has turned property law on hits head and created a fountainhead of disaster for property 

owners. It is alleged in Appellants’ case, and associated cases, that this turn of events has 

transpired in Texas, too.

A copy of the amicus brief is attached and this Court is urged to review it as it applies to 

critical questions in the case at bar.

A copy of this letter, the Pennsylvania opinion, and the amicus brief, have been sent 

certified mail, return receipt requested, to opposing counsel.

Respectfully submitted,

/s/ Stephen Casey

Enclosures:

1) District Court opinion: Montgomery County v. Merscorp, Inc., No. NO. 11-CV-6968, 2014 U.S. Dist. 

LEXIS 89222 (E.D. Penn Jul. 1, 2014) 

2) Amicus Brief in the United States Court of Appeals for the Third Circuit: No. 14-4315, 

Montgomery County v. Merscorp, Inc., BRIEF OF AMICUS CURIAE THE LEGAL SERVICES 

CENTER OF HARVARD LAW SCHOOL AND LAW PROFESSORS IN SUPPORT OF 

THE APPELLEE.

Copy to:

Marcie Schout,

Quilling, Selander, Lownds, Winslett & Moser, P.C.

2001 Bryan Street Suite 1800

Dallas, TX 75201

via certified mail, return receipt requested
Montgomery County v. Merscorp, Inc.

United States District Court for the Eastern District of Pennsylvania

June 30, 2014, Decided; July 1, 2014, Filed

CIVIL ACTION NO. 11-CV-6968

Reporter

16 F. Supp. 3d 542; 2014 U.S. Dist. LEXIS 89222; 2014 WL 2957494

MONTGOMERY COUNTY, PENNSYLVANIA,

RECORDER OF DEEDS, by and through Nancy J. Becker

in her official capacity as Recorder of Deeds of Montgomery

County, on its own behalf and on behalf of all others

similarly situated, Plaintiff, v. MERSCORP, INC., and

MORTGAGE ELECTRONIC REGISTRATION

SYSTEMS, INC., Defendants.

Subsequent History: Amended by, Motion granted by, in

part, Motion denied by, in part Montgomery County v.

Merscorp, Inc., 2014 U.S. Dist. LEXIS 129096 (E.D. Pa.,

Sept. 8, 2014)

Prior History: Montgomery County v. Merscorp, Inc., 904

F. Supp. 2d 436, 2012 U.S. Dist. LEXIS 151598 (E.D. Pa.,

2012)

Counsel: [**1] For Montgomery County, Pennsylvania,

Recorder of Deeds, BY AND THROUGH NANCY J.

BECKER, IN HER OFFICIAL CAPACITY AS THE

RECORDER OF DEEDS OF MONTGOMERY COUNTY,

PENNSYLVANIA, ON ITS OWN BEHALF AND ON

BEHALF OF ALL OTHERS SIMILIARLY SITUATED,

Plaintiff: CHARLES JOSEPH LADUCA, LEAD

ATTORNEY, PRO HAC VICE, CUNEO GILBERT &

LADUCA LLP, Bethesda , MD; CRAIG W. HILLWIG,

JOSEPH C. KOHN LEAD ATTORNEYS, ROBERT J.

LAROCCA, WILLIAM E. HOESE, KOHN SWIFT &

GRAF, P.C., Philadelphia , PA; GARY E. MASON, LEAD

ATTORNEY, JASON S. RATHOD, LEAD ATTORNEY,

PRO HAC VICE, WHITFIELD BRYSON & MASON LLP,

Washington , DC; JENNIFER E. KELLY, LEAD

ATTORNEY, PRO HAC VICE, JONATHAN W. CUNEO,

LEAD ATTORNEY, CUNEO GILBERT & LADUCA LLP

Washington , DC; JAMES C. SARGENT , JR., LAW

OFFICES OF LAMB & McERLANE, P.C., West Chester ,

PA; MAUREEN M. MCBRIDE, LAW OFFICES OF

WINDLE & McERLANE, P.C., West Chester , PA;

WILLIAM H. LAMB, LAMB MCERLANE, P.C., West

Chester , PA.

For Merscorp, Inc., Mortgage Electronic Registration

Systems, Inc., Defendants: ROBERT M. BROCHIN, LEAD

ATTORNEY, MORGAN, LEWIS AND BOCKIUS, Miami

, FL; ANDREW C. WHITNEY, FRANCO A. CORRADO,

KRISTOFOR T. HENNING, NICHOLAS C. VANCE,

MORGAN LEWIS & BOCKIUS LLP, [**2] Philadelphia ,

PA; BRIAN M. ERCOLE, MORGAN LEWIS, Miami , FL.

For Community Legal Services, Pennsylvania Legal Aid

Network, Housing Alliance of Pennsylvania, Movants:

JENNIFER R. CLARKE, PUBLIC INTEREST LAW

CENTER OF PHILADELPHIA, Philadelphia , PA.

Judges: J. CURTIS JOYNER, J.

Opinion by: J. CURTIS JOYNER

Opinion

[*544] MEMORANDUM AND ORDER

JOYNER, J.

This civil action is once again before the Court on

cross-motions of Defendants [*545] Merscorp, Inc. and

Mortgage Electronic Registration Systems, Inc. (′′the MERS

Defendants′′ or ′′MERS′′) and Plaintiff for summary

judgment and partial summary judgment, respectively (Doc.

Nos. 67 and 80). For the reasons set forth below, Plaintiff’s

motion shall be granted in part and Defendants’ motion

denied in its entirety.

Factual Background

As outlined in our previous Memoranda adjudicating the

various motions filed earlier in this matter, Plaintiff, Nancy

Becker, is the Recorder of Deeds in and for Montgomery

County, Pennsylvania. She filed this lawsuit on behalf of

herself and all other Pennsylvania Recorders of Deeds

alleging that by creating and maintaining a private,

members-only registry for recording and tracking

conveyances of interests in real property, the MERS
Defendants have violated 21 P.S. §351 [**3] 1 which

requires that such conveyances be publicly recorded in the

county recorder of deeds offices. Specifically, Plaintiff is

challenging the practice by which MERS serves as the

mortgagee of record in the public land records as the

′′nominee′′ for a lender who holds the mortgage note and its

successors and assigns and thereby circumvents the need to

record the transfer of the note each time it is sold.

As a result of what Plaintiff contends are Defendants’

negligent and willful violations of the foregoing statute,

Plaintiff seeks both monetary and equitable relief in the

form of a declaration and/or permanent injunction directing

Defendants to record mortgage assignments as well as an

order quieting title and finding that Defendants were unjustly

enriched. By the motions which are now before us, the

parties ask this Court to enter judgment and partial judgment

in their favor as a matter of law, asserting that the dispute

between them is primarily legal in nature and that there are

no material facts in dispute. (See, e.g., MERS Defendants’

Memorandum of Law [**5] in Support of Motion for

Summary Judgment, p. 8).

Standards For Adjudicating Summary Judgment

Motions

It is Fed. R. Civ. P. 56 which outlines the standards to be

employed by the federal courts in considering motions for

summary judgment. Subsection(a) of that rule provides the

following in relevant part:

A party may move for summary judgment, identifying

each claim or defense - or the part of each claim or

defense - on which summary judgment is [*546]

sought. The court shall grant summary judgment if the

movant shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as

a matter of law...

In reviewing the record before it for purposes of assessing

the propriety of entering summary judgment, the court

should view the facts in the light most favorable to the

non-moving party and draw all reasonable inferences in that

party’s favor. Ma v. Westinghouse Electric Co., No. 13-2433,

559 Fed. Appx. 165, 2014 U.S. App. LEXIS 5049, *9

(March 18, 2014); Burton v. Teleflex, Inc., 707 F.3d 417,

425 (3d Cir. 2013). The initial burden is on the party seeking

summary judgment to point to the evidence ′′which it

believes demonstrate the absence of a genuine issue of

material fact.′′ United States v. Donovan, 661 F.3d 174, 185

(3d Cir. 2011)(quoting [**6] Celotex Corp. v. Catrett, 477

U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed.2d 265 (1986)). An

issue is genuine only if there is a sufficient evidentiary basis

on which a reasonable jury could find for the non-moving

party, and a factual dispute is material only if it might affect

the outcome of the suit under governing law. Kaucher v.

County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006)(citing

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.

Ct. 2505, 91 L. Ed.2d 202 (1986)).

However, to survive summary judgment, the non-moving

party must present more than a mere scintilla of evidence;

there must be evidence on which the jury could reasonably

find for the non-movant. Jakimas v. Hoffmann-LaRoche,

Inc., 485 F.3d 770, 777 (3d Cir. 2007). And, ′′if there is a

chance that a reasonable juror would not accept a moving

party’s necessary propositions of fact,′′ summary judgment

is inappropriate.′′ Burton, supra, (quoting El v. SEPTA, 479

F. 3d 232, 238 (3d Cir. 2007)).

The rule is no different where there are cross-motions for

summary judgment. As the Third Circuit Court of Appeals

1

§351. Failure to record conveyance

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 [**4] 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.

16 F. Supp. 3d 542, *545; 2014 U.S. Dist. LEXIS 89222, **5
has observed: ′′cross-motions are no more than a claim by

each side that it alone is entitled to summary judgment,

[**7] and the making of such inherently contradictory

claims does not constitute an agreement that if one is

rejected the other is necessarily justified or that the losing

party waives judicial consideration and determination

whether genuine issues of material fact exist.′′ Lawrence v.

City of Philadelphia, 527 F.3d 299, 310 (3d Cir.

2008)(quoting Rains v. Cascade Industries, Inc., 402 F.2d

241, 245 (3d Cir. 1968)). And, the mere fact that ′′both

parties seek summary judgment does not constitute a waiver

of a full trial or the right to have the case presented to a

jury.′′ Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1023

(3d Cir. 2008)(quoting 10A Charles Alan Wright, Arthur R.

Miller & Mary Kay Kane, Federal Practice and Procedure

§2720 (3d ed. 1998), at 330-331).

Discussion

According to the MERS Defendants,

′′[t]he following five legal questions and issues are

presented to the Court in this summary judgment

motion:

(1) whether Plaintiff has shown that the MERS

Defendants have any mortgage assignments to land

in Montgomery County, Pennsylvania that have

not been recorded pursuant to the mandate in

Section 351 (as interpreted by this Court) requiring

the recording of all conveyances of land;

(2) [**8] whether, in the absence of any such

written mortgage assignments, Section 351 requires

the transfer of secured debt to first be documented

in a form suitable for recording and then recorded

in the land records because it creates in the

transferee an equitable interest in the mortgage;

[*547] (3) if transfers of secured debt must first be

documented and then recorded under Section 351,

whether the MERS Defendants have been the

transferor or transferee of any such secured debt

and, if they have not, whether, the MERS

Defendants are the proper parties who are liable for

and subject to the ′′mandates contained in Section

351;

(4) if Section 351 requires the documenting and

recording of transfers of secured debt and the

MERS Defendants are the proper defendants, but

Section 351 creates no private cause of action on

behalf of the County Recorder, whether the statute

can be enforced by the Recorder of Deeds by

bringing claims for quiet title and unjust enrichment

as a means to enforce the statutory requirements

contained in Section 351; and lastly,

(5) if summary judgment is not granted on any of

the previous four issues, whether Plaintiff has

presented the necessary proof to establish the

elements [**9] of her claims for unjust enrichment

and to quiet title to land.′′

(Defendants’ Memorandum of Law in Support of Motion

for Summary Judgment, p. 9).

By her response in opposition and cross-motion for partial

summary judgment, Plaintiff rejoins that the entry of an

Order of Declaratory Judgment finding that Defendants

have violated and are currently violating 21 P.S. §351 with

the result that they have been unjustly enriched at the

expense of all of the county recorders of deeds in

Pennsylvania is appropriate. More particularly, Plaintiff

submits that because the promissory note and mortgage are

inseparable and an assignment of mortgage constitutes a

recordable conveyance of title in land, this Court should

reject MERS’ argument that its system is lawful because

there is no legal requirement to publicly record promissory

notes.

We begin by noting that Defendants’ Question 4 has already

been effectively answered by our Memorandum of October

19, 2012 wherein we found no need to reach the question of

whether Section 351 bestowed a private right of action

because Pa. R. C. P. No. 1061(b)(3) permitted Plaintiff to

pursue an action to quiet title.2 Thus, inasmuch as this

finding established the [**10] law of the case, we see no

need to discuss it further.3 To appropriately address and

answer Defendants’ other questions and the arguments

advanced by Plaintiff, we must confront head-on the model

upon which Defendants’ entire business is built and in so

doing determine whether the ′′splitting′′ of a promissory

2

See also, Memorandum of March 6, 2013 wherein we denied Defendants’ second motion to dismiss the complaint and reiterated that

Pa. R. C. P. 1061 permitted a quiet title action absent an interest in the underlying land at issue.

3

The law of the case doctrine essentially holds that when a court decides upon a rule of law, that decision should continue to govern

the same issues in the subsequent stages in the same case in the absence of extraordinary circumstances such as where the initial decision

was clearly erroneous and would make a manifest injustice. Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 816, 108 S.

Ct. 2166, 2177-2178, 100 L. Ed.2d 811, 830 (1988); [**11] Benjamin v. Department of Public Welfare of Pennsylvania, 701 F.3d 938,

16 F. Supp. 3d 542, *546; 2014 U.S. Dist. LEXIS 89222, **6
note from the mortgage lien that secures it obviates the

recording requirements imposed [*548] under the

Pennsylvania statute.4 Underscoring this inquiry are the

threshold questions of what is a mortgage under

Pennsylvania law and what are the purposes of the

Pennsylvania recording laws?

A. What is a Mortgage?

As generally described above, the ordinary mortgage consists

of two instruments - the note or bond 5

and the mortgage

instrument itself. The mortgage is simply security for the

payment of the note, with a right of a lien on the mortgage

premises to enforce payment. Philadelphia Federal Credit

Union v. Ankrah, Civ. A. No. 13-3040, 2014 U.S. Dist.

LEXIS 21095 at *8 (E.D. Pa. Jan. 30, 2014). [**14] ′′A

mortgage, unless it contain some express covenant to that

effect, is not of itself an [*549] instrument which imports

any personal liability for the money it secures.′′ Baum v.

949 (3d Cir. 2012). The law of the case rules have developed to maintain consistency and avoid reconsideration of matters once decided

during the course of a single continuing lawsuit. Pharmacy Benefit Manages Antitrust Litigation, 582 F.3d 432, 439 (3d Cir. 2009).

4

Indeed, we outlined the process by which MERS functions in our Memorandum Opinion of October 19, 2012 denying the defendants’

motion to dismiss in large part. As we explained:

The typical residential mortgage finance transaction results in two legally operative documents: (1) a promissory note, a

negotiable instrument which represents the borrower’s repayment obligation over the term of the loan; and (2) a mortgage,

representing the security interest in certain property which entitles the holder of the note to foreclose on the property in the

event of default on the note. ... MERS enters a mortgage finance transaction when the lender and the borrower name MERS,

in the mortgage instrument, ′′as the mortgagee (as nominee for the lender and its successors and assigns).′′ ... The attendant

promissory note is sold on the secondary mortgage market and may, over [**12] its term, have many owners. Sale of

the note onto the secondary mortgage market principally takes two forms. In one, relatively straightforward,

transaction, a lender who retains a note as part of its own loan portfolio transfers the note to another party for

that party to hold for its own account or portfolio. ... In the other, a more complex process called securitization,

the note is transferred, along with many other notes, through several different entities into a special purpose

vehicle, typically a trust; the trust then issues securities backed by the trust corpus, i.e., the notes, to investors.

... Regardless of the secondary market route which the note takes, MERS remains the named mortgagee as

′′nominee′′ for the subsequent owners of the note as long as the note is held by a MERS member. ...

...

