Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 1 of 24 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

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1 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 1 of 24 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA MONTGOMERY COUNTY, : PENNSYLVANIA, RECORDER OF : DEEDS, by and through NANCY J. : BECKER, in her official capacity as the : Civil Action No Recorder of Deeds of Montgomery County, : Pennsylvania, on its own behalf and on : Judge J. Curtis Joyner behalf of all others similarly situated, : : Filed Electronically Plaintiff, : : Oral Argument Requested v. : : MERSCORP, INC., and MORTGAGE : ELECTRONIC REGISTRATION : SYSTEMS, INC., : : Defendants. : : REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS MOTION TO DISMISS PLAINTIFF S COMPLAINT

2 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 2 of 24 TABLE OF CONTENTS Page(s) I. INTRODUCTION... 1 II. ARGUMENT... 2 A. PENNSYLVANIA LAW DOES NOT IMPOSE A DUTY TO RECORD MORTGAGES OR ASSIGNMENTS The Word Shall In The Context of Section 351 Does Not Require Recording The History And Purpose Of The Recording Statutes Make Clear That Recording Is Permissive Plaintiff Cannot Ignore 200+ Years of Pennsylvania Case Law Holding That Recording Is Permissive... 7 B. PLAINTIFF LACKS STANDING TO BRING THIS ACTION BECAUSE IT FAILS TO IDENTIFY A LEGALLY PROTECTED INTEREST AND FAILS TO ALLEGE THAT DEFENDANTS CAUSED ANY COMPENSABLE INJURY Plaintiff s Generic Interest In Protecting The Public From Some Unspecified Harm Does Not Confer Standing... 9 a. The Public Suffers No Harm regardless Of Whether Or Not Property Interests Are Recorded... 9 b. Plaintiff s Generic Interest In Protecting The Recording System from Impairment Does Not Confer Standing Plaintiff Cannot Assert Standing For Lost Recording Fees Plaintiff Also Lacks Standing Because It Fails To Allege Any Compensable Injury C. PLAINTIFF DOES NOT HAVE A PRIVATE RIGHT OF ACTION UNDER SECTION D. THE COMPLAINT FAILS TO STATE A CLAIM FOR UNJUST ENRICHMENT E. THE COMPLAINT FAILS TO STATE A CLAIM FOR DECLARATORY JUDGMENT OR INJUNCTIVE RELIEF III. CONCLUSION i

3 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 3 of 24 TABLE OF AUTHORITIES FEDERAL CASES Page(s) Bates v. MERS, Inc., No. 3:10-cv-407, 2011 WL (D. Nev. Mar. 30, 2011)...2, 7, 8, 14 Child v. Adams, 5 F. Cas. 613 (C.C.E.D.Pa. 1854)...12 Christian County Clerk v. MERS No. 5:11-cv M, 2011 WL (W.D. Ky. Feb. 21, 2012)... passim Freeman v. Corzine, 629 F.3d 146 (3d Cir. 2010)...12 Reiter v. Kille (E.D. Pa. 1956)...5, 6 OTHER CASES Appeal of Powell, 98 Pa. 403, 1881 WL Com. v. Baker, 547 Pa. 214, 690 A.2d 164 (1997)...4, 5 Com. v. McCoy, 599 Pa. 599, 962 A.2d 1160 (2009)...3 County of McKean v. Young, 11 Pa. Super. 481 (1899)...12 Custer v. Glessner, 68 Pa. Super. 60, 1917 WL , 12 Estate of Witthoeft v. Kiskaddon, 557 Pa. 340, 733 A. 2d 623 (1999)...13 Franklin Twp. v. Com, Dep. of Envtl. Svcs., 500 Pa. 1, 452 A.2d 718 (1982)...11 In re Incorporation of Borough of Valley-Hi, 33 Pa. Cmwlth. 180, 381 A.2d 204 (1977)...11 Industrial Packaging Products Co. v. Fort Pitt Packaging International, Inc., 399 Pa. 643, 161 A.2d 19 (1960)...10 ii

4 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 4 of 24 Lancaster v. Flowers, 198 Pa. 614, 48 A. 896 (1901)...3 Land v. Com., Pa. Housing Finance Agency, 101 Pa. Cmwlth. 179, 515 A.2d 1024 (1986)...10,12, 18 Malamed v. Sedelsky, 367 Pa. 353, 80 A.2d 853 (1951)...6 Mortgage Electronic Registration Systems, Inc. v. Ralich, 982 A.2d 77 (Pa. Super. Ct. 2009)...12, 17 Oberneder v. Link Computer Corp., 696 A.2d 148 (1997)...4 Pines v. Farrell, 848 A.2d 94 (2004)...7 S. Fayette Twp. v. Com., 73 Pa. Cmwlth. 495, 459 A.2d 41 (1983)...11 Schaeffer v. Frey, 403 Pa. Super. 560, 589 A.2d 752 (1991)...11, 12 Uniroyal, Inc. v. Coleman, 15 Pa. Cmwlth. 596, 328 A.2d 893 (1974)...11 Upper Moreland Tp. v. Com., Pa. Dept. of Transp., 48 Pa. Cmwlth. 27, 409 A.2d 118 (1979)...11 OTHER STATUTES 16 P.S P.S passim 21 P.S. 352 (repeal effective June 27, 1980, by the Judiciary Act Repealer Act of April 28, 1978, P.L (a)) P.S Pa. Stat a(f)...4 KRS RULES Pa. R. Civ. P iii

