                                                                                                                           ACCEPTED
                                                                                                                       03-14-00304-CV
                                                                                                                               5395094
                                                                                                            THIRD COURT OF APPEALS
                                                                                                                       AUSTIN, TEXAS
                                                                                                                 5/22/2015 11:21:57 AM
                                                          July 22, 2015                                              JEFFREY D. KYLE
                                                                                                                                CLERK
Micah 6:8
                                                                                                     22 May 2015
                                                                                                 RECEIVED IN
                                                                                           3rd COURT OF APPEALS
            Third Court of Appeals                                                              AUSTIN, TEXAS
            209 West 14th Street, Room 101                                                 5/22/2015 11:21:57 AM
            Austin, Texas 78701                                                                JEFFREY D. KYLE
                                                                                                    Clerk
            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.
                   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
                                                                                                        Page 1 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




                                                                                         Page 2 of 2
                               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,       ATTORNEY, MORGAN, LEWIS AND BOCKIUS, Miami
RECORDER OF DEEDS, by and through Nancy J. Becker             , FL; ANDREW C. WHITNEY, FRANCO A. CORRADO,
in her official capacity as Recorder of Deeds of Montgomery   KRISTOFOR T. HENNING, NICHOLAS C. VANCE,
County, on its own behalf and on behalf of all others         MORGAN LEWIS & BOCKIUS LLP, [**2] Philadelphia ,
similarly situated, Plaintiff, v. MERSCORP, INC., and         PA; BRIAN M. ERCOLE, MORGAN LEWIS, Miami , FL.
MORTGAGE              ELECTRONIC           REGISTRATION
SYSTEMS, INC., Defendants.
                                                              For Community Legal Services, Pennsylvania Legal Aid
                                                              Network, Housing Alliance of Pennsylvania, Movants:
Subsequent History: Amended by, Motion granted by, in
                                                              JENNIFER R. CLARKE, PUBLIC INTEREST LAW
part, Motion denied by, in part Montgomery County v.
                                                              CENTER OF PHILADELPHIA, Philadelphia , PA.
Merscorp, Inc., 2014 U.S. Dist. LEXIS 129096 (E.D. Pa.,
Sept. 8, 2014)
                                                              Judges: J. CURTIS JOYNER, J.
Prior History: Montgomery County v. Merscorp, Inc., 904
F. Supp. 2d 436, 2012 U.S. Dist. LEXIS 151598 (E.D. Pa.,      Opinion by: J. CURTIS JOYNER
2012)
                                                              Opinion
Counsel: [**1] For Montgomery County, Pennsylvania,
Recorder of Deeds, BY AND THROUGH NANCY J.
                                                              [*544] MEMORANDUM AND ORDER
BECKER, IN HER OFFICIAL CAPACITY AS THE
RECORDER OF DEEDS OF MONTGOMERY COUNTY,                       JOYNER, J.
PENNSYLVANIA, ON ITS OWN BEHALF AND ON
BEHALF OF ALL OTHERS SIMILIARLY SITUATED,
                                                              This civil action is once again before the Court on
Plaintiff: CHARLES JOSEPH LADUCA, LEAD
                                                              cross-motions of Defendants [*545] Merscorp, Inc. and
ATTORNEY, PRO HAC VICE, CUNEO GILBERT &
                                                              Mortgage Electronic Registration Systems, Inc. (″the MERS
LADUCA LLP, Bethesda , MD; CRAIG W. HILLWIG,
                                                              Defendants″ or ″MERS″) and Plaintiff for summary
JOSEPH C. KOHN LEAD ATTORNEYS, ROBERT J.
                                                              judgment and partial summary judgment, respectively (Doc.
LAROCCA, WILLIAM E. HOESE, KOHN SWIFT &
GRAF, P.C., Philadelphia , PA; GARY E. MASON, LEAD            Nos. 67 and 80). For the reasons set forth below, Plaintiff’s
ATTORNEY, JASON S. RATHOD, LEAD ATTORNEY,                     motion shall be granted in part and Defendants’ motion
PRO HAC VICE, WHITFIELD BRYSON & MASON LLP,                   denied in its entirety.
Washington , DC; JENNIFER E. KELLY, LEAD
ATTORNEY, PRO HAC VICE, JONATHAN W. CUNEO,                    Factual Background
LEAD ATTORNEY, CUNEO GILBERT & LADUCA LLP
Washington , DC; JAMES C. SARGENT , JR., LAW                  As outlined in our previous Memoranda adjudicating the
OFFICES OF LAMB & McERLANE, P.C., West Chester ,              various motions filed earlier in this matter, Plaintiff, Nancy
PA; MAUREEN M. MCBRIDE, LAW OFFICES OF                        Becker, is the Recorder of Deeds in and for Montgomery
WINDLE & McERLANE, P.C., West Chester , PA;                   County, Pennsylvania. She filed this lawsuit on behalf of
WILLIAM H. LAMB, LAMB MCERLANE, P.C., West                    herself and all other Pennsylvania Recorders of Deeds
Chester , PA.                                                 alleging that by creating and maintaining a private,
                                                              members-only registry for recording and tracking
For Merscorp, Inc., Mortgage Electronic Registration          conveyances of interests in real property, the MERS
Systems, Inc., Defendants: ROBERT M. BROCHIN, LEAD
                                  16 F. Supp. 3d 542, *545; 2014 U.S. Dist. LEXIS 89222, **5

Defendants have violated 21 P.S. §351 [**3] 1 which                         material fact and the movant is entitled to judgment as
requires that such conveyances be publicly recorded in the                  a matter of law...
county recorder of deeds offices. Specifically, Plaintiff is
challenging the practice by which MERS serves as the                   In reviewing the record before it for purposes of assessing
mortgagee of record in the public land records as the                  the propriety of entering summary judgment, the court
″nominee″ for a lender who holds the mortgage note and its             should view the facts in the light most favorable to the
successors and assigns and thereby circumvents the need to             non-moving party and draw all reasonable inferences in that
record the transfer of the note each time it is sold.                  party’s favor. Ma v. Westinghouse Electric Co., No. 13-2433,
                                                                       559 Fed. Appx. 165, 2014 U.S. App. LEXIS 5049, *9
As a result of what Plaintiff contends are Defendants’                 (March 18, 2014); Burton v. Teleflex, Inc., 707 F.3d 417,
negligent and willful violations of the foregoing statute,             425 (3d Cir. 2013). The initial burden is on the party seeking
Plaintiff seeks both monetary and equitable relief in the              summary judgment to point to the evidence ″which it
form of a declaration and/or permanent injunction directing            believes demonstrate the absence of a genuine issue of
Defendants to record mortgage assignments as well as an                material fact.″ United States v. Donovan, 661 F.3d 174, 185
order quieting title and finding that Defendants were unjustly         (3d Cir. 2011)(quoting [**6] Celotex Corp. v. Catrett, 477
enriched. By the motions which are now before us, the                  U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed.2d 265 (1986)). An
parties ask this Court to enter judgment and partial judgment          issue is genuine only if there is a sufficient evidentiary basis
in their favor as a matter of law, asserting that the dispute          on which a reasonable jury could find for the non-moving
between them is primarily legal in nature and that there are           party, and a factual dispute is material only if it might affect
no material facts in dispute. (See, e.g., MERS Defendants’             the outcome of the suit under governing law. Kaucher v.
Memorandum of Law [**5] in Support of Motion for                       County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006)(citing
Summary Judgment, p. 8).                                               Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.
                                                                       Ct. 2505, 91 L. Ed.2d 202 (1986)).
Standards For Adjudicating Summary Judgment
Motions                                                                However, to survive summary judgment, the non-moving
                                                                       party must present more than a mere scintilla of evidence;
It is Fed. R. Civ. P. 56 which outlines the standards to be            there must be evidence on which the jury could reasonably
employed by the federal courts in considering motions for              find for the non-movant. Jakimas v. Hoffmann-LaRoche,
summary judgment. Subsection(a) of that rule provides the              Inc., 485 F.3d 770, 777 (3d Cir. 2007). And, ″if there is a
following in relevant part:                                            chance that a reasonable juror would not accept a moving
                                                                       party’s necessary propositions of fact,″ summary judgment
     A party may move for summary judgment, identifying                is inappropriate.″ Burton, supra, (quoting El v. SEPTA, 479
     each claim or defense - or the part of each claim or              F. 3d 232, 238 (3d Cir. 2007)).
     defense - on which summary judgment is [*546]
     sought. The court shall grant summary judgment if the             The rule is no different where there are cross-motions for
     movant shows that there is no genuine dispute as to any           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, *546; 2014 U.S. Dist. LEXIS 89222, **6