Before the formation of MERS, secondary market investors generally required recorded assignments for most transfers of

prior ownership interests [in security interests, i.e. mortgages.] ... This system entailed substantial administrative burdens

on secondary mortgage market participants. ... As a result, in 1993, the Mortgage Bankers’ Association (′′MBA′′)

Interagency Technology Task Force [**13] published a ′′white paper′′ ... that describes an electronic book entry

system for the residential mortgage industry. At the time, among other benefits to the mortgage industry, MERS

proponents claimed that ′′once MERS is established as the mortgagee of record, all subsequent transfers of

ownership would be recorded electronically, eliminating the need to physically prepare, deliver, record and

track assignment documents. The estimated cost savings for assignment processing for a single transfer would

be an average of $45.50 per loan. ... So instead of effecting formal assignments of a mortgage when MERS

members transfer the accompanying note between one another, the MERS members simply register the change

in beneficial ownership in the MERS electronic database. ...

See, 904 F. Supp.2d 436, 439-440, 441 (E.D. Pa. 2012)(internal citations omitted).

5 Historically, mortgages were accompanied by a bond, which was ′′a promise to pay a sum of [**15] money according to the terms,

covenants and conditions set forth in the instrument,′′ and a warrant of attorney authorizing ′′any attorney-at-law to appear for the obligor

and confess judgment against that obligor for the penal sum of the bond.′′ Ladner, Conveyancing in Pennsylvania §25.02(a), (b) (5th ed.

2013). ′′In modern mortgage practice, promissory notes have supplanted bonds and warrants as the underlying obligation in residential

mortgage transactions and in most commercial transactions as well.′′ Id.

16 F. Supp. 3d 542, *547; 2014 U.S. Dist. LEXIS 89222, **14
Tomkin, 110 Pa. 569, 572, 1 A. 535, 536, 17 Week. Notes

Cas. 535, 43 Legal Int. 262, 33 Pitts. Leg. J. 200 (1885). In

Pennsylvania,

[a] mortgage may be created as well without as with an

accompanying personal obligation of the mortgagor to

pay the debt secured, or attempted to be secured

thereby. In the one case the property alone is charged

with the lien - is looked to solely by the mortgagee out

of which to make his lien; in the other, he has the

additional security of the personal obligation of the

mortgagor. A debt chargeable only against certain

property is, in effect, simply a debt with limited means

of satisfaction or enforcement; the value of the property

charged with the indebtedness is the measure of the

security afforded.

Hartje’s Estate, 345 Pa. 570, 574, 28 A.2d 908, 910 (1942).

Accordingly, under Pennsylvania state law, a valid mortgage

can be created without requiring the mortgagor to assume

personal liability under a note. In re Farris, 194 B.R. 931,

940 (Bankr. E.D. Pa. 1996).

6

Typically, a mortgagor’s failure to pay the amounts due and

owing under the note constitutes an event of default

following which the holder may proceed to enforce the

terms of the mortgage either through in rem foreclosure

proceedings or by obtaining an in personam judgment on

the note and seeking to execute. Amerco Real Estate Co. v.

Appalachian Self Storage, LLC, Civ. A. No. 3:11-CV-1166,

2012 U.S. Dist. LEXIS 116997 at *21 (M.D. Pa. Aug. 20,

2012)(citing Wilson v. Parisi, 549 F. Supp. 2d 637, 655

(M.D. Pa. 2008)). See also, PFCU v. Ankrah, supra, (′′The

holder of a bond and mortgage can proceed in rem or in

personam to enforce his claim; he may proceed by an action

of mortgage foreclosure or by an action on the bond which

the mortgage secures.′′ (citing U.S. Bank, N.A. v. Mallory,

2009 PA Super. 182, 982 A.2d 986, 992 n.3 (Pa. Super. Ct.

2009); Levitt v. Patrick, 2009 PA Super. 117, 976 A.2d

581(2009) and Bank of Pennsylvania v. G/N Enterprises,

Inc., 316 Pa. Super. 367, 371, 463 A.2d 4, 6 (1983)). To be

sure, by having a loan secured by both a mortgage and a

bond or note, a mortgagee has a choice of remedies - one

against [**17] the mortgaged property, the other against the

mortgagor personally. See, Ladner, at §22.05(b). See also,

Easton Theatres, Inc. v. Wells Fargo Land & Mortgage Co.,

498 Pa. 557, 565, 449 A.2d 1372, 1376 (1982)(Dissenting

Opinion, Flaherty, J.)(′′The effect of executing a bond or

note secured by a mortgage, unless recourse on the bond is

specifically limited, is to subject all of the real and personal

property of the obligor to execution in the event of default.′′).

While these remedies may be pursued concurrently or

consecutively, the mortgage may have only one satisfaction.

Schuylkill Trust Co. v. Sobolewski, 325 Pa. 422, 426-427,

190 A. 919, 922 (1937); Elmwood Federal Savings Bank v.

Parker, 446 Pa. Super. 254, [*550] 666 A.2d 721, 724, n.6

(1995).

Further, inasmuch as an action in mortgage foreclosure is

strictly an in rem proceeding the sole purpose of which is to

effect a judicial sale of the mortgaged real estate, it may not

include an in personam action to enforce personal liability,

unless the mortgagor waives any objection to the inclusion

of the breach of contract action for a personal judgment in

the mortgage foreclosure suit. Newtown Village Partnership

v. Kimmel, 424 Pa. Super. 53, 55, 621 A.2d 1036, 1037

(1993); [**18] Insilco Corp. v. Rayburn, 374 Pa. Super. 362,

368, 543 A.2d 120, 123 (1988)(citing Pa. R. C. P. 1141 and

Meco Realty Company v. Burns, 414 Pa. 495, 200 A.2d 869

(1964) and First Seneca Bank v. Greenville Distributing

Company, 367 Pa. Super. 558, 533 A.2d 157 (1987)). To

pursue both of these remedies, however, the creditor/

mortgagee must possess both the note and the mortgage.

See, e.g., U.S. Bank v. Montalvo, Civ. A. No. 3:08-CV-1504,

2013 U.S. Dist. LEXIS 162595 at *8 (M.D. Pa. Nov. 14,

2013)(where defendant mortgagee signatory to mortgage

only and not note, plaintiff could not have brought in

personam action against him based on any alleged failures

to pay obligations due under note).

Additionally, notes secured by mortgages have been

determined to be negotiable instruments under the

6

Stated otherwise,

[a] mortgage is a security instrument used by the mortgagee to secure payment of a debt or performance of an obligation.

When properly executed, delivered, accepted and recorded, the mortgage places a lien on the mortgaged premises. If the

mortgagor is unable or unwilling to pay the debt or perform the obligation, the mortgagee has recourse against the property.

That recourse usually is a mortgage foreclosure action in court that results in a judicial sale. Being a secured creditor is

important so that there is something of value that may be sold if the mortgagor defaults. And, in bankruptcy situations,

secured creditors usually have preference over those that are [**16] unsecured.

Ladner, Conveyancing in Pennsylvania, supra, §22.01.

16 F. Supp. 3d 542, *549; 2014 U.S. Dist. LEXIS 89222, **14
Pennsylvania Uniform Commercial Code,7

such that the

holder of such an instrument may be entitled to the

protections afforded thereunder to a holder in due course. JP

Morgan Chase Bank, N.A. v. Murray, 2013 PA Super. 55, 63

A.3d 1258, 1265 (2013); In re Walker, 466 B.R. 271, 282

(Bankr. E.D. Pa. 2012); Deutsche Bank Nat’l Trust Company

v. Carmichael, 448 B.R. 690, 694 (Bankr. E.D. Pa. 2011).

Under the [**19] Code, a note may be negotiated from one

person to another by mere transfer of possession. See, 13 Pa.

C. S. §§3201, 3203 (governing ′′Negotiation,′′ and ′′Transfer

of instrument; rights acquired by transfer′′). From all of this,

we conclude that Defendants are correct in their assertion

that Pennsylvania law does indeed recognize a clear legal

distinction between a promissory note and a mortgage and

that promissory notes may generally be freely transferred

without the requirement of recording.

This does not end the matter, however. Again, it is the

Defendants’ premise that because the debt transfers at issue

occur by mere delivery of promissory notes, they are not

′′written instruments′′ subject to [*551] the recording

requirement of Section 351. Accordingly, the question

which this case presents and with which we are here

confronted is whether a promissory note that is secured by

a mortgage also falls within the purview and meaning of a

′′conveyance,′′ ′′contract,′′ or ′′other instrument 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 [**21] situate in th[e] Commonwealth [of

Pennsylvania].′′ 21 P.S. §351. If so, then the mandate of

Section 351 is clear: it ′′shall be recorded in the office for

the recording of deeds in the county where such lands,

tenements and hereditaments are situate.′′ Id. In an effort to

resolve this question, we turn now to an examination of the

purposes and intentions behind the Pennsylvania Recording

statutes.

B. Pennsylvania Recording Law

Generally speaking, the primary purpose behind enactment

of the Pennsylvania statutes governing recording of property

conveyances was the provision of notice of the identities of

those who held an interest in the real estate at issue,

primarily to protect subsequent bona fide purchasers from

injuries caused by secret pledges of property. 6 Summ. Pa.

Jur. 2d Property §§8:112, 9:17 (2d ed.)(2012).8

Indeed as

early as 1848, the Pennsylvania Supreme Court noted that:

′′The intention of the acts requiring deeds to be recorded

was to secure subsequent purchasers and mortgagees

against prior secret conveyances and fraudulent

encumbrances; and therefore when a person has notice

of a prior conveyance, it is not a secret conveyance by

which he can be prejudiced...

Mott v. Clark, 9 Pa. 399, 405 (1848). [**22] And, just two

years later, the Court observed:

′′The principle runs through the whole system of our

recording acts, that the object is to give public notice in

whom the title resides; so that no one may be defrauded

by deceptious appearance of title. ... The recording

laws, like all other public laws are intended for the

benefit and security of the people generally.′′

Salter v. Reed, 15 Pa. 260, 263-264 (1850). These holdings

7

13 Pa. C. S. §3104 defines negotiable instruments and notes under the Uniform Commercial Code. See generally, 13 Pa. C. S.

§3104(a), (e). Under Subsection (a), ′′negotiable instrument,′′ ′′except as provided in subsections (c) and (d), ... means an unconditional

promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2) is payable on demand or at a definite time; and

(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition

to the payment of money, but the [**20] promise or order may contain:

(i) an undertaking or power to give, maintain or protect collateral to secure payment;

(ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral;

(iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.′′

Subsection (e) states that ′′[a]n instrument is a ’note’ if it is a promise and is a ’draft’ if it is an order. If an instrument falls within

the definition of both ’note’ and ’draft,’ a person entitled to enforce the instrument may treat it as either.

8

′′To qualify as a bona fide purchaser, a subsequent buyer must be without notice of a prior equitable interest.′′ Id.

16 F. Supp. 3d 542, *550; 2014 U.S. Dist. LEXIS 89222, **19
remain undisturbed despite the passage of more than 150

years and thus the underlying purpose behind the

Pennsylvania recording acts remains clear - to provide

notice to the public of the identities of those who hold an

interest in real estate as well as notice of the true nature of

the transaction on record. See, e.g., U.S. Bank, N.A. v.

Mallory, 2009 PA Super 182, 982 A.2d 986, 994, n.6

(2009)(′′Mortgages are recorded to provide notice to the

world as to whose interest encumbers title.′′); Weik v. Estate

of Brown, 2002 PA Super. 63, 794 A.2d 907, 911 (Pa. Super.

Ct. 2002); Roberts v. Estate of Pursley, 718 A.2d 837, 841

(Pa. Super. Ct. 1998); Mancine v. Concord-Liberty Savings

& Loan Ass’n., 299 Pa. Super. 260, 445 A.2d 744 (1982);

Reiter v. Kille, 143 F. Supp. 590, 592-593 (E.D. Pa.

1956)(holding [**23] that inasmuch as recording is

obligatory in Pennsylvania so as to give public notice in

whom title resides, federal tax lien premised on unrecorded

deed ineffective as against subsequent purchaser for value);

Capital Center Equities v. Estate of Gordon, 137 B.R. 600,

611 (Bankr. E.D. Pa. 1992)(quoting Jaques v. Weeks, 7

Watts 261 (Pa. 1838)). In accord, 1 West’s Pa. Prac.

§803(14)-1 (3d ed.)(2012): (′′The purpose of [the] statutes

[providing for the recording of deeds and mortgages]

[*552] is to give notice of who holds interests in the

property, to provide evidence of title in case the original

documents are lost or unavailable, and to protect the interest

holders from the claims of others.′′). And in 1852, it was

determined that assignments of mortgages also fell within

the recording acts. Pepper’s Appeal, 77 Pa. 373, 377, 1

Week. Notes Cas. 437, 7 Legal Gaz. 205, 32 Legal Int. 321,

22 Pitts. Leg. J. 182 (1875); Philips v. Bank of Lewistown,

18 Pa. 394, 402 (1852).

While the earlier versions of the recording statutes did not

make recording mandatory, nevertheless,

′′[w]hen the election [to record] is made and an

instrument authorized by law to be recorded, is

[**24] actually recorded, all the incidents and force of

a public record attach to that record. It is an early and

well recognized principle that one great object in

spreading an instrument of writing on a public record is

to give constructive notice of its contents to all

mankind.′′

Pepper’s Appeal, supra.

Thus, the benefits of recording an interest in land have long

been recognized in Pennsylvania and in 1863, the

Pennsylvania legislature first decreed that such recording

should be mandatory.9

C. How Pennsylvania Law Treats Mortgages

Over the years, however, there was some confusion over

how a mortgage should be viewed by the Pennsylvania

courts - was it a conveyance of title, a lien or cloud on the

title of the real estate, or merely security for the payment of

money or performance of some other collateral contract?

See, e.g., Wilson v. Shoenberger’s Executors, 31 Pa. 295,

299 (1858)(′′It is the settled law of the Pennsylvania

mortgage, that though in form a conveyance of title, it is in

reality, both at law and equity, only a security for the

payment of money, or performance of other collateral

contract.′′); McIntyre v. Velte, 153 Pa. 350, 25 A. 739

(1893)(′′The mortgage is but a security for the payment of

money with a right of lien upon the mortgaged premises to

enforce payment.′′); Bulger v. Wilderman, 101 Pa. Super.

168 (1931)(′′In [**26] form, a mortgage is certainly a

conveyance; but it is unquestionably treated at law here, in

the way it is treated in equity elsewhere, as a bare

incumbrance, and the accessory of a debt. As between the

parties it is a conveyance, so far as is necessary to enforce

it as a security: as regards third persons, the mortgagor is the

owner, even of the legal estate...′′)(quoting Presbyterian

Corporation v. Wallace, 3 Rawle 109 (Pa. 1831)).

9

See, Act of April 1, 1863, P.L. 188, §1 repealed in part by 42 Pa. C.S. §20002(a)[414]:

Be it enacted by the Senate and House of Representatives of the Commonwealth of Pennsylvania in General Assembly met,

and it is hereby enacted by the authority of the same,

That in all cases in which any of the former owners, or any other person, or persons, shall have, in his or their possession,

any bargains of sales, deeds, conveyances, or other instruments in writing, concerning any lands, tenements or

hereditaments in this commonwealth, he, or they, shall, upon six months’ notice being given to him, or them, by the present

owner of such premises, or by any other person, or persons, in any manner interested in any [**25] such bargains of

sales, deeds, conveyances, or other instruments of writing, place the same upon record in the proper county, or

deliver the same into the hands, or possession, of the present owner, if such application be made by him.

(Italics in original)

Thereafter, 21 P.S. §351 was enacted in 1925. See, Act of May 12, 1925, P.L. 613, No. 327, §1.