5 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 5 of 24 I. INTRODUCTION Plaintiff s entire Complaint ( Complaint ) is based on alleged non-compliance with Pennsylvania s recording statute, 21 P.S. 351 ( Section 351 ). But Section 351 does not authorize or provide for a private cause of action nor can Plaintiff rely on a non-existent generalized duty to protect the public from an alleged impairment of the recording system as a proxy to sue for alleged violations of Section 351. And there certainly is no cause of action to compel payment of recording fees for documents that are not required by law to be recorded and were not proffered for recording pursuant to Section 351, particularly where the Pennsylvania courts have uniformly held that the only consequence of not recording mortgages or mortgage assignments is that the unrecorded lien may lose its priority. Indeed, just last month, the District Court for the Western District of Kentucky dismissed with prejudice a similar class action brought by a county clerk seeking identical relief based on unrecorded mortgage assignments. Noting that the purpose of recording statutes is to protect mortgagees, creditors, subsequent bona fide purchasers and the like and not county clerks the Court in Christian County Clerk v. MERS, No. 5:11-cv M, 2012 WL (W.D. Ky. Feb. 21, 2012) (attached as Exhibit A) summarily dismissed the government s attempts to collect recording fees when, in fact, the clerk did not provide the service of recording and where the recording statutes were not designed to protect the clerks of courts. This decision is of particular note because, unlike Pennsylvania s recording statutes, Kentucky s recording statute requires mortgage assignments to be recorded. Id. at *1; KRS In contrast to Christian County, which is directly on point, pages 7-9 of Plaintiff s Opposition focuses on irrelevant government actions involving MERS, including actions brought 1 When a mortgage is assigned to another person, the assignee shall file the assignment for recording with the county clerk within thirty (30) days of the assignment.... (emphasis added.) Id. 1

6 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 6 of 24 by two Attorneys General. Plaintiff attempts to substantiate its allegations in this case by citing to the unsworn allegations in the complaints of those two actions, none of which have any merit. Plaintiff also cites three actions similar to Plaintiff s case, alleging statutory violations of recording acts. These cases similarly fail to support Plaintiff here, because the only courts which have ruled on this novel theory have flatly rejected it. See Christian County Clerk, supra; Bates v. MERS, Inc., No. 3:10-cv-407, 2011 WL , at *3 (D. Nev. Mar. 30, 2011). Plaintiff tries to distract the Court with these cases, because no legal support exists for Plaintiff s underlying theory. Plaintiff does not cite a single case in support of its contention that Pennsylvania law requires the recording of property interests. Rather, Plaintiff asks this Court to ignore Pennsylvania Supreme Court precedent and more than 200 years of Pennsylvania case law holding that documents conveying property do not need to be recorded. Plaintiff s theory that mortgage assignments must be recorded is contrary to well-settled Pennsylvania law. The Motion to Dismiss should be granted, and Plaintiff s Complaint should be dismissed with prejudice. II. ARGUMENT A. PENNSYLVANIA LAW DOES NOT IMPOSE A DUTY TO RECORD MORTGAGES OR ASSIGNMENTS Plaintiff advances three arguments for its contention that Section 351 makes recording mandatory, each of which fails for the reasons discussed below. 1. The Word Shall In The Context of Section 351 Does Not Require Recording Plaintiff claims that the statutory language shall be recorded is an absolute mandate that all mortgages and mortgage assignments must be recorded to comply with Pennsylvania law. For more than 200 years, however the Pennsylvania courts, have interpreted the shall be recorded language in this recording statute as not imposing an absolute duty to record. Plaintiff 2

7 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 7 of 24 essentially ignores this line of cases and offers no contrary legal authority in support of its contention that recording is not required other than its strained reading of Section 351. Plaintiff s proposed reading of Section 351 focuses exclusively on the phrase shall be recorded and ignores the meaning of that phrase in the context of the rest of the sentence and the following sentence. See Opp. at 12. Pennsylvania law rejects any statutory interpretation that focuses on isolated portions of a statute, demanding instead that courts read a statute in its entirety. See Com. v. McCoy, 599 Pa. 599, 614, 962 A.2d 1160, 1168 (2009) ( When there is an interpretation available that gives effect to all of the statute s phrases and does not lead to an absurd result, that interpretation must prevail. ) Section 351 dictates the exclusive location (i.e. in the office for the recording of deeds in the county where such lands, tenements, and hereditaments are situate ) where certain documents shall be recorded to provide notice of their existence. That Section 351 dictates where documents are to be recorded (if one chooses to record) makes perfect sense. Individuals who have acquired a property interest should only need to provide notice of their interest in one location. Likewise, subsequent purchasers and creditors should only need to search the records in one location. Section 351 specifies that location. Indeed, an improperly recorded instrument does not constitute constructive notice and, therefore, is not entitled to the protection afforded by the recording acts. Lancaster v. Flowers, 198 Pa. 614, 48 A. 896 (1901); Appeal of Powell, 98 Pa. 403, 1881 WL Plaintiff further ignores the fact that Section 351, which, as indicated by its title, addresses the effect of a failure to record conveyance[s], expressly provides that the only effect of failing to record a property interest in the proper location is that it shall be adjudged fraudulent and void as to any subsequent bona fide purchaser or mortgagee or holder of any 3

