Montgomery Cnty. v. Merscorp, Inc., Civil Action No. 11–CV–6968.

• Citation: 16 F.Supp.3d 542
• Decision Date: 30 June 2014
• Docket Number: Civil Action No. 11–CV–6968.
• Parties: 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.
• Court: United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)

16 F.Supp.3d 542

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.

Civil Action No. 11–CV–6968.

United States District Court, E.D. Pennsylvania.

Signed June 30, 2014.

Filed July 1, 2014.

Charles Joseph Laduca, Cuneo Gilbert & Laduca LLP, Bethesda, MD, Craig W. Hillwig, Joseph C. Kohn, Robert J. Larocca, William E. Hoese, Kohn, Swift & Graf, P.C., Philadelphia, PA, Gary E. Mason, Jason S. Rathod, Whitfield Bryson & Mason, Jennifer E. Kelly, Jonathan W. Cuneo, Cuneo Gilbert & Laduca LLP, Washington, DC, James C. Sargent, Jr., Maureen M. McBride, William H. Lamb, Law Offices of Lamb & McErlane, P.C., West Chester, PA, for Plaintiff.

Robert M. Brochin, Brian M. Ercole, Morgan, Lewis and Bockius, Miami, FL, Andrew C. Whitney, Franco A. Corrado, Kristofor T. Henning, Nicholas C. Vance, Morgan Lewis & Bockius, LLP, Philadelphia, PA, for Defendants.

MEMORANDUM AND ORDER

JOYNER, District Judge.

This civil action is once again before the Court on cross-motions of Defendants 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. § 351¹ 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 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 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., 559 Fed.Appx. 165, 168 (3d Cir.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 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 nonmovant. Jakimas v. Hoffmann–La Roche, 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.” Donovan, 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 has observed: “cross-motions are no more than a claim by each side that it alone is entitled to summary judgment, 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) 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;(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 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 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 note from the mortgage lien that secures it obviates the recording requirements imposed 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 bond⁵ and the mortgage instrument itself. The mortgage is simply security for the payment of the note, with a right of a lien on the...