16 F. Supp. 3d 542, *551; 2014 U.S. Dist. LEXIS 89222, **24
In 2004, the Pennsylvania Supreme Court decided Pines v.

Farrell, 577 Pa. 564, 848 A.2d 94 (2004). Specifically the

[*553] issue presented in that case was whether certain

financial regulations which had been promulgated by the

Court Administrator of Pennsylvania interpreting the

definition of ′′property transfer′′ in 42 Pa. C. S.

§3733(a.1)(1)(v)10 to include mortgage ssignments, mortgage

releases, and mortgage satisfactions were valid and

enforceable. The Pines Court began its analysis with this

observation:

′′Proper resolution of this question first requires an

examination of the legal definition of a mortgage; i.e.,

if a mortgage represents a property transfer, it logically

follows that transactions involving mortgages are also

property transfers. The ′′title theory [**27] of mortgages

deems a mortgage to be a conveyance, while a

competing theory, the ′′lien theory, suggests that a

mortgage merely represents a security interest.′′

Id., 848 A.2d at 99. Recognizing that there was ample

authority for both theories under Pennsylvania common law,

the Supreme Court nevertheless found that such actions

were ′′property transfers′′ which bound the recorders of

deeds, clerks of courts and equivalent officials throughout

Pennsylvania who were charged with the duty of collecting

fees in connection with such transfers. Indeed, the Court

reasoned:

What definitively tips the balance in this Court’s view,

is that, although a mortgage can be considered both a

conveyance in form as well as a security interest, for

purposes of actions involving recording acts, mortgages

traditionally have been treated as conveyances. ′′In all

questions upon the recording acts, the mortgage is

spoken of as a conveyance of land.′′ ... Thus, for

purposes of determining whether mortgage assignments,

mortgage satisfactions and mortgage releases are

property transfers, we begin with the premise that a

mortgage conveys the property subject to the mortgage

to the mortgagee until the obligations under [**28] the

mortgage are fulfilled.

Id. at 100 (quoting In re Long’s Appeal, 77 Pa. 151 (1874).

From there, the Court further opined:

Given our conclusion that a mortgage conditionally

conveys the subject property, it logically follows that an

assignment of the mortgagee’s rights likewise effects a

conditional transfer of the subject [*554] property to

10 This statute reads, in pertinent part:

§3733. Deposits into account.

(a) General rule.

(1) Beginning July 1, 1987, and thereafter, the total of all fines, fees and costs collected by any division of the unified

judicial system which are in excess of the amount collected from such sources in the fiscal year 1986-1987 shall be

deposited in the Judicial Computer System Augmentation Account. Any fines, fees or costs which are allocated by law or

otherwise directed to the Pennsylvania Fish and Boat Commission, to the Pennsylvania Game Commission or to counties

and municipalities, to the Crime Victim’s Compensation Board, to the Commission on Crime and Delinquency for

victim-witness services grants under section 477.15(c) of the act of April 9, 1929 ... known as the Administrative Code of

1929, to rape crisis centers, to the Emergency Medical Services [**30] Operating Fund or to domestic violence

shelters shall not be affected by this subchapter.

...

(a.1) Additional fees.

(1) In addition to the court costs and filing fees authorized to be collected by statute:

....

(v) An additional fee of $10 shall be charged and collected by the recorders of deeds and clerks of court, or by any

officials designated to perform similar functions, for each filing of a deed, mortgage or property transfer for which

a fee, charge or cost is now authorized. The Supreme Court shall designate by financial regulations which filings

meet the criteria of this subparagraph.

16 F. Supp. 3d 542, *552; 2014 U.S. Dist. LEXIS 89222, **27
the assignee. Additionally, even accepting respondent’s

argument that an assignee’s rights cannot exceed those

of the assignor, a property transfer still exists because

the assignee will receive the rights held by the assignor,

i.e., the conveyance of the property subject to the terms

of the mortgage. ... Thus, the Court Administrator

correctly defined property transfer to include mortgage

assignments.

Id. at 100-101 (citation omitted). The Court reached the

same conclusion with respect to mortgage satisfactions and

releases. That is, the effect of both a mortgage satisfaction

and a mortgage release was to discharge the lien and release

the mortgagor from the obligations under the mortgage and

to ′′reconvey′′ the property to the mortgagor. Pines, 848

A.2d at 101, 102. See also, First Citizens National Bank v.

Sherwood, 583 Pa. 466, 879 A. 2d 178, 180, n.2 (2005)(′′A

[**29] transfer of title is no insubstantial thing, but rather

resembles a right or privilege which is permanent in nature.

The fact that at one point, the mortgagor may fulfill the

obligations of the mortgage, and thereby receive title to the

mortgaged property, does not negate the fact that mortgaging

the property transfers the title to the mortgagee.′′).

While Pines may not be on all fours with the case at hand

inasmuch as we are charged here with interpreting a

different statute, it nonetheless represents a clear statement

of Pennsylvania law which is equally applicable in this case

particularly in view of its specific reference to the recording

acts. Hence, inasmuch as ′′conveyance′′ is defined, inter

alia, as ′′a. Transfer of title to property from one person to

another. b. The document by which this transfer is

effected,′′

11 we likewise find that a mortgage assignment is

a ′′conveyance′′ subject to the recording mandate of §351.

D. Severability of Notes and Mortgages

In view of this finding, we next consider whether a note

memorializing debt that is secured by a mortgage stands

alone such that it may be freely transferred by change in

possession or whether it too must be recorded.

Under well-settled, long-held American law, where

′′mortgaged premises are pledged as security for debt,′′...

′′the note and mortgage are inseparable. ...′′ Carpenter v.

Longan, 83 U.S. 271, 274, 16 Wall. 271, 21 L. Ed. 313, 315

(1872). Thus, ′′[a]n assignment of the note carries the

mortgage with it, while an assignment of the latter alone is

a nullity.′′ Id. Indeed, ′′[a]ll the authorities agree that the

debt is the principal thing and the mortgage an accessory. ...

The mortgage can have no separate existence. When the

note is paid the mortgage expires.′′ Id. 83 U.S. at 275, 21 L.

Ed at 315. See also, National Live Stock Bank of Chicago

v. First National Bank of Geneseo, 203 U.S. 296, 306, 27 S.

Ct. 79, 81, 51 L. Ed. 192 (1906)(same).

These principles remain viable and are likewise embodied

in the Restatement (Third) of Property: Mortgages, §5.4

(1997), which reads as follows:

§5.4 Transfer of Mortgages [**32] and Obligations

Secured by Mortgages

(a) A transfer of an obligation secured by a mortgage

also transfers the mortgage unless the parties to the

transfer agree otherwise.

(b) Except as otherwise required by the Uniform

Commercial Code, a transfer of a mortgage also transfers

the obligation the mortgage secures unless the parties to

the transfer agree otherwise.

[*555] (c) A mortgage may be enforced only by, or in

behalf of, a person who is entitled to enforce the

obligation the mortgage secures.

Pennsylvania law was and is in accord. See, e.g., In re North

City Trust Co., 327 Pa. 356, 361, 194 A. 395, 398 (1937)

(′′[C]ollateral for a debt follows the obligation into the

hands of the assignee thereof.′′); Beaver Trust Co. v.

Morgan, 259 Pa. 567, 103 A. 367, 369 (1918)(′′A purchase

of a debt is a purchase of all the securities for it, whether

named or not at the time of the assignment, unless expressly

agreed at the time they shall not pass.′′); Moore v. Cornell,

68 Pa. 320, 322 (1871)(′′A [**33] mortgage is discharged by

payment, and an assignment of the debt transfers the right to

the mortgage itself; for whatever will give the money

secured by the mortgage, will carry the mortgaged premises

along with it.′′); 13 Pa. C. S. §9203(g)(′′The attachment of a

security interest in a right to payment or performance

secured by a security interest or other lien on personal or

real property is also attachment of a security interest in the

security interest, mortgage or other lien.′′). See also, Russell’s

Appeal, 15 Pa. 319, 321, 322 (1950)(′′Even, although a

conveyance be absolute in its terms, if it is intended by the

parties to be a mere security for the payment of a debt, it is

a mortgage. ... An article of agreement for the sale of land,

accompanied by delivery of possession and payment of part

of the purchase-money, is much more than a chose in action;

it is an abiding interest in the land itself.′′).

This notion that notes and mortgages are legally inter-woven

is further supported by the language employed by the

11 WEBSTER’S II NEW RIVERSIDE [**31] UNIVERSITY DICTIONARY 308 3d ed. 1994)

16 F. Supp. 3d 542, *554; 2014 U.S. Dist. LEXIS 89222, **28
Multistate Fixed Rate Uniform Instrument Note and

Pennsylvania Mortgage forms 12 which appear to be currently

utilized in most loan settlement transactions in which

MERS is designated [**34] as the mortgagee. Beginning

with the Note form, at paragraph 10, the following verbiage

appears:

... In addition to the protections given to the Note

Holder under this Note, a Mortgage, Deed of Trust, or

Security Deed (the ′′Security Instrument′′), dated the

same date as this Note, protects the Note Holder from

possible losses which might result if I do not keep the

promises which I make in this Note. That Security

Instrument describes how and under what conditions I

may be required to make immediate payment in full of

all amounts I owe under this Note. ...

The Mortgage, in turn, includes the following language in

excerpted relevant parts:

Definitions

(C) ′′MERS′′ is Mortgage Electronic Registration

Systems, Inc. MERS is a separate corporation that is

acting solely as a nominee for Lender and Lender’s

successors and assigns. MERS is the mortgagee

[**35] under this Security Instrument. ...

...

(E) ′′Note′′ means the promissory note signed by

Borrower and dated . ...

...

(G) ′′Loan′′ means the debt evidenced by the Note, plus

interest, any prepayment charges and late charges due

under [*556] the Note, and all sums due under this

Security Instrument, plus interest.

...

Transfer of Rights in the Property

This Security Instrument secures to Lender: (i) the

repayment of the Loan, and all renewals, extensions

and modifications of the Note; and (ii) the performance

of Borrower’s covenants and agreements under this

Security Instrument and the Note. For this purpose,

Borrower does hereby mortgage, grant and convey to

MERS (solely as nominee for Lender and Lender’s

successors and assigns) and to the successors and

assigns of MERS, the following described property

located in this (County) of which currently has the

address of (Street), (City), Pennsylvania (Zip

Code) (′′Property Address′′) ...

TOGETHER WITH all the improvements now or

hereafter erected on the property, and all easements,

appurtenances, and fixtures now or hereafter a part of

the property. All replacements and additions shall also

be covered by this Security Instrument. All of [**36] the

foregoing is referred to in this Security Instrument as

the ′′Property.′′ Borrower understands and agrees that

MERS holds only legal title to the interests granted by

the Borrower in this Security Instrument, but if

necessary to comply with law or custom, MERS (as

nominee for Lender and Lender’s successors and

assigns) has the right: to exercise any or all of those

interests, including, but not limited to, the right to

foreclose and sell the Property; and to take any action

required of Lender including, but not limited to,

releasing and canceling this Security Instrument.

...

UNIFORM COVENANTS. Borrower and Lender

covenant and agree as follows:

...

9. Protection of Lender’s Interest in the Property

and Rights Under this Security Instrument.

If (a) Borrower fails to perform the covenants and

agreements contained in this Security Instrument, (b)

there is a legal proceeding that might significantly

affect Lender’s interest in the Property and/or rights

under this Security Instrument (such as a proceeding in

bankruptcy, probate, for condemnation or forfeiture, for

enforcement of a lien which may attain priority over

this Security Instrument or to enforce laws or

regulations), or (c) Borrower [**37] has abandoned the

Property, then Lender may do and pay for whatever is

reasonable or appropriate to protect Lender’s interest in

the Property and rights under this Security Instrument,

including protecting and/or assessing the value of the

Property, and securing and/or repairing the Property.

Lender’s actions can include, but are not limited to: (a)

paying any sums secured by a lien which has priority

over this Security Instrument; (b) appearing in court;

12 We here refer specifically to Form Nos. 3200 and 3039 containing the further designation ′′Single Family - Fannie Mae/Freddie Mac

UNIFORM INSTRUMENT and UNIFORM INSTRUMENT WITH MERS attached as Exhibit ′′A1′′ to Plaintiff’s Memorandum in Opposition to

Defendant’s Motion for Summary Judgment and in Support of Plaintiff’s Cross Motion for Summary Judgment.

16 F. Supp. 3d 542, *555; 2014 U.S. Dist. LEXIS 89222, **33
and (c) paying reasonable attorneys’ fees to protect its

interest in the Property and/or rights under this Security

Instrument, including its secured position in a

bankruptcy proceeding. ...

...

20. Sale of Note; Change of Loan Servicer; Notice of

Grievance. The Note or a partial interest in the Note

(together with this Security Instrument) can be sold one

or more times without prior notice to Borrower. A sale

might result in a change in the entity (known as the

′′Loan Servicer′′) that collects Periodic Payments due

under the Note and this Security Instrument and

performs [*557] other mortgage loan servicing

obligations under the Note, this Security Instrument,

and Applicable Law. There also might be one or more

changes of the Loan Servicer [**38] unrelated to a sale

of the Note. If there is a change of the Loan Servicer,

Borrower will be given written notice of the change

which will state the name and address of the new Loan

Servicer, the address to which payments should be

made and any other information RESPA requires in

connection with a notice of transfer of servicing. If the

Note is sold and thereafter the Loan is serviced by a

Loan Servicer other than the purchaser of the Note, the

mortgage loan servicing obligations to Borrower will

remain with the Loan Servicer or be transferred to a

successor Loan Servicer and are not assumed by the

Note purchaser unless otherwise provided by the Note

purchaser.

...

(Emphasis in original)

It therefore appears obvious from all of the foregoing, that

whether effectuated via a writing or a mere ′′transfer of

possession′′ of a note, the result is the same by operation of

law - an interest in and/or title to the property which secures

it has been assigned and conveyed from one party to another

under Pennsylvania law.13 As to the requirement of a

writing, 21 P.S. §623-1 14 is crystal clear: ′′Hereafter no

assignment of any mortgage shall be entered of record in

any county of the second class, unless [**39] such

assignment shall be in writing, and acknowledged by the

assignor or assignors before an officer or person duly

authorized to take such acknowledgments.′′ Accordingly, in

answer to Defendants’ question No. 2 as formulated in its

motion papers, we now hereby find that the Pennsylvania

Recording Act does in fact require the transfer of secured

debt to first be documented in a form suitable for recording

and then recorded in the land records because it creates in

the transferee an equitable interest in the mortgage.15

[*558] We endeavor now to answer Defendants’ first and

third questions and to confront what is perhaps the most

13 This is essentially the same conclusion which the U.S. District Court for the Eastern District of Kentucky very recently reached in

Higgins v. BAC Home Loans Servicing, LP, Civ. A. No. 12-cv-183-KKC, 2014 U.S. Dist. LEXIS 43274 (E.D. KY March 31, 2014).

While the Higgins case obviously required construction of Kentucky law, specifically, KRS 382.360(3), the similarities between that case

and this one are striking given the direction contained in the Kentucky statute - ′′[when a mortgage is assigned to another person, the

assignee shall file the assignment for recording with the county clerk within thirty days of the assignment...′′ Thus the Court in Higgins

framed the [**40] issue there presented as ′′whether, under Kentucky law, when a MERS member assigns a promissory note to another

MERS member, that note assignment effects an assignment of the mortgage that must be recorded.′′ 2014 U.S. Dist. LEXIS at *7. And,

recognizing that a note assignment may not be a physical document since a note can be assigned simply by delivery to the assignee, the

Court concluded: ′′Thus where a secured note is assigned by delivering the note to the assignee, the assigment of the mortgage that occurs

by operation of law should be recorded as provided in Kentucky’s recording statutes.′′ 2014 U.S. Dist. LEXIS 43274, at *21-*22.