8 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 8 of 24 judgment without actual or constructive notice of its existence. This also makes sense. Purchasers of real estate and creditors of funds used to purchase real estate are expressly protected by Section 351 from prior unrecorded property interests. Plaintiff s reliance on Oberneder v. Link Computer Corp., 696 A.2d 148, 150 (1997) is an attempt to avoid the proper interpretation of the statute is misplaced. This case discussed the use of the word shall in the context of a statutory mandate that courts must award attorneys fees to plaintiffs where defendants have violated the Wage and Collection Law. First and foremost, the context in which the word shall appears in the Wage and Collection Law makes it clear that shall means mandatory. The statutory provision, in its entirety provides as follows: The court in any action brought under this section shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow costs for reasonable attorneys fees of any nature to be paid by defendant. 43 Pa. Stat a(f). In this context, the court in Oberneder found that the use of the word shall was free from ambiguity. Id. To be sure, the Oberneder court further noted that its reading of shall as mandatory promotes the statute s purpose to protect employees when employers breach a contractual obligation to pay wages. Id. at 151. Context is paramount. As the Pennsylvania Supreme Court recognized in Com. v. Baker, 547 Pa. 214, 690 A.2d 164 (1997), Notwithstanding the general rule that shall is mandatory, we are aware that the word shall has also been interpreted to mean may or as being merely directory as opposed to mandatory. See e.g., Commonwealth ex rel. Bell v. Powell, 249 Pa. 144, 94 A. 746 (1915) (interpreting shall as may ); Fishkin v. Hi-Acres, Inc., 462 Pa. 309, 341 A.2d 95 (1975) (interpreting shall to be merely directory as opposed to mandatory). In observing that the word shall can be ambiguous given that it may be interpreted in at least one of two ways, we have stated that [e]xcept when relating to the time of doing something, statutory provisions containing the 4

9 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 9 of 24 word shall are usually considered to be mandatory, but it is the intent of the legislature which governs, and this intent is to be ascertained from a consideration of the entire act, its nature, its object, and the consequences that would result from construing it one way or the other. Francis v. Corleto, 418 Pa. 417, 428, 211 A.2d 503, 509 (1965) quoting, Pleasant Hills Borough v. Carroll, 182 Pa.Super. 102, 106, 125 A.2d 466, 468 (1956) Id. at 218, 690 A.2d at Read in its entirety and consistent with the Pennsylvania caselaw, Section 351 is not a mandate to record property interests. Rather, it specifies the location where such documents must be recorded if they are to obtain priority over subsequently acquired property interests. The interpretation of Section 351 advanced by Plaintiff that property interests must be recorded and that county recorders are entitled to recording fees where property interests are not recorded ignores all but one phrase in Section 351 and leads to an absurd result that is contrary to well-settled Pennsylvania law. 2. The History And Purpose Of The Recording Statutes Make Clear That Recording Is Permissive As Plaintiff concedes, to the extent there is any ambiguity in the construction of a statute, Pennsylvania courts must consider the purpose of the statute. Opp. at 17. Plaintiff then argues that protecting subsequent bona fide purchasers, mortgagees and creditors is not the sole purpose of Section 351 based on its flawed interpretation of one case. Plaintiff quotes Reiter v. Kille (E.D. Pa. 1956), which provides as follows: The primary purpose of recording a deed is to give public notice in whom the title resides; so that no one may be defrauded by deceptious appearance of title. For this reason recording is obligatory, on peril of having an unrecorded deed adjudged fraudulent and void as against subsequent purchasers, mortgagees and creditors. 143 F.Supp. 590, (quoting commentary of Title 21 of Purdon s Statutes) (emphasis added). Despite Plaintiff s contention that the purpose of the statute is defeated if parties are 5