has observed: ″cross-motions are no more than a claim by                        (4) if Section 351 requires the documenting and
each side that it alone is entitled to summary judgment,                        recording of transfers of secured debt and the
  [**7] and the making of such inherently contradictory                         MERS Defendants are the proper defendants, but
claims does not constitute an agreement that if one is                          Section 351 creates no private cause of action on
rejected the other is necessarily justified or that the losing                  behalf of the County Recorder, whether the statute
party waives judicial consideration and determination                           can be enforced by the Recorder of Deeds by
whether genuine issues of material fact exist.″ Lawrence v.                     bringing claims for quiet title and unjust enrichment
City of Philadelphia, 527 F.3d 299, 310 (3d Cir.                                as a means to enforce the statutory requirements
2008)(quoting Rains v. Cascade Industries, Inc., 402 F.2d                       contained in Section 351; and lastly,
241, 245 (3d Cir. 1968)). And, the mere fact that ″both
                                                                                (5) if summary judgment is not granted on any of
parties seek summary judgment does not constitute a waiver
                                                                                the previous four issues, whether Plaintiff has
of a full trial or the right to have the case presented to a
                                                                                presented the necessary proof to establish the
jury.″ Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1023
                                                                                elements [**9] of her claims for unjust enrichment
(3d Cir. 2008)(quoting 10A Charles Alan Wright, Arthur R.
                                                                                and to quiet title to land.″
Miller & Mary Kay Kane, Federal Practice and Procedure
§2720 (3d ed. 1998), at 330-331).
                                                                      (Defendants’ Memorandum of Law in Support of Motion
                                                                      for Summary Judgment, p. 9).
Discussion
According to the MERS Defendants,                                     By her response in opposition and cross-motion for partial
                                                                      summary judgment, Plaintiff rejoins that the entry of an
     ″[t]he following five legal questions and issues are             Order of Declaratory Judgment finding that Defendants
     presented to the Court in this summary judgment                  have violated and are currently violating 21 P.S. §351 with
     motion:                                                          the result that they have been unjustly enriched at the
          (1) whether Plaintiff has shown that the MERS               expense of all of the county recorders of deeds in
          Defendants have any mortgage assignments to land            Pennsylvania is appropriate. More particularly, Plaintiff
          in Montgomery County, Pennsylvania that have                submits that because the promissory note and mortgage are
          not been recorded pursuant to the mandate in                inseparable and an assignment of mortgage constitutes a
          Section 351 (as interpreted by this Court) requiring        recordable conveyance of title in land, this Court should
          the recording of all conveyances of land;                   reject MERS’ argument that its system is lawful because
                                                                      there is no legal requirement to publicly record promissory
          (2) [**8] whether, in the absence of any such
                                                                      notes.
          written mortgage assignments, Section 351 requires
          the transfer of secured debt to first be documented
                                                                      We begin by noting that Defendants’ Question 4 has already
          in a form suitable for recording and then recorded
                                                                      been effectively answered by our Memorandum of October
          in the land records because it creates in the
                                                                      19, 2012 wherein we found no need to reach the question of
          transferee an equitable interest in the mortgage;
                                                                      whether Section 351 bestowed a private right of action
           [*547] (3) if transfers of secured debt must first be      because Pa. R. C. P. No. 1061(b)(3) permitted Plaintiff to
          documented and then recorded under Section 351,             pursue an action to quiet title.2 Thus, inasmuch as this
          whether the MERS Defendants have been the                   finding established the [**10] law of the case, we see no
          transferor or transferee of any such secured debt           need to discuss it further.3 To appropriately address and
          and, if they have not, whether, the MERS                    answer Defendants’ other questions and the arguments
          Defendants are the proper parties who are liable for        advanced by Plaintiff, we must confront head-on the model
          and subject to the ″mandates contained in Section           upon which Defendants’ entire business is built and in so
          351;                                                        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, *547; 2014 U.S. Dist. LEXIS 89222, **14

note from the mortgage lien that secures it obviates the               As generally described above, the ordinary mortgage consists
recording requirements imposed      [*548]    under the                of two instruments - the note or bond 5 and the mortgage
Pennsylvania statute.4 Underscoring this inquiry are the               instrument itself. The mortgage is simply security for the
threshold questions of what is a mortgage under                        payment of the note, with a right of a lien on the mortgage
Pennsylvania law and what are the purposes of the                      premises to enforce payment. Philadelphia Federal Credit
Pennsylvania recording laws?                                           Union v. Ankrah, Civ. A. No. 13-3040, 2014 U.S. Dist.
                                                                       LEXIS 21095 at *8 (E.D. Pa. Jan. 30, 2014). [**14] ″A
A. What is a Mortgage?                                                 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, *549; 2014 U.S. Dist. LEXIS 89222, **14

Tomkin, 110 Pa. 569, 572, 1 A. 535, 536, 17 Week. Notes                sure, by having a loan secured by both a mortgage and a
Cas. 535, 43 Legal Int. 262, 33 Pitts. Leg. J. 200 (1885). In          bond or note, a mortgagee has a choice of remedies - one
Pennsylvania,                                                          against [**17] the mortgaged property, the other against the
                                                                       mortgagor personally. See, Ladner, at §22.05(b). See also,
       [a] mortgage may be created as well without as with an          Easton Theatres, Inc. v. Wells Fargo Land & Mortgage Co.,
       accompanying personal obligation of the mortgagor to            498 Pa. 557, 565, 449 A.2d 1372, 1376 (1982)(Dissenting
       pay the debt secured, or attempted to be secured                Opinion, Flaherty, J.)(″The effect of executing a bond or
       thereby. In the one case the property alone is charged          note secured by a mortgage, unless recourse on the bond is
       with the lien - is looked to solely by the mortgagee out        specifically limited, is to subject all of the real and personal
       of which to make his lien; in the other, he has the             property of the obligor to execution in the event of default.″).
       additional security of the personal obligation of the           While these remedies may be pursued concurrently or
       mortgagor. A debt chargeable only against certain               consecutively, the mortgage may have only one satisfaction.
       property is, in effect, simply a debt with limited means        Schuylkill Trust Co. v. Sobolewski, 325 Pa. 422, 426-427,
       of satisfaction or enforcement; the value of the property       190 A. 919, 922 (1937); Elmwood Federal Savings Bank v.
       charged with the indebtedness is the measure of the             Parker, 446 Pa. Super. 254, [*550] 666 A.2d 721, 724, n.6
       security afforded.                                              (1995).