14 Statutes which apply to the same persons or things or to the same class of persons or things are in pari materia and should be

construed together if possible as one statute. 1 Pa. C.S. §1932(a), (b); Holland v. Marcy, 584 Pa. 195, 206, 883 A.2d 449, 456 (2005).

See also, Roberts v. Estate of Pursley, 1998 PA Super. LEXIS 2869, 718 A.2d 837, 841 (1998)(′′we adopt the theory that sections 351

and 444 of Title 21 must be read together.′′)

15 We believe this conclusion is further supported by the language of 21 P.S. §444, which provides in relevant part:

All deeds and conveyances, which, [**41] from and after the passage of this act, shall be made and executed within

this commonwealth of or concerning any lands, tenements or hereditaments in this commonwealth, or whereby

the title to the same may be in any way affected in law or equity, shall be acknowledged by the grantor, or grantors,

bargainor or bargainors, or proved by one or more of the subscribing witnesses thereto, before one of the judges of the

supreme court or before one of the judges of the court of common pleas, or recorder of deeds, prothonotary, or clerk of any

court of record, justice of the peace, or notary public of the county wherein said conveyed lands lie, and shall be recorded

in the office for the recording of deeds where such lands, tenements or hereditaments are lying and being, within ninety

days after the execution of such deeds or conveyance... (emphasis supplied).

16 F. Supp. 3d 542, *556; 2014 U.S. Dist. LEXIS 89222, **37
challenging issue in this case: whether the MERS Defendants

have been the transferor or transferee of unrecorded secured

debt and if not, whether they are the proper parties who are

subject to the mandates contained in the recording

[**42] statutes.

E. MERS as ′′Nominee′′

The MERS Defendants have repeatedly taken the position

that, in commencing the instant action, Plaintiffs sued the

wrong parties because ′′MERS has not and does not

negotiate or transfer promissory notes secured by mortgages

recorded in Montgomery County, Pennsylvania.′′ (MERS’

Memorandum of Law in Support of Their Motion for

Summary Judgment, at p. 44). More particularly, MERS

argues:

But there is no circumstance and no amount of wild

speculation that could lead the Court to conclude that

Section 351 mandates that a person or entity who did

not buy the note, did not sell the note, and was not in

any way involved with the transfer of the note, either as

an assignor or as an assignee, is the person or entity that

Section 351 mandates is responsible for documenting

and then recording note transfers or other changes in

ownership of debt.

(MERS’ Memo of Law in Support of Motion for Summary

Judgment at p. 45).

At first blush, this argument appears compelling. However,

now that it is clear that transfer of the note by operation of

law also transfers the mortgage, the argument loses much of

its original luster. What’s more, as recited in the MERS

Defendants’ Memorandum [**43] of Law in Support of

Their Motion for Summary Judgment at page 10:

Defendants are MERSCORP Holdings, Inc.

(′′MERSCORP′′) and Mortgage Electronic Registration

Systems, Inc. (′′MERS′′). MERS is a wholly owned

subsidiary of MERSCORP. MERSCORP operates the

MERS ® system and membership in the MERS ®

System and members are governed by the MERS ®

System Rules of Membership. It is MERS that serves

as the mortgagee of record in the public land

records as the ′′nominee′′ for a lender (noteholder)

and its successors and assigns. (Emphasis added)

And, under MERS Rule 8, Section 2(a),16

[*559] If a Member chooses to conduct foreclosures in

the name of Mortgage Electronic Registration Systems,

Inc., the note must be endorsed in blank and in

possession of one of the Member’s MERS certifying

officers. If the investor so allows, then MERS can be

designated as the note-holder.

Thus, in apparent contradiction to its argument, MERS at

least initially acknowledges that it in fact is ′′involved with

the transfer of the note′′ by virtue of its service as the

mortgagee of record as the nominee for a lender/noteholder

and its successors and assigns and that when required to

facilitate a foreclosure, MERS itself can become a

′′note-holder.′′

The relationship between the MERS Defendants (′′MERS′′)

and its members is more particularly described by William

C. Hultman, the Vice President of [**45] Legislative Affairs

for MERSCORP and a former officer of MERS, in his

Declaration which is attached to Defendants’ Memorandum

of Law in Support of Motion for Summary Judgment as

Exhibit ′′A.′′ According to Mr. Hultman,

6. In regard to the mortgage or security instrument, the

borrower and lender contractually agree to designate

MERS as the mortgagee (as the nominee for the lender

and the lender’s successors and assigns) such that legal

title to the lender’s (and its successors and assigns)

secured interests in the property are held by MERS on

behalf of subsequent transferees of the promissory note.

MERS serves as the mortgagee of record on a mortgage,

16 Attached [**44] as Exhibit ′′A15′′ to Plaintiff’s Memorandum in Opposition to Defendant’s Motion for Summary Judgment and in

Support of Plaintiff’s Cross Motion for Partial Summary Judgment. See also, Exhibit ′′A16′′ to Plaintiff’s Memorandum, Deposition

testimony of R.K. Arnold, in Trent v. MERS, Case No. 3:06CV-374-J-32HTS in the U.S. District Court for the Middle District of Florida,

Jacksonville Division, at p. 67, 76-77, 81-82, 112-113 on 9/25/06; Plaintiff’s Exhibit ′′A17,′′ Deposition testimony of William C. Hultman

in Henderson v. MERS, Case No. CV 2008-900805 in the Circuit Court of Montgomery County, AL, dated 11/11/09, pp. 62-63, 108,

109-112, 114-116). It does appear, however, that in March 2013 these rules were altered such that under the current procedure governing

foreclosures, an assignment from MERS to the foreclosing party or whoever will be foreclosing must first be recorded in the public land

records. MERS no longer undertakes foreclosure proceedings in its own name. (Hultman Deposition, Plaintiff’s Memorandum, Exhibit

′′A13,′′ at pp. 62-65).

16 F. Supp. 3d 542, *558; 2014 U.S. Dist. LEXIS 89222, **39
as the nominee (i.e., agent) for the lender and for the

lender’s successors and assigns, who are members of

the MERS ® System.

...

9. From time to time, MERS assigns the MERS

Mortgages. In such instances, MERS is the assignor of

the MERS Mortgage, and it is a MERS Signing Officer

who signs the assignment of the MERS Mortgage

(′′MERS Assignment of Mortgage′′). Once the MERS

Assignment of Mortgage is duly executed and delivered,

the MERS Assignment of Mortgage is, as required by

the MERS ® System rules, recorded in the public, local

land records, [**46] and any fees imposed for recording

the MERS Assignment of Mortgage are paid.

...

11. ... MERS’s only role is and was to serve as the

mortgagee on the mortgage - as the nominee (or in the

stead) of the lender and the lender’s successors and

assigns, who are members of the MERS ® System.

...

14. When the transfer or sale of the debt or promissory

note involves a MERS ® System member, MERS

remains as the mortgagee of record and continues to act

as the mortgagee as the nominee for the purchaser (who

is the beneficial owner of the debt or note), who is then

the lender’s successor or assign. The MERS Mortgage

is not assigned because MERS remains the mortgagee

as the nominee for purchaser.

(Hultman Declaration, Exhibit ′′A,′′ at pp. 3-4, 5). See also,

Deposition of William C. Hultman of October 18, 2013, at

p. 65-66, annexed to Plaintiff’s Memorandum of Law in

Opposition to Defendants’ Motion for Summary Judgment

and in Support of Cross-Motion for Summary Judgment as

Exhibit ′′A13′′).

[*560] Therefore according also to Mr. Hultman, MERS is

both named as the mortgagee and acts as agent for the

lenders - not only the lender which originates the loan to the

borrower, but also those lenders to whom the note is

[**47] ultimately sold and transferred. It is MERS that

′′from time to time′′ will assign and record the mortgages

over which it has charge in the public local land records and

ensure that any associated fees therefor are paid. See also,

Plaintiff’s Exhibit ′′A10,′′ MERS’ System Rules of

Membership, Section 10, p. 45). Clearly then, MERS is

involved with the transfer of the note and mortgage and we

find, is an appropriate party to this action.

We likewise reject the proposition that MERS is not subject

to liability because it is only an agent for its member-lenders.

Indeed, as a general matter, an ′′agent′′ is a ′′person

authorized by another (principal) to act for or in place of

him; one intrusted with another’s business.′′ BLACK’S

LAW DICTIONARY 63 (6th ed. 1990). An agent holds the

power to alter the legal relations between the principal and

third persons. Tribune-Review Publishing Co. v.

Westmoreland County Housing Authority, 574 Pa. 661, 675,

833 A.2d 112, 120 (2003). An agency relationship arises

when the following basic elements coalesce: there is a

manifestation by the principal that the agent shall act for

him, the agent accepts the undertaking, and the parties

understand that the principal [**48] is to be in control of the

undertaking. V-Tech Services, Inc. v. Street, 2013 PA Super.

166, 72 A.3d 270, 278 (2013)(quoting Walton v. Robert

Wood Johnson University Hospital, 2013 PA Super 108, 66

A.3d 782 (2013)). The party asserting the existence of an

agency relationship bears the burden of proving it by a fair

preponderance of the evidence. Id. (quoting Id.).

It is a basic tenet of agency law that an individual acting as

an agent for a disclosed principal is not personally liable on

a contract between the principal and a third party unless the

agent specifically agrees to assume liability.

Azarchi-Steinhauser v. Protective Life Insurance Co., 629 F.

Supp. 2d 495, 499-500 (E.D. Pa. 2009)(quoting Vernon D.

Cox & Co. v. Giles, 267 Pa. Super. 411, 406 A.2d 1107,

1110 (1979). Instead, the principal is liable for and bound by

any acts that the agent performs with actual or implied

authority from the principal that are within the scope of the

agent’s employment. Id. However, an authorized agent who

enters into a contract on behalf of a principal without

disclosing that it is acting for the principal, is personally

liable on the contract. Burton v. Boland, 339 Pa. Super. 444,

446, 489 A.2d 243, 245 (1985)(citing [**49] Revere Press,

Inc. v. Blumberg, 431 Pa. 370, 246 A.2d 407 (1968) and

Dwyer v. Rothman, 288 Pa. Super. 256, 431 A.2d 1035

(1981)). See also, Strawbridge & Clothier v. Garment

Manufacturers, Inc., 189 Pa. Super. 43, 46, 149 A.2d 471,

472 (1959)(′′An agent for undisclosed principals bears the

legal consequences of assuming liability for those

undertakings which his principals would have undertaken,

had he made a disclosure.′′); Pennsylvania Railway Co. v.

Rothstein, 116 Pa. Super. 156, 161, 176 A. 861 (1935)(′′It is

an elemental principle of agency that to relieve himself from

liability, an agent in dealing with a third party must not only

disclose the fact of the agency, but also the name of his

principal.′′).

As per Mr. Hultman,

3. MERSCORP maintains a database of the loans

registered on the MERS ® System. The information on

16 F. Supp. 3d 542, *559; 2014 U.S. Dist. LEXIS 89222, **45
the database tracks the beneficial interests in, and the

servicing rights to, the loans registered on and by the

members of the [*561] MERS ® System. It is the

MERS ® System members who are responsible for and

who report the transactions regarding the registered

loans by inputting the data regarding the beneficial

interests in, and servicing rights to, the members’

particular [**50] loans registered on the MERS ®

System. For example, if there is a transfer of the

beneficial interests of a loan as a result of a promissory

note being transferred, it is the MERS ® System

member (or the MERS ® System member who is the

servicer of the loan for the transferee of those beneficial

interests) that reports the transfer of beneficial interests

by inputting the data reflecting the transfer onto the

MERS ® System database.

Neither MERS nor MERSCORP is involved in any way

in the transfer, sale, or purchase of any promissory

notes, and neither MERS nor MERSCORP is involved

in reporting the transfer, sale, or purchase of any

promissory notes by a MERS ® System member to

another MERS ® System member, or by a MERS ®

System member to one who is not a MERS ® System

member.

(Hultman Declaration, at pp. 3-4).

Hence as Mr. Hultman’s declaration attests, the identities of

the lenders for whom MERS is acting as agent are only

revealed to other MERS members by MERS members, as

′′neither MERS nor MERSCORP is involved in reporting

the transfer, sale or purchase of any promissory notes′′ by

one member to another nor to anyone who is not a member.

(See also, Exhibit ′′A20′′ to Plaintiff’s Memorandum

[**51] of Law in Opposition to Defendant’s Motion for

Summary Judgment and in Support of Cross Motion for

Summary Judgment, Deposition Testimony of R.K. Arnold

in Henderson v. MERS, Case No. CV 2008-900805 in the

Circuit Court of Montgomery County, AL, dated 9/25/09, at

p. 112, lines 10-12: ′′The members utilize the [MERS]

system to track the note.′′). That the identities of the

lenders/note holders for whom MERS is ostensibly acting as

agent are likewise inaccessible to licensed title agents and

consumers has also been attested. (See, Plaintiff’s Exhibits

′′B,′′ p.5, ′′G,′′ pp. 6-7 and ′′H,′′ p. 6).

From this we conclude that ample evidence exists to support

the argument that MERS may alternatively be held

responsible as an undisclosed agent of the lenders for whom

it was acting as ′′nominee.′′ Accordingly, we now hold that

the MERS Defendants are proper parties who may be liable

for and subject to the mandates of the Pennsylvania

Recording Statutes in general and Section 351 in particular.

Defendants’ motion for summary judgment is therefore

denied as to Count I of the Complaint.

F. Plaintiff’s Claims for Unjust Enrichment and Quiet Title

Defendants also move for summary judgment in their favor

on Plaintiff’s [**52] causes of action for unjust enrichment

and to quiet title,17 asserting as the reasons therefor that

Plaintiff has failed to prove the essential elements of each.

We note at the outset that to survive a summary judgment

motion, the non-moving party is not required to prove its

case, although it must present sufficient evidence on which

a jury could reasonably find in its favor. See, e.g., Jakimas,

and Kaucher, both supra. [*562] After reviewing the

evidentiary materials in the record of this matter in the light

most favorable to the plaintiff, we find that it has indeed

mustered sufficient evidence to proceed to trial.

Pursuant to Pa. R. C. P. 1061(b)(3), an action to quiet title

may be brought to compel an adverse party to file, record,

cancel, surrender or satisfy [**53] of record, or admit the

validity, invalidity or discharge of, any document, obligation

or deed affecting any right, lien, title or interest in land.

Kean v. Forman, 2000 PA Super. 141, 752 A.2d 906, 908

(2000), appeal denied, 564 Pa. 712, 764 A.2d 1070 (2000).

Rule 1061 was intended to be liberally construed. Brennan

v. Shore Brothers, Inc., 380 Pa. 283, 286, 110 A.2d 401, 402

(1955).

In our Memorandum Opinion of October 19, 2012, we held

that Plaintiff had sufficiently pled a quiet title claim by

alleging that she was a ′′party in any manner interested in

the assignment - i.e. conveyance of mortgages recorded in

the name of MERS as nominee,′′ and that she had pled ′′a

pecuniary interest which is affected by whether the mortgage

assignments which MERS tracks are recorded.′′ See, 904 F.

Supp. 2d at 451. The evidentiary materials produced by

Plaintiff in opposition to Defendants’ Motion for Summary

Judgment include, among other things, a statewide summary

from the Pennsylvania Department of Revenue showing the

total number of instruments (deeds, mortgages and other

writs) recorded in each county Recorder of Deeds office and

17 We note that Defendants re-raise their previously-addressed claim that there is no private right of action to enforce §351 and again

challenge the appropriateness of permitting Plaintiff to proceed under a quiet title theory. In the absence of a showing of extraordinary

circumstances and in view of our previous rulings on this point, we reiterate that we see no need to reconsider those rulings as per the

rule of the case doctrine.