10 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 10 of 24 not required to record (Opp. at 17-18), the quote from Reiter expressly acknowledges that the purpose of Section 351 is satisfied regardless of whether one chooses to record his or her property interest. Section 351 simply provides that properly recorded interests obtain priority over subsequent purchasers, mortgagees and creditors; improperly recorded or unrecorded interests do not. In either scenario, potential purchasers and creditors are protected from the risks of deceptious appearance of title. As Defendants establish in their Motion to Dismiss, Pennsylvania cases and treatises addressing the issue uniformly recognize the recording statutes twofold purpose: (1) to provide a means for a purchaser or creditor to record his interest, thus giving public notice of his interest and giving his interest priority over the claim of any subsequent purchaser or creditor; and (2) if the purchaser or creditor fails to record his interest, to make his or her interest void as to any subsequent purchaser or creditor without notice of the prior unrecorded interest. Recognizing this, the Pennsylvania Supreme Court has repeatedly stated that recording is not required. See, e.g., Malamed v. Sedelsky, 367 Pa. 353, 358, 80 A.2d 853, 856 (1951) ( Delivery is all that is necessary to pass title, recording is only essential to protect by constructive notice any subsequent purchasers, mortgagees and new judgment creditors. ) (emphasis in original). And yet, Plaintiff requests this Court to ignore the Pennsylvania Supreme Court s rulings and attempt to subject all of the public to the expense of recording for no reason at all. Plaintiff s suggestion that the purpose of the recording statutes is to create an accurate chronology of all property transfers and mortgage assignments has no support. 2 This theory was 2 Likewise, Plaintiff s suggestion that county recorders cannot fulfill their ministerial duty to properly record documents presented to them for recording if they do not receive documents to record and that county recorders cannot fulfill their duty to furnish their records to tax collectors or departments of the State government if they do not receive certain documents for recording is without merit. Obviously, the county recorders duty to record documents is limited to documents that are actually presented for recording and the county recorders duty to furnish records upon request does not extend to documents that are not within their possession. 6

11 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 11 of 24 recently advanced by the plaintiffs and rejected in Christian County, 2012 WL The Court held that the additional purpose of the recording statute, as advanced by plaintiffs, to maintain accurate real estate records is simply another way of stating that the records exist to protect landowners and lienholders, not county clerks. Id. at *4. 3. Plaintiff Cannot Ignore 200+ Years of Pennsylvania Case Law Holding That Recording Is Permissive Plaintiff incorrectly asserts that the cases cited by Defendants are not controlling because none of them involved a case by a county recorder or other governmental entity seeking to mandate the recording of documents in order to collect recording fees. Beyond that conclusory attempt to distinguish these cases, Plaintiff advances no meaningful support for its request that the Court ignore the repeated holdings of the Pennsylvania Supreme Court that no requirement to record exists. See, e.g., cases cited at pages of Defendants opening brief. Plaintiff does, however, attempt to suggest that this precedent is no longer good law by citing to Pines v. Farrell, 848 A.2d 94 (2004), for the proposition that mortgage assignments are in fact conveyances and are subject to the recording act. Opp. at 19. Plaintiff misses the point: the recording act does not require recording. Therefore, regardless of whether the mortgage assignments are subject to the recording act, Pennsylvania law simply does not require that they be recorded. Plaintiff offers no other support for its argument that the Pennsylvania Supreme Court cases, which expressly state that recording is optional, are not controlling. Plaintiff next argues that Defendants citation of Bates v. MERS, Inc., No. 3:10-cv-407, 2011 WL , at *3 (D. Nev. Mar. 30, 2011), which described the theory Plaintiff advances in this case as legally frivolous and sua sponte dismissed the case with prejudice, is irrelevant because the statute in Nevada contained the language may be recorded. Although, the Nevada 7

12 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 12 of 24 statute does contain different language, both statutes have been uniformly interpreted in a manner consistent with that Court s explanation: Recordation of an interest in land simply serves to perfect one s interest in real property by putting the world at large on constructive notice of the claimed interest; but recordation is not required to validate one s interest. Every law student studying for the bar exam understands this better than he cares to.... If Defendants do not wish to record assignments of loans or deeds of trust, they need not do so. A party may choose to avoid the filing fee and hassle of recording an assignment if it would rather bear the risk that its interest in the property will not be protected from a potential subsequent bona fide purchaser under the applicable recording statute. Bates, 2011 WL at *3 (emphasis added). Plaintiff offers no meaningful support for its position that recording is optional in the context of analyzing the validity of unrecorded interests, but is required in the context of determining whether a county recorder is entitled to recording fees where an interest was not recorded. Because recording is not required under Pennsylvania law, Plaintiff s Complaint, which is premised on a purported requirement to record, fails as a matter of law. B. PLAINTIFF LACKS STANDING TO BRING THIS ACTION BECAUSE IT FAILS TO IDENTIFY A LEGALLY PROTECTED INTEREST AND FAILS TO ALLEGE THAT DEFENDANTS CAUSED ANY COMPENSABLE INJURY As Defendants established in their opening brief (at 17-22), the Court should dismiss this lawsuit because Section 351 does not create any private right of action, and because Plaintiff has not suffered any injury from non-recorded assignments. Plaintiff responds in its Opposition that it does, in fact, have standing. Opp. at 20. Plaintiff provides no valid responses to Defendants arguments, and instead, attempts to cobble together a standing argument by asserting that it does not need a private right of action because it has a generalized duty to protect the public from an alleged impairment of the County s recording system. 8