Hartje’s Estate, 345 Pa. 570, 574, 28 A.2d 908, 910 (1942).            Further, inasmuch as an action in mortgage foreclosure is
Accordingly, under Pennsylvania state law, a valid mortgage            strictly an in rem proceeding the sole purpose of which is to
can be created without requiring the mortgagor to assume               effect a judicial sale of the mortgaged real estate, it may not
personal liability under a note. In re Farris, 194 B.R. 931,           include an in personam action to enforce personal liability,
940 (Bankr. E.D. Pa. 1996).6                                           unless the mortgagor waives any objection to the inclusion
                                                                       of the breach of contract action for a personal judgment in
Typically, a mortgagor’s failure to pay the amounts due and            the mortgage foreclosure suit. Newtown Village Partnership
owing under the note constitutes an event of default                   v. Kimmel, 424 Pa. Super. 53, 55, 621 A.2d 1036, 1037
following which the holder may proceed to enforce the                  (1993); [**18] Insilco Corp. v. Rayburn, 374 Pa. Super. 362,
terms of the mortgage either through in rem foreclosure                368, 543 A.2d 120, 123 (1988)(citing Pa. R. C. P. 1141 and
proceedings or by obtaining an in personam judgment on                 Meco Realty Company v. Burns, 414 Pa. 495, 200 A.2d 869
the note and seeking to execute. Amerco Real Estate Co. v.             (1964) and First Seneca Bank v. Greenville Distributing
Appalachian Self Storage, LLC, Civ. A. No. 3:11-CV-1166,               Company, 367 Pa. Super. 558, 533 A.2d 157 (1987)). To
2012 U.S. Dist. LEXIS 116997 at *21 (M.D. Pa. Aug. 20,                 pursue both of these remedies, however, the creditor/
2012)(citing Wilson v. Parisi, 549 F. Supp. 2d 637, 655                mortgagee must possess both the note and the mortgage.
(M.D. Pa. 2008)). See also, PFCU v. Ankrah, supra, (″The               See, e.g., U.S. Bank v. Montalvo, Civ. A. No. 3:08-CV-1504,
holder of a bond and mortgage can proceed in rem or in                 2013 U.S. Dist. LEXIS 162595 at *8 (M.D. Pa. Nov. 14,
personam to enforce his claim; he may proceed by an action             2013)(where defendant mortgagee signatory to mortgage
of mortgage foreclosure or by an action on the bond which              only and not note, plaintiff could not have brought in
the mortgage secures.″ (citing U.S. Bank, N.A. v. Mallory,             personam action against him based on any alleged failures
2009 PA Super. 182, 982 A.2d 986, 992 n.3 (Pa. Super. Ct.              to pay obligations due under note).
2009); Levitt v. Patrick, 2009 PA Super. 117, 976 A.2d
581(2009) and Bank of Pennsylvania v. G/N Enterprises,                 Additionally, notes secured by mortgages have been
Inc., 316 Pa. Super. 367, 371, 463 A.2d 4, 6 (1983)). To be            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, *550; 2014 U.S. Dist. LEXIS 89222, **19

Pennsylvania Uniform Commercial Code,7 such that the                          resolve this question, we turn now to an examination of the
holder of such an instrument may be entitled to the                           purposes and intentions behind the Pennsylvania Recording
protections afforded thereunder to a holder in due course. JP                 statutes.
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                       B. Pennsylvania Recording Law
(Bankr. E.D. Pa. 2012); Deutsche Bank Nat’l Trust Company
v. Carmichael, 448 B.R. 690, 694 (Bankr. E.D. Pa. 2011).                      Generally speaking, the primary purpose behind enactment
Under the [**19] Code, a note may be negotiated from one                      of the Pennsylvania statutes governing recording of property
person to another by mere transfer of possession. See, 13 Pa.                 conveyances was the provision of notice of the identities of
C. S. §§3201, 3203 (governing ″Negotiation,″ and ″Transfer                    those who held an interest in the real estate at issue,
of instrument; rights acquired by transfer″). From all of this,               primarily to protect subsequent bona fide purchasers from
we conclude that Defendants are correct in their assertion                    injuries caused by secret pledges of property. 6 Summ. Pa.
that Pennsylvania law does indeed recognize a clear legal                     Jur. 2d Property §§8:112, 9:17 (2d ed.)(2012).8 Indeed as
distinction between a promissory note and a mortgage and                      early as 1848, the Pennsylvania Supreme Court noted that:
that promissory notes may generally be freely transferred
without the requirement of recording.                                              ″The intention of the acts requiring deeds to be recorded
                                                                                   was to secure subsequent purchasers and mortgagees
This does not end the matter, however. Again, it is the                            against prior secret conveyances and fraudulent
Defendants’ premise that because the debt transfers at issue                       encumbrances; and therefore when a person has notice
occur by mere delivery of promissory notes, they are not                           of a prior conveyance, it is not a secret conveyance by
″written instruments″ subject to [*551] the recording                              which he can be prejudiced...
requirement of Section 351. Accordingly, the question
which this case presents and with which we are here                           Mott v. Clark, 9 Pa. 399, 405 (1848). [**22] And, just two
confronted is whether a promissory note that is secured by                    years later, the Court observed:
a mortgage also falls within the purview and meaning of a
″conveyance,″ ″contract,″ or ″other instrument of writing″                         ″The principle runs through the whole system of our
″wherein it shall be the intention of the parties executing the                    recording acts, that the object is to give public notice in
same to grant, bargain, sell and convey any lands, tenements                       whom the title resides; so that no one may be defrauded
or hereditaments [**21] situate in th[e] Commonwealth [of                          by deceptious appearance of title. ... The recording
Pennsylvania].″ 21 P.S. §351. If so, then the mandate of                           laws, like all other public laws are intended for the
Section 351 is clear: it ″shall be recorded in the office for                      benefit and security of the people generally.″
the recording of deeds in the county where such lands,
tenements and hereditaments are situate.″ Id. In an effort to                 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, *551; 2014 U.S. Dist. LEXIS 89222, **24

remain undisturbed despite the passage of more than 150                      [**24] actually recorded, all the incidents and force of
years and thus the underlying purpose behind the                            a public record attach to that record. It is an early and
Pennsylvania recording acts remains clear - to provide                      well recognized principle that one great object in
notice to the public of the identities of those who hold an                 spreading an instrument of writing on a public record is
interest in real estate as well as notice of the true nature of             to give constructive notice of its contents to all
the transaction on record. See, e.g., U.S. Bank, N.A. v.                    mankind.″
Mallory, 2009 PA Super 182, 982 A.2d 986, 994, n.6
(2009)(″Mortgages are recorded to provide notice to the                Pepper’s Appeal, supra.
world as to whose interest encumbers title.″); Weik v. Estate
                                                                       Thus, the benefits of recording an interest in land have long
of Brown, 2002 PA Super. 63, 794 A.2d 907, 911 (Pa. Super.
                                                                       been recognized in Pennsylvania and in 1863, the
Ct. 2002); Roberts v. Estate of Pursley, 718 A.2d 837, 841
                                                                       Pennsylvania legislature first decreed that such recording
(Pa. Super. Ct. 1998); Mancine v. Concord-Liberty Savings
                                                                       should be mandatory.9
& Loan Ass’n., 299 Pa. Super. 260, 445 A.2d 744 (1982);
Reiter v. Kille, 143 F. Supp. 590, 592-593 (E.D. Pa.
                                                                       C. How Pennsylvania Law Treats Mortgages
1956)(holding [**23] that inasmuch as recording is
obligatory in Pennsylvania so as to give public notice in              Over the years, however, there was some confusion over
whom title resides, federal tax lien premised on unrecorded            how a mortgage should be viewed by the Pennsylvania
deed ineffective as against subsequent purchaser for value);           courts - was it a conveyance of title, a lien or cloud on the
Capital Center Equities v. Estate of Gordon, 137 B.R. 600,             title of the real estate, or merely security for the payment of
611 (Bankr. E.D. Pa. 1992)(quoting Jaques v. Weeks, 7                  money or performance of some other collateral contract?
Watts 261 (Pa. 1838)). In accord, 1 West’s Pa. Prac.                   See, e.g., Wilson v. Shoenberger’s Executors, 31 Pa. 295,
§803(14)-1 (3d ed.)(2012): (″The purpose of [the] statutes             299 (1858)(″It is the settled law of the Pennsylvania
[providing for the recording of deeds and mortgages]                   mortgage, that though in form a conveyance of title, it is in
 [*552] is to give notice of who holds interests in the                reality, both at law and equity, only a security for the
property, to provide evidence of title in case the original            payment of money, or performance of other collateral
documents are lost or unavailable, and to protect the interest         contract.″); McIntyre v. Velte, 153 Pa. 350, 25 A. 739
holders from the claims of others.″). And in 1852, it was              (1893)(″The mortgage is but a security for the payment of
determined that assignments of mortgages also fell within              money with a right of lien upon the mortgaged premises to
the recording acts. Pepper’s Appeal, 77 Pa. 373, 377, 1                enforce payment.″); Bulger v. Wilderman, 101 Pa. Super.
Week. Notes Cas. 437, 7 Legal Gaz. 205, 32 Legal Int. 321,             168 (1931)(″In [**26] form, a mortgage is certainly a
22 Pitts. Leg. J. 182 (1875); Philips v. Bank of Lewistown,            conveyance; but it is unquestionably treated at law here, in
18 Pa. 394, 402 (1852).                                                the way it is treated in equity elsewhere, as a bare
                                                                       incumbrance, and the accessory of a debt. As between the
While the earlier versions of the recording statutes did not
                                                                       parties it is a conveyance, so far as is necessary to enforce
make recording mandatory, nevertheless,
                                                                       it as a security: as regards third persons, the mortgagor is the
     ″[w]hen the election [to record] is made and an                   owner, even of the legal estate...″)(quoting Presbyterian
     instrument authorized by law to be recorded, is                   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, *552; 2014 U.S. Dist. LEXIS 89222, **27