16 F. Supp. 3d 542, *560; 2014 U.S. Dist. LEXIS 89222, **49
the amounts collected in recording fees for the 2011

calendar [**54] year and a survey prepared by the

Philadelphia Department of Records for the period between

2000 and 2012 of the number of MERS and non-MERS

recorded documents, as well as a number of Affidavits from

attorneys and former attorneys from Community Legal

Services, the Pennsylvania Legal Aid Network, and the

Housing Alliance of Pennsylvania. (See, Plaintiff’s Exhibits

′′B,′′ ′′C,′′ ′′D,′′ ′′E′′ and ′′F′′). As these Exhibits demonstrate,

over the last twelve years, the number of documents

recorded by MERS has steadily increased, while the number

of documents recorded by others has steadily decreased.

There has, in turn, been a corresponding decrease in the

amount of recording fees collected by the county Recorders

of Deeds. Inasmuch as Community Legal Services, the

Legal Aid Network and the Housing Alliance receive much

of their funding and financial support from the collection of,

inter alia, fees paid to the Recorders of Deeds offices, they

too have suffered monetary injury.

In addition, Plaintiff has produced reports from two of its

proposed expert witnesses with experience in forensic

analysis of chain of title issues and real estate law - Marie

T. McDonnell and Charles W. Proctor, III. Ms. McDonnell

[**55] reported on her analysis of a MERS mortgage for a

residential property in Montgomery County which was

originated with Countrywide Home Loans, Inc. in June,

2005, was securitized in late August, 2005, sold at least

three times and foreclosed in March, 2013. (See, Plaintiff’s

Exhibit ′′G,′′ pp. 3-5). Throughout the process, Ms.

McDonnell found that there were five missing assignments

that should have been recorded with the Montgomery

County Recorder of Deeds, that the MERS Milestones data

was incomplete and in contradiction to the securitization

deal documents, and that title to the property had been

corrupted by MERS’ failure to record a complete chain of

title. (Exhibit ′′G,′′ p.7).

In his Declaration, Mr. Proctor attests that licensed title

agents have no access to the information in the bar codes

which MERS adds to every document that it records or to

the MERS data base of exchanges, sales and assignments

that [*563] MERS facilitates for the benefit of its

customers/members. This means that title searchers and

consumers are denied the ability to ascertain who currently

owns the note secured by a MERS mortgage and that neither

the mortgagor nor the courts can ascertain the chain of

events or [**56] the validity of a transaction. This results,

according to Mr. Proctor, in an erosion of Pennsylvania’s

land records and the inability to evaluate the marketability

of title and credit worthiness of the consumer. (See,

Plaintiff’s Exhibit ′′H,′′ pp. 6-7).

Plaintiff Becker herself also testified that it is the obligation

of the Recorders of Deeds to make sure that the chain of title

of properties in their county is clear and complete. (See,

Plaintiff’s Exhibit ′′A9,′′ Deposition of Nancy Becker dated

July 17, 2013, p. 48). Indeed, the Pennsylvania Superior

Court has found that ′′the primary duty of the recorder of

deeds is to serve the public by receiving and duly recording

any recordable instruments as to serve the future necessities

of the law,′′ and that ′′as the custodian of the county deed

books, the recorder of deeds is obligated to protect the

public in preserving the integrity of the official records of

his or her office.′′ Schaeffer v. Frey, 403 Pa. Super. 560,

567-568, 589 A.2d 752, 756 (1991)(internal citations

omitted). However, over the past several years, a number of

residents who were facing foreclosure didn’t know who

owned their mortgage or to whom they should be making

their [**57] mortgage payments. (Id., 66). Plaintiff attributes

this to the fact that MERS is not recording all of the note

assignments with the result that not only is there a loss in

revenue, but also the land title records are incomplete to the

public. (Id., 65-68, 176-177).

Finally, Plaintiff also testified that based on a forensic audit

which revealed that a MERS-affiliated mortgage was

transferred on average between 4 and 12 times, she

conservatively estimates that Montgomery County alone

has lost $15.7 million in recording fees. (Id., 178-180).

Because we find that all of this evidence is sufficient to

demonstrate that a genuine issue of material fact exists with

respect to Plaintiff’s entitlement to quiet title relief,

Defendants’ motion for the entry of judgment in their favor

as a matter of law on this claim is also denied.

We reach the same conclusion with regard to Plaintiff’s

unjust enrichment claim. A cause of action for unjust

enrichment is a claim by which the plaintiff seeks restitution

for benefits conferred on and retained by a defendant who

offered no compensation in circumstances where

compensation was reasonably expected. White v. Conestoga

Title Insurance Co., 617 Pa. 498, 504, 53 A.3d 720, 723

(2012). [**58] A showing of unjust enrichment requires a

demonstration that: (1) a benefit was conferred on the

defendant; (2) appreciation of such benefits by defendant;

and (3) acceptance and retention of such benefits under

circumstances that it would be inequitable for defendant to

retain the benefit without payment to the plaintiff. EBC, Inc.

v. Clark Building Systems, Inc., 618 F.3d 253, 273 (3d Cir.

2010); Durst v. Milroy General Contracting, 2012 PA Super.

179, 52 A.3d 357, 360 (2012). Here, Plaintiff proffers the

videotaped deposition testimony of its former President and

CEO, R.K. Arnold in Henderson v. Merscorp, Inc., et. al., a

similar action before the Circuit Court for Montgomery

County, Alabama:

16 F. Supp. 3d 542, *562; 2014 U.S. Dist. LEXIS 89222, **53
Q. ... Is it your company’s intention to supplement or

assist the public land records of the several states with

the MERS system to make it more clear about who

owns what?

A. No.

[*564] Q. Is it your company’s intent to supplant the

mortgage land records of various states with its system?

A. No. We layer it on top is the way to think of it.

Q. When you say layer it on top, explain that, please.

A. Well, the MERS system couldn’t exist if the recording

system didn’t exist.

Q. But the recording system can exist [**59] without

MERS?

A. Certainly. So we are the mortgagee of record, and

there has to be a place for us to establish that. And then

we track the servicer.

(See, Plaintiff’s Exhibit ′′A20,′′ 111-112). This testimony is,

we find, essentially tantamount to an admission that by

maintaining the recording system in Pennsylvania, the

county recorders of deeds confer a benefit upon defendants

which is in fact appreciated by defendants. Because

Defendants do not pay any fees when a note is transferred

between its membership fee-paying members, we find that

a genuine issue of material fact exists as to whether it would

be unjust to allow Defendants to retain the benefits conferred

on them without paying Plaintiff and the class whom she

represents therefor. Consequently, Defendants’ motion for

summary judgment as to Count III of the Complaint is also

denied.

G. Plaintiff’s Cross Motion for Partial Summary Judgment

In addition to opposing Defendants’ Motion for Summary

Judgment, Plaintiff also seeks the entry of partial judgment

in her favor as a matter of law pursuant to Count IV of her

Complaint and asserts that this Court should now enter an

order declaring that Defendants’ past and present failures to

[**60] record note assignments among its members

constitutes a violation of Section 351 and that Defendants

have been unjustly enriched by their actions.

Under the Declaratory Judgment Act, 28 U.S.C. §2201,

(a) In a case of actual controversy within its jurisdiction,

... any court of the United States, upon the filing of an

appropriate pleading, may declare the rights and other

legal relations of any interested party seeking such

declaration, whether or not further relief is or could be

sought. Any such declaration shall have the force and

effect of a final judgment or decree and shall be

reviewable as such.

This language has been said to ′′place a remedial arrow in

the district court’s quiver,′′ and to confer ′′a unique and

substantial discretion on federal courts to determine whether

to declare litigants’ rights.′′ Reifer v. Westport Insurance

Corp., No. 13-2880, 751 F.3d 129, 2014 U.S. App. LEXIS

8014 *24 (3d Cir. Apr. 29, 2014) (quoting Wilton v. Seven

Falls Co., 515 U.S. 277, 286, 288, 115 S. Ct. 2137, 132 L.

Ed. 2d 214 (1995)). Generally, the judgment in a suit for

declaratory judgment must be responsive to the pleadings

and issues presented. Westport Insurance Corp. v. Bayer,

284 F.3d 489, 499 (3d Cir. 2002). [**61] Indeed, ′′[w]hen all

is said and done,′′ the Supreme Court has concluded, ′′the

propriety of declaratory relief in a particular case will

depend upon a circumspect sense of its fitness informed by

the teachings and experience concerning the functions and

extent of federal judicial power.′′ Wilton, 515 U.S. at 287,

115 S. Ct. at 2143. A declaratory judgment action is

appropriate when the declaration will settle the question

presented and terminate the entire controversy - courts are

to avoid using declaratory judgment to make abstract

determinations or to try the controversy in piecemeal

fashion. Pennsylvania Video Operators v. United States, 731

F. Supp. 717, 719 (W.D. Pa. 1990), aff’d w/o opinion,

[*565] 919 F.2d 136 (3d Cir. 1990)(citing Maryland

Casualty Co. v. Rosen, 445 F.2d 1012 (2d Cir. 1971) and

Rowland v. Tarr, 378 F. Supp. 766, 769 (E.D. Pa. 1974)).

Over the years, the Third Circuit has enumerated the

following factors for district courts to consider when

exercising Declaratory Judgment Act discretion. These are:

(1) the likelihood that a federal court declaration will

resolve the uncertainty of obligation which gave rise to

the controversy;

(2) the convenience of the parties;

(3) the [**62] public interest in settlement of the

uncertainty of the obligation; and

(4) the availability and relative convenience of other

remedies.

Reifer v. Westport Insurance Co., 2014 U.S. App. LEXIS at

*28 (citing United States v. Pa. Dep’t of Envtl. Res., 923

F.2d 1071, 1075 (3d Cir. 1991), Terra Nova Ins. Co. v. 900

Bar, Inc., 887 F.2d 1213, 1224 (3d Cir. 1989) and Bituminous

Coal Operators’ Assoc. v. Int’l Union, United Mine Workers

16 F. Supp. 3d 542, *563; 2014 U.S. Dist. LEXIS 89222, **58
of America, 585 F.2d 586, 596 (3d Cir. 1975), abrogated on

other grounds by Carbon Fuel Co. v. United Mine Workers

of Am., 444 U.S. 212, 100 S. Ct. 410, 62 L. Ed. 2d 394

(1979)).

In this matter and in light of the rationale outlined in the

preceding sections of this opinion, we must concur with

Plaintiff’s assertion that declaratory judgment is now

properly entered in her favor with regard to Count I of the

Complaint such that we now formally declare that the

assignment or transfer of a promissory note secured by a

mortgage on real estate is, in Pennsylvania, equivalent to a

mortgage assignment. We further declare that Defendants’

failure to create and record documents evincing the transfers

of promissory notes secured by mortgages on real estate in

the Commonwealth [**63] of Pennsylvania is, was and will

in the future be, in violation of the Pennsylvania Recording

law - most particularly 21 P.S. §§351.

18 Plaintiff’s motion

for partial summary judgment is therefore granted as to

Defendants’ liability under Count I with the issue of the

extent of the damages as a consequence of these violations

to be addressed at the trial of this matter.

We must decline to enter summary judgment in Plaintiff’s

favor as to Count III however. To be sure, while there

clearly is evidence that Defendants may have been unjustly

enriched as a result of the conduct complained of, we do not

find the record to have been sufficiently developed on this

claim to allow the entry of judgment as a matter of law or

to make an award of damages at this time. Therefore, we

leave this claim to be further and finally thrashed out at trial.

So saying, Plaintiff’s motion for partial summary judgment

shall be granted in part.19

Conclusion

For all of the reasons set forth above, the Defendants’

Motion for Summary [*566] Judgment shall be denied in its

entirety and the Plaintiff’s Cross-Motion for Partial Summary

Judgment shall be granted in part. An appropriate order

follows.

ORDER

AND NOW, this 30th Day of June, 2014, upon

[**65] consideration of the Motion for Summary Judgment

of Defendants, Merscorp, Inc. and Mortgage Electronic

Registration Systems, Inc. (collectively ′′MERS Defendants′′)

(Doc. No. 66) and Plaintiff’s Cross-Motion for Partial

Summary Judgment (Doc. No. 80) and the parties’ further

Memoranda of Law in Support and in Opposition, it is

hereby ORDERED that Defendants’ Motion is DENIED in

its entirety and Plaintiff’s Motion is GRANTED IN PART

as outlined in the preceding Memorandum Opinion.

IT IS FURTHER ORDERED that Declaratory Judgment is

hereby entered in favor of Plaintiff and against Defendants

such that Defendants’ are declared to be obligated to create

and record written documents memorializing the transfers

of debt/promissory notes which are secured by real estate

mortgages in the Commonwealth of Pennsylvania for all

such debt transfers past, present and future in the Office for

the Recording of Deeds in the County where such property

is situate.

IT IS STILL FURTHER ORDERED AND DECLARED

that inasmuch as such debt/mortgage note transfers are

conveyances within the meaning of Pennsylvania law, the

failure to so document and record is violative of the

Pennsylvania Recording Statute(s).

BY THE [**66] COURT:

/s/ J. Curtis Joyner

J. CURTIS JOYNER, J.

18 Although not specifically pled in Plaintiff’s complaint, for the reasons given previously in this Memorandum Opinion, Sections 444,

621 and 623-1 appear to also have been violated.

19 While it is not entirely clear from the briefing whether Plaintiff is likewise seeking [**64] the entry of summary judgment in the

form of permanent injunctive relief, we would deny that relief as well. A plaintiff seeking a permanent injunction must satisfy a

four-factor test before a court may grant such relief. Ebay Inc. v. Mercexchange, L.L.C., 547 U.S. 388, 391, 126 S. Ct. 1837, 1839, 164

L. Ed.2d 641 (2006). Specifically, a plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available

at law, such as monetary damages, are inadequate to compensate for that injury; (3) that considering the balance of hardships between

the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not disserved by a permanent

injunction. Id. Indeed, among the remedies sought by Plaintiff is an award of monetary damages. So saying, we cannot find that judgment

would be properly now entered in her favor on this equitable claim.

16 F. Supp. 3d 542, *565; 2014 U.S. Dist. LEXIS 89222, **62
i

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

_________________________________________ 

No. 14-4315 

_________________________________________ 

MONTGOMERY COUNTY, PENNSYLVANIA, RECORDER OF DEEDS, by 

and through NANCY J. BECKER, in her official capacity as the Recorder of 

Deeds of Montgomery County, Pennsylvania, 

 Plaintiff-Appellee, 

 v. 

MERSCORP, INC., and MORTGAGE ELECTRONIC 

REGISTRATION SYSTEMS, INC. 

 

Defendants-Appellants. 

_________________________________________ 

Appeal from the July 11, 2014 decision of the United States District 

Court for the Eastern District of Pennsylvania Civil Action No. 11-CV-06968 

(Honorable Curtis Joyner) certified for interlocutory appeal on 

September 8, 2014 

_________________________________________ 

BRIEF OF AMICUS CURIAE THE LEGAL SERVICES CENTER 

OF HARVARD LAW SCHOOL AND LAW PROFESSORS 

IN SUPPORT OF THE APPELLEE 

_________________________________________ 

MAX WEINSTEIN 

CHARLES CARRIERE 

K-SUE PARK 

LEGAL SERVICES CENTER OF 

HARVARD LAW SCHOOL 

 120 Boylston Street 

 Jamaica Plain, MA 

(617) 390-2694 

March 16, 2015 

Case: 14-4315 Document: 003111912092 Page: 1 Date Filed: 03/23/2015
ii

CORPORATE DISCLOSURE STATEMENT 

The Legal Services Center is a program of Harvard Law School at Harvard 

University, a 501(c)(3) non-profit organization. No party, party’s counsel, nor any 

person other than the amicus curiae authored any part of the brief, nor contributed 

money intended to fund preparing or submitting the brief. 