13 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 13 of Plaintiff s Generic Interest In Protecting The Public From Some Unspecified Harm Does Not Confer Standing Plaintiff s standing argument is premised on its unfounded claim that the recording system has somehow been harmed and that Plaintiff has a statutory mandate to protect the public from this harm. Opp. at 20. Plaintiff s standing argument fails, however, because the public has suffered no harm and Plaintiff, in its ministerial role, lacks any broad statutory mandate to protect the public-at-large. a. The Public Suffers No Harm regardless Of Whether Or Not Property Interests Are Recorded Plaintiff s Opposition contains a number of conclusory allegations that the system of property recordation is in jeopardy, that failing to record mortgage assignments has created uncertain[ty] about the chain of title to thousands of properties, and that, unless all mortgage assignments are recorded, the public will face issues of tangled title, property records will be in shambles, and the whole recording apparatus crumbles. Opp. at 25, 32. Plaintiff has not provided any explanation of these colorful allegations, or how anyone has been injured. An individual s decision not to record a property interest does not result in harm to the public. First, as provided by Section 351, if one chooses not to record a property interest, then it shall be adjudged fraudulent and void as to any subsequent bona fide purchaser or mortgagee or holder of any judgment without actual or constructive notice of its existence. In other words, the public, as prospective purchasers of real estate or creditors of funds used to purchase real estate, is expressly protected by Section 351 if a prior property interest is not recorded. Second, with respect to MERSCORP s tracking of loan interests among its members, no harm to the public occurs because the public is on notice of all MERS mortgages. Even without the recordation of a mortgage assignment, any prospective creditor can still determine that the property is subject to the prior lien and properly recorded showing MERS as the mortgagee as 9

14 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 14 of 24 the nominee for the lender. Prospective purchasers or creditors are not protected by notice of who owns the underlying debt secured by the mortgage; they are protected by the presence of the properly recorded mortgage. They are equally protected if the lien is not properly recorded because, by operation of Pennsylvania law, a purchaser s or creditor s interest is only subordinate to a properly recorded lien. Plaintiff is suggesting, without any explanation or support, that the use of an agent or nominee as the designated mortgagee tangles title. But a mortgage relates to a lien on the property, not title to the property, and the lien is valid regardless of whether it is recorded in the public records. See, e.g., Land v. Com., Pa. Housing Finance Agency, 101 Pa. Cmwlth. 179, 184, 515 A.2d 1024, 1026 (1986) ( an unrecorded mortgage is good as against the mortgagor, his alienee or mortgagee with notice or a voluntary assignee for creditors. ). But the land record is not harmed and title to the property is not tangled. Further, the use of agents or nominees in real estate transactions has long been appropriate and permitted. 3 See, e.g., cases cited in n. 2 of Defendants opening brief. Contrary to Plaintiff s rhetoric, the absence of a mortgage assignment in the land records does not tangle title or cause property records to be in shambles and the public is not harmed because the public is on notice of the recorded lien b. Plaintiff s Generic Interest In Protecting The Recording System from Impairment Does Not Confer Standing Plaintiff cites two cases in support of its position that it does not need to rely upon [ ] an express [right of action] or an implied private right of action to assert standing. Neither case supports Plaintiff s assertion. In Franklin Twp. v. Com, Dep. of Envtl. Svcs., 500 Pa. 1, 452 A.2d 3 Indeed, the Pennsylvania Supreme Court made this point regarding notice to the public in the context of Uniform Commercial Code filing and rejected the very argument made by Plaintiff. See Industrial Packaging Products Co. v. Fort Pitt Packaging International, Inc., 399 Pa. 643, 648, 161 A.2d 19, 21 (1960) ( The purpose of filing this financing statement is to give notice to potential future creditors of the debtor or purchasers of the collateral. It makes no difference as far as such notice is concerned whether the secured party listed in the filing statement is a principal or an agent[.] ) (emphasis added). 10