In 2004, the Pennsylvania Supreme Court decided Pines v.                Pennsylvania who were charged with the duty of collecting
Farrell, 577 Pa. 564, 848 A.2d 94 (2004). Specifically the              fees in connection with such transfers. Indeed, the Court
 [*553] issue presented in that case was whether certain                reasoned:
financial regulations which had been promulgated by the
Court Administrator of Pennsylvania interpreting the                         What definitively tips the balance in this Court’s view,
definition of ″property transfer″ in 42 Pa. C. S.                            is that, although a mortgage can be considered both a
§3733(a.1)(1)(v)10 to include mortgage ssignments, mortgage                  conveyance in form as well as a security interest, for
releases, and mortgage satisfactions were valid and                          purposes of actions involving recording acts, mortgages
enforceable. The Pines Court began its analysis with this                    traditionally have been treated as conveyances. ″In all
observation:                                                                 questions upon the recording acts, the mortgage is
                                                                             spoken of as a conveyance of land.″ ... Thus, for
     ″Proper resolution of this question first requires an                   purposes of determining whether mortgage assignments,
     examination of the legal definition of a mortgage; i.e.,                mortgage satisfactions and mortgage releases are
     if a mortgage represents a property transfer, it logically              property transfers, we begin with the premise that a
     follows that transactions involving mortgages are also                  mortgage conveys the property subject to the mortgage
     property transfers. The ″title theory [**27] of mortgages               to the mortgagee until the obligations under [**28] the
     deems a mortgage to be a conveyance, while a                            mortgage are fulfilled.
     competing theory, the ″lien theory, suggests that a
     mortgage merely represents a security interest.″                   Id. at 100 (quoting In re Long’s Appeal, 77 Pa. 151 (1874).
                                                                        From there, the Court further opined:
Id., 848 A.2d at 99. Recognizing that there was ample
authority for both theories under Pennsylvania common law,                   Given our conclusion that a mortgage conditionally
the Supreme Court nevertheless found that such actions                       conveys the subject property, it logically follows that an
were ″property transfers″ which bound the recorders of                       assignment of the mortgagee’s rights likewise effects a
deeds, clerks of courts and equivalent officials throughout                  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, *554; 2014 U.S. Dist. LEXIS 89222, **28

     the assignee. Additionally, even accepting respondent’s          The mortgage can have no separate existence. When the
     argument that an assignee’s rights cannot exceed those           note is paid the mortgage expires.″ Id. 83 U.S. at 275, 21 L.
     of the assignor, a property transfer still exists because        Ed at 315. See also, National Live Stock Bank of Chicago
     the assignee will receive the rights held by the assignor,       v. First National Bank of Geneseo, 203 U.S. 296, 306, 27 S.
     i.e., the conveyance of the property subject to the terms        Ct. 79, 81, 51 L. Ed. 192 (1906)(same).
     of the mortgage. ... Thus, the Court Administrator               These principles remain viable and are likewise embodied
     correctly defined property transfer to include mortgage          in the Restatement (Third) of Property: Mortgages, §5.4
     assignments.                                                     (1997), which reads as follows:

Id. at 100-101 (citation omitted). The Court reached the                   §5.4 Transfer of Mortgages [**32] and Obligations
same conclusion with respect to mortgage satisfactions and
                                                                           Secured by Mortgages
releases. That is, the effect of both a mortgage satisfaction
and a mortgage release was to discharge the lien and release               (a) A transfer of an obligation secured by a mortgage
the mortgagor from the obligations under the mortgage and                  also transfers the mortgage unless the parties to the
to ″reconvey″ the property to the mortgagor. Pines, 848                    transfer agree otherwise.
A.2d at 101, 102. See also, First Citizens National Bank v.                (b) Except as otherwise required by the Uniform
Sherwood, 583 Pa. 466, 879 A. 2d 178, 180, n.2 (2005)(″A                   Commercial Code, a transfer of a mortgage also transfers
 [**29] transfer of title is no insubstantial thing, but rather            the obligation the mortgage secures unless the parties to
resembles a right or privilege which is permanent in nature.               the transfer agree otherwise.
The fact that at one point, the mortgagor may fulfill the                   [*555] (c) A mortgage may be enforced only by, or in
obligations of the mortgage, and thereby receive title to the              behalf of, a person who is entitled to enforce the
mortgaged property, does not negate the fact that mortgaging               obligation the mortgage secures.
the property transfers the title to the mortgagee.″).
                                                                      Pennsylvania law was and is in accord. See, e.g., In re North
While Pines may not be on all fours with the case at hand             City Trust Co., 327 Pa. 356, 361, 194 A. 395, 398 (1937)
inasmuch as we are charged here with interpreting a                   (″[C]ollateral for a debt follows the obligation into the
different statute, it nonetheless represents a clear statement        hands of the assignee thereof.″); Beaver Trust Co. v.
of Pennsylvania law which is equally applicable in this case          Morgan, 259 Pa. 567, 103 A. 367, 369 (1918)(″A purchase
particularly in view of its specific reference to the recording       of a debt is a purchase of all the securities for it, whether
acts. Hence, inasmuch as ″conveyance″ is defined, inter               named or not at the time of the assignment, unless expressly
alia, as ″a. Transfer of title to property from one person to         agreed at the time they shall not pass.″); Moore v. Cornell,
another. b. The document by which this transfer is                    68 Pa. 320, 322 (1871)(″A [**33] mortgage is discharged by
effected,″11 we likewise find that a mortgage assignment is           payment, and an assignment of the debt transfers the right to
a ″conveyance″ subject to the recording mandate of §351.              the mortgage itself; for whatever will give the money
                                                                      secured by the mortgage, will carry the mortgaged premises
D. Severability of Notes and Mortgages                                along with it.″); 13 Pa. C. S. §9203(g)(″The attachment of a
                                                                      security interest in a right to payment or performance
In view of this finding, we next consider whether a note
                                                                      secured by a security interest or other lien on personal or
memorializing debt that is secured by a mortgage stands
                                                                      real property is also attachment of a security interest in the
alone such that it may be freely transferred by change in
                                                                      security interest, mortgage or other lien.″). See also, Russell’s
possession or whether it too must be recorded.
                                                                      Appeal, 15 Pa. 319, 321, 322 (1950)(″Even, although a
Under well-settled, long-held American law, where                     conveyance be absolute in its terms, if it is intended by the
″mortgaged premises are pledged as security for debt,″...             parties to be a mere security for the payment of a debt, it is
″the note and mortgage are inseparable. ...″ Carpenter v.             a mortgage. ... An article of agreement for the sale of land,
Longan, 83 U.S. 271, 274, 16 Wall. 271, 21 L. Ed. 313, 315            accompanied by delivery of possession and payment of part
(1872). Thus, ″[a]n assignment of the note carries the                of the purchase-money, is much more than a chose in action;
mortgage with it, while an assignment of the latter alone is          it is an abiding interest in the land itself.″).
a nullity.″ Id. Indeed, ″[a]ll the authorities agree that the         This notion that notes and mortgages are legally inter-woven
debt is the principal thing and the mortgage an accessory. ...        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, *555; 2014 U.S. Dist. LEXIS 89222, **33