Case: 14-4315 Document: 003111912092 Page: 2 Date Filed: 03/23/2015
iii

TABLE OF CONTENTS 

STATEMENT OF INTEREST................................................................. 1 

ISSUE TO BE ADDRESSED................................................................ 1 

SUMMARY OF ARGUMENT.............................................................. 1 

ARGUMENT............................................................................................ 4 

I. MERS is a departure from and disruption of the traditional recording 

practices, upon which it relies........................................................... 4 

A. Prior to MERS, records of real property interests were public, 

transparent, and provided a secure foundation upon which the 

American economy could grow........................................... 4 

B. MERS was created to reduce costs for sellers of mortgage-backed 

securities (MBS)................................................................ 6 

C. The MERS structure substitutes the MERS name for that of the 

mortgage lender in the county registry..................................... 8 

D. MERS privatized and made the documentation of transfers of 

mortgage notes optional, discouraging the mortgage industry from 

maintaining complete records of actual holders of interests in real 

property............................................................................... 10 

E. MERS interferes with Pennsylvania’s requirement that purported 

assignees prove their relationship to the original lender in order to 

 foreclose...................................................................... 12 

F. MERS lacks legal authority and public accountability.................... 12 

G. MERS acts as a placeholder in the traditional recording system, 

and cannot function without that system ................................. 17 

II. MERS helped precipitate the foreclosure crisis and left homeowners 

without recourse to protect their property 

rights.................................... 18

A. MERS facilitated the securitization of subprime loans................. 18 

B. MERS increased the costs of enforcing property rights and left 

homeowners without recourse to challenge wrongful 

 foreclosures....................................................................................... 21 

C. Surveys, audits and public media have exposed the inaccuracy of 

records in the MERS database............................................. 22 

D. Court proceedings and federal agency investigations have exposed 

the inaccuracy of records in the MERS database........................ 24 

E. MERS’s inaccuracy affects not only the properties for which it 

is named as mortgagee, but all properties adjoining those 

 properties..................................................................... 26 

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iv

CONCLUSION................................................................................. 26 

CERTIFICATES ................................................................................ 28 

 

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TABLE OF AUTHORITIES 

Scholarly Authorities Page(s) 

Ann M. Burkhart, Lenders and Land, 64 Mo. L. Rev. 249 (1999).................... 7 

M. Mark Heekin, Modernizing Mortgage Foreclosure Law: A Call for 

Transparency and an End to the Payment Rule, 

33 Quinnipiac L. Rev. 165 (2014).............................................. 5-6, 21-22 

Adam J. Levitin, The Paper Chase: Securitization, Foreclosure, and the 

Uncertainty of Mortgage Title, 

63 Duke L.J. 637 (2013)........................................................... 14, 15, 21 

Gloria J. Liddell and Pearson Liddell, Jr., Robo Signers: The Legal Quagmire of 

Invalid Residential Foreclosure Proceedings and the Resultant Potential Impact 

Upon Stakeholders, 16 Chap. L. Rev. 367 (2012) ...................................... 21 

Tanya Marsh, Foreclosures and the Failure of the American Land Title Recording 

System, 111 Colum. L. Rev. 19 (Sidebar) (2011)......... ............................ 21 

Grant S. Nelson and Dale A. Whitman, Real Estate Finance Law (5th ed. 

2007)........................................................................................... 5 

Joyce D. Patton and Carroll G. Palomar, Patton and Palomar on Land Titles (3d ed. 

2003)............................................................................................ 6 

Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic 

System’s Land Title Theory, 

53 Wm. & Mary L. Rev. 111 (2011).....................................9, 11, 18, 24, 26 

Christopher L. Peterson, Foreclosure, Subprime Mortgage Lending, and the 

Mortgage Electronic Registration System, 

78 U. Cin. L. Rev. 1359 (2010)............................................4, 5-6, 8, 17-21 

Powell on Real Property (Michael Allen Wolf ed., 2007)..............................5 

Joseph Singer, Foreclosure and the Failures of Formality, 

46 Conn .L. Rev. 497 (2013)...............................................................14 

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vi

Laura A. Steven, MERS and the Mortgage Crisis: Obfuscating Loan Ownership 

and the Need for Clarity, 7 Brook. J. Corp. Fin. & Com. L. 251 (2012)............ 15 

Joseph Story, Commentaries on the Constitution of the United States 

(1833).......................................................................................... 4 

Herbert T. Tiffany and Basil Jones, Tiffany on Real Property 

(1939)........................................................................................................................ 5 

Alan M. White, Losing the Paper- Mortgage Assignments, Note Transfers and 

Consumer Protection, 

24 Loy. Consumer L. Rev. 468 (2012)..................................................... 23

David Woolley and Lisa Herzog, MERS: The Unreported Effects of Lost Chain of 

Title on Real Property Owners, 

8 Hastings Bus. L J. 365 (2012)...................................................... 26-27

Caryl A. Yzenbaard, Residential Real Estate Transactions 

(1991). ......................................................................................... 5

Public Media and Industry Literature 

R.K. Arnold, Yes, There is Life on MERS, 

11-Aug. Prob. & Prop. 32 (1997). ...................................................8-9, 17

R.K. Arnold, Viewpoint, 

INSIDE MERS 1 (Jan. Feb. 2004)........................................................20 

Arnold Deposition 176-80 (September 25, 2009), on file with the author and 

available at <https://www.dropbox.com/s/hzrzapyxa7bogw5/MERS-DEPO-OFCEO-RK-Arnold-2009.pdf?dl=0>.........................................................11 

R.K. Arnold (prepared statement), Robo-Signing, Chain of Title, Loss Mitigation, 

and Other Issues in Mortgage Servicing: Hearing Before the Subcommittee on 

Housing and Comty. Opportunity of the H. Comm. On Fin. Servs., 

111th Cong. 103-04 (2010) .................... .............................................10 

Kate Berry, Foreclosures Turn Up Heat on MERS, 

Am. Banker 1 (July 10, 2007). ............................................................20

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Worth Civils & Mark Gongloff, Subprime Shakeout: Lenders that Have Closed 

Shop, Been Acquired or Stopped Loans, Wall St. J. Online, available at 

<http://online.wsj.com/public/resources/documents/info‐subprimeloans0706‐sort.html> (last 

visited March 13, 2015) ................................................ 24

Memorandum from Covington & Burling to R.K. Arnold, President and CEO, 

MERSCORP, Inc. (Sept. 1, 1997) (on file with the Duke Law Journal)............14 

Federal Reserve, Office of the Comptroller of the Currency, and Office of Thrift 

Supervision, Interagency Review of Foreclosure Policies and Practices 10-11 

(2011)......................................................................................... 26 

Failed Bank List, Federal Deposit Insurance Corporation (FDIC), available at 

<http://www.fdic.gov/bank/individual/failed/banklist.html> 

(last visited March 13, 2015)............................................................... 24

Mike McIntire, Tracking Loans Through a Firm that Holds Millions, 

N.Y. Times, April 23, 2009, at B1. ....................................................... 21

MERS Registers 10 Million Loans, Inside MERS 1 (Nov./Dec. 2002).............. 20 

MERS Registers 20 Million Loans, Inside MERS 1 (Jan./Feb. 2004)............... 20 

MERS Procedures Manual (v. 27.0), available at <http://www.mersinc.org/joinmers-docman/978-mers-system-procedures-final/file>......................... 9, 12-13

MERS Rules of Membership, available at <http://www.mersinc.org/join-mersdocman/37-mers-commercial-rules-of-membership/file>............................. 13 

Moody’s Investors Service, Mortgage Electronic Registration Systems, Inc. 

(MERS): Its Impact on the Credit Quality of First-Mortgage Jumbo MBS 

Transactions, Structured Finance Special (April 30, 1999).............................19 

Carson Mullen, MERS: Tracking Loans Electronically, 

60:8 Mortgage Banking 62 (May 31, 2000). .......................................19, 20

Michael Powell and Gretchen Morgenson, MERS? It May Have Swallowed Your 

Loan, N.Y. Times, March 6, 2011, at BU1. ......................................... 24-25 

Property deed ready for book entry, 

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viii

19.3 National Mortgage News 20 (Oct. 17, 1994)......................................14 

Phyllis K. Slesinger and Daniel McLaughlin, Mortgage Electronic Registration 

System, 31 Idaho L. Rev. 805 (1995).............................................7-8, 13 

Cases 

Culhane v. Aurora Loan Services of Nebraska, 

826 F.Supp 2d 352 (D. Mass 2011).......................................................12 

Escher v. Decision One Mortgage Co., 

369 B.R. 862 n.8 (Bankr. E.D. Pa. 2007). ...............................................16

HSBC Bank USA v. Eslava, 

No. 1-2008-CA-055313 (Fla. Cir. Ct. May 6, 2010)....................................25 

Landmark Nat’l Bank v. Kesler, 

40 Kan. App. 2d 325 (2008)................................................................16 

Landmark Nat’l Bank v. Kesler, 

216 P.3d 158, 165–66 (2009) .............................................................17

Statutes 

21 Penn. Stat. § 351........................................................................ 6 

Pa. R. C. P. 1147 (a)(1) .................................................................... 12

U.C.C. § 8 (1994). ......................................................................... 16

U.C.C. § 9 (1994)........................................................................... 14 

15 U.S.C. § 78 (2010)...................................................................... 16

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1

STATEMENT OF INTEREST 

All parties have consented to the filing of this brief. 

The Legal Services Center (LSC), part of Harvard Law School’s clinical 

program, is a legal services office staffed by Harvard Law School faculty. LSC’s 

clinical faculty offer courses on a range of consumer law topics, including 

mortgage law, consumer bankruptcy, and student loan law. Instructors also 

supervise students as part of a client services clinic, and many of LSC’s cases 

involve representation of homeowners facing foreclosure on the basis of MERS 

loans. LSC’s academic role and direct experience with MERS informs its views on 

MERS practices. 

Rebecca Tushnet is a Professor of Law at Georgetown Law. She teaches 

property law and she has written extensively about consumer protection issues. 

Joseph William Singer is Bussey Professor of Law at Harvard Law School. 

He writes scholarly articles on property law theory, including an analysis of the 

ways the MERS system conflicts with the traditional legal infrastructure of the 

American private property system. 

David Reiss is a Professor of Law and Research Director at the Center for 

Urban Business Entrepreneurship at Brooklyn Law School. He writes scholarly 

articles on real estate finance and consumer financial services. 

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2

Melanie Leslie is Vice Dean and Professor of Law at Benjamin N. Cardozo 

School of Law at Yeshiva University. She teaches property, trusts and estates, and 

nonprofit law. 

The above parties submit this brief supporting the Appellee and respectfully 

request that the District Court’s Declaratory Judgment be upheld. 

ISSUE TO BE ADDRESSED 

Is MERS an appropriate and reliable substitute for county-based recording 

systems, such as exists in Montgomery County through Appellee’s Office of the 

Recorder of Deeds, which have traditionally served as a public basis for 

ascertaining, enforcing and ensuring the orderly transfer of rights in real property? 

SUMMARY OF ARGUMENT 

MERS represents a major departure from and grave disruption of recording 

practices in counties such as Montgomery County, Pennsylvania, that have 

traditionally ensured the orderly transfer of real property across the country. Prior 

to MERS, records of real property interests were public, transparent, and provided 

a secure foundation upon which the American economy could grow. MERS is a 

privately run recording system created to reduce costs for large investment banks, 

the “sell-side” of the mortgage industry, which is largely inaccessible to the public. 

MERS is recorded as the mortgage holder in traditional county records, as a 

“nominee” for the holder of the mortgage note. Meanwhile, the promissory note 

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3

secured by the mortgage is pooled, securitized, and transferred multiple times, but 

MERS does not require that its members enter these transfers into its database. 

MERS is a system that is “grafted” onto the traditional recording system and could 

not exist without it, but it usurps the function of county recorders and eviscerates 

the system recorders are charged with maintaining. 

The MERS system was modeled after the Depository Trust Company 

(DTC), an institution created to hold corporate and municipal securities, but, unlike 

the DTC, MERS has no statutory basis, nor is it regulated by the SEC. MERS’s 

lack of statutory grounding and oversight means that it has neither legal authority 

nor public accountability. By allowing its members to transfer mortgages from 

MERS to themselves without any evidence of ownership, MERS dispensed with 

the traditional requirement that purported assignees prove their relationship to the 

mortgagee of record with a complete chain of mortgage assignments, in order to 

foreclose. MERS thereby eliminated the rules that protected the rights of mortgage 

holders and homeowners. Surveys, government audits, reporting by public media, 

and court cases from across the country have revealed that MERS’s records are 

inaccurate, incomplete, and unreliable. Moreover, because MERS does not allow 

public access to its records, the full extent of its system’s destruction of chains of 

title and the clarity of entitlements to real property is not yet known. 

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 Electronic and paper recording systems alike can contain errors and 

inconsistencies. Electronic systems have the potential to increase the accessibility 

and accuracy of public records, but MERS has not done this. Rather, by making 

recording of mortgage assignments voluntary, and cloaking its system in secrecy, it 

has introduced unprecedented and perhaps irreparable levels of opacity, 

inaccuracy, and incompleteness, wreaking havoc on the local title recording 

systems that have existed in America since colonial times. 

ARGUMENT 

I. MERS is a departure from and disruption of the traditional recording 

practices upon which it relies. 

A. Prior to MERS, records of real property interests were public, 

transparent, and provided a secure foundation upon which the 

American economy could grow. 

The land title records system has ensured the orderly transfer of American 

property entitlements and provided a secure platform for private commerce since 

colonial times. Since the earliest period of British settlement in America, land 

secured the loans upon which the American economy flourished. Joseph Story, 

Commentaries on the Constitution of the United States § 182, 164 (1833). The 

objective of recording laws was then, as it is now, to prevent disputes over 

property rights, to facilitate the enforcement of property rights and the resolution of 

disputes that nonetheless arise. Christopher L. Peterson, Foreclosure, Subprime 

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Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. 

L. Rev. 1359, 1364-65 (2010) [hereinafter Foreclosure]. 

For over three hundred years, mortgage records were held as part of the 

public land title records in the county where mortgaged land was located. M. Mark 

Heekin, Modernizing Mortgage Foreclosure Law: A Call for Transparency and an 

End to the Payment Rule, 33 Quinnipiac L. Rev. 165, 193 (2014). As early as 

1639, the Connecticut General Court insisted that “all bargaines or mortgages of 

land whatsoever shall be accounted of no value until they be recorded.” 14 Powell 

on Real Property § 82.01[1][b] (Michael Allen Wolf ed., 2007) (sic). By the time 

of the Revolution, mortgagees that failed to record their mortgages or assignments 

risked losing the ability to enforce the terms of their loans. Herbert T. Tiffany and 

Basil Jones, Tiffany on Real Property § 1457 (1939); Caryl A. Yzenbaard, 

Residential Real Estate Transactions § 5:7 (1991); Grant S. Nelson and Dale A. 

Whitman, Real Estate Finance Law § 5.34 (5th ed. 2007). A transparent public 

record of entitlements in real property has provided certainty in private bargains 

and a collective reference point that protects communities from commercial chaos 

after disasters like floods, earthquakes, fire, and hurricanes. Peterson, Foreclosure, 

supra 4 at 1365. The establishment of a public recording act in each state has 

thereby long protected all parties holding or dealing in interests in land, and 

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constituted “[t]he cornerstone of America’s legal tradition of transparency of 

landholding interests.” Id. 

Accordingly, since 1717, Pennsylvania law has mandated that “[a]ll 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 ... shall be 

recorded in the office for the recording of deeds in the county where such lands, 

tenements, and hereditaments are situate.” 21 Pa. Cons. Stat. § 351 (West). 1 Joyce 

D. Patton and Carroll G. Palomar, Patton and Palomar on Land Titles § 4, n. 7 (3d 

ed. 2003). Prior to MERS, the public recording system, maintained by County 

Recorders such as Appellee Nancy Becker, provided a public forum in which 

parties recorded legally operative documents pertaining to transfers of interests in 

real property. Through the simple but essential service of recording the name of a 

person or entity that originated a mortgage loan, any party that subsequently sought 

to purchase a mortgage note could ascertain that a seller possessed the interest he 

claimed by verifying that his chain of title was complete and derived from the 

original lender. Heekin, supra 5 at 190. The burden lay upon a party seeking to 

foreclose to confirm the interest it claimed to hold by showing that same unbroken 

chain of title. 