15 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 15 of (1982), the Court held that the county had standing because it had a substantial, direct and immediate interest in the establishment and operation of a toxic waste landfill within its boundaries. The Court did not find standing based on harm to the public, but rather found that the county had standing because [w]hatever affects the natural environment within the borders of a township or county affects the very township or county itself. Id. at 6, 452 A.2d 720. Similarly, in S. Fayette Twp. v. Com., 459 A.2d 41, (Pa. Commw. Ct. 1983), the court found that a municipality had standing to sue to obtain its share of a tax to which it was entitled under a particular statute given its active role in developing fire protection by designating the recipients of this tax. Id. at Unlike these two cases, where the plaintiffs had a substantial and immediate interest directly related to their responsibilities, Plaintiff s role in the recording process is purely ministerial. Section 351 does not contain a broad statutory mandate for county recorders to protect the integrity of the public recording system. In fact, Pennsylvania courts have determined that the kind of generic interest articulated by Plaintiff is insufficient to confer standing. E.g., Upper Moreland Tp. v. Com., Pa. Dept. of Transp., 409 A.2d 118, 120 (Pa. Commw. Ct. 1979). 4 Plaintiff also cites language from Schaeffer v. Frey, 589 A.2d 752 (Pa. Super Ct. 1991) and Custer v. Glessner, 68 Pa. Super 60, 1917 WL 3448 (Pa. Super. Ct. 1917) to support its assertion that the recorder of deeds has a broad mandate to protect the public-at-large. However, far from supporting Plaintiff s position, both cases actually affirm Plaintiff s 4 See also In re Incorporation of Borough of Valley-Hi, 33 Pa. Cmwlth. 180, 184, 381 A.2d 204, 207 (1977) (County lacked standing in absence of a specific mandate); County of McKean v. Young, 11 Pa. Super. 481 (1899) (Where law prescribes authority, that authority cannot be enlarged); Child v. Adams, 5 F. Cas. 613 (C.C.E.D.Pa. 1854) ( Where a statute defines the extent of power given to one who acts ministerially, the courts can not extend it, or validate acts done without or beyond its authority. ); Uniroyal, Inc. v. Coleman, 15 Pa.Cmwlth. 596, 599, 328 A.2d 893, 895 (1974) ( In performing his duties, the Commissioner of Records may act only in accordance with the law. ) 11

16 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 16 of 24 ministerial role. In Schaeffer, the court merely found that the statute requiring recorders of deeds to submit their records to courts of common pleas for inspection does not substitute the Court of Common Pleas for the recorder of deeds as custodian with control and responsibility over deed records. Id. at 756. In Custer, the court found that the Court of Common Pleas may make an order prescribing the manner in which indices in the recorder's office are to be kept, but it has no jurisdiction to direct the county commissioners to enter into a contract for necessary books and to direct them to employ someone to transcribe the records into the new books, which is a matter for the recorder. Id. at *2. Neither case holds that the recorder of deeds has a broader mandate to protect the public as a whole. In short, Plaintiff has not articulated any harm to the public and even if it did, Plaintiff lacks standing to serve as a guardian of the public interest. 2. Plaintiff Cannot Assert Standing For Lost Recording Fees Plaintiff cannot assert standing based on a theory that it is entitled to fees for services that were never recorded. Standing requires, inter alia, that a litigant demonstrate that her interests are arguably within the zone of interests intended to be protected by the statute, rule, or constitutional provision on which the claim is based. Freeman v. Corzine, 629 F.3d 146, 154 (3d Cir. 2010). Plaintiff has failed to plead any facts alleging that Section 351 was intended for its benefit or that the consequence of a decision not to record goes beyond a loss of priority as to subsequent purchasers or creditors without knowledge. Rather, Pennsylvania courts have 12

17 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 17 of 24 recognized that the recording system was passed instead to benefit two distinct groups: (1) the mortgagee who makes a loan, as it may record its interest in the land records and give the world notice of its secured claim; and (2) later purchasers, mortgagees, and holders of judgments who can make decisions whether to extend credit or acquire property informed by the existence of prior interests which will have priority by virtue of having been recorded first. Copenhaver, 13 Pa. D. & C.3d at 414, 1980 WL at *3. The foregoing is fatal to Plaintiff s claim of standing based on lost recording fees. Because Pennsylvania law is clear that property interests are not required to be recorded and because Plaintiff is not within the zone of interests intended to be protected by the recording statutes, the County lacks standing to assert a claim for lost recording fees. 3. Plaintiff Also Lacks Standing Because It Fails To Allege Any Compensable Injury Plaintiff argues that it has suffered economic injury from Defendant s choice not to record mortgage assignments. Opp. at 24. But Plaintiff does not allege Defendants recorded any assignments for which they did not pay. So Plaintiff is trying to allege a compensable injury for not being paid for a service Plaintiff did not provide. A county s entitlement to a recording fee only comes about when a person chooses to record a document. Bates, WL at *5 ( [P]laintiffs argue that the beneficiaries [mortgagees] of the loans had an absolute duty to ensure that a proper entity [recorded the correct documents]... but such a duty is separate from the duty to pay a recording fee upon filing, which is a contingent duty. ) Thus, even if there were some obligation to record mortgage assignments (there is not), and even if Plaintiff had standing to attempt to enforce the recording of mortgage assignments (it does not), Plaintiff still has no compensable injury because the recording fee is contingent upon providing the service of recording documents. See 21 P.S ; see also 16 P.S The court in Christian County further explained that in 13