Multistate Fixed Rate Uniform Instrument Note and                       successors and assigns) and to the successors and
Pennsylvania Mortgage forms 12 which appear to be currently             assigns of MERS, the following described property
utilized in most loan settlement transactions in which                  located in this (County) of which currently has the
MERS is designated [**34] as the mortgagee. Beginning                   address of     (Street), (City), Pennsylvania (Zip
with the Note form, at paragraph 10, the following verbiage             Code) (″Property Address″) ...
appears:
                                                                        TOGETHER WITH all the improvements now or
                                                                        hereafter erected on the property, and all easements,
     ... In addition to the protections given to the Note
                                                                        appurtenances, and fixtures now or hereafter a part of
     Holder under this Note, a Mortgage, Deed of Trust, or
                                                                        the property. All replacements and additions shall also
     Security Deed (the ″Security Instrument″), dated the
                                                                        be covered by this Security Instrument. All of [**36] the
     same date as this Note, protects the Note Holder from
                                                                        foregoing is referred to in this Security Instrument as
     possible losses which might result if I do not keep the
                                                                        the ″Property.″ Borrower understands and agrees that
     promises which I make in this Note. That Security
                                                                        MERS holds only legal title to the interests granted by
     Instrument describes how and under what conditions I
                                                                        the Borrower in this Security Instrument, but if
     may be required to make immediate payment in full of
                                                                        necessary to comply with law or custom, MERS (as
     all amounts I owe under this Note. ...
                                                                        nominee for Lender and Lender’s successors and
The Mortgage, in turn, includes the following language in               assigns) has the right: to exercise any or all of those
excerpted relevant parts:                                               interests, including, but not limited to, the right to
                                                                        foreclose and sell the Property; and to take any action
     Definitions                                                        required of Lender including, but not limited to,
                                                                        releasing and canceling this Security Instrument.
     (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                 UNIFORM COVENANTS. Borrower and Lender
     successors and assigns. MERS is the mortgagee                      covenant and agree as follows:
      [**35] under this Security Instrument. ...
                                                                        ...
     ...
                                                                        9. Protection of Lender’s Interest in the Property
     (E) ″Note″ means the promissory note signed by
                                                                        and Rights Under this Security Instrument.
     Borrower and dated . ...
                                                                        If (a) Borrower fails to perform the covenants and
     ...
                                                                        agreements contained in this Security Instrument, (b)
     (G) ″Loan″ means the debt evidenced by the Note, plus              there is a legal proceeding that might significantly
     interest, any prepayment charges and late charges due              affect Lender’s interest in the Property and/or rights
     under [*556] the Note, and all sums due under this                 under this Security Instrument (such as a proceeding in
     Security Instrument, plus interest.                                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
     Transfer of Rights in the Property
                                                                        Property, then Lender may do and pay for whatever is
     This Security Instrument secures to Lender: (i) the                reasonable or appropriate to protect Lender’s interest in
     repayment of the Loan, and all renewals, extensions                the Property and rights under this Security Instrument,
     and modifications of the Note; and (ii) the performance            including protecting and/or assessing the value of the
     of Borrower’s covenants and agreements under this                  Property, and securing and/or repairing the Property.
     Security Instrument and the Note. For this purpose,                Lender’s actions can include, but are not limited to: (a)
     Borrower does hereby mortgage, grant and convey to                 paying any sums secured by a lien which has priority
     MERS (solely as nominee for Lender and Lender’s                    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, *556; 2014 U.S. Dist. LEXIS 89222, **37

     and (c) paying reasonable attorneys’ fees to protect its               successor Loan Servicer and are not assumed by the
     interest in the Property and/or rights under this Security             Note purchaser unless otherwise provided by the Note
     Instrument, including its secured position in a                        purchaser.
     bankruptcy proceeding. ...                                       ...
     ...                                                              (Emphasis in original)
     20. Sale of Note; Change of Loan Servicer; Notice of             It therefore appears obvious from all of the foregoing, that
     Grievance. The Note or a partial interest in the Note            whether effectuated via a writing or a mere ″transfer of
     (together with this Security Instrument) can be sold one         possession″ of a note, the result is the same by operation of
     or more times without prior notice to Borrower. A sale           law - an interest in and/or title to the property which secures
     might result in a change in the entity (known as the             it has been assigned and conveyed from one party to another
     ″Loan Servicer″) that collects Periodic Payments due             under Pennsylvania law.13 As to the requirement of a
     under the Note and this Security Instrument and                  writing, 21 P.S. §623-1 14 is crystal clear: ″Hereafter no
     performs [*557] other mortgage loan servicing                    assignment of any mortgage shall be entered of record in
     obligations under the Note, this Security Instrument,            any county of the second class, unless [**39] such
     and Applicable Law. There also might be one or more              assignment shall be in writing, and acknowledged by the
     changes of the Loan Servicer [**38] unrelated to a sale          assignor or assignors before an officer or person duly
     of the Note. If there is a change of the Loan Servicer,          authorized to take such acknowledgments.″ Accordingly, in
     Borrower will be given written notice of the change              answer to Defendants’ question No. 2 as formulated in its
     which will state the name and address of the new Loan            motion papers, we now hereby find that the Pennsylvania
     Servicer, the address to which payments should be                Recording Act does in fact require the transfer of secured
     made and any other information RESPA requires in                 debt to first be documented in a form suitable for recording
     connection with a notice of transfer of servicing. If the        and then recorded in the land records because it creates in
     Note is sold and thereafter the Loan is serviced by a            the transferee an equitable interest in the mortgage.15
     Loan Servicer other than the purchaser of the Note, the
     mortgage loan servicing obligations to Borrower will              [*558] We endeavor now to answer Defendants’ first and
     remain with the Loan Servicer or be transferred to a             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, *558; 2014 U.S. Dist. LEXIS 89222, **39

challenging issue in this case: whether the MERS Defendants               subsidiary of MERSCORP. MERSCORP operates the
have been the transferor or transferee of unrecorded secured              MERS ® system and membership in the MERS ®
debt and if not, whether they are the proper parties who are              System and members are governed by the MERS ®
subject to the mandates contained in the recording                        System Rules of Membership. It is MERS that serves
 [**42] statutes.                                                         as the mortgagee of record in the public land
                                                                          records as the ″nominee″ for a lender (noteholder)
E. MERS as ″Nominee″                                                      and its successors and assigns. (Emphasis added)
                                                                          And, under MERS Rule 8, Section 2(a),16
The MERS Defendants have repeatedly taken the position
that, in commencing the instant action, Plaintiffs sued the                [*559] If a Member chooses to conduct foreclosures in
wrong parties because ″MERS has not and does not                          the name of Mortgage Electronic Registration Systems,
negotiate or transfer promissory notes secured by mortgages               Inc., the note must be endorsed in blank and in
recorded in Montgomery County, Pennsylvania.″ (MERS’                      possession of one of the Member’s MERS certifying
Memorandum of Law in Support of Their Motion for                          officers. If the investor so allows, then MERS can be
Summary Judgment, at p. 44). More particularly, MERS                      designated as the note-holder.
argues:
                                                                     Thus, in apparent contradiction to its argument, MERS at
     But there is no circumstance and no amount of wild              least initially acknowledges that it in fact is ″involved with
     speculation that could lead the Court to conclude that          the transfer of the note″ by virtue of its service as the
     Section 351 mandates that a person or entity who did            mortgagee of record as the nominee for a lender/noteholder
     not buy the note, did not sell the note, and was not in         and its successors and assigns and that when required to
     any way involved with the transfer of the note, either as       facilitate a foreclosure, MERS itself can become a
     an assignor or as an assignee, is the person or entity that     ″note-holder.″
     Section 351 mandates is responsible for documenting
     and then recording note transfers or other changes in           The relationship between the MERS Defendants (″MERS″)
     ownership of debt.                                              and its members is more particularly described by William
                                                                     C. Hultman, the Vice President of [**45] Legislative Affairs
(MERS’ Memo of Law in Support of Motion for Summary                  for MERSCORP and a former officer of MERS, in his
Judgment at p. 45).                                                  Declaration which is attached to Defendants’ Memorandum
                                                                     of Law in Support of Motion for Summary Judgment as
At first blush, this argument appears compelling. However,           Exhibit ″A.″ According to Mr. Hultman,
now that it is clear that transfer of the note by operation of
law also transfers the mortgage, the argument loses much of               6. In regard to the mortgage or security instrument, the
its original luster. What’s more, as recited in the MERS                  borrower and lender contractually agree to designate
Defendants’ Memorandum [**43] of Law in Support of                        MERS as the mortgagee (as the nominee for the lender
Their Motion for Summary Judgment at page 10:                             and the lender’s successors and assigns) such that legal
                                                                          title to the lender’s (and its successors and assigns)
     Defendants are MERSCORP Holdings, Inc.                               secured interests in the property are held by MERS on
     (″MERSCORP″) and Mortgage Electronic Registration                    behalf of subsequent transferees of the promissory note.
     Systems, Inc. (″MERS″). MERS is a wholly owned                       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, *559; 2014 U.S. Dist. LEXIS 89222, **45