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B. MERS was created to reduce costs for sellers of mortgage-backed 

securities (MBS). 

From its planning stages, MERS was conceived as a way of reducing costs 

for sellers of mortgage-backed securities (MBS). In 1970, the Federal National 

Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage 

Corporation (Freddie Mac), and the Government National Mortgage Association 

(Ginnie Mae), radically changed mortgage lending relationships by originating the 

creation and sale of mortgage backed securities (MBS)—pools of mortgages, or 

bonds secured by such pools, for which they sold fractional interests. Ann M. 

Burkhart, Lenders and Land, 64 Mo. L. Rev. 249 (1999). By the mid-1990s, more 

than three-quarters of new single-family residential mortgages were being 

securitized, and Fannie Mae had become the largest corporation in the United 

States, with assets exceeding $351 billion. Id. 

 As trade in MBS burgeoned and the costs of securitization increased, the 

industry sought a means of escaping the “terribly cumbersome” and “costly” 

process of executing and recording mortgage assignments. Phyllis K. Slesinger and 

Daniel McLaughlin, Mortgage Electronic Registration System, 31 Idaho L. Rev. 

805, 808 (1995). The MERS concept originated in October, 1993, when an 

industry group comprised of representatives from Fannie Mae, Freddie Mac, 

Ginnie Mae, and the Mortgage Bankers’ Association of America (MBA), 

published a “white paper” proposing the MERS concept to solicit comments from 

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the real estate finance industry. Id. at 810-11. In June 1994, these parties formed a 

Steering Committee and commissioned a study by Ernst & Young, LLP. Mortgage 

banking companies made initial capital contributions to incorporate MERS, Inc. 

Peterson, Foreclosure, supra 4 at n.61. 

In 1995, MBA executives who led the establishment of MERS wrote that 

MERS would apply “information technology to reduce processing costs.” 

Slesinger and McLaughlin, supra 7 at 807. At the time, standard investor 

guidelines required that the industry record assignments from the originating 

lender to a wholesaler, from the wholesaler to the Seller, and from the Seller to the 

Buyer. Meanwhile, an average lender/buyer was “acquiring a $550 million 

portfolio of servicing through a bulk purchase of mortgages with an average loan 

balance [of] $125,000.” Id. at 809. Estimating the recordation costs for portfolios 

this size, MBA executives calculate at the time that “[a]ssuming that the portfolio 

has 4,400 loans and that recordation is $10 for each loan... the cost of the three 

recordations alone would be $132,000.” Id. at 810. Furthermore, because investors 

would have to pay to prepare documents, track the return of recorded assignments 

and possibly rerecord, to correct errors, they concluded that “[o]ver the life of a 

loan, the current environment is very costly to the industry.” Id. In 1997, then-CEO 

of MERS, Inc. R.K. Arnold wrote, “[e]stimates are that MERS will save the 

mortgage industry $200 million a year by eliminating the need for many 

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assignments.” R.K. Arnold, Yes, There is Life on MERS, 11 Prob. & Prop. 33, 35 

(1997). 

C. The MERS structure substitutes the MERS name for the mortgage 

lender in the county registry. 

After originating a mortgage loan, a lender registers the mortgage under the 

MERS name in the county recorder’s office. Christopher L. Peterson, Two Faces: 

Demystifying the Mortgage Electronic System’s Land Title Theory, 53 Wm. & 

Mary L. Rev. 111, 116 (2011) [hereinafter Two Faces]. MERS, who is named 

“solely as nominee,” remains the mortgagee even after subsequent transfers of the 

mortgage note. Id. These subsequent transfers are not recorded in the public 

registry. Rather, MERS operates a private database and mortgage servicers may 

voluntarily report changes in “beneficial interests” and servicing rights for 

individual mortgages. See MERS Procedures Manual (v. 27) at 88-91.1

Consequently, MERS removes the incentives for its members to retain and 

aggregate the legal documentation pertaining to such transfers for any given piece 

of property, astronomically increasing both the likelihood of broken chains of title 

and the difficulty of detecting fraudulent claims in the absence of documentation 

showing the legitimacy of prior transfers. 

                                                      

1

 Available at <http://www.mersinc.org/join-mers-docman/978-mers-system-proceduresfinal/file>. 

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When a subsequent holder of the note wishes to foreclose, MERS ostensibly 

transfers the mortgage to that party. However, in actuality, that party assumes the 

MERS identity to transfer the mortgage to itself. MERS operates by allowing 

employees of mortgage servicers, originators, debt collectors, and foreclosure law 

firms to enter their own names on a webpage that certifies them as assistant 

secretaries or vice-presidents of MERS for a low fee. Peterson, Two Faces, supra 

p. 9, at 120; Robo-Signing, Chain of Title, Loss Mitigation, and Other Issues in 

Mortgage Servicing: Hearing Before the Subcommittee on Housing and Comty. 

Opportunity of the H. Comm. On Fin. Servs., 111th Cong. 103-04 (2010) (prepared 

statement of R.K. Arnold, MERSCORP Inc. President and Chief Executive 

Officer). MERS itself has under fifty employees, but over 20,000 such secretaries 

and vice presidents, who are not employees of MERS, and do not know simple 

facts about the company, such as where it is located or who its president is. Id. 

D. MERS privatized and made the documentation of transfers of 

mortgage notes optional, discouraging the mortgage industry from 

maintaining complete records of actual holders of interests in real 

property. 

The planners of MERS heralded MERS as an electronic system that would 

more accurately and efficiently record information about successive interests in 

property. See Slesinger and McLaughlin, supra p. 9, at 806 (“Advanced technology 

has come to the residential mortgage industry... mortgage lending is being 

reengineered to reduce costs and deliver a better product”); Arnold, Life on MERS, 

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supra p. 8, at 33 (“MERS is the result of an industry effort to reduce the need for 

mortgage assignments in the residential mortgage market and thus increase 

efficiency and reduce costs”). They also emphasized the need for careful recording 

while they sought to garner support for the project: before MERS was launched, 

the Senior Director and Director of Technology Initiatives of the MBA wrote that 

“[c]learinghouse rules will have to be carefully developed to assure the protection 

of the mortgage rights of participants.” Slesinger and McLaughlin, supra 7 at 808. 

However, MERS did not develop reliable clearinghouse rules to provide 

such protection. Rather, it has introduced unprecedented opacity and 

incompleteness to the record of interests in real estate. First, MERS makes it 

possible to keep transfers of a mortgage note private once a mortgage is recorded 

under its name in a county registry, because access to MERS is restricted to its 

members. The public has no way of identifying the actual owner of a lien on a 

property and therefore, of holding lenders and investors accountable for errors or 

fraud. 

Moreover, MERS enables incomplete record-keeping by making it voluntary 

for its members to update information on the MERS database. It does not compel 

financial institutions to record changes in ownership rights of mortgages, or 

penalize them for failures to do so. Arnold Deposition 176-80 (September 25, 

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2009).2 MERS does not keep digital or hard copies of documents embodying 

agreements through which the beneficial ownership interest in a loan changes 

hands. Id.; Peterson, Two Faces, supra 8 at 126. Nothing binds MERS members to 

keep accurate records concerning the beneficial ownership interests of loans, on 

the MERS database or independently. Moreover, MERS makes no representations 

or warranties regarding the accuracy or reliability of its database. See generally 

MERS Procedures Manual, supra p. 12. Simply put, “MERS is the Wikipedia of 

land registration systems.” Culhane v. Aurora Loan Services. 826 F. Supp. 2d 352 

(D. Mass. 2011) aff'd, 708 F.3d 282 (1st Cir. 2013). 

E. MERS interferes with Pennsylvania’s requirement that purported 

assignees prove their relationship to the original lender in order to 

foreclose. 

MERS has also obstructed foreclosing plaintiffs’ ability to comply with the 

requirements for initiating a foreclosure action under Pennsylvania law. The 

Pennsylvania Rules of Civil Procedure require a foreclosure plaintiff to set forth in 

its complaint “the parties to and the date of the mortgage, and of any assignments, 

and a statement of the place of record of the mortgage and assignments.” Pa. R. C. 

P. 1147 (a)(1) (emphasis added). However, in direct contravention of these 

requirements, MERS never requests or possesses proof that one of its members in 

fact holds the mortgage note or is the agent of the note holder when that member 

                                                      

2

 Available at https://www.dropbox.com/s/hzrzapyxa7bogw5/MERS-DEPO-OF-CEO-RKArnold-2009.pdf?dl=0. 

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seeks to foreclose. Rather, it allows its member’s certifying officer to assign the 

mortgage at will, without reviewing the records to confirm that the party receiving 

the transfer is entitled to enforce the mortgage. MERS Rules of Membership 29-

34;4

 MERS Procedures 124-25.5 MERS possesses no legal authority to create 

special rules that absolve its members of the Pennsylvania state requirement, which 

non-MERS institutions continue to observe, that entities seeking to foreclose must 

plead and prove a recorded full chain of title.

F. MERS lacks legal authority and public accountability. 

The creators of MERS did not lobby Congress for a uniform, electronic 

mortgage system that could have retained the public recording system’s 

transparency and reduced costs. Rather, without judicially or statutorily recognized 

legal authority, they independently launched MERS as a private system, and 

created legal theories to legitimate the system post facto. In Professor Joseph 

Singer’s words, MERS allowed banks “to be prolific about securitizing those 

mortgages but complacent about formalizing mortgage assignments. The result 

was that the banks made many, many mistakes in keeping track of these 

transactions. Formal records of mortgage transfers are often incomplete or 

incorrect; the chain of title for many properties appears to be irretrievably broken.” 

                                                      

4 Available at <http://www.mersinc.org/join-mers-docman/37-mers-commercial-rules-ofmembership/file>.

5

 Available at <http://www.mersinc.org/join-mers-docman/978-mers-system-proceduresfinal/file>. 

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Joseph Singer, Foreclosure and the Failures of Formality, 46 Conn. L. Rev. 497, 

503-04 (2013). 

MERS stands on agency-law principles, which, as Professor Adam Levitin 

of Georgetown Law notes, raise numerous questions in the context of mortgage 

loans. No provisions specifying the bounds of agency law exist in state mortgage 

recordation statutes, as for security interests in personalty.6

 Adam J. Levitin, The 

Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title, 

63 Duke L.J. 637, 680 (2013). 

From its earliest stages, the creators of MERS were aware that differences in 

states’ real-property law would affect MERS’s validity. Daniel McLaughlin, 

director of technology for MBA, acknowledged in 1994 that the mortgage industry 

“faced unique problems that the securities industry did not have,” namely that 

“[w]e have fifty states with their own systems and laws that we have to comply 

with.” Property Deed Ready for Book Entry, 19.3 Nat’l Mortgage News 20 (Oct. 

17, 1994). Nevertheless, MERS conducted no fifty-state analysis of the potential 

impact of its operations. Memorandum from Covington & Burling to R.K. Arnold, 

President and CEO, MERSCORP, Inc. (Sept. 1, 1997) (on file with the Duke Law 

Journal). MERS’s attempt to establish “facts on the ground supporting its existence 

                                                      

6

 The U.C.C. expressly permits the recording of financing statements for security interests in 

personalty in the name of a “representative of the secured party”; failure to indicate this 

representative capacity does not affect the U.C.C. financing statement’s validity. U.C.C. §§ 9-

502, 9-503. 

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therefore does not deserve deference, and in practice has not worked. State laws 

have unsurprisingly taken disparate positions with respect to numerous aspects of 

MERS, and borrowers are now impacted in vastly different ways based on their 

jurisdiction. Laura A. Steven, MERS and the Mortgage Crisis: Obfuscating Loan 

Ownership and the Need for Clarity,” 7 Brook. J. Corp. Fin. & Com. L. 251, 256-

57 (2012). 

In design, MERS was meant to mimic the structure of the Depository 

Trading Company (DTC), and similarly replaces the lender as the mortgagee in 

local land records to immobilize legal title to mortgages. The DTC is a common 

agency structure for securities trades that was created to resolve the “Wall Street 

Paperwork Crisis” of the 1960s, when the volume of daily trades made the then 

requisite delivery of physical stock certificates and bonds from sellers to buyers 

impractical.7

 However, the DTC does not legitimize the MERS structure as 

precedent, because no equivalent statutory or regulatory framework exists for 

MERS as for the DTC; MERS’s lack of legal foundation and oversight is radically 

new. 

The DTC operates within a statutory framework as a “securities 

intermediary” under U.C.C. Article 8. The law makes clear that the DTC holds but 

                                                      

7

 Instead of listing individual investors as registered securities’ owners with various firms, 

corporate-securities registrations now list the DTC as a common nominee, and the DTC tracks 

ownership of the securities in its books and holds physical securities in its vaults. The DTC 

immobilizes between 85-90% of all equities, corporate, and municipal bonds issued in paper 

form in the United States. Levitin, supra p. 14 at 680-81. 

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does not own physical securities, which remain the property of investors. U.C.C. 

§§ 8-102, 8-502. Further, the statute sets out investors’ rights vis-à-vis third 

parties, and the DTC has legal duties to comply with investors’ instructions. 

U.C.C. §§ 8-502, 8-506, 8-507, 8-510, 8-511. Finally, the SEC regulates the DTC 

as a registered clearing agency, and must approve DTC rules. 15 U.S.C. §§ 78s, 

78q(1). 

Again, MERS lacks any comparable statutory authority and regulation. Its 

lack of legal foundation means that it has been able pursue arguments most 

favorable to its growth in any given situation, even when those arguments 

contradict each other in different jurisdictions. For example, when MERS has 

brought foreclosure actions, it has argued that it was an actual mortgagee or 

assignee. See, e.g., Landmark National Bank v. Kesler, 40 Kan. App. 2d 325, 327 

(2008) (“MERS claims that it holds the title to the second mortgage... MERS 

objects to its characterization as an agent.”). However, when faced with suits 

alleging fraud, deceptive practices, or when it wished to avoid license and 

registration requirements, it argued that it was merely an agent without exposure to 

liability, and did not have the same power as a mortgage owner. See, e.g., Escher 

v. Decision One Mortgage Co., 369 B.R. 862 n.8 (Bankr. E.D. Pa. 2007) 

(“MERS’s role as nominee leads the Court to conclude that it cannot be liable on 

any of the Plaintiff’s [Truth in Lending or Pennsylvania consumer protection] 

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claims. A nominee is understood to be an agent for another.”). See also Peterson, 

Foreclosure, supra p. 4, at 1376. MERS’s adoption of inconsistent positions across 

jurisdictions to obtain favorable outcomes in litigation underscores its fundamental 

lack of legal authority. See also Landmark Nat'l Bank v. Kesler, 289 Kan. 528, 216 

P.3d 158, 165–66 (2009) (stating that MERS defines its role “in much the same 

way that the blind men of Indian legend described an elephant—their description 

depended on which part they were touching at any given time”). 

MERS’s contradictory claims to be both agent of a mortgagee and also the 

actual mortgagee are especially alarming since MERS professes that its strongest 

claim to legal authority lies in the principles of agency law. Without legal 

foundation, MERS has exploited its lack of legal oversight to usurp the function of 

the state’s County Recorders, and trample on the long-tended records of interests in 

land, to reduce recording costs for mortgage bankers. 

G. MERS acts as a placeholder in the traditional recording system, and 

cannot function without that system. 

MERS inserts a placeholder in the public record. It thereby grafts itself onto 

systems for recording interests in land, while rendering that recording meaningless. 