18 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 18 of 24 Kentucky, just as in Pennsylvania, the lack of intent to protect County Clerks is further demonstrated by the fact that the recording fees Plaintiffs seek to recover are not mentioned in the recording statutes, but rather are contained in an entirely different chapter.... Christian County, 2012 WL at *4. The same is true in Pennsylvania. Compare Section 351 (allowing recording) with 21 P.S (providing for recording fees). 5 Because Plaintiff is not entitled to recording fees unless and until a document is presented for recording, the Opposition falsely conflates an alleged duty to record with the contingent and essentially unrelated right to charge a fee if a document is recorded. Simply put, Plaintiff cannot be injured by not being paid for services it has not performed. Plaintiff cannot properly allege any harm to the public, much less a harm related to its ministerial mandates, either. As a result, Plaintiff has failed to plead an injury caused by any alleged action of Defendants. C. PLAINTIFF DOES NOT HAVE A PRIVATE RIGHT OF ACTION UNDER SECTION 351 Plaintiff asserts that it has an implied private right of action under the following threeprong test employed by Pennsylvania courts, which requires the following: (1) that plaintiff is one of the class for whose especial benefit the statute was enacted; (2) legislative intent to create a private remedy; and (3) that such a private remedy would be consistent with the underlying purposes of the legislative scheme. See, e.g., Estate of Witthoeft v. Kiskaddon, 557 Pa. 340, 346, 733 A. 2d 623, 626 (1999). In apparent recognition of the fact that Section 351 was not enacted for its benefit, Plaintiff ignores the first factor. This is not surprising because Section 351 expressly identifies 5 The court in Christian County did find Article III standing where, as unlike here, there is a statutory requirement in Kentucky to record mortgage assignments WL at *2. As discussed below, the court held that the Clerk did not have a private right of action under the Kentucky recording statute, and thus lacked statutory standing. Id. 14

19 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 19 of 24 the individuals for whom it was intended to benefit purchasers, mortgagees, and creditors. County recorders are not identified. Plaintiff does argue that it has a private right of action under the second and third factors because it is the guardian of all recordation and [w]ithout a mechanism to require parties to record, the whole recording apparatus crumbles. Opp. at 25. A decision not to record, however, does not cause any harm because Section 351 specifies the rights of purchasers, creditors and mortgagees in the event a property interest is not recorded. As noted above, the Clerk of Christian County, Kentucky, recently brought essentially the same class action seeking to recover recording fees for unrecorded assignments of mortgages. Christian County, 2012 WL The District Court for the Western District of Kentucky dismissed the Clerk s Complaint with prejudice because he lacked a right of action to bring the same claims against many of the same defendants named in this suit. Id. at *4-5. Despite a statutory requirement to record mortgage assignments, the court held that the Clerk did not have a private right of action under the Kentucky recording statute, and thus lacked statutory standing. Id. at *2. The Clerk also attempted to bring claims pursuant to a separate statute providing that [a] person injured by the violation of any statute may recover from the offender such damages as he sustained by reason of the violation.... Id. at *3-4. The court rejected the Clerk s claim and dismissed the entire case with prejudice holding: There is nothing in the plain language of the statute that indicates that the statute was designed to be enforced by the county clerk. * * * The General Assembly did not provide a statutory mechanism for the recovery of fees for unfiled assignments by the county clerks. Had the General Assembly wanted to allow county clerks to file lawsuits regarding recording fees, it certainly knew how to do so. Id. at *2, 5. Plaintiff incorrectly tries to distinguish the Kentucky recording statutes from the Pennsylvania recording statutes by stating that [t]he Pennsylvania statute... does not provide 15

20 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 20 of 24 an expressed right of action for property owners. This attempt misses the mark because, Pennsylvania Rule of Civil Procedure 1061 et seq., permits a private right of action by a present owner to compel a former owner under an unrecorded deed or other document to record it. Pa. R. Civ. P superseded 21 P.S. 352 (repeal effective June 27, 1980, by the Judiciary Act Repealer Act of April 28, 1978, P.L (a)) by procedure.) As with the Kentucky statute, this rule demonstrates the absence of any intent to create a private right of action in Section 351. See Alfred M. Lutheran Distrib., Inc. v. A.P. Weilersbacher, Inc., 437 Pa. Super. 391, , 650 A.2d 83, (1994). In Alfred M. Lutheran Distributors, Inc., for example, the court refused to imply a cause of action where, as here, the General Assembly chose to grant an express remedy in favor of certain groups, but did not create any private remedy in favor of the plaintiff who filed suit. Id. The Court explained that it would not substitute its judgment for that of the legislature, which could have easily expressly provided for the remedy sought. Therefore, in addition to and independent from the lack of any legal requirement to record mortgages and mortgage assignments in Pennsylvania, and the fact that Plaintiff lacks standing, Plaintiff does not have a private right of action under Section 351. D. THE COMPLAINT FAILS TO STATE A CLAIM FOR UNJUST ENRICHMENT Plaintiff argues that [d]efendants appreciated the benefits of not recording as members of the mortgage industry claimed various benefits only available to properly recorded mortgages. Opp. at 28. As a matter of law, the county recorder, however, does not and cannot confer any benefit upon MERS by recording a mortgage assignment, aside from the ministerial task of physically filing the document. There is no allegation that Defendants did not pay for any and all documents presented to the country recorded for recording. The additional benefits cited by Plaintiff claiming priority on the mortgages within the [RMBS] trusts, 16