    as the nominee (i.e., agent) for the lender and for the      We likewise reject the proposition that MERS is not subject
    lender’s successors and assigns, who are members of          to liability because it is only an agent for its member-lenders.
    the MERS ® System.                                           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
    9. From time to time, MERS assigns the MERS                  LAW DICTIONARY 63 (6th ed. 1990). An agent holds the
    Mortgages. In such instances, MERS is the assignor of        power to alter the legal relations between the principal and
    the MERS Mortgage, and it is a MERS Signing Officer          third persons. Tribune-Review Publishing Co. v.
    who signs the assignment of the MERS Mortgage                Westmoreland County Housing Authority, 574 Pa. 661, 675,
    (″MERS Assignment of Mortgage″). Once the MERS               833 A.2d 112, 120 (2003). An agency relationship arises
    Assignment of Mortgage is duly executed and delivered,       when the following basic elements coalesce: there is a
    the MERS Assignment of Mortgage is, as required by           manifestation by the principal that the agent shall act for
    the MERS ® System rules, recorded in the public, local       him, the agent accepts the undertaking, and the parties
    land records, [**46] and any fees imposed for recording      understand that the principal [**48] is to be in control of the
    the MERS Assignment of Mortgage are paid.                    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
    11. ... MERS’s only role is and was to serve as the          A.3d 782 (2013)). The party asserting the existence of an
    mortgagee on the mortgage - as the nominee (or in the        agency relationship bears the burden of proving it by a fair
    stead) of the lender and the lender’s successors and         preponderance of the evidence. Id. (quoting Id.).
    assigns, who are members of the MERS ® System.               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.
    14. When the transfer or sale of the debt or promissory
                                                                 Azarchi-Steinhauser v. Protective Life Insurance Co., 629 F.
    note involves a MERS ® System member, MERS
                                                                 Supp. 2d 495, 499-500 (E.D. Pa. 2009)(quoting Vernon D.
    remains as the mortgagee of record and continues to act
                                                                 Cox & Co. v. Giles, 267 Pa. Super. 411, 406 A.2d 1107,
    as the mortgagee as the nominee for the purchaser (who
                                                                 1110 (1979). Instead, the principal is liable for and bound by
    is the beneficial owner of the debt or note), who is then
                                                                 any acts that the agent performs with actual or implied
    the lender’s successor or assign. The MERS Mortgage
                                                                 authority from the principal that are within the scope of the
    is not assigned because MERS remains the mortgagee
                                                                 agent’s employment. Id. However, an authorized agent who
    as the nominee for purchaser.
                                                                 enters into a contract on behalf of a principal without
(Hultman Declaration, Exhibit ″A,″ at pp. 3-4, 5). See also,     disclosing that it is acting for the principal, is personally
Deposition of William C. Hultman of October 18, 2013, at         liable on the contract. Burton v. Boland, 339 Pa. Super. 444,
p. 65-66, annexed to Plaintiff’s Memorandum of Law in            446, 489 A.2d 243, 245 (1985)(citing [**49] Revere Press,
Opposition to Defendants’ Motion for Summary Judgment            Inc. v. Blumberg, 431 Pa. 370, 246 A.2d 407 (1968) and
and in Support of Cross-Motion for Summary Judgment as           Dwyer v. Rothman, 288 Pa. Super. 256, 431 A.2d 1035
Exhibit ″A13″).                                                  (1981)). See also, Strawbridge & Clothier v. Garment
                                                                 Manufacturers, Inc., 189 Pa. Super. 43, 46, 149 A.2d 471,
 [*560] Therefore according also to Mr. Hultman, MERS is         472 (1959)(″An agent for undisclosed principals bears the
both named as the mortgagee and acts as agent for the            legal consequences of assuming liability for those
lenders - not only the lender which originates the loan to the   undertakings which his principals would have undertaken,
borrower, but also those lenders to whom the note is             had he made a disclosure.″); Pennsylvania Railway Co. v.
  [**47] ultimately sold and transferred. It is MERS that        Rothstein, 116 Pa. Super. 156, 161, 176 A. 861 (1935)(″It is
″from time to time″ will assign and record the mortgages         an elemental principle of agency that to relieve himself from
over which it has charge in the public local land records and    liability, an agent in dealing with a third party must not only
ensure that any associated fees therefor are paid. See also,     disclose the fact of the agency, but also the name of his
Plaintiff’s Exhibit ″A10,″ MERS’ System Rules of                 principal.″).
Membership, Section 10, p. 45). Clearly then, MERS is            As per Mr. Hultman,
involved with the transfer of the note and mortgage and we             3. MERSCORP maintains a database of the loans
find, is an appropriate party to this action.                          registered on the MERS ® System. The information on
                                16 F. Supp. 3d 542, *560; 2014 U.S. Dist. LEXIS 89222, **49

     the database tracks the beneficial interests in, and the         responsible as an undisclosed agent of the lenders for whom
     servicing rights to, the loans registered on and by the          it was acting as ″nominee.″ Accordingly, we now hold that
     members of the [*561] MERS ® System. It is the                   the MERS Defendants are proper parties who may be liable
     MERS ® System members who are responsible for and                for and subject to the mandates of the Pennsylvania
     who report the transactions regarding the registered             Recording Statutes in general and Section 351 in particular.
     loans by inputting the data regarding the beneficial             Defendants’ motion for summary judgment is therefore
     interests in, and servicing rights to, the members’              denied as to Count I of the Complaint.
     particular [**50] loans registered on the MERS ®
     System. For example, if there is a transfer of the               F. Plaintiff’s Claims for Unjust Enrichment and Quiet Title
     beneficial interests of a loan as a result of a promissory
     note being transferred, it is the MERS ® System                  Defendants also move for summary judgment in their favor
     member (or the MERS ® System member who is the                   on Plaintiff’s [**52] causes of action for unjust enrichment
     servicer of the loan for the transferee of those beneficial      and to quiet title,17 asserting as the reasons therefor that
     interests) that reports the transfer of beneficial interests     Plaintiff has failed to prove the essential elements of each.
     by inputting the data reflecting the transfer onto the           We note at the outset that to survive a summary judgment
     MERS ® System database.                                          motion, the non-moving party is not required to prove its
     Neither MERS nor MERSCORP is involved in any way                 case, although it must present sufficient evidence on which
     in the transfer, sale, or purchase of any promissory             a jury could reasonably find in its favor. See, e.g., Jakimas,
     notes, and neither MERS nor MERSCORP is involved                 and Kaucher, both supra. [*562] After reviewing the
     in reporting the transfer, sale, or purchase of any              evidentiary materials in the record of this matter in the light
     promissory notes by a MERS ® System member to                    most favorable to the plaintiff, we find that it has indeed
     another MERS ® System member, or by a MERS ®                     mustered sufficient evidence to proceed to trial.
     System member to one who is not a MERS ® System
                                                                      Pursuant to Pa. R. C. P. 1061(b)(3), an action to quiet title
     member.
                                                                      may be brought to compel an adverse party to file, record,
                                                                      cancel, surrender or satisfy [**53] of record, or admit the
(Hultman Declaration, at pp. 3-4).
                                                                      validity, invalidity or discharge of, any document, obligation
Hence as Mr. Hultman’s declaration attests, the identities of         or deed affecting any right, lien, title or interest in land.
the lenders for whom MERS is acting as agent are only                 Kean v. Forman, 2000 PA Super. 141, 752 A.2d 906, 908
revealed to other MERS members by MERS members, as                    (2000), appeal denied, 564 Pa. 712, 764 A.2d 1070 (2000).
″neither MERS nor MERSCORP is involved in reporting                   Rule 1061 was intended to be liberally construed. Brennan
the transfer, sale or purchase of any promissory notes″ by            v. Shore Brothers, Inc., 380 Pa. 283, 286, 110 A.2d 401, 402
one member to another nor to anyone who is not a member.              (1955).
(See also, Exhibit ″A20″ to Plaintiff’s Memorandum
 [**51] of Law in Opposition to Defendant’s Motion for                In our Memorandum Opinion of October 19, 2012, we held
Summary Judgment and in Support of Cross Motion for                   that Plaintiff had sufficiently pled a quiet title claim by
Summary Judgment, Deposition Testimony of R.K. Arnold                 alleging that she was a ″party in any manner interested in
in Henderson v. MERS, Case No. CV 2008-900805 in the                  the assignment - i.e. conveyance of mortgages recorded in
Circuit Court of Montgomery County, AL, dated 9/25/09, at             the name of MERS as nominee,″ and that she had pled ″a
p. 112, lines 10-12: ″The members utilize the [MERS]                  pecuniary interest which is affected by whether the mortgage
system to track the note.″). That the identities of the               assignments which MERS tracks are recorded.″ See, 904 F.
lenders/note holders for whom MERS is ostensibly acting as            Supp. 2d at 451. The evidentiary materials produced by
agent are likewise inaccessible to licensed title agents and          Plaintiff in opposition to Defendants’ Motion for Summary
consumers has also been attested. (See, Plaintiff’s Exhibits          Judgment include, among other things, a statewide summary
″B,″ p.5, ″G,″ pp. 6-7 and ″H,″ p. 6).                                from the Pennsylvania Department of Revenue showing the
From this we conclude that ample evidence exists to support           total number of instruments (deeds, mortgages and other
the argument that MERS may alternatively be held                      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, *562; 2014 U.S. Dist. LEXIS 89222, **53