By resting its system on the placeholder record of its name, it allows all subsequent 

activity related to the mortgage loan to ensue without internal or external 

regulation. MERS therefore consists of private contractual arrangements that 

derive what questionable legality they possess by “grafting” the MERS system 

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onto local land-recording offices, a preexisting public legal structure. As R.K. 

Arnold, CEO of MERS until 2011, noted, “because MERS is premised on an 

assignment recorded in the public land records, MERS cannot work without county 

recorders.” Arnold, Life on MERS, supra p. 8, at 703. 

 MERS has therefore privatized the majority of mortgage records in the 

country while undermining the value of county public records. Peterson, Two 

Faces, supra p. 9, at 132 (2011). MERS purports to simplify the process of trading 

mortgage-backed securities, because it has taken the liberty of eliminating 

requirements for documenting changes to the beneficial ownership interests in real 

property. MERS, in effect, creates a lacuna in the record, and makes meaningless 

the record onto which it is grafted. As Professor Christopher Peterson writes, 

“Recording mortgages in MERS’s name and subsequent refusal to record 

assignments is not a technological innovation. On the contrary, it is an example of 

atrophy of the mortgage market’s information infrastructure and the rule of law.” 

Peterson, Foreclosure, supra p. 4, at 1404. 

II. MERS helped precipitate the foreclosure crisis and left homeowners 

without recourse to protect their property rights. 

A. MERS facilitated the securitization of subprime loans. 

MERS’s impact on homeownership and the mortgage industry has had broad 

national consequences, including but not limited to the foreclosure crisis of 2008. 

These consequences have caused significant and continuing distress for 

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Pennsylvania’s cities and homeowners, which Pennsylvania’s recording statute 

was meant to protect. 

Since MERS increased the speed and the volume at which mortgage-backed 

securities could be traded while reducing recording costs, the mortgage finance 

industry quickly embraced recording and foreclosing its mortgage loans in 

MERS’s name, rather than the actual parties in interest. Industry players did not 

embrace MERS based on the passage of legislation or a landmark court ruling, 

since none legitimized the creation of MERS. Rather, mortgage industry insiders 

reported that the key development that led them to use MERS was its endorsement 

by credit rating agencies such as Moody’s, Standard and Poor’s, and Fitch 

Investment. Peterson, Foreclosure, supra p. 4, at 1373; Carson Mullen, MERS: 

Tracking Loans Electronically, 60:8 Mortgage Banking 62, 65 (May 31, 2000). In 

particular, Moody’s published an opinion approving of MERS despite its 

acknowledgment that the system’s legality in every state was uncertain. Moody’s 

Investors Service, Mortgage Electronic Registration Systems, Inc. (MERS): Its 

Impact on the Credit Quality of First-Mortgage Jumbo MBS Transactions at 3, 

Structured Finance Special (April 30, 1999) (“Although in many states the 

assignment of mortgage does not have to be recorded when the note is transferred, 

there are some states that require the assignment of mortgage to be recorded so that 

the buyer of the loan is protected against subsequent transferees and creditors of 

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the seller of the mortgage. There are also some states where the law is uncertain as 

to the protection afforded loan buyers against subsequent transferees and creditors 

of the loan seller.”). 

Although they were on notice that MERS would legally conflict with the 

laws in some states, mortgage industry insiders, including Moody’s, pursued or 

encouraged the pursuit of the immediate financial opportunities the system 

presented, rather than seek structural adjustments that would respect the rights that 

conflicting state laws protected. By 1999, private label subprime mortgage 

securitizers had begun using MERS. Peterson, Foreclosure, supra p. 4 at 1370; 

Mullen, supra p. 19, at 64. In the early 2000s, the use of MERS exploded, and by 

late 2002 MERS had recorded its name in place of actual assignees and mortgagees 

in ten million residential home mortgages. MERS Registers 10 Million Loans, 

Inside MERS 1 (Nov./Dec. 2002). As the subprime mortgage refinancing industry 

boomed, MERS registered 21,000 loans on its system each day on average. A year 

later, the number of loans recorded in MERS’s name doubled to twenty million. 

MERS Registers 20 Million Loans, Inside MERS 1 (Jan./Feb. 2004). MERS’s then 

CEO R.K. Arnold proclaimed that MERS’s mission was to “capture every 

mortgage in the country.” R.K. Arnold, Viewpoint, Inside MERS 1 (Jan. Feb. 

2004). By May of 2007, it had tripled again to sixty million mortgage loans. Kate 

Berry, Foreclosures Turn Up Heat on MERS, Am. Banker 1 (July 10, 2007). 

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Subsequently, MERS, as Christopher Peterson has written, “was an 

important cog in the machine that churned out the millions of unsuitable, poorly 

underwritten, and incompletely documented mortgages that were destined for 

foreclosure” in the recent mortgage crisis. Peterson, Foreclosure, supra 4 at 1407. 

As Wake Forest Law School Professor Tanya Marsh observed in 2011, many 

scholars and policymakers found that MERS’s lack of transparency, along with the 

increasing complexity of transactions, contributed to the recent financial crisis. 

Foreclosures and the Failure of the American Land Title Recording System, 111 

Colum. R. Rev. 19 (2011) (Sidebar). The New York Times reported in 2009 that 

MERS had “played an integral, if unsung, role in the proliferation of mortgagebacked securities that fueled the housing boom.” Mike McIntire, Tracking Loans 

Through a Firm that Holds Millions, April 23, 2009, at B1. 

B. MERS increased the costs of enforcing property rights and left 

homeowners without recourse to challenge wrongful foreclosures. 

MERS’s up-front savings for financial institutions that securitized mortgages 

came at the expense of certainty and enforceability of property rights. When the 

mortgage backed securities market crashed, MERS frequently could not identify 

and locate the holders of the mortgage notes that had been bundled. Heekin, supra 

p. 5 at 191; Gloria J. Liddell and Pearson Liddell, Jr., Robo Signers: The Legal 

Quagmire of Invalid Residential Foreclosure Proceedings and the Resultant 

Potential Impact Upon Stakeholders, 16 Chap. L. Rev. 367 (2012). The principal 

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issue that has caused foreclosures to be set aside has been the inability of many 

foreclosing lenders to produce the original mortgage note when called upon to do 

so. Heekin, supra 4-5 at 171. 

However, such foreclosures are only ever set aside after protracted, 

expensive foreclosure litigation. The reduced ability to clearly ascertain property 

rights has thus led to tremendous costs in the enforcement of property rights. As 

Professor Levitin observes, the rise of foreclosures and foreclosure litigation in 

2007 revealed how MERS, and its alterations to the processes of mortgage transfer, 

“shifted costs from deal formation to deal enforcement.” Levitin, supra at 649. 

When one compares these costs to the costs of record-keeping that the industry 

targeted for elimination, $10 per recordation, amounting to around $30 per loan, 

seems a small amount to pay to protect a family’s interest in the ability to discover 

who owns their loan, who would execute a foreclosure proceeding against them, 

and to challenge a party attempting to do so on the basis of mistake or fraud. The 

costs of recordation that the industry now “saves” constitutes only a very small 

fraction of each $125,000 loan, and has come at the loss of the security of 

someone’s home. Furthermore, MERS has shifted the costs of resolving the 

problems caused by MERS’s poor documentation practices to courts of the same 

cities, now suffering as a result of the foreclosure crisis, at the expense of whom 

large investment banks “saved” those initial costs in recording fees. 

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C. Surveys, audits and public media have exposed the inaccuracy of 

records in the MERS database. 

It is practically impossible to track errors or detect fraud through the MERS 

system both because MERS does not require that its members record the necessary 

documentation and because MERS does not make its records available to the 

public. Because MERS records are shrouded in secrecy, it is also impossible to 

know just how incomplete or inaccurate MERS records are. However, surveys and 

reporting by public media have suggested that the MERS database is alarmingly 

inaccurate. 

One survey of 396 foreclosure cases in six judicial foreclosure states found 

that “the plaintiff asserting the right to foreclose matched the identified ‘investor’ 

in MERS database only twenty percent of the time.” Alan M. White, Losing the 

Paper-Mortgage Assignments, Note Transfers and Consumer Protection, 24 Loy. 

Consumer L. Rev. 468, 486 (2012). An audit in California, a non-judicial 

foreclosure state, found that the beneficiary on the foreclosure sale deed only 

matched MERS’s “investor” field forty-two percent of the time. Id. at 487 (citing 

Aequitas Compliance Solutions, Inc., Foreclosure in California: A Crisis of 

Compliance 7 (2012)). This figure excluded cases where MERS did not disclose an 

investor. Id. 

In 2011, the New York Times reported that MERS and its member banks 

“apparently lost or mistakenly destroyed loan documents” in thousands of cases, 

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and often confused and misrepresented which entities owned mortgage notes. 

Michael Powell and Gretchen Morgenson, MERS? It May Have Swallowed Your 

Loan, N.Y. Times, March 6, 2011, at BU1. Homeowners were left to try to contact 

mortgage servicing and origination companies, or federally insured banks, which 

often did not have accurate records of their own, and which collapsed during the 

foreclosure crisis by the hundreds. Peterson, Two Faces, supra p. 9, at 126; Worth 

Civils & Mark Gongloff, Subprime Shakeout: Lenders that Have Closed Shop, 

Been Acquired or Stopped Loans, Wall St. J. Online;8 Failed Bank List, Federal 

Deposit Insurance Corporation (FDIC).9 

D. Court proceedings and federal agency investigations have further 

exposed the inaccuracy of records in the MERS database. 

Mortgage servicing companies, banks, courts and government agencies have 

all expressed astonishment at the extent to which MERS database is inaccurate. In 

2009, a Florida mortgage origination and servicing company called Diversified 

Mortgage (Diversified) sued MERS over the uncertainty in ownership of Florida 

mortgages registered on MERS. Diversified complained that MERS may have 

allowed Diversified’s trading partners to list themselves as owners of Diversified’s 

loans without permission from Diversified. Peterson, Two Faces, supra p. 9, at 

                                                      

8

 Available at <http://online.wsj.com/public/resources/documents/info-subprimeloans0706-

sort.html> (last visited March 13, 2015). 

9

 Available at <http://www.fdic.gov/bank/individual/failed/banklist.html> (last visited March 13, 

2015).

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131. Diversified claimed that when asked to produce a list of all its trading partners 

that may have made this claim, MERS could not or refused to do so, eventually 

became “confusing and hostile,” and “demanded that Diversified not attempt 

further contact with MERS.” Id. at 132. Diversified then learned that other thirdparty financial institutions had initiated foreclosure proceedings on mortgages that 

Diversified believed it owned. Id. at 132-33. 

In another Florida case, Judge Jennifer Bailey, a circuit court judge in Miami 

stated of 60,000 foreclosures filed in 2009 in her court, “[A]lmost every single one 

of them... represents a situation where the bank’s position is constantly shifting 

and changing because they don’t know what the Sam Hill is going on in their 

files.” Transcript of Hearing on Order to Show Cause at 5, HSBC Bank USA v. 

Eslava, No. 1-2008-CA-055313 (Fla. Cir. Ct. May 6, 2010). Janis Smith, a 

spokeswoman for Fannie Mae, admitted Fannie Mae kept its own records and that 

“We would never rely on it [MERS] to find ownership.” Powell and Morgenson, 

supra p. 32. 

In 2011, the Federal Reserve, the Office of the Comptroller of the Currency, 

and the Office of Thrift Supervision conducted an on-site review of MERSCORP 

and MERS. They found, as they wrote in an Interagency Report on their review of 

foreclosure policies and practices, significant weaknesses in MERS’s oversight, 

management supervision and corporate governance that merited bringing formal 

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enforcement action against MERS under the Bank Service Company Act and the 

Federal Deposit Insurance Act. Federal Reserve, Office of the Comptroller of the 

Currency, and Office of Thrift Supervision, Interagency Review of Foreclosure 

Policies and Practices 10-11 (2011). Additionally, the Interagency Report found 

that servicers had failed in conducting appropriate due diligence assessments of 

and quality control processes pertaining to MERS, by failing to monitor, evaluate, 

and appropriately manage the MERS contractual relationship, assess internal 

control processes at MERS, ensure the accuracy of servicing transfers, and ensure 

that servicers’ records matched MERS records. Id. 

E. MERS’s inaccuracy affects not only the properties for which it is 

named as mortgagee, but all properties adjoining those properties. 

 Not only is it difficult and sometimes impossible to track down who is the 

beneficial owner of the borrower’s obligation, but MERS clouds or renders 

unmarketable properties of neighbors to a foreclosed property in other respects. As 

David Woolley, a California Licensed Land Surveyor and Certified Fraud 

Examiner with over two decades of experience, has noted, MERS does not comply 

with first in time (race) or constructive or actual notice statutes, so senior/junior 

property rights cannot be determined when discrepancies arise in property 

boundary lines. David Woolley and Lisa Herzog, MERS: The Unreported Effects 

of Lost Chain of Title on Real Property Owners, 8 Hastings Bus. L. J. 365, 366 

(2012). Thus, MERS destroys adjoining property rights and records of 

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homeowners who never defaulted on mortgages and are now forced to litigate 

boundary disputes. Id. 

CONCLUSION

MERS has largely replaced the formerly transparent public record of 

mortgage interests with a partial, inaccurate and inaccessible private registry that 

greatly increased the likelihood of fraud and litigation. For the first time in the 

history of the nation, there is no longer an authoritative public record of interests in 

land in each county. For the above reasons, to uphold Pennsylvania law, and to 

allow Montgomery County to begin to reconstitute the damage to the record 

MERS has wrought, the Order on Appeal should be affirmed.

 Respectfully submitted, 

 /s/ Max Weinstein 

 

Max Weinstein 

Charles Carriere 

K-Sue Park 

Legal Services Center of 

Harvard Law School 

120 Boylston Street 

Jamaica Plain, MA 

(617) 390-2694 

 

 /s/ Rebecca Tushnet 

Rebecca Tushnet 

Professor of Law at Georgetown Law 

/s/ Joseph William Singer 

Case: 14-4315 Document: 003111912092 Page: 35 Date Filed: 03/23/2015
28

Joseph William Singer 

Bussey Professor of Law at Harvard Law School 

/s/ David Reiss 

David Reiss 

Professor of Law and Research Director at the 

Center for Urban Business Entrepreneurship 

/s/ Melanie Leslie 

Melanie Leslie, Vice Dean and Professor of Law at 

Benjamin N. Cardozo School of Law 

Dated: March 23, 2015 

 

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CERTIFICATES 

I, Max Weinstein, hereby certify that: 

1. I caused a true and correct copy of the foregoing Brief of Amicus Curiae 

to be served upon all counsel of record via the Court’s ECF system, in 

accordance with L.A.R. Misc. 113.4, on this the 23rd day of March, 

2015. 

2. The Brief of Amicus Curiae was filed with the Court via the Court’s ECF 

system, and by Fedex, postage prepaid, in accordance with Rule 

25(a)(2)(B) of the Federal Rules of Appellate Procedure. 

3. I am admitted to the bar of the Third Circuit. 

4. This Brief complies with the type-volume limitation of Fed. R. App. P. 

32(a)(7)(B) because this brief contains 5,924 words, excluding the parts 

of the brief exempted by Fed. R. App. P. 32(a)(7)(B). 

5. This Brief further complies with the typeface requirements of Fed. R. 

App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 

32(a)(6) because this brief has been prepared in a proportionally spaced 

typeface using Microsoft Word 2010 in 14-Times New Roman. 

6. In addition, I certify that the Brief filed electronically is identical to the 

Brief that is being filed in paper form. I also certify that the document 

Case: 14-4315 Document: 003111912092 Page: 37 Date Filed: 03/23/2015
30

was subject to a virus check pursuant to the Center’s virus check system, 

Microsoft Endpoint Protection, and no virus was detected. 

/s/ Max Weinstein

Amicus Curiae 

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