21 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 21 of 24 foreclosing on non-performing mortgages, favorable tax treatment (pass-through tax status), and bankruptcy protection (Id.) are not benefits conferred by Plaintiff. Rather, these benefits are conferred by the operation of Pennsylvania law, including centuries of authority, which holds that recording is not required for a mortgage or mortgage assignment to be effective. 6 The only benefit conferred by county recorders, on the other hand, is to file documents in their allotted place, as they are required to do by statute, if a creditor decides to record the document. For this service, and only when it is performed, county recorders are entitled to a fee. There is no allegation or dispute that Plaintiff was paid each time Plaintiff recorded a mortgage or assignment. Plaintiff is seeking recovery here for doing nothing, and based on alleged benefits conferred by operation of Pennsylvania law. Plaintiff has not conferred any benefits for which Defendants did not pay. The Court should dismiss Plaintiff s unjust enrichment claim for this additional reason. 7 E. THE COMPLAINT FAILS TO STATE A CLAIM FOR DECLARATORY JUDGMENT OR INJUNCTIVE RELIEF Plaintiff seeks declaratory relief on the grounds that the time-honored system of property recordation is in jeopardy, the public will face issues of tangled title, there will be little confidence in property records, and the county is denied mandated recording fees. Opp. at With respect to foreclosures completed in the name of MERS, the Pennsylvania Superior Court recently stated that the Mortgage vests MERS with the authority, as nominee, to enforce the loan. Mortgage Electronic Registration Systems, Inc. v. Ralich, 982 A.2d 77, 81 (Pa. Super. Ct. 2009). The Superior Court concluded that the [County s] argument [that] MERS lacked the authority to complete the sheriff s sale is without merit. Id. Plaintiff s unjust enrichment claim is also at odds with its statement from the previous section of its opposition, which provides [p]laintiff does not seek damages for mortgages and mortgage assignments which were not recorded. Plaintiff does reserve the claim to be paid the required fee for each recording required as a result of this lawsuit. Opp. at On the one hand, Plaintiff seeks to recover recording fees for unrecorded mortgages on the grounds that members of the mortgage industry have been unjustly enriched and, on the other hand, Plaintiff seeks to compel Defendants to create and record mortgage assignments that were never recorded, in which case County recorders would actually confer a ministerial benefit. 17

22 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 22 of 24 Plaintiff, however, fails to show how any land records are damaged by Defendants decision to not record mortgage assignments, much less how Plaintiff is allegedly harmed. Plaintiff s vague allegations are a sham because the absence of a mortgage assignment in the land records cannot under any theory tangle title or jeopardize property records. When a borrower purchases a home, the creditor who loans the money secures the loan with a mortgage on the home. The creditor may record the mortgage in the land records to provide notice to subsequent purchasers, mortgagees, and creditors that the property is security for a loan. If the mortgage is not recorded, the land record is not injured. The mortgage merely fails to obtain priority over subsequent purchasers, mortgagees, and creditors. The mortgage remains valid as between the borrower and the creditor. See, e.g., Land, 101 Pa. Cmwlth. at 184, 515 A.2d at Likewise, if the creditor sells the note and assigns the mortgage, the land record is not affected. The record still reflects that the land is encumbered. None of these possible actions in any way tangles title or jeopardizes the land record as suggested by Plaintiff. These acts only affect priority among creditors or mortgagees. Accordingly, Plaintiff has not and cannot plead any facts to support his conclusory statements that the public land records are jeopardized or that title is tangled. III. CONCLUSION For the reasons set forth above and in their previously filed Motion to Dismiss, Defendants respectfully request that the Court grant their Motion to Dismiss the Complaint with prejudice. 18

23 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 23 of 24 Dated: March 27, 2012 Respectfully submitted, s/ James E. DelBello James E. DelBello, Esquire (PA ID #78638) Nicholas C. Vance, Esquire (PA ID #203364) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA Telephone: (215) Fax: (215) Robert M. Brochin (admitted pro hac vice) MORGAN, LEWIS & BOCKIUS LLP 5300 Southeast Financial Center 200 S. Biscayne Boulevard Miami, FL Telephone: (305) Fax: (305) Attorneys for MERSCORP, Inc. and Mortgage Electronic Registration Systems, Inc. 19

24 Case 2:11-cv JCJ Document 16 Filed 03/27/12 Page 24 of 24 CERTIFICATE OF SERVICE I hereby certify that on March 27, 2012, a copy of the foregoing Defendants Reply in Support of Motion to Dismiss Plaintiff s Complaint was filed electronically, is available for viewing and downloading from the ECF system, and was served by electronic mail, on: Joseph C. Kohn, Esquire Robert J. LaRocca, Esquire Jared G. Solomon, Esquire KOHN, SWIFT & GRAF, P.C. One South Broad Street, Suite 2100 Philadelphia, PA Telephone: (215) Fax: (215) Jeffrey D. Schaffer, Esquire COOPER & SCHAFFER, LLC 815 Greenwood Avenue, Suite 22 Jenkintown, PA Phone: (215) Attorneys for Plaintiff and the Class s/ Nicholas C. Vance Nicholas C. Vance