the amounts collected in recording fees for the 2011             Plaintiff Becker herself also testified that it is the obligation
calendar [**54] year and a survey prepared by the                of the Recorders of Deeds to make sure that the chain of title
Philadelphia Department of Records for the period between        of properties in their county is clear and complete. (See,
2000 and 2012 of the number of MERS and non-MERS                 Plaintiff’s Exhibit ″A9,″ Deposition of Nancy Becker dated
recorded documents, as well as a number of Affidavits from       July 17, 2013, p. 48). Indeed, the Pennsylvania Superior
attorneys and former attorneys from Community Legal              Court has found that ″the primary duty of the recorder of
Services, the Pennsylvania Legal Aid Network, and the            deeds is to serve the public by receiving and duly recording
Housing Alliance of Pennsylvania. (See, Plaintiff’s Exhibits     any recordable instruments as to serve the future necessities
″B,″ ″C,″ ″D,″ ″E″ and ″F″). As these Exhibits demonstrate,      of the law,″ and that ″as the custodian of the county deed
over the last twelve years, the number of documents              books, the recorder of deeds is obligated to protect the
recorded by MERS has steadily increased, while the number        public in preserving the integrity of the official records of
of documents recorded by others has steadily decreased.          his or her office.″ Schaeffer v. Frey, 403 Pa. Super. 560,
There has, in turn, been a corresponding decrease in the         567-568, 589 A.2d 752, 756 (1991)(internal citations
amount of recording fees collected by the county Recorders       omitted). However, over the past several years, a number of
of Deeds. Inasmuch as Community Legal Services, the              residents who were facing foreclosure didn’t know who
Legal Aid Network and the Housing Alliance receive much          owned their mortgage or to whom they should be making
of their funding and financial support from the collection of,   their [**57] mortgage payments. (Id., 66). Plaintiff attributes
inter alia, fees paid to the Recorders of Deeds offices, they    this to the fact that MERS is not recording all of the note
too have suffered monetary injury.                               assignments with the result that not only is there a loss in
                                                                 revenue, but also the land title records are incomplete to the
In addition, Plaintiff has produced reports from two of its      public. (Id., 65-68, 176-177).
proposed expert witnesses with experience in forensic
                                                                 Finally, Plaintiff also testified that based on a forensic audit
analysis of chain of title issues and real estate law - Marie
                                                                 which revealed that a MERS-affiliated mortgage was
T. McDonnell and Charles W. Proctor, III. Ms. McDonnell
                                                                 transferred on average between 4 and 12 times, she
 [**55] reported on her analysis of a MERS mortgage for a
                                                                 conservatively estimates that Montgomery County alone
residential property in Montgomery County which was
                                                                 has lost $15.7 million in recording fees. (Id., 178-180).
originated with Countrywide Home Loans, Inc. in June,
                                                                 Because we find that all of this evidence is sufficient to
2005, was securitized in late August, 2005, sold at least
                                                                 demonstrate that a genuine issue of material fact exists with
three times and foreclosed in March, 2013. (See, Plaintiff’s
                                                                 respect to Plaintiff’s entitlement to quiet title relief,
Exhibit ″G,″ pp. 3-5). Throughout the process, Ms.
                                                                 Defendants’ motion for the entry of judgment in their favor
McDonnell found that there were five missing assignments
                                                                 as a matter of law on this claim is also denied.
that should have been recorded with the Montgomery
                                                                 We reach the same conclusion with regard to Plaintiff’s
County Recorder of Deeds, that the MERS Milestones data
was incomplete and in contradiction to the securitization        unjust enrichment claim. A cause of action for unjust
deal documents, and that title to the property had been          enrichment is a claim by which the plaintiff seeks restitution
corrupted by MERS’ failure to record a complete chain of         for benefits conferred on and retained by a defendant who
title. (Exhibit ″G,″ p.7).                                       offered no compensation in circumstances where
                                                                 compensation was reasonably expected. White v. Conestoga
In his Declaration, Mr. Proctor attests that licensed title      Title Insurance Co., 617 Pa. 498, 504, 53 A.3d 720, 723
agents have no access to the information in the bar codes        (2012). [**58] A showing of unjust enrichment requires a
which MERS adds to every document that it records or to          demonstration that: (1) a benefit was conferred on the
the MERS data base of exchanges, sales and assignments           defendant; (2) appreciation of such benefits by defendant;
that [*563] MERS facilitates for the benefit of its              and (3) acceptance and retention of such benefits under
customers/members. This means that title searchers and           circumstances that it would be inequitable for defendant to
consumers are denied the ability to ascertain who currently      retain the benefit without payment to the plaintiff. EBC, Inc.
owns the note secured by a MERS mortgage and that neither        v. Clark Building Systems, Inc., 618 F.3d 253, 273 (3d Cir.
the mortgagor nor the courts can ascertain the chain of          2010); Durst v. Milroy General Contracting, 2012 PA Super.
events or [**56] the validity of a transaction. This results,    179, 52 A.3d 357, 360 (2012). Here, Plaintiff proffers the
according to Mr. Proctor, in an erosion of Pennsylvania’s        videotaped deposition testimony of its former President and
land records and the inability to evaluate the marketability     CEO, R.K. Arnold in Henderson v. Merscorp, Inc., et. al., a
of title and credit worthiness of the consumer. (See,            similar action before the Circuit Court for Montgomery
Plaintiff’s Exhibit ″H,″ pp. 6-7).                               County, Alabama:
                               16 F. Supp. 3d 542, *563; 2014 U.S. Dist. LEXIS 89222, **58

