MERSCORP, et al v. Delaware Co., et al.

This appeal arose from four separate, yet substantively similar, lawsuits filed by the county recorders in Delaware, Chester, Bucks and Berks Counties, Pennsylvania, and their respective Counties (collectively, the Recorders). The Recorders sued appellees, MERSCORP, Inc., its wholly-owned subsidiary, Mortgage Electronic Registration Systems, Inc. (MERS), and several financial institutions who are members of MERS (collectively, MERSCORP). The issue presented for the Pennsylvania Supreme Court was whether the Commonwealth Court correctly determined that 21 P.S. 351, “Failure to record conveyance,” did not create a mandatory duty to record all mortgages and mortgage assignments in a county office for the recorder of deeds. The Third Circuit Court of Appeals reversed a federal district court’s decision and held Section 351 did not create a mandatory duty to record all land conveyances. Relying on the Third Circuit’s decision, MERSCORP filed preliminary objections in the nature of a demurrer to the Recorders’ complaints at state court, seeking dismissal on the basis that Section 351 did not provide a duty to record, and the Recorders did not have authority to enforce Section 351 in any event. The court overruled the preliminary objections, and denied MERSCORP’s request to certify its interlocutory order for an immediate appeal. MERSCORP then filed a petition for review in the Commonwealth Court; a divided Commonwealth Court reversed. The majority agreed with the Third Circuit’s conclusion in the Federal Action, specifically ruling “Section 351 does not issue a blanket command that all conveyances must be recorded; it states that a conveyance ‘shall be recorded’ in the appropriate place, or else the party risks losing his interest in the property to a bona fide purchaser.” The majority observed the plain language of Section 351 did not specify which party to a transaction must record a conveyance, nor did it state when recording must take place. The majority also recognized Pennsylvania courts have consistently interpreted Section 351 and other provisions of Title 21 as intended to protect subsequent mortgages and purchasers, and that the failure to record inherently provides a limited consequence — the loss of a priority interest. The majority found further support for its conclusion in precedent recognizing as valid even unrecorded interests in land. The majority noted the Recorders have a ministerial duty to the public to record and safeguard records presented to them for recording, but that duty does not confer standing to file actions to protect the public from “inaccurate” records in the MERS(r) system. The Recorders appealed, but finding no reversible error with the Commonwealth Court's judgment, the Supreme Court affirmed. View "MERSCORP, et al v. Delaware Co., et al." on Justia Law