    Q. ... Is it your company’s intention to supplement or             declaration, whether or not further relief is or could be
    assist the public land records of the several states with          sought. Any such declaration shall have the force and
    the MERS system to make it more clear about who                    effect of a final judgment or decree and shall be
    owns what?                                                         reviewable as such.
    A. No.
                                                                   This language has been said to ″place a remedial arrow in
    [*564] Q. Is it your company’s intent to supplant the          the district court’s quiver,″ and to confer ″a unique and
    mortgage land records of various states with its system?       substantial discretion on federal courts to determine whether
                                                                   to declare litigants’ rights.″ Reifer v. Westport Insurance
    A. No. We layer it on top is the way to think of it.
                                                                   Corp., No. 13-2880, 751 F.3d 129, 2014 U.S. App. LEXIS
    Q. When you say layer it on top, explain that, please.         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.
    A. Well, the MERS system couldn’t exist if the recording       Ed. 2d 214 (1995)). Generally, the judgment in a suit for
    system didn’t exist.                                           declaratory judgment must be responsive to the pleadings
    Q. But the recording system can exist [**59] without           and issues presented. Westport Insurance Corp. v. Bayer,
    MERS?                                                          284 F.3d 489, 499 (3d Cir. 2002). [**61] Indeed, ″[w]hen all
                                                                   is said and done,″ the Supreme Court has concluded, ″the
    A. Certainly. So we are the mortgagee of record, and           propriety of declaratory relief in a particular case will
    there has to be a place for us to establish that. And then     depend upon a circumspect sense of its fitness informed by
    we track the servicer.                                         the teachings and experience concerning the functions and
                                                                   extent of federal judicial power.″ Wilton, 515 U.S. at 287,
(See, Plaintiff’s Exhibit ″A20,″ 111-112). This testimony is,      115 S. Ct. at 2143. A declaratory judgment action is
we find, essentially tantamount to an admission that by            appropriate when the declaration will settle the question
maintaining the recording system in Pennsylvania, the              presented and terminate the entire controversy - courts are
county recorders of deeds confer a benefit upon defendants         to avoid using declaratory judgment to make abstract
which is in fact appreciated by defendants. Because                determinations or to try the controversy in piecemeal
Defendants do not pay any fees when a note is transferred          fashion. Pennsylvania Video Operators v. United States, 731
between its membership fee-paying members, we find that            F. Supp. 717, 719 (W.D. Pa. 1990), aff’d w/o opinion,
a genuine issue of material fact exists as to whether it would       [*565] 919 F.2d 136 (3d Cir. 1990)(citing Maryland
be unjust to allow Defendants to retain the benefits conferred     Casualty Co. v. Rosen, 445 F.2d 1012 (2d Cir. 1971) and
on them without paying Plaintiff and the class whom she            Rowland v. Tarr, 378 F. Supp. 766, 769 (E.D. Pa. 1974)).
represents therefor. Consequently, Defendants’ motion for
summary judgment as to Count III of the Complaint is also          Over the years, the Third Circuit has enumerated the
denied.                                                            following factors for district courts to consider when
                                                                   exercising Declaratory Judgment Act discretion. These are:
G. Plaintiff’s Cross Motion for Partial Summary Judgment
                                                                       (1) the likelihood that a federal court declaration will
In addition to opposing Defendants’ Motion for Summary
                                                                       resolve the uncertainty of obligation which gave rise to
Judgment, Plaintiff also seeks the entry of partial judgment
                                                                       the controversy;
in her favor as a matter of law pursuant to Count IV of her
Complaint and asserts that this Court should now enter an              (2) the convenience of the parties;
order declaring that Defendants’ past and present failures to
                                                                       (3) the [**62] public interest in settlement of the
  [**60] record note assignments among its members
                                                                       uncertainty of the obligation; and
constitutes a violation of Section 351 and that Defendants
have been unjustly enriched by their actions.                          (4) the availability and relative convenience of other
                                                                       remedies.
Under the Declaratory Judgment Act, 28 U.S.C. §2201,
                                                                   Reifer v. Westport Insurance Co., 2014 U.S. App. LEXIS at
    (a) In a case of actual controversy within its jurisdiction,   *28 (citing United States v. Pa. Dep’t of Envtl. Res., 923
    ... any court of the United States, upon the filing of an      F.2d 1071, 1075 (3d Cir. 1991), Terra Nova Ins. Co. v. 900
    appropriate pleading, may declare the rights and other         Bar, Inc., 887 F.2d 1213, 1224 (3d Cir. 1989) and Bituminous
    legal relations of any interested party seeking such           Coal Operators’ Assoc. v. Int’l Union, United Mine Workers
                                 16 F. Supp. 3d 542, *565; 2014 U.S. Dist. LEXIS 89222, **62

of America, 585 F.2d 586, 596 (3d Cir. 1975), abrogated on             entirety and the Plaintiff’s Cross-Motion for Partial Summary
other grounds by Carbon Fuel Co. v. United Mine Workers                Judgment shall be granted in part. An appropriate order
of Am., 444 U.S. 212, 100 S. Ct. 410, 62 L. Ed. 2d 394                 follows.
(1979)).
                                                                       ORDER
In this matter and in light of the rationale outlined in the
preceding sections of this opinion, we must concur with                AND NOW, this 30th Day of June, 2014, upon
Plaintiff’s assertion that declaratory judgment is now                  [**65] consideration of the Motion for Summary Judgment
properly entered in her favor with regard to Count I of the            of Defendants, Merscorp, Inc. and Mortgage Electronic
Complaint such that we now formally declare that the                   Registration Systems, Inc. (collectively ″MERS Defendants″)
assignment or transfer of a promissory note secured by a               (Doc. No. 66) and Plaintiff’s Cross-Motion for Partial
mortgage on real estate is, in Pennsylvania, equivalent to a           Summary Judgment (Doc. No. 80) and the parties’ further
mortgage assignment. We further declare that Defendants’               Memoranda of Law in Support and in Opposition, it is
failure to create and record documents evincing the transfers          hereby ORDERED that Defendants’ Motion is DENIED in
of promissory notes secured by mortgages on real estate in             its entirety and Plaintiff’s Motion is GRANTED IN PART
the Commonwealth [**63] of Pennsylvania is, was and will               as outlined in the preceding Memorandum Opinion.
in the future be, in violation of the Pennsylvania Recording
law - most particularly 21 P.S. §§351.18 Plaintiff’s motion            IT IS FURTHER ORDERED that Declaratory Judgment is
for partial summary judgment is therefore granted as to                hereby entered in favor of Plaintiff and against Defendants
Defendants’ liability under Count I with the issue of the              such that Defendants’ are declared to be obligated to create
extent of the damages as a consequence of these violations             and record written documents memorializing the transfers
to be addressed at the trial of this matter.                           of debt/promissory notes which are secured by real estate
                                                                       mortgages in the Commonwealth of Pennsylvania for all
We must decline to enter summary judgment in Plaintiff’s               such debt transfers past, present and future in the Office for
favor as to Count III however. To be sure, while there                 the Recording of Deeds in the County where such property
clearly is evidence that Defendants may have been unjustly             is situate.
enriched as a result of the conduct complained of, we do not
find the record to have been sufficiently developed on this            IT IS STILL FURTHER ORDERED AND DECLARED
claim to allow the entry of judgment as a matter of law or             that inasmuch as such debt/mortgage note transfers are
to make an award of damages at this time. Therefore, we                conveyances within the meaning of Pennsylvania law, the
leave this claim to be further and finally thrashed out at trial.      failure to so document and record is violative of the
So saying, Plaintiff’s motion for partial summary judgment             Pennsylvania Recording Statute(s).
shall be granted in part.19
                                                                       BY THE [**66] COURT:

Conclusion                                                             /s/ J. Curtis Joyner

For all of the reasons set forth above, the Defendants’                J. CURTIS JOYNER, J.
Motion for Summary [*566] Judgment shall be denied in its




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



                    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

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                    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.




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                                     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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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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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-OF-
CEO-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/join-
mers-docman/978-mers-system-procedures-final/file>.………...………… 9, 12-13

MERS Rules of Membership, available at <http://www.mersinc.org/join-mers-
docman/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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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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                           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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       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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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-procedures-
final/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-RK-
Arnold-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-of-
membership/file>. 
5
   Available at <http://www.mersinc.org/join-mers-docman/978-mers-system-procedures-
final/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 mortgage-

backed 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 third-

party 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



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                               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




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    Case: 14-4315   Document: 003111912092     Page: 38       Date Filed: 03/23/2015